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New deal

The New Deal

During the 1930's, America witnessed a breakdown of the

Democratic and free enterprise system as the US fell into

the worst depression in history. The economic depression

that beset the United States and other countries was unique

in its severity and its consequences. At the depth of the

depression, in 1933, one American worker in every four was

out of a job. The great industrial slump continued

throughout the 1930's, shaking the foundations of Western


The New Deal describes the program of US president

Franklin D. Roosevelt from 1933 to 1939 of relief, recovery,

and reform. These new policies aimed to solve the economic

problems created by the depression of the 1930's. When

Roosevelt was nominated, he said, "I pledge you, I pledge

myself, to a new deal for the American people." The New Deal

included federal action of unprecedented scope to

stimulate industrial recovery, assist victims of the

Depression, guarantee minimum living standards, and prevent

future economic crises. Many economic, political, and

social factors lead up to the New Deal. Staggering

statistics, like a 25% unemployment rate, and the fact that

20% of NYC school children were under weight and

malnourished, made it clear immediate action was necessary.

In the first two years, the New Deal was concerned mainly

with relief, setting up shelters and soup kitchens to feed

the millions of unemployed.

However as time progressed, the focus shifted towards

recovery. In order to accomplish this monumental task,

several agencies were created. The National Recovery

Administration (NRA) was the keystone of the early new deal

program launched by Roosevelt. It was created in June 1933

under the terms of the National Industrial Recovery Act.

The NRA permitted businesses to draft "codes of fair

competition," with presidential approval, that regulated

prices, wages, working conditions, and credit terms.

Businesses that complied with the codes were exempted from

antitrust laws, and workers were given the right to organize

unions and bargain collectively. After that, the government

set up long-range goals which included permanent recovery,

and a reform of current abuses. Particularly those that

produced the boom-or-bust catastrophe. The NRA gave the

President power to regulate interstate commerce. This power

was originally given to Congress. While the NRA was

effective, it was bringing America closer to socialism by

giving the President unconstitutional powers.

In May 1935 the US Supreme Court, in Schechter Poultry

Corporation V. United States, unanimously declared the NRA

unconstitutional on the grounds that the code-drafting

process was unconstitutional. Another New Deal measure under

Title II of the National Industrial Recovery Act of June

1933, the Public Works Administration (PWA), was designed to

stimulate US industrial recovery by pumping federal funds

into large-scale construction projects. The head of the PWA

exercised extreme caution in allocating funds, and this did

not stimulate the rapid revival of US industry that New

Dealers had hoped for. The PWA spent $6 billion enabling

building contractors to employ approximately 650,000 workers

who might otherwise have been jobless. The PWA built

everything from schools and libraries to roads and highways.

The agency also financed the construction of cruisers,

aircraft carriers, and destroyers for the navy.

In addition, the New Deal program founded the Works

Projects Administration in 1939. It was the most important

New Deal work-relief agency. The WPA developed relief

programs to preserve peoples skills and self-respect by

providing useful work during a period of massive

unemployment. From 1935 to 1943 the WPA provided

approximately 8 million jobs at a cost of more than $11

billion. This funded the construction of thousands of

public buildings and facilities. In addition, the WPA

sponsored the Federal Theater Project, Federal Art

Project, and Federal Writers' Project providing work for

people in the arts. In 1943, after the onset of wartime

prosperity, Roosevelt terminated the WPA. One of the most

well known, The Social Security Act, created a system of

old-age pensions and unemployment insurance, which is still

around today. Social security consists of public programs to

protect workers and their families from income losses

associated with old age, illness, unemployment, or death.

The Fair Labor Standards Act (1938) established a federal

Minimum Wage and maximum-hours policy. The minimum wage, 25

cents per hour, applied to many workers engaged in

interstate commerce. The law was intended to prevent

competitive wage cutting by employers during the Depression.

After the law was passed, wages began to rise as the economy

turned to war production. Wages and prices continued to

rise, and the original minimum wage ceased to be relevant.

However, this new law still excluded millions of working

people, as did social security. However, a severe recession

led many people to turn against New Deal policies. In

addition, World War II erupted in September 1939. Causing an

enormous growth in the economy as war goods were once again

in great demand. No major New Deal legislation was enacted

after 1938.

The Depression was a devastating event in America, and

by regulating banks and the stock market the New Deal

eliminated the dubious financial practices that had helped

precipitate the Great Depression. However, Roosevelt's chief

fiscal tool, deficit spending, proved to be ineffective

in averting downturns in the economy.

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