The new deal

INTRODUCTION
The New Deal was a transformative series of programs, public work
projects, financial reforms, and regulations launched by President Franklin
D. Roosevelt between 1933 and 1939. It was developed in response to the
catastrophic economic collapse triggered by the 1929 stock market crash,
which led to widespread unemployment, bank failures, and poverty across
the United States. At the height of the Great Depression, nearly a quarter of
the American workforce was unemployed, and many families faced hunger
and homelessness.. Organized into two key phases—the First New Deal
which prioritized