The federal government during the Great Depression era, 1929-1939, set a precedent for the government’s role in the affairs of the public. Franklin Delano Roosevelt’s New Deal sought to give hope to dismal Americans and resolve the arduous conditions that many people faced. The rigorous New Deal attempted to reopen banks in order to restore Americans’ feeling of security in their deposits. The government imposed itself into the lives of the public through a myriad of agricultural reforms by organizing numerous administrations. By taking immense responsibility for poverty-stricken people and laborers in need, the government strengthened its bond with a majority of the American people. Although the New Deal did not completely end the Depression, it was a success in restoring public confidence and creating new programs that brought hope and relief to millions of Americans.
Prior to the Great Depression, the United States had a very weak and unreliable banking system. During the early 1900s, banks often did not make guarantees on the money people deposited in the bank, which played an immense role in causing the Great Depression. Prior to the market crash, the New York Stock Exchange experienced huge growth, enticing more people to buy shares and in greater amounts. According to ushistory.com’s article, “The New Deal,” 1925 to 1929, the value of the New York Stock Exchange skyrocketed from 25 billion dollars to 87 billion dollars.
Banks allowed loans to be given to reckless speculators to be used for gambling in the stock market. The audacious speculators made purchases on margin which allowed, “an investor to borrow money, typically as much as 75% of the purchase price, to buy a greater amount of stock… Borrowers were often willing to pay 20% interest rates on loans, being dead certain that the risk would be worth the rewards” (ushistory.org). These brash withdrawals were common at the time, resulting in huge amounts of money being taken away from the banks, that would eventually be lost in stocks. Additionally, a huge wealth gap existed in which the wealthiest one percent owned a large portion of all American assets.
127 our experts are availableright now
These faults in America’s banks greatly contributed to the stock market crash in 1929. The Great Depression commenced with Black Thursday, on October 24, 1929, when the New York Stock Exchange crashed, “between October 24 and 29, sixteen million stocks were traded for decreasing values” (ushistory.com) and many stocks were left unbought. The short term consequences of the market crash created a perfect storm of problems causing the American economy to spiral out of control. Banks across the country began to close at an unprecedented rate, impacting the entire the United States economy. The closings devastated many families since banks at the time did not make guarantees to their depositors, so when a bank closed, a family’s savings would be lost.
Subsequently, as bank failures swept the nation and savings vanished, less money was put back into the economy from purchasing goods or services. Additionally, many manufactures had over produced during the extremely successful 1920s, leading to enormous monetary losses. This caused companies to lay off and fire many employees since they could not afford to pay as large of a workforce. The impact of the Great Depression on workforces had cyclical effects on the economy. President Franklin Delano Roosevelt, elected in 1932, gave confidence to thousands of hopeless people who were convinced that the future of the nation was bleak. Whether it be through his fireside chats or his determination to fix America, FDR gave people a sliver of desperately needed hope in one of the country’s darkest times.
During his first inaugural address Roosevelt recapitulates the daunting challenges that America must overcome: Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kind is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone (Franklin Delano Roosevelt). The new President faced a daunting task to mend a broken nation and he strived to bring America back from the brink of ruin. Roosevelt recognized that strong, decisive action was needed to stem economic decline.
Since many banks were closing, people across the country lost their trust in the banks, so they quickly withdrew their money; only causing more banks to close, “In 1929 alone, 659 banks closed their doors. By 1932, an additional 5102 banks went out of business” (ushistory.org). FDR made his first priority bringing back public confidence in the banks. The President’s first step was introduced only two days after he took the oath of office. FDR ordered a national “Bank Holiday,” halting all banking transactions lasting from March 6 to March 10, while he explained the merits of the Emergency Banking Act to Congress. Roosevelt received huge support for his plan and was quickly passed, enabling the government to reopen banks that were recoverable and close those that were not.
On the day before the banks reopened, FDR talked to 60 million people through one of his fireside chats and restored many people’s trust in the banks, “On the first day back in business, deposits exceeded withdrawals. By the beginning of April, Americans confidently returned a billion dollars to the banking system” (“The New Deal). The tremendous success of the Emergency Act essentially brought an end to the banking disaster. Even though FDR virtually fixed America’s banks, he continued to introduce new legislation to give people more confidence in the banks.
The Glass-Steagall Banking Reform Act was signed on June 16, 1933 and created the Federal Deposit Insurance Corporation. This reform act guaranteed money back to depositors who had savings in a failed bank, at the expense of the government up to $2500 at the time. Furthermore, it prevented banks from irresponsibly lending depositors money to be spent in the stock market. By effectively eliminating the bank crisis, Franklin Delano Roosevelt allowed Americans to finally breathe a heavy sigh of relief and prove that the Great Depression was conquerable. Next, FDR emphasized the need to reinstate the unemployed back into the workforce and help them once again support their hungry families. Many manufacturers had over produced during the growing economy of the 1920s, leading to devastating repercussions that resulted in enormous monetary losses. Since more people were unemployed, even less consumer spending occurred.
