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What measures did Roosevelt introduce to deal with the Depression?

  

  

Mr. Roosevelt is the only man we ever had in the White House who would understand that my boss is a sonofabitch.

North Carolina mill worker (c.1935).

 

* * * * *

The New Deal

 [Can Franklin Achieve ... Some Noble Successes Not Failures?]

 

Roosevelt had been elected in November 1932 on his promise to give the people of America a 'New Deal.

The New Deal was remarkable ...  revolutionary.  Nothing like it had ever been tried before.  Historians have suggested that the it was based on four principles:

  1. To create a ‘humanised’ system of capitalism which would provide security for everyone. 

  2. To set up a regulatory state that would restrain capitalism’s excesses.

  3. That government has a responsibility to provide for people what they need, but cannot provide for themselves. 

  4. Experimentation – if it doesn’t work, try something different.

In his Fourth Fireside Chat (June 1934), Roosevelt said that his ‘New Deal’ had three related steps:

  • Relief (helping the poor and unemployed to survive)

  • Recovery (getting the economy going again) and

  • Reform (changing things so a depression could never happen like that again). 

And Roosevelt's New Deal had two parts. 

First, he set about offering relief and trying to get the economy to recover. 

After 1935, however, he set about a much more radical agenda of social reform.

 

Initially, however, he was faced with a crisis.  During the four months Roosevelt was waiting to come into office (March 1933), the economy declined further, culminating in a banking crisis.  At the beginning of March, millions of people marched into their banks and demanded their money – as they were allowed – in gold.  It was impossible; banks in 34 states closed and padlocked their doors.  The entire financial system of the USA was on the verge of collapse. 

Roosevelt persuaded Congress to give him emergency powers from 9 March to 16 June 1933 (the 'Hundred Days').  Although many of Roosevelt's ideas were not new (some just copied Hoover's), 1933 - especially the 100 days - saw a burst of legislation to tackle the Depression like never before.

  

Going Deeper

The following links will help you widen your knowledge:

Basic accounts from BBC Bitesize

Clear account from Social Studies Help

 

BBC Bitesize podcast on Roosevelt - Roosevelt speaks for himself

BBC Sounds - The New Deal (excellent)

The New Deal  - BBC Witness History

 

YouTube

The New Deal and the TVA

   

 

 

 

 

 

 

 

 

 

 

  

This famous cartoon of the time shows FDR throwing out all Hoover's policies.  How true is it?

   

The First New Deal

 

  1. Confidence

    Roosevelt undertook a series of measures to end 'fear' and to get the American people on board:

    1. Abolished Prohibition:

      • He said: “I think this would be a good time for a beer”.  This restored faith in the government because it stopped the humiliation of the government’s laws being openly ignored. 
      • (It also increased the government’s revenues.)

    2. Fireside Chats:

      • FDR described his policies in radio broadcasts called ‘fireside chats’. 
      • FDR made sure that everyone who sent him a letter got a reply (he and Eleanor Roosevelt received up to 8,000 letters a day - see Sources A and B), and that everyone who telephoned the White House was never cut off. 

    3. Bank holiday:

      • The Emergency Banking Act closed the banks for four days.  The government checked that all were financially sound, and when they reopened, they reopened with the backing of the Federal Reserve. 
      • “I can assure you that it is safer to keep your money in a reopened bank than under the mattress.” (1st Fireside Chat, March 1933)
      • The Glass-Steagall Act of June 1933 forced the banks to keep their depositors money separate from any money they were using for speculative activities (e.g. buying shares themselves, or lending 'on margin' to others to do so).
      • This restored confidence in the banks, and people deposited their money there again. 

    4. Stock Exchange:

      • The Securities and Exchange Commission introduced rules for the Stock Exchange to prevent another Crash like 1929.

    2.  

  2. Finance and the Economy

    Roosevelt believed that he had to make sure that the economy was ‘sound’. 

    1. Budget:

      • He did not run deficit budgets (i.e.  the government did not spend more than it gathered in taxes). 
      • He CUT the pay of government employees by 15%. 

        (These measures actually made the depression worse.)

      • The government borrowed huge amounts of money to finance the New Deal, but it spent it on projects that were planned to pay back eventually. 

    2. Bankruptcies:

      • The Farm Loan Act and the Bankruptcy Act prevented banks from foreclosing on solvent businesses until they had had a chance to borrow from the Federal Reserve. 
      • The Home Loan Act and the Home Owners Loan Corporation did the same for ordinary home owners. 

    3. Prices and Wages:

      • The Agricultural Adjustment Act (AAA) paid farmers to take fields out of production; the idea of this was to stop over-production and to drive up prices. 
      • The National Industrial Recovery Act (NRA) gave businesses the right to form cartels, set their own codes of conduct, and force up prices, as long as they promised to cut production, pay good wages and allow workers to join a union.   Those who did joined a ‘Roll of Honour’ (and were allowed to show a blue eagle symbol) – 2.5 million firms, employing 22 million people, joined the scheme. 
      • FDR also abolished Child Labour – this put more adults into work. 

    4. Currency:

      You will read in some books that FDR 'abolished the gold standard' (a rule which links the value of a dollar to a certain weight of gold).  This is not true.  He did:

      • stop people owning gold (they had to deposit it in banks). 
      • make the banks give all the gold to the government. 
      • increase the price of gold from $20 to £35 an ounce. 

        (This stopped people hoarding/saving their money, and increased the amount of government reserves.  Since the dollar was still linked to gold, moreover, many foreign investors bought American dollars for gold, which increased the amount of government reserves.)

    3.  

