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The New Deal

During the 1930's, America witnessed a breakdown of the Democratic and

free enterprise system as the US fell into the worst depression in history.

The economic depression that beset the United States and other countries

was unique in its severity and its consequences.  At the depth of the depression,

in 1933, one American worker in every four was out of a job. The great industrial

slump continued throughout the 1930's, shaking the foundations of Western

capitalism.

        The New Deal describes the program of US president Franklin D. Roosevelt

from 1933 to 1939  of relief, recovery, and reform. These new policies aimed to

solve the economic problems created by the depression of the 1930's. When Roosevelt

was nominated, he said, "I pledge you, I pledge myself, to a new deal for the

American people." The New Deal included federal action of unprecedented scope to

stimulate industrial recovery, assist victims of the Depression, guarantee minimum

living standards, and prevent future economic crises. Many economic, political, and

social factors lead up to the New Deal.  Staggering statistics, like a 25% unemployment

rate, and the fact that 20% of NYC school children were under weight and malnourished,

made it clear immediate action was necessary.

          In the first two years, the New Deal was concerned mainly with relief,

setting up shelters and soup kitchens to feed the millions of unemployed.  However

as time progressed, the focus  shifted towards recovery. In order to accomplish this

monumental task, several agencies were created. The National Recovery Administration

(NRA) was the keystone of the early new deal program launched by Roosevelt. It was

created in June 1933 under the terms of the National Industrial Recovery Act. The NRA

permitted businesses to draft "codes of fair competition," with presidential approval,

that regulated prices, wages, working conditions, and credit terms. Businesses that

complied with the codes were exempted from antitrust laws, and workers were given the

right to organize unions and bargain collectively.  After that, the government set up

long-range goals which included permanent recovery, and a reform of current abuses.

Particularly those that produced the boom-or-bust catastrophe.  The NRA gave the President

power to regulate interstate commerce.  This power was originally given to Congress.  While

the NRA was effective, it was bringing America closer to socialism by giving the President

unconstitutional powers. In May 1935 the US Supreme Court, in Schechter Poultry Corporation

V. United States, unanimously declared the NRA unconstitutional on the grounds that the

code-drafting process was unconstitutional.

        Another New Deal  measure under Title II of the National Industrial Recovery Act

of June 1933, the Public Works Administration (PWA), was designed to stimulate US

industrial recovery by pumping federal funds into large-scale construction projects. The

head of the PWA exercised extreme caution in allocating funds, and this did not stimulate

the rapid revival of US industry that New Dealers had hoped for.  The PWA spent $6 billion

enabling building contractors to employ approximately 650,000 workers who might otherwise

have been jobless. The PWA built everything from schools and libraries to roads and highways.

The agency also financed the construction of cruisers, aircraft carriers, and destroyers for

the navy.

        In addition, the New Deal program founded the Works Projects Administration in 1939. 

It was the most important New Deal work-relief agency. The WPA developed relief programs

to preserve peoples skills and self-respect by providing useful work during a period of

massive unemployment. From 1935 to 1943 the WPA provided approximately 8 million jobs at

a cost of more than $11 billion. This funded the construction of thousands of public buildings

and facilities.  In addition, the WPA sponsored the Federal Theater Project, Federal Art

Project, and Federal Writers' Project providing work for people  in the arts. In 1943, after

the onset of wartime prosperity, Roosevelt terminated the WPA.

        One of the most well known, The Social Security Act, created a system of

old-age pensions and unemployment insurance, which is still around today. Social security consists

of public programs to protect workers and their families from income losses associated with old age,

illness, unemployment, or death.

        The Fair Labor Standards Act (1938) established a federal Minimum Wage and maximum-hours

policy. The minimum wage, 25 cents per hour, applied to  many workers engaged in interstate commerce.

The law was intended to prevent competitive wage cutting by employers during the Depression. After

the law was passed, wages began to rise as the economy turned to war production. Wages and prices

continued to rise, and the original minimum wage ceased to be relevant.  However, this new law still

excluded millions of working people, as did social security.

        However, a severe recession led many people to turn against New Deal policies. In addition,

World War II erupted in September 1939. Causing an enormous growth in the economy as war goods were

once again in great demand. No major New Deal legislation was enacted after 1938.

        The Depression was a devastating event in America, and by regulating banks and the stock

market the New Deal eliminated the dubious financial practices that had helped precipitate the

Great Depression. However, Roosevelt's chief fiscal tool, deficit spending, proved to be ineffective

in averting downturns in the economy.