Great Depression and the New Deal Essay

The booming prosperity of the American economy in the 1920s suddenly collapsed due to unexpected stock market crash in 1929. For the decade that followed, the country found itself stuck in an unprecedented economic depression. Statistically, the unemployment rate in the United States soared as high as to 25 per cent (to compare: in 1929 it was just 3.2 per cent). Industrial figures were no better. For example, overall production within industries declined by a half with international trade decreasing by 30 per cent. Investment reached the figure of 98 per cent (“Great Depression and the New Deal”).

Roosevelt that took the office in 1933, just at the peak of Great Depression, proposed the Americans “The New Deal”. It was a policy that aimed at ending Depression through extensive government intrusion. It suggested new legislation that increased the role of government in the life of the American society.


While many historians believe that the New Deal was an effective way to come out of Great Depression, it actually did not shorten the latter.

To begin with, let us focus on the essence of the New Deal. The very next day after Roosevelt’s inauguration, he announced a “bank holiday” across the United States. All banks were closed down and subject to government inspection that would approve the banks’ soundness (Murphy 10). In a few days, the 73rd Congress was called to session by Roosevelt. This marked the start of famous “Hundred Days”, a new legislation’s outpouring that beat all the records. Most notable acts included: the Emergency Banking Act (which enabled the president to have broad powers, as well as made it possible to withdraw from the existing gold standard); the creation of the Civilian Conservation Corps (abbreviated as CCCs), the Agricultural Adjustment Act (AAA), the Federal Securities Act (FSA), the Federal Emergency Relief Act (FERA), the formation of TVA – Tennessee Valley Authority, and the National Employment System Act. Two more significant acts were the Home Owners Refinancing Act and, finally, the National Industrial Recovery Act that served the basis for setting up the Public Works Administration (abbreviated as PWA) and the National Recovery Administration (abbreviated as NRA). Later in 1935 the Social Security Act came into power, aiming to provide the disabled, old-age or surviving citizens with social insurance.

The New Deal, though rather slowly, appeared to be working. As Robert Murphy writes, “Although still abysmal, the unemployment numbers finally began receding almost the moment Roosevelt took office. Other indicators of economic health, such as Gross National Product, also reversed their staggering decline.” (Murphy 12).

It seemed, availability of public funds freed many people from starvation and despair. In one of the accounts of the Senate Committee on Manufacturers (1932), the Committee’s member exemplifies horrors of the Great Depression through recalling a woman who “borrowed 50 cents from a friend and bought stale bread for 3 and a half cents per loaf, and that is all they had for eleven days except for one or two meals”. His other examples include people picking up food that accidentally fell from the goods train, people starving for two days and finally feeding themselves with dandelions (Senate Committee on Manufacturers). The photo taken during the time of Great Depression illustrates how undernourished and emaciated people were in their efforts to earn at least a dollar or two (See Picture 1).

But as soon as 1938 a new disaster struck. As there appeared to be a 3 per cent collapse within the economic output, the unemployment rate also soared to the yearly figure of 19 per cent. This came to be known as “depression within the Depression” (Murphy 13). Roosevelt’s New Deal turned out to be incapable of producing the expected full recovery.

This view has been supported by professors Cole and Ohanian, the authors of “How Government Prolonged the Depression”. In particular, Cole and Ohanian believe that the expected vigorous recovery never started within the New Deal due to few excessively restrictive policies which violated the focal economic principles. Among them there were establishing wages that were recognized too high for many sectors, as well as competition suppression (Cole & Ohanian, “How Government Prolonged the Depression”).

Picture 1. A man who is selling apples in the period of Great Depression.

Thus, it is no wonder that Roosevelt’s socially colored policies encountered strong opposition from many business leaders. Analyzing the cartoon stamp issued by the Republicans for the elections that were to take place in 1932, one can definitely say that there was a certain layer of people who opposed Roosevelt’s social policies. For example, the discussed stamp implies that as soon as he takes office Roosevelt will empty the pockets of the U.S. workers to feed old people (see Picture 2).

Picture 2. Cartoon against Roosevelt

Interestingly, despite the fact that many modern historians are inclined to depict Roosevelt as a saver, and his New Deal policy as a successful recovery act, his close colleague and advisor Henry Morgenthau was known to think the opposite. In his diary entry, Morgenthau confesses that Roosevelt’s social policy is a failure. He explains that despite spending great sums, “it does not work” (Morgenthau). To make the matters worse, he recognizes that “we have never made on our promises”, so that there is as much unemployment as at the beginning of the office (Morgenthau).

To conclude, Roosevelt’s Great Deal was only partially effective in overcoming the hardships of Great Depression. Despite providing a good safety net for the unemployed and successfully managing to stabilize the economy, the Great Deal did not overcome depression but rather served as an impediment to economy’s development.

Works Cited

“Great Depression and the New Deal”. DigitalHistory.Uh.Edu. DigitalHistory.Uh.Edu. N.d. Web. 26 September 2011.

Cole, Harold and Lee Ohanian. “How the Government Prolonged the Depression”. The Wall Street Journal. Online. Wsj.Com, N.d. Web. 26 September 2011.

Morgenthau, Henry. Diary. Quoted in Robert Murphy. May 1939. Web. 26 September 2011.

Murphy, R. The Politically Incorrect Guide to the Great Depression and the New Deal. Regnery Publishing, 2009. Print.

N.a. “A Man Who is Selling Apples in the Period of Great Depression”. Photograph. The Wall Street Journal. Online. Wsj.Com, N.d. Web. 26 September 2011.

N.a. “Cartoon Against Roosevelt.” Cartoon. Social Security History. N.d. Web. 26 September 2011.

Senate Committee on Manufacturers 1932 account. DigitalHistory.Uh.Edu. DigitalHistory.Uh.Edu. N.d. Web. 26 September 2011.