New Deal

The New Deal ( Nouvelle gives ) is the name of the policy interventionist installation at the instigation of the US president Franklin Delano Roosevelt to fight against the economic crisis of 1929. It was thought whereas the crisis was caused by an instability inherent in the market, and that the intervention of the government was necessary to rationalize and stabilize the economy. New Deal thus constitutes a first experiment of État-providence to the the United States. Various programs was implemented like that of the Farm Security Administration.

Origins of New Deal

Great Depression and elections of 1932

Between the October 24th and the October 29th 1929, the “Krach of 1929” made plunge the stock exchange courts to the New York Stock Exchange (called Wall Street ), the principal American purse. This event, which finds its origin in deep economic imbalances, marks the beginning of the Grande the depression, largest Economic crisis of the 20th century, which had consequences in the whole world. With the the United States, it causes an important rise of the Unemployment rate which, on the basis of a rate of 3% of the Active population will reach in 1932 a high point with 25%. The manufacturing output decreases by approximately a third.

The July 2nd 1932, Roosevelt promises in a speech of its electoral campaign “a news gives for the American people”. Indicator that the the USSR of Stalin escaped the crisis, much thought of having to plan the economy to leave stagnation, including to America. Actually, the the USSR was affected little by the crisis because she had not known the boom of the Années 1920 and that its commercial exchanges with “the Western” were reduced.

Vis-a-vis the outgoing president Herbert Hoover, that the voters reject because of the Economic crisis, Roosevelt is elected with a strong majority (472 mandates against 59). However, Roosevelt arrived at the capacity without having of plan preconceived to save the saving in its country. Its “  New Deal   ” was not ideological, but rather pragmatic, which led to some contradictions. It applied ideas that it had learned for the period progressist from Wilson and made use of its political experiments acquired during the years 1920 : opposition to the monopoly and the idea that the Pauvreté is due to the personal liabilities of the individuals .

The March 4th 1933, its inaugural speech remainder impresses commonplaces, just is satisfied it to warn the Americans against an excess of pessimism.

To conclude his policy, the new president is surrounded brilliant advisers and imaginatifs : Raymond Moley, Adolf Berle, Felix Frankfurter (which will become later judge at the Supreme court), Cordell Hull (Foreign affairs), Henry Wallace (Agriculture), Frances Perkins (Work), first woman to be reached a ministerial position.

Basic principles

Certain historians distinguish two New Deal, the first implemented during the “Hundred Days” (between on March 9th and on June 16th, 1933) which includes/understands a great number of measurements in favor of the currency and the banking system in general, of agriculture, industry and the fight against unemployment.

Agricultural Adjustment Act (AAA) and the National Industrial Recovery Act (NIRA) which belong to this first jet of reforms are invalidated in 1935 and 1936 by the Supreme court. But, at this moment, Roosevelt had already started second series of measure reforming, called second New Deal.

The first hundred days

Reforms of the banking environment and the currency (1933)

The crushing victory of the democratic party to the elections of 1932 and the gravity of the crisis allowed Roosevelt and its administration to exert a great influence on the Congrès during the first months of its mandate. That made easy and rapid the adoption of series of measure intended to restore the balance of the banking system, financial market and to help the unemployed. One of the objectives by Roosevelt was to restore confidence and the economic growth.

March 6th, 1933, it imposes the closing of all the US banks for four days ( bank holiday ); during this time, the Congress meets in extraordinary session. A few days afterwards, it sends to the Congress the Emergency Banking Act which solves the banking crisis quickly. A new commission is created, the Securities and Exchange Commission (SEC).

To allow an increase of the prices, the gold standard is abandoned (April 1933). It follows a fall of the dollar and a slow resumption of the prices.

The Agricultural Adjustment Act and the Agricultural Adjustment Administration (A.A.A.)

On the recommendations of Henry Wallace, the Roosevelt administration undertook to protect the farmers against the risks from the market by distributing federal subsidies and by controlling the production by a.A.A. One decided the reduction of harvests to make go up the agricultural courses. Moreover, one most of harvests and reserves were destroyed. The debts of the farmers were re-spread. The first results, at the end of three years, were encouraging, since the income of the farmers increased. Also, official interventionism in the primary sector was started. The cogency of this type of policy, which went until subsidizing the farmers agreeing to burn whole or part of their harvests, is however contestable economically, since to achieve an objective in terms of employment, and price, the government carries out an effective destruction of richness, whose counterparts are, within the meaning of many mainly liberal economists, insufficient to justify it.

The National Industrial Recovery Act (NIRA)

The National Industrial Recovery Act (NIRA) was voted by the Congress in 1933 and proposed two types of reforms. On the one hand, he encouraged the industrialists to sign codes of honest competition, on the other hand, he granted to the workmen freedom to syndicate and negotiate collective agreements.

