New Deal (1933-1939): Roosevelt's Answer to the Great Depression

The New Deal was the programme of relief, recovery and reform launched by President Franklin D. Roosevelt in response to the Great Depression in the United States. Beginning with the “Hundred Days” of 1933 and continuing through the late 1930s, it created dozens of federal agencies, from the Civilian Conservation Corps to Social Security. It permanently expanded the role of the federal government in American economic and social life, although historians still debate how far it ended the Depression.

Background

By early 1933 the economy had been shrinking for more than three years since the Wall Street Crash of 1929. About a quarter of the workforce was unemployed, thousands of banks had failed and a new wave of banking panics was closing banks across the country. Herbert Hoover’s administration had resisted direct federal relief, and its violent eviction of the Bonus Army of veterans in 1932 had deepened public anger.

Roosevelt, the Democratic governor of New York, promised “a new deal for the American people” when he accepted his party’s nomination in July 1932. He won the November election in a landslide and took office on 4 March 1933. In his inaugural address he told Americans that “the only thing we have to fear is fear itself”.

Roosevelt relied on a group of advisers sometimes called the “Brain Trust”, and on strong-minded officials. Frances Perkins, his Secretary of Labor, became the first woman to serve in a US cabinet. Eleanor Roosevelt travelled widely, reporting to her husband on conditions around the country and pressing for help for women, young people and African Americans.

The Hundred Days (1933)

Roosevelt acted at once. He declared a national bank holiday, and on 9 March Congress, called into special session, passed the Emergency Banking Act, allowing sound banks to reopen under federal supervision. On 12 March he gave the first of his radio “fireside chats”, explaining the banking crisis to the public. When banks reopened, deposits returned.

Over the following hundred days, until Congress adjourned on 16 June 1933, an unprecedented series of laws passed:

• The Civilian Conservation Corps (CCC) put young unemployed men to work planting trees, fighting soil erosion and building parks; about 3 million served between 1933 and 1942.
• The Federal Emergency Relief Administration gave grants to the states for relief.
• The Agricultural Adjustment Act paid farmers to reduce production in order to raise prices.
• The Tennessee Valley Authority (TVA) built dams to control floods and supply electricity to one of the poorest regions of the country.
• The Securities Act required companies to disclose information when selling shares.
• The Home Owners’ Loan Corporation refinanced mortgages to prevent foreclosures.
• The Banking Act of 1933, often called the Glass-Steagall Act, separated commercial and investment banking and created federal deposit insurance.
• The National Industrial Recovery Act created the National Recovery Administration (NRA), which drew up industry codes on prices, wages and hours, and the Public Works Administration.

Roosevelt also took the United States off the gold standard in 1933 and in January 1934 fixed the price of gold at 35 dollars an ounce, effectively devaluing the dollar. Prohibition ended in December 1933.

The Second New Deal (1935-1938)

In May 1935 the Supreme Court struck down the NRA in Schechter Poultry Corp. v. United States, and in January 1936 it invalidated the original Agricultural Adjustment Act. Roosevelt faced pressure from critics on the left, such as Senator Huey Long with his “Share Our Wealth” plan, Father Charles Coughlin and Francis Townsend, as well as from business opponents on the right.

He responded with a second wave of reforms. The Works Progress Administration (WPA), created in 1935 and led by Harry Hopkins, employed about 8.5 million people over its lifetime on roads, bridges, schools and airports, as well as arts, writing and theatre projects. The Wagner Act (National Labor Relations Act) of July 1935, sponsored by Senator Robert F. Wagner, guaranteed workers’ right to form unions and bargain collectively. The Social Security Act, signed on 14 August 1935 and shaped by Labor Secretary Frances Perkins, created old-age pensions and unemployment insurance. The Rural Electrification Administration brought power lines to farms.

Earlier reforms were also extended. The Securities Exchange Act of June 1934 created the Securities and Exchange Commission to police the stock markets, and its first chairman was the financier Joseph P. Kennedy. Within the WPA, the Federal Writers’ Project, the Federal Art Project and the Federal Theatre Project employed thousands of writers, painters, actors and musicians, producing state guidebooks, murals and oral histories, including interviews with formerly enslaved people.

Roosevelt won re-election in 1936, carrying 46 of the 48 states. In 1937 he proposed adding up to six new justices to the Supreme Court; the “court-packing” plan failed in Congress and damaged his standing. The last major New Deal law, the Fair Labor Standards Act of 1938, set a federal minimum wage and maximum working hours and restricted child labour.

Debates and criticism

The New Deal was controversial from the start. Conservatives argued that it expanded federal power, raised taxes and interfered with business, and some economists believe that the NRA’s price-fixing and tight labour rules slowed recovery. Others argue that the devaluation of the dollar and the end of the banking panics were the main drivers of recovery, and that the government did too little, not too much, especially when it cut spending in 1937 and triggered a new recession.

The benefits were also unequally shared. Agricultural and domestic workers, a large proportion of whom were African American, were initially excluded from Social Security, and New Deal farm payments often went to landowners rather than tenants and sharecroppers. Federal housing policies used maps that marked many Black neighbourhoods as high risk, limiting access to mortgages. Programmes such as the Indian Reorganization Act of 1934 and some relief work aimed to help marginalised groups, with mixed results.

By the numbers

Legacy

Many New Deal institutions still exist, including Social Security, the FDIC, the Securities and Exchange Commission, the TVA and the federal minimum wage. Physical traces remain across the country in thousands of schools, post offices, bridges, dams and parks, some of them alongside the farmland scarred by the Dust Bowl. Politically, the New Deal built a coalition of urban workers, Southern whites, many African Americans and farmers that kept the Democratic Party dominant for decades.

Timeline

• 1933, 4 March: Roosevelt is inaugurated.
• 1933, 9 March: The Emergency Banking Act passes on the first day of the special session.
• 1933, 31 March: The Civilian Conservation Corps is established.
• 1933, 18 May: The Tennessee Valley Authority is created.
• 1933, 16 June: The Banking Act and National Industrial Recovery Act are signed; the Hundred Days end.
• 1935, 27 May: The Supreme Court strikes down the NRA.
• 1935, 5 July: The Wagner Act is signed.
• 1935, 14 August: The Social Security Act is signed.
• 1938, 25 June: The Fair Labor Standards Act is signed.

Why it matters

The New Deal changed the relationship between Americans and their government. It established the principle that Washington bears responsibility for economic stability, financial regulation and a basic social safety net, ideas that still shape American politics today.