This essay outline the New Deal policies of the Roosevelt Presidential Administration in the 1930s

which demonstrates a major political economic struggle over the role of government in the economy.

The main focus is on critically analyzing whether or not the New Deal initiated revolutionary changes

and how effectively functioned in solving the worst economic downturn in American history, brought

by the Great Depression.

By the time of Great Depression, it was clear to acknowledge the failure of the economy in sustaining

levels of output and employment that Neo-classical economics methodological approach of

considering economic downturn as only an exogenous shock generated by market distortions and

market having its self-correcting properties were no longer sacrosanct. Roosevelt, in his last

depression-conscious term as a governor of New York, also faced a personal challenge in reshaping

his ideas on economic policy (Conkin 1975, p.18). Particularly after the disastrous failure of the Bank

of the United states in December 1930, he had lost some of his earlier faith in private bankers

competence, self-regulation and was ready to press serious financial reforms (Conkin 1975, p.19).

In the first New Deal period (1933-1934), major banking reform took place to restore confidence in

banking and consumer spending. Roosevelt and the Democratic Congress passed Emergency Banking

Act and this empowered the secretary of the treasury to reopen financially sound institutions and

unsound banks to remain closed for a thorough supervision carried by the Treasury (Biles 1991 p.35).

By simplified and persuasive explanation of the situation delivered in Roosevelts radio address, the

American people regained their confidence in banks; As a result, deposits soon exceeded withdrawals,

majority of the national banks had managed to reopen and 90 percent of deposits were restored after 2

months which eventually ended the banking crisis (Biles 1991 p.35). Moreover, the large budget cut

was announced followed by cutting salaries of federal workers by 15% and passed a law of permitting

beer and wine consumption. Although the first few moves of the Roosevelt government were popular,

there were yet no revolutionary actions to be recognized as a new deal.

In response to the critics anticipating on significant government actions, the Agricultural Adjustment

Act (AAA) that regulated the farmers to reduce production in return for the subsidy was announced

(Biles 1991 p.36). This Act was introduced to retrieve the original price of farm-produced goods but
could not avoid conservative critics that this act allows the government body of self-financing and the

regressive tax provided to the farmers would eventually pass along to consumers to pay higher costs

for the same quality of goods. Further Farm and Rural programs such as Resettlement Administration

(RA) and Rural Electrification Administration (REA) was followed in order to educate farmers about

better land-use practices and provide electricity to farming households. However, these two

subordinate policies sought different outputs. For the Resettlement Administration, plans on

improving farming by collectivization were shattered by the hostile congress, its negative publicity

and the President Roosevelts rather tepid support which led to the resignation of competent

bureaucrats like Rexford Tugwell who were highly interested in the matter led to the failure of the

program (Biles 1991, p.66-67). On the other hand, Rural Electrification Administrations effort for

providing public power nationally was successful in significantly modernizing the work of farmers,

improving the standard of life for all the related households and even contributed to narrowing the

social gap between urban and rural areas (Biles 1991, p.74).

Besides the success of REA, New deal economic policy related to public works provided decent help

in recovering from the depression in 1934. With careful planning of Harold Ickes who was in charge

of the Department of the Interior and capable of securing the maximum benefit out of limited funds,

his Public Works Administration (PWA) was able to allocate three billion dollars to the projects

(Conkin 1975, p.32). Nevertheless, some critics argued that due to the slow proceedings of actual

construction projects, substantial benefit did not meet their expected profits and resulted in generating

a drastic effect on recovery (Conkin 1975, p.32).

After two years of effort for recovery resulted in bringing few notable successes and considering the

fact that his reelection was only a year away, Roosevelt began a new discussion on the need of the

Second hundred days which is known as the Second New Deal period (1935-1938).

Firstly, the $4.8 billion worth of Emergency Relief Appropriations Act for the Works Progress

Administration (WPA) was the largest amount ever made in the early American history to stimulate
unemployed workers to return to the workforce (Conkin 1975, p.127). Also, a package of legislations

was announced on May 27th of 1935 which included Social Security, a banking act, a public utility

measure, tax increase in business sectors and a labor bill to replace the Section 7(a) of National Labor

Relations Act (Biles 1991 p.128). The original industrial codes drafted by the corporate leaders in the

related industries had some positive effect on increasing competition, work efficiency and even

temporarily increasing the rate of employment (Conkin 1975, p.33). However, it was found

problematic since it raised prices of goods and services and narrowed the leeway of small business

which led to the limited production of goods (Conkin 1975 p.33). Although Section 7(a) of the NLRA

strictly ask business to abide by the labor codes including bargaining rights, prevention of child labor

and wage-hour protection it was often evaded by many corporations at the time; therefore, this new

labor bill empowering the National Labor Relations Board (NLRB) to safeguard labor rights was

considered highly effective in increasing workers labor conditions.

In addition, Social Security Act in the legislative package supported the Americans who were

financially dependent on the state. Before the Great Depression, poverty relief was largely the

responsibility of local governments rather than the federal government. For example, the states

provided aid for widows with children, work compensation for injured workers with families and

medical aid to the blind (Fishback 2016 p.7). However, the unprecedented depression brought a

dramatic shift in attitudes towards the federal government spending and tax collecting. The social

welfare system had effectively improved overall living standards of retired, handicapped and

unemployed poor (Fishback 2016 p.7).

The New Deal policies implemented closely to American lives in the 1930s had both positive and

negative effects. The successful New Deal measures discussed in the essay showed significant effects

dealing more directly with the immediate economic and social needs of individuals and families.

Although the efforts of Roosevelt administration had failed to gain complete recovery, it is clear to

see how significantly it changed the structure and the role of the government in the economy.
References

Biles, R. 1991, A New Deal for The American People, Northern Illinois University Press, Dekalb.
Conkin, P. 1975, The American History Series: The New Deal, Harlan Davidson Inc, New York.
Fishback, P. 2016, How successful was the New Deal? The Microeconomic Impact of New Deal
spending and lending policies in the 1930s, National Bureau of Economic Research, Cambridge, MA,
viewed 15th May 2017, < http://www.nber.org.ezproxy1.library.usyd.edu.au/papers/w21925>