top-rated free essay

FDR's New Deal Policies and Their Effectiveness

By kimberlyrem Apr 28, 2015 1088 Words
“Even though the New Deal programs of Franklin D. Roosevelt were massive in their size, they did not effectively solve the economic problems created by the Great Depression in the United States”. To what extend do you agree with this statement?

The Great Depression in the United States began in 1929 and carried on into the 1930s. THis period of time was difficult for most Americans, as many were unemployed, poor and yet still had to support their families. The main economic problems of the Great Depression included a lack of business investment, reduced consumer spending power, unemployment and a poor banking system. Franklin Delano Roosevelt, the president at the time, knew that something had to be done immediately. Thus, he established the New Deal, a series of programs aimed at relief, reform and recovery from the Great Depression. Even though the New Deal programs of Franklin D. Roosevelt were massive in their size, they did not effectively solve the economic problems created by the Great Depression in the United States to a large extent, as even though the relief programs existed, the New Deal furthered the failure of businesses and reduced consumer purchasing power, thereby halting the flow of money in the economy.

The New Deal was harsh on large businesses, making it difficult for firms to invest and grow. Roosevelt was very much opposed large businesses from the beginning. In his first inaugural address, he declared that money changers were now expelled from the temples of the federal government. In essence, he declared the end to the reign of large businesses and the free market. According to historian Jim Powell, Roosevelt made an enemy out of big businesses, and very many of his New Deal programs attacked these firms. This is shown through one of Roosevelt’s most hard-hitting programs, the National Recovery act of 1933, or the NRA. THe NRA was aimed at protecting workers’ rights - putting a cap on hours worked per week, minimum wage, and protecting children from harsh labor conditions (e.g. 0-16 year olds were not allowed to work in factories). Additionally, while GM and Chrysler joined the NRA, Ford did not and when they all bid to manufacture 500 trucks for the CCC, Ford won because they had the lowest bid and they paid higher wages than Dodge. This shows how other businesses were restricted by the NRA because Ford was able to win the bid and pay their workers better. Furthermore, with average wages increasing by 70% during the Great Depression, firms’ costs of production increased. This, coupled with the fact that demand for consumer goods decreased, meant that firms made less profit and revenue. This prompted firms to lay off workers. By 1930, 500,000 African Americans were fired due to the NRA minimum wage law. Not only did this mean even less demand for the firm’s goods, but it also meant that firms were not recovering from the effects of the Great Depression - a lack of demand and revenue. Firms were discouraged even further from investing, as business taxes also increased. In fact, in 1936, a limit was placed on how much large firms were allowed to profit, called the Revenue Act. For every extra dollar of profit passed this limit, 10% of it was taxed away. Individuals were also affected, like in April of 1934 a 49 year old immigrant, Jacob Maged of New Jersey, was jailed for 3 months and fined for charging 35 cents to press a suit rather than the 40 cents mandated by the NRA. This discouraged firms from expanding or investing, as they had less power to do so and it was also clear that they did not have the support of the federal government. Economist Ellis W. Hawley said, “ their tendency toward restriction, their failure to provide any incentive for expansion when an expanding economy was the crying need of the time”. With a lack of incentive, firms would not invest. A lack of profit made it so that firms did not have incentive to expand. Thus, firms were not able to do their part in playing by the law of supply and demand - where they were producing goods and services that consumers wanted to purchase. This halted potential cash flow in the economy.

The New Deal also reduced consumer spending power, making it even more difficult to kick start American capitalism. FDR was known for his sky-high taxes. In fact, he even taxed alcohol and increased taxes for wine and beer by up to 40%. He also made personal wealth taxes more progressive - as people with income up to $9000/year were taxed at 30% and those with $9000/year or higher were taxed at 40%. By the 1940s, states’ revenue increased to $4 billion from $2.1 billion in 1930. Economist Benjamin Anderson thought that these taxes would have “paralyzing” results, and they did. With less money in their pockets, consumers could not spend as much. Furthermore, many New Deal programs that affected businesses, like the NRA, also affected households. Unemployment rose to 20% in 1932. With no income, people spent less. There was also the issue of hunger and lack of money to even purchase food. The Agricultural Adjustment Act of 1933 cost the government $20 billion to destroy 10 Although this helped prices rise, it wasted precious food for hungry people, and made it so that they could not afford to feed their families.

