New Deal
In the autumn of 1929, the United States stock market crashed and triggered a chain reaction that would last for four years. Manufacturing output fell by one third between 1929 and 1933 while prices dropped twenty percent across the nation. Unemployment climbed from four percent to twenty five percent as factories shut their doors and workers lost their livelihoods. One third of all employed people were downgraded to part time work with much smaller paychecks. Almost fifty percent of the nation's human work power went unused during these dark years. Bank deposits were not guaranteed by any government agency so when thousands of banks closed depositors temporarily lost access to their money. Most funds were eventually restored but gloom and panic gripped the country. The United States had no national safety net or public unemployment insurance before this crisis began.
Roosevelt entered office on March fourth 1933 with enormous political capital after winning the election in a landslide over Herbert Hoover. Americans of all political persuasions demanded immediate action against the crumbling economy. During his first hundred days Roosevelt met with Congress for one hundred straight days to pass new programs. Congress granted every request he made and even passed some programs like the Federal Deposit Insurance Corporation that he initially opposed. Walter Lippmann famously noted how the economy hit bottom in March 1933 then started to expand immediately. Economic indicators showed the Federal Reserve Index of Industrial Production sank to its lowest point of 52.8 in July 1932. By July 1933 it reached 85.5 representing a dramatic rebound of fifty seven percent in just four months. Recovery was steady and strong until 1937 except for employment which remained stubbornly high.
Between 1929 and 1933 forty percent of all banks failed out of twenty three thousand six hundred ninety seven total institutions. Bank runs occurred when large numbers of customers withdrew deposits because they believed the bank might become insolvent. As the run progressed it generated a self fulfilling prophecy where more withdrawals increased the likelihood of default. Roosevelt gave a radio address known as a Fireside Chat explaining the causes of the banking crisis to the public. He closed all banks in the country and kept them shut until new legislation could be passed on March ninth 1933. The Emergency Banking Act provided for reopening sound banks under Treasury supervision with federal loans available if needed. Three quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in hoarded currency and gold flowed back into them within a month stabilizing the system. By the end of 1933 four thousand four small local banks were permanently closed and merged into larger ones. Their deposits totaled three point six billion dollars while depositors lost five hundred forty million dollars eventually receiving eighty five cents on the dollar.
The Public Works Administration spent thirty three billion dollars between 1933 and 1935 to build thirty four thousand five hundred ninety nine projects. Many of these structures were quite large including bridges airports dams post offices hospitals and hundreds of thousands of miles of road. Through reforestation and flood control workers reclaimed millions of hectares of soil from erosion and devastation. The Civilian Conservation Corps enlisted young men for manual labor on government land while the Tennessee Valley Authority promoted electricity generation. The Works Progress Administration employed more than eight point five million workers who built six hundred fifty thousand miles of highways. Prominent projects included the Lincoln Tunnel the Triborough Bridge the LaGuardia Airport and the San Francisco Oakland Bay Bridge. Rural homes lacking electricity fell from ninety percent to forty percent between 1935 and 1940 through cooperative efforts by the Rural Electrification Administration. The WPA also financed hospitals schools roads reservoirs irrigation systems parks playgrounds and other facilities across the nation.
Farm income had fallen by over fifty percent since 1929 leaving rural people in severe poverty especially throughout the South. Major programs addressed their needs including the Resettlement Administration and the National Youth Administration which opened roads in remote areas. In 1933 the Roosevelt administration launched the Tennessee Valley Authority involving dam construction planning on an unprecedented scale. Under the Farmers Relief Act of 1933 the government paid compensation to farmers who reduced output thereby raising prices. Because of this legislation average farm income almost doubled by 1937 despite food prices remaining well below the 1929 peak. The Agricultural Adjustment Administration aimed to raise prices for commodities through artificial scarcity using domestic allotments. Six million piglets were killed and discarded while bountiful crops were left to rot to force up farm prices. The AAA established an important long lasting federal role in planning the entire agricultural sector of the economy. It was the first program on such a scale for the troubled agricultural economy facing collapse at the beginning of 1933.
The Social Security Act established a permanent system of universal retirement pensions unemployment insurance and welfare benefits for the handicapped. Roosevelt insisted it should be funded by payroll taxes rather than from the general fund so contributors gained legal moral and political rights. The Wagner Act finally guaranteed workers the right to collective bargaining through unions of their own choice. Labor became a major component of the New Deal political coalition with tremendous growth in union membership especially in mass production sectors. The Fair Labor Standards Act set maximum hours of forty four per week and minimum wages of twenty five cents per hour for most categories. Child labor under age sixteen was forbidden while children under eighteen could not work in hazardous employment. Wages of three hundred thousand workers increased and hours of one point three million were reduced as a result. The National Labor Relations Board facilitated wage agreements and suppressed repeated labor disturbances throughout the country during this era.
In 1938 the Republican Party gained seats in Congress and joined conservative Democrats to block further New Deal legislation. Some programs were declared unconstitutional by the Supreme Court including the original version of the Agricultural Adjustment Act. The New Deal produced a political realignment reorienting the Democratic Party base to include labor unions blue collar workers big city machines racial minorities white Southerners and intellectuals. This realignment crystallized into a powerful liberal coalition which dominated presidential elections into the 1960s. Conservative Republicans and Democrats controlled both Houses of Congress following the 1938 midterm elections forming an informal conservative coalition. By 1942 relief programs such as the Works Progress Administration and Civilian Conservation Corps were shut down. President Dwight D. Eisenhower left the New Deal largely intact even expanding it in some areas from 1953 to 1961. Several organizations created by New Deal programs remain active today including the Federal Deposit Insurance Corporation and the Tennessee Valley Authority.
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Common questions
What was the unemployment rate during the Great Depression before Franklin D. Roosevelt entered office?
Unemployment climbed from four percent to twenty five percent as factories shut their doors and workers lost their livelihoods.
When did Franklin D. Roosevelt enter office and how many days did he meet with Congress in his first hundred days?
Roosevelt entered office on March fourth 1933 with enormous political capital after winning the election in a landslide over Herbert Hoover. During his first hundred days Roosevelt met with Congress for one hundred straight days to pass new programs.
How many banks failed between 1929 and 1933 and what legislation helped reopen them?
Between 1929 and 1933 forty percent of all banks failed out of twenty three thousand six hundred ninety seven total institutions. The Emergency Banking Act provided for reopening sound banks under Treasury supervision with federal loans available if needed.
Which New Deal program spent thirty three billion dollars to build thousands of projects including bridges and roads?
The Public Works Administration spent thirty three billion dollars between 1933 and 1935 to build thirty four thousand five hundred ninety nine projects. Prominent projects included the Lincoln Tunnel the Triborough Bridge the LaGuardia Airport and the San Francisco Oakland Bay Bridge.
What was the purpose of the Agricultural Adjustment Administration and how much farm income increased by 1937?
The Agricultural Adjustment Administration aimed to raise prices for commodities through artificial scarcity using domestic allotments. Average farm income almost doubled by 1937 despite food prices remaining well below the 1929 peak.