The First New Deal:
1933–1934
Events
1932 Roosevelt is
elected president
1933 First Hundred
Days: Congress and Roosevelt establish many New Deal agencies, including CCC,
FERA, CWA, AAA, TVA, and PWA Twenty-First Amendment is ratified
1934 Congress creates
Securities and Exchange Commission (SEC)
Key People
Franklin Delano Roosevelt - 32nd U.S.
president; immediately set to work creating New Deal policies to end Great
Depression upon taking office in 1933
John Maynard Keynes - British
economist who believed that deficit spending during recessions and depressions
could revive national economies; his theories formed the basis of Roosevelt’s
New Deal approach
The First Hundred Days
Americans voted for Franklin Delano
Roosevelt in 1932 on the assumption that the Democrats would dole out
more federal assistance than Hoover and the Republicans had. Indeed,
immediately after taking the oath of office, FDR set out to provide relief,
recovery, and reform in his bundle of programs known as the New Deal.
Roosevelt drew much of his inspiration for the
New Deal from the writings of British economist John Maynard Keynes,
who believed that a government’s deficit spending could prime the economic pump
and jump-start the economy. With the support of a panicked Democratic Congress,
Roosevelt created most of the “alphabet agencies” of the First
New Deal within his landmark First Hundred Days in
office.
The Banking Acts
On March 6, 1933, two days after becoming president,
Roosevelt declared a five-day national bank holiday to close
banks temporarily. During Hoover’s presidency, roughly 1,500 banks had
closed each year, and FDR hoped that a short break would give the surviving
banks time to reopen on more solid footing. Several days later, Congress passed
the Emergency Banking Relief Act, which gave Roosevelt the power to
regulate banking transactions and foreign exchange.
Several months later, Congress passed the Glass-Steagall
Banking Reform Act to protect savings deposits. The act, in turn,
created the Federal Deposit Insurance Corporation (FDIC),
which insured an individual’s savings of up to $5,000 (today, it insures deposits of up to $100,000). The act also
regulated lending policies and forbade banks from investing in the stock
market. After the banking crisis was resolved, Roosevelt aired the first of his “fireside
chats” to over 50 million radio listeners, encouraging Americans to
redeposit their money in the newly opened banks.
The Civilian
Conservation Corps
In March 1933, Congress created the Civilian
Conservation Corps (CCC), which hired unemployed young men to
work on environmental conservation projects throughout the country. For a wage
of thirty dollars a month, men worked on flood control and reforestation
projects, helped improve national parks, and built many public roads.
Approximately 3 million
men worked in CCC camps during the program’s nine-year existence.
The Federal Emergency
Relief Administration
The “Hundred Days Congress” also created the Federal
Emergency Relief Administration (FERA), in May 1933, to dole out
roughly $500 million
to the states. About half of this money was earmarked to bail out bankrupt
state and local governments. States matched the other half (three state dollars
for every one federal dollar) and distributed it directly to the people. FERA
also created the Civil Works Administration (CWA), which
helped generate temporary labor for those most in need.
The Agricultural
Adjustment Administration
Roosevelt also encouraged the creation of the Agricultural
Adjustment Administration(AAA) to assist America’s farmers. The AAA
temporarily reset prices for farm commodities, including corn, wheat, rice,
milk, cotton, and livestock, and then began subsidizing farmers to reduce production.
Before the depression, many debt-ridden farmers had increased crop production
in order to earn more money. Ironically, this increased production had led to
overproduction, which flooded the market and drove prices down, forcing farmers
to plant even more the next year in a never-ending cycle. The AAA, however,
began paying farmers extra to plant less or destroy their surplus crops in
order to raise prices again. Congress also passed the Farm Credit Act to
provide loans to farmers in danger of bankruptcy.
The AAA was quite controversial, as many
critics wondered why landowners rather than sharecroppers and tenant farmers
were receiving federal aid. Indeed, some landowners who received aid unjustly
used it to purchase farm equipment, which had the potential to eliminate farm
owners’ need for sharecroppers and tenant farmers entirely. Furthermore, many
poorer and hungrier Americans were outraged that the government was paying
farmers money to destroy perfectly edible crops in order to inflate prices. Despite
these criticisms, however, the AAA did manage to raise prices to their
pre–World War I highs.
The Tennessee Valley
Authority
Congress also created the Tennessee
Valley Authority (TVA), whose goal was to modernize and reduce
unemployment in the Tennessee River valley, one of the poorest and hardest-hit
regions in the country. The agency hired local workers to construct a series of
dams and hydroelectric power plants, which brought cheap electricity to
thousands of people. The public corporation also created affordable employee
housing, manufactured cheap fertilizer, and drained thousands of acres for
farming.
The TVA, like the AAA, was highly
controversial. Many conservatives claimed that government production of
electricity was a mild form of socialism and that it disrupted market prices
too much. Competing electric companies also attacked the TVA for selling
cheaper electricity and lowering their profits. Still, the TVA had such a
profound impact on the economy and quality of life in the Tennessee River
valley region that the federal government initiated similar projects throughout
the West and South. Within a decade, many major U.S. rivers were set up to
produce hydroelectric power that provided both electricity and jobs.