Based on Gene Smiley’s article, in 1929 before the stock market crashed, approximately 1.5 million people were unemployed, yet in 1932, about 12 billion people were unemployed; a 25% unemployment rate. To bring jobs back to Americans, Franklin Roosevelt utilized a priming the pump strategy, since he believed that the federal government needed to inject money into the economy in order to initiate its repair. The president’s first step in mending the workforce was the short-term Federal Emergency Relief Act (FERA), led by advisor Harry Hopkins, which gave several billion dollars to state and local governments to be used for direct relief payments to the unemployed. The first initiative of FERA was employing young, unmarried men through the Civil Conservation Corps, a long term program.
The program focused on employing men living outside of cities and suburbs, and these laborers concentrated on public works and recreational projects. Another push for re-employment came in the form of the Civil Works Administration which sought to employ a wider range of people. At its peak, the program, “employed 2.5 million in a month’s time and eventually grew to a multitudinous 4 million at its peak” (“The New Deal”). FDR’s most significant relief program was the Work Progress Administration which employed almost 9 million individuals before its end in 1943. This program utilized people regardless of their skills, most of whom worked on public works projects such as infrastructure.
Even though the average wages from the WPA were hardly enough to sustain oneself, the influx of cash bettered the lives of millions of Americans. Before the economic decline, American farmers were already facing insurmountable debt due in part to falling farm product values and purchasing new supplies along with equipment. After the Great Depression began, the future was even bleaker for farmers. The Dust Bowl during the early 1930s eroded precious farmland, further worsening the lives of farmers.
As a part of the New Deal, the Agricultural Adjustment Administration (AAA) was formed as an effort to increase the value of farm products. To accomplish the program’s goal, the AAA created artificial rarity of many common farm products. Farmers were given quotas on their products that were not allowed to be exceeded. Farmers had to use drastic means to maintain the AAA’s quotas, “to meet the demands set by the AAA, farmers plowed under millions of acres of already planted crops. Six million young pigs were slaughtered to meet the subsidy guidelines” (“The New Deal”). Although the AAA did exceed in increasing the value of farm output,s the association wasted millions of pounds of meat along with an enormous amount of produce that could have been given to a starving nation
. Another benefit of the AAA was that it enabled many farmers to purchase better machinery, lowering the demand for farm laborers, bringing sharecropping close to its end. FDR wanted farmers to be able to refinance their debt-stricken farms with the Farm Credit Act, allowing farmers to more easily take out loans for agricultural purposes. He also introduced the Frazier-Lemke Bankruptcy Act helping thousands of farmers to regain their farms which had previously defaulting on their property, by enabling them to pay back their mortgages. Roosevelt also intended to give more farms access to electricity since only “about 10% farms were capable of utilizing electricity” (The New Deal).
As a result, both the federal government and private companies rapidly brought power lines to more rural areas. The New Deal’s next major endeavor was improving social security, leading to the federal government forming an unprecedented bond with the public. Franklin Roosevelt’s first priority in improving social security was aimed at assisting the elderly through payments funded by pensions from employed workers. At the time, a majority of laboring Americans did not have pension plans or much savings delegated for retirement. For the aforementioned reason, FDR introduced the Social Security Act of 1935.
The act ensured that most of the employed would have one percent of their salaries be dedicated to retirees. In addition, employers paid pensions that were also used to subsidize the unemployment insurance, the physically impaired, and unmarried women with children. By accepting responsibility for people in need, the Social Security Act set a precedent for the connection between the federal government and the people, “The New Deal sparked a revolution in American public thought regarding the relationship between the people and the federal government” (ushistory.org). Throughout the existence of the New Deal, FDR created a myriad of bureaus, programs, and agencies to help pull the nation and its people out of depression. The National Industrial Recovery Act in 1933 enabled the President to regulate industry in an effort to boost prices after intense deflation and to invigorate economic recovery.
The National Recovery Association (NRA) behaved as a more lenient version of the Agricultural Adjustment Association by coercing companies to set their own quotas to limit the amount of outputs in order to boost the value of the products. The NRA also wanted to gain the support of labor unions, and subsequently, the bureau outlawed child labor, set maximum daily working hours, and required a minimum wage. In addition, the NRA guaranteed the right of collective bargaining, acquiring significant support from labor unions. In 1935 the Wagner Act was passed which created the National Labor Relations Board to protect that right. After being sworn into presidency in 1932, FDR recognized the magnitude of the Great Depression and how it impacted the lives of the public. Both the nation as a whole and its people faced arduous challenges daily, and FDR took on the responsibility of forming a connection with Americans and giving them hope.
By utilizing the radio Franklin Roosevelt’s fireside chats made a bond with the public and showed them that he was determined to mend the nation. His first focus in office was to restore America’s banks so that people could confidently make transactions, without the fear of losing their savings. The government was able to reopen thousands of banks and help impoverished people regain their savings. The New Deal also reversed the effects of the mass layoffs of employees by employing millions of people to labor on public works projects. Putting money into people’s pockets resulted in more money being spent and circulated in the economy. Franklin Roosevelt’s amicable relationship gave grief-stricken Americans hope during one of America’s darkest eras. Through the New Deal’s myriad of programs, agencies, and acts, FDR imposed his passion of overcoming the Great Depression into the lives of the public.