The goals of the NIRA were to fight against the deflation of the industrial products and to adjust the wages at the prices of the consumer goods, in accordance with the wishes of the trade unions, the radicals and the American Communist party.

The National Recovery Administration had the role of stabilizing the prices and the wages while cooperating with the companies and the trade unions. It was managed initially by Hugh S. Johnson. It created the Public Works Administration (PWA), which was to control the implementation of the policy of great public works.

All these provisions were greeted by employers and the trade unions; they were popular for the whole of the Americans.

Other initiatives

the Federal Emergency Relief Administration (WILL MAKE): allowed to financially support the supplementary programmes of the various States. the Civil Conservation Body: thanks to work of afforestation, fight against erosion, conservation of the ground, it pourvoya at the time of recruitment.

the Farm Credit Administration supported the farmers involved in debt in their granting loans.

The Tennessee Valley Authority (VAT) got busy with the construction of Barrage S in order to arrange the territory of the valley of the Tennessee, limiting the floods, increasing the hydroelectric production and providing employment to the unemployed.

The Securities and Exchange Commission (SEC): this federal agency was created in order to control the stockmarket. The 21e amendment with the Constitution, cancelling the Prohibition alcohol.

The Hundred Days assessment

This set of measures, the force of conviction of Roosevelt and its team, if they did not produce all the discounted ends, reflect fine with the pessimism of the Americans.

Indeed, because of many resistances on behalf of a certain employers and certain farmers, the recovery was very slow: the increase in the purchasing power which would have allowed the growth of the production, was long in being felt. On the other hand, unemployment declined quickly.

This assessment in half-tone supported the expression of dissatisfactions. Thus, the senator Long Huey in Louisiana gathered the dissatisfied ones with the South and Middle West. In the suburbs of Strait, Charles Coughlin, a catholic priest, used a demagogic speech and exploited the xenophobe feelings of his fellow-citizens.

They is then the mediums of businesses which will show Roosevelt to defend a socialist program.

Despite everything, the president does not disarm. The legislative elections of 1934 which reinforce the democratic majority consolidate it in its options.

Of the economic policy to the industrial relations policy

The measurements started into 1933 are supplemented and concluded their. Since 1934, the dollar is devaluated and fixed at 59.06% of its value. The long run and the social one are taken into account as from 1935.

Thus is set up the Works Progress Administration (WPA) equipped with 1,4 billion dollar. From 1935 to 1941, this one engages more than two million workers assigned to various tasks: plantation of trees, restoration of urban centres, etc

The National Labor Relations Act of July 5th, 1935, known under the other name of Wagner Act , reinforce the provisions of the N.R.A. while the National Labor Relations Board judge all measurements discriminatory towards the trade unionists.

Retirements

But one of the largest projections of this period is the Social Security Act of August 14th, 1935, which establishes a system social protection at the federal level: reprocess for the most 65 years, various unemployment insurances and assistances for the handicapped people, the disease and disability not being covered. The blind men and the handicapped children receive assistances financed by federal subsidies granted to the states. New Deal launched the bases of the État-providence ( welfare state in English).

With the the United States, the system of the retirements by distribution (in English Social Security ) was founded during New Deal of the years 1930, in the aim of protection the elderly against misery. In 2005, this system gave more half of their incomes to two thirds of reprocessed country.

Opposition of the Supreme court

Supreme court, as from 1935, invalid several measurements, thus placing the government in a difficult situation. Thus the NRA is condemned unanimously of the nine judges, who estimate that the codes of honest competition go against the commercial provisions of the Constitution. Moreover, Roosevelt is shown to want to reinforce the executive power.

In January 1936, it is with the turn of the AAA to be invalidated to have created an illegal tax in favor of the farmers.

These two stops intervene at the time when America is on the way of the recovery; their consequences will hardly have effects on the economic activity.

After the presidential elections of 1936, Roosevelt reforms the Supreme court, not without opposition of the judges.

A new recession

Whereas the economic indices showed that the situation had returned to that of 1929, an abrupt recession appears during the summer 1937. It has as a consequence a reduction in the production of 30% and one increase in the unemployment from approximately 50%: from 14,3% to 19% of the active population between 1937 and 1938.

This recession is explained by the fact why, the Roosevelt administration considering the budget too generous, and thus possible source of inflation, decreased radically and prematurely the federal appropriations used the previous years.

Finally, Roosevelt reconsidered its decision and convened the Congress to subject to him a plan of additional expenditure of 5 billion dollars.