The National
Industrial Recovery Act
The 1933 National Industrial Recovery Act was
the federal government’s first attempt to revive the economy as a whole. The
bill created the National Recovery Administration (NRA) to
stimulate industrial production and improve competition by drafting corporate
codes of conduct. The NRA also sought to limit production of consumer goods to
drive up prices. Furthermore, the act helped set up the Public Works
Administration (PWA) to construct public roads, bridges,
and buildings. In accordance with Keynesian economic theories, Roosevelt
believed that improving the public infrastructure would put more money into the
economy.
Restructuring American
Finance
Finally, Roosevelt also lobbied Congress to
establish new regulations on thefinancial sector of the economy.
After taking office, he took the country off thegold standard, which
allowed citizens and foreign countries to exchange paper money for gold. To
prevent people from hoarding the precious metal, the president also ordered all
private gold stocks to be turned over to the U.S. Treasury in exchange for
paper dollars. Congress also created the Securities and Exchange
Commission (SEC) to regulate trading on Wall Street and
curb the out-of-control speculation that had led to the Crash of 1929.
The Three Rs and Their
Legacy
Although the New Deal sometimes comes across
as a cohesive package, much of the individual legislation passed during the
First Hundred Days was conceived on the fly. So many special interest groups,
such as big business and organized labor, were hounding the government for
change that Roosevelt and Congress often felt they were being pulled in
opposite directions.
Nevertheless, the New Deal policies did much
to get Americans back on their feet. They not only provided relief, recovery,
and reform but also drastically changed the federal
government’s role in politics and society. Roosevelt’s successful application
of Keynes’s economic theories transformed the Democrats into social welfare
advocates. Even decades after the Great Depression, Democratic politicians
would continue fighting for more government intervention in the economy,
redistribution of wealth, and aid for the neediest.
Relief
Much of the legislation that the Hundred Days
Congress drafted doled out immediate relief for the American people that
President Hoover and the Republicans had failed to provide. The Federal
Emergency Relief Administration’s relief assistance, for example, provided
millions of Americans with enough money to make ends meet. The Civil Works
Administration put the unemployed to work, and the Agricultural Adjustment
Administration, the Tennessee Valley Authority, the National Recovery
Administration, and the Public Works Administration kept millions of others
alive as well. Americans were so relieved by the federal government’s quick
action that many became die-hard Democrats and Roosevelt fans. The president’s
optimism and can-do attitude, combined with the success of his immediate relief
programs, made him almost politically untouchable during his first term.
Recovery
Many of the same programs designed to provide
immediate relief were also geared toward long-term economic recovery. The
Civilian Conservation Corps and the Public Works Administration put millions of
men to work not only to keep them employed but also to improve the national infrastructure.
When the United States finally emerged from the Great Depression during World
War II, it had hundreds of new roads and public buildings, widespread
electrical power, and replenished resources for industry.
Reform
The third goal of the New Deal policies was to
reform the banking and financial sector of the economy to curb bad lending
practices, poor trading techniques, and corruption. The president’s decision to
take the country off the gold standard proved to be a smart move because it
boosted people’s confidence in the U.S. dollar. The Federal Deposit Insurance
Corporation, created under the Glass-Steagall Act, eliminated untrustworthy
banks that had plagued the country for more than a century. Once Americans
became confident that their funds would be safe, the number of bank deposits
surged. Likewise, the Securities and Exchange Commission in 1934, which weeded
out bad investment habits, gave Americans more confidence in the
stock market.
The Good Neighbor
Policy
Although foreign policy often got lost in the
shuffle amid the domestic economic concerns of the New Deal, Roosevelt did
create a major international initiative with Latin America in the Good
Neighbor Policy of 1933 and 1934. As part of the initiative,
Roosevelt embarked on a tour of the region; signed new, friendlier treaties
with several Latin American countries; pledged to avoid military intervention
in Latin America; and shunned the (Theodore) Roosevelt Corollary to the Monroe
Doctrine by withdrawing troops from several countries.
REFERENCE
GALBRAITH,
JOHN KENNETH. The
Great Crash: 1929 .
Boston: Mariner Books,1997.
KENNEDY,
DAVID M. Freedom from
Fear: The American People in Depression and War, 1929–1945 . New York: Oxford University
Press, 2001.
KINDLEBERGER,
CHARLES P. The
World in Depression, 1929–1939 .
Berkeley: University of California Press, 1986.
LEUCHTENBURG,
WILLIAM E. Franklin
D. Roosevelt and the New Deal. New York: Perennial, 1963.
SCHLESINGER,
ARTHUR M., JR. The
Age of Roosevelt, Volume I: The Crisis of the Old Order, 1919–1933 .
Boston: Mariner Books, 2003 .
———. The Age of Roosevelt, Volume II:
The Coming of the New Deal, 1933–1935 . Boston: Mariner Books, 2003.
———. The Age of Roosevelt, Volume III:
The Politics of Upheaval, 1935–1936 . Boston: Mariner Books, 2003.
WORSTER,
DONALD. Dust Bowl:
The Southern Plains in the 1930s. New York: Oxford University
Press, 1982.
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