However, some programs helped employment. The CCC, or Civilian Conservation Corps, employed up to 3 million men, giving them $30 a month with free lodging and food Within 5 months it had employed ¼ a million people and 2 million by 1938. It was also beneficial to the individuals, as 40,000 illiterate men were taught to read.This money went back to the family and helped put more money into the economy once that money was spent. The Workers Progress Administration of 1935 and the Tennessee Valley Act of 1933 also employed more people, and in effect gave up to 6 million men jobs to support their families. The TVA provided jobs, electricity and control the floods. However, with 123 million Americans, these programs did not reach the majority of the unemployed, as is seen by the fact that 75% of african Americans were unemployed, and 15% of Americans were unemployed by 1936.

Thus, the New Deal programs to a large extent did not help economic problems, as they stopped consumers from consuming and producers from producing - stopping the flow of money in the economy.

Cite This Document

Related Documents

  • FDR's New Deal: Effective or Not?

    ...The New Deal was an economic plan developed by Franklin D. Roosevelt, based on Keynesian Economics that was geared towards pulling the nation out of the Great Depression. Although it did not achieve its main goal, it steered the nation in the right direction so that it finally ended in 1943 when unemployment rates reached pre-Depression rates. H...

    Read More
  • Fdr's New Deal

    ...Following the stock market crash in late 1929, America began a long period of depression. The thirties were known for the extreme lack of money for families and for individuals. No jobs were available and the road ahead was long. In an attempt to help fix these problems, President Roosevelt developed a series of programs known as the New Deal. T...

    Read More
  • FDR's New Deal: Inspired by Relief, Recovery and Reform

    ... FDR and The New Deal Franklin Delano Roosevelt was elected as the thirty-second president of the United States in 1932. His greatest legacy was his creation of the “New Deal” which changed the relationship between the economy, the government and the people. The American people came to believe that the federal governm...

    Read More
  • New Deal

    ...The New Deal 1933-2939 1933-1939 periods were one of the most critical periods in the American History. Around 1929, Americans faced unremitting economical privation, where complete reformation was required in order to restore its economical health. The Great Depression of America destroyed its confidence and trusts in the government, furthermo...

    Read More
  • FDR's The New Deal: Strengthening the Role of the Federal Government

    ...maintained the idea of laissez-faire. This idea, however failed to help the economy at the time. The people wanted a new president; and on March 4, 1933 Franklin D. Roosevelt took office. Roosevelt tried to reform and restore the American economy saying, “All we have to fear is fear itself.” Roosevelt implemented his New Deal plan to assuage...

    Read More
  • Fdr's New Deal

    ...Qahdirrha Parker DBQ Quarterly 1 “Identify who supported and who argued against FDR’s New Deal. Why are there such different views on this President and his policies?” FDR’s New Deal is a series of economic programs that have been enacted in the United States between 1933 and 1936. These programs were set towards the Great Depr...

    Read More
  • FDR's New Deal Alphabet Soup Agencies

    ...What do you do when an entire country is in an economic depression? You can count on FDR's New Deal to resolve it. FDR's New Deal is an expression that is used to describe the number of relief, recovery, and reforms programs aimed to fight off the Great Depression. These programs are also known as the alphabet agencies due to their acronyms. ...

    Read More
  • FDR's The New Deal: Combating the Great Depression

    ... Whatever else the new law accomplished, it helped dispel the panic. Three quarters of the banks in the Federal Reserve System reopened within the next three days, and $1 billion in hoarded currency and flowed back into them within a month. Roosevelt also moved his first days in office to put to rest one of the divisive issues of the 1920’s. H...

    Read More

Discover the Best Free Essays on StudyMode

Conquer writer's block once and for all.

High Quality Essays

Our library contains thousands of carefully selected free research papers and essays.

Popular Topics

No matter the topic you're researching, chances are we have it covered.