By this injection of new appropriations, the situation improves since 1938.

Other measurements supplemented this device: the time limit weekly of work at 44 hours, the installation of minimal wages, the credit line for the construction of dwellings like various measurements in favor of agriculture.

New Deal and economic aids

New Deal and the Keynésianisme

See also: John Maynard Keynes

Even if the concept of Welfare state is brought by New Deal, the influence of Keynes on this one is almost non-existent. Indeed, the General Theory of employment, the interest and the currency was published only in 1936, in other words nearly three years after the beginning of New Deal. Moreover, at the conclusion of an interview between Roosevelt and Keynes, the first would have stated not to have included/understood anything with the speech held by Keynes. On the other hand, second New Deal, whose measurements were developed by the school known as of the conjoncturists (Hansen and Foster in particular) was strongly influenced by work of Keynes, with in particular the principle of the pump primiry (“restarting of the pump”), essential to the economic revival.

The Second world war and end of the Great depression

The requirements out of weapons started again the production. Saving in war, effort of war

Assessment of New Deal

There is no proof that New Deal had any effectiveness in the fight against the crisis, which will perdura until America mobilizes its economy for the Second world war. Nevertheless, the reasons of its relative failure are very discussed.

Vision progressist

Those which are wary of the markets think that the New Deal was the good manners to tackle the problem, but that the crisis was so deep that even an intervention of great scale could not have come to end from the damage caused by the instability of the market. In any case, if the country truly did not leave the Great Crisis, it at least prevented aggravation of it. It inaugurated an official tradition of interventionism in the market. In addition, Roosevelt made presidential function the central authority of the American federal government.

Liberal vision

Those in favor of the markets affirm that the crisis was at the same time caused and maintained by the intervention the government on the market. Principal criticism towards New Deal is that it very strongly increased the costs of the companies, and thus prevented the employers from investing to increase their productivity, or to engage.

Political vision

The main result of New Deal is before any policy: the Depression which undergo the American people is tearing its social fabric because never in its history, it did not undergo such a crisis. Roosevelt feels it very well. Also, he endeavors above all to restore the confidence of the people in his economic system and policy. Its inaugural speech contains, at the beginning, the sentence-key of its program: " The only thing we cuts to fear is fear itself! " ( the only thing that we must fear is fear itself! ). The crisis of 1937 was perhaps even more serious than that of 1929, but without political consequences because Roosevelt had restored confidence.

DEBATEs in connection with the second mandate of Roosevelt (1937-1941)

The historians of left and right-hand side are in general disappointed by the second mandate of Roosevelt. Those of right-hand side, like John T. Flynn, denounces a “dictatorial” tendency and “Socialist” of Roosevelt in his work The Roosevelt Myth (1956). Others on the contrary found New Deal too preserving.

In the years 1960, the new American left appeared very critical towards the policy of Roosevelt: Barton J. Bernstein, in 1968, makes the list of the opportunities missed and the inadequate solutions to the economic and social problems by the years 1930. Paul K. Conkin in The New Deal (1967) denounces a policy favorable to the owners. Howard Zinn, in a test of 1966, reproach in New Deal to have preserved the Capitalism in the United States.

List programs of New Deal

  • United States bank holiday, 1933: closing of all the banks of the country until they receive the certification of the federal government.
  • Civilian Conservation Body (CCC), 1933: employ young people who work for the federal government.
  • Tennessee Valley Authority (VAT), 1933: construction of stoppings on the river Tennessee
  • Federal Emergency Relief Administration (WILL MAKE), 1933: assistances for the unemployed.
  • Agricultural Adjustment Act (AAA), 1933:
  • National Recovery Act (NRA), 1933:
  • Civil Works Administration
  • Public Works Administration (PWA), 1933: employ skilled workers to work on public projects; cost four billion dollars.
  • Federal Deposit Insurance Corporation (FDIC)/Knell-Steagall Act: the confidence of the public in the banks restores.
  • Securities Act off 1933, creation of the Securities and Exchange Commission (SEC), 1933:
  • Indian Reorganization Act, 1934
  • Federal Writers' Project, (FWP) 1935 - 1941: launched by the administration in order to reabsorb the problem of unemployment among the professions called “in White collar”.
  • Social Security Act (SA), 1935: ensure an income the elderly, handicapped person, unemployed.
  • Works Progress Administration (WPA), 1935:
  • National Labor Relations Act (NLRA)/Wagner Act, 1935: to guarantee the freedom of trade union.
  • Judiciary Act, 1937:
  • Fair Labor Standards Act (FLSA), 1938: establishes the working week at 40 hours and a wage minimum to 40 hundreds per day.

Personalities in bond with New Deal

See too

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