  3. Alphahabet Agencies

    FDR set up what came to be called the ‘alphabet agencies’ because their names were reduced to acronyms.  The main ones were:

    1. CCC (Civilian Conservation Corps):

      • provided paid conservation work to give unemployed young men jobs – by 1941, 2.5 million had taken part PLUS millions of trees panted/ parks and forest areas developed.

    2. FERA (Federal Emergency Relief Administration):

      • provided matched funding to help states organise payments to the unemployed and homeless.

    3. PWA (Public Works Administration):

      • was given $3.3bn in 1933, and $7bn in total, to build large-scale public works such as dams, bridges, hospitals, and schools.

    4. WPA (Works Progress Administration):

      • ran projects which provided work for the unemployed, e.g. in arts, drama, media, and literacy projects, as well as in construction, and running relief programmes – although its wags were poor millions earned a small amount and felt valuable.

    5. TVA (Tennessee Valley Authority):

      • built 21 dams in ten years – stopped flooding, provided cheap electricity and provided work.

    Other Agencies included: the Farm Security Administration (FSA), the Home Owners Loan Corporation (HOLC) and the Civil Works Administration (CWA).

       

THE FIRESDE CHATS

(They are worth listening to – they will give you the best impression of what FDR was about.)

These chats were brilliant propaganda and they had three key aspects:

  • Homeliness – the chats were delivered “like a father discussing public affairs with his family in the living room” (people could hear the fire in the background).  FDR told people that he went fishing to think over big reforms, so he would not get out of touch with ordinary people’s thinking. 

  • Reasonableness – FDR said that he was not going to make false promises, and that he would not succeed every time.  (“We may make mistakes.  I have no expectation of making a hit every time I come to bat”). 

  • Blame – he spoke of ‘the 10%’ who wanted the New Deal to fail.  (“They may be divided roughly into two groups: First, those who seek special political privilege and, second, those who seek special financial privilege."). 

Ordinary people believed that he was fighting the rich and selfish in their behalf – as a result, even though the gains of the first New Deal were not great, FDR won the 1936 election by another landslide

 

 

Source A

Dear Mr. President:

This is just to tell you that everything is all right now.  The man you sent found our house all right, and we went down to the bank with him and the mortgage can go on for a while longer.  You remember I wrote you about losing the furniture too.  Well, your man got it back for us. 

I never heard of a President like you.

Letter to the President from an old man and his wife, (summer, 1933).

 

Source B

Dear Mrs. Roosevelt,

About a month ago I wrote you asking if you would buy some baby clothes for me...  Do you remember? 

As a proof that I really am sincere, I am sending you two of my dearest possessions to keep as security, a ring my husband gave me before we were married, and a ring my mother used to wear.  If you will consider buying the baby clothes, please keep them (rings) until I send you the money you spent. 

It is very hard to face bearing a baby we cannot afford to have, and the fact it is due to arrive soon, and still there is no money for the hospital or clothing, does not make it any easier.

If you will get these for me I would rather no one knew about it.  I promise to repay the cost of the layette as soon as possible.  We will all be very grateful to you, and I will be more than happy. 

Sincerely yours,

Mrs. H.E.C.

Letter to Eleanor Roosevelt, written by an expectant mother of two in New York.

 

 

 

The Second New Deal

 

In 1935, Roosevelt's New Deal was still hugely popular with the people, but it was running into opposition (see next page for greater detail). 

The most important elements of this opposition were:

  1. The Supreme Court, which ruled the NRA and the AAA illegal, because they took away the right of states to run their own affairs. 

  2. Some businessmen, who attacked and ignored the NRA saying that it was expensive and wasteful. 

 

Therefore, in the run up to the 1936 election and after it, Roosevelt followed a much more radical 'reform' agenda:

     

  1. Social Security Act (1935):

    • Provided America's first system of social welfare. 

    • set up a national system of old-age pensions.

    • gave help to people with physical disabilities.

    • gave help to children in need.

    • set up a national system of unemployment insurance. 

    2.  

  2. National Labour Relations Act (1935):

    • Also known as the Wagner Act. 

    • To replace the banned NRA.

    • Protected workers' right to join a trade union. 

    • Set up the National Labour Relations Board (NLRB) to prevent employers from victimising workers. 

    3.  

  3. Soil Conservation Act (1935):

    • To replace the banned AAA. 

    • Allowed the government to continue subsidising farmers. 

    4.  

  4. National Housing Act (1937):

    • Provided loans to buy houses. 

    • Reduced excessive rents. 

    5.  

  5. Fair Labour Standards Act (1938):

    • Set hours and conditions of work. 

    • Fixed a minimum wage. 

 

Source C

Never before in all our history have these forces of [organised money] been so united in their hate for one candidate – and I welcome their hatred.

I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match.  I should like to have it said of my second administration that in it they met their master..

Franklin D. Roosevelt, 'We Have Only Just Begun to Fight', election speech October 31, 1936. .

 

Source D

But here is the challenge to our democracy: In this nation I see tens of millions of its citizens - a substantial part of its whole population - who at this very moment are denied the greater part of what the very lowest standards of today call the necessities of life... 

I see millions denied education, recreation, and the opportunity to better their lot and the lot of their children. 

I see one-third of a nation ill-housed, ill-clad, ill-nourished... 

The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.

2nd Inaugural Address (1937).

 

Source E

This 1934 mural sees Roosevelt as the protector and friend of the working man.

  

 

Consider:

1.  Sources A and B make me cry.  What about them makes them so emotionally moving?  What do they reveal about people's attiudes towards Roosevelt?

2.  How was the Second New Deal different to the first?

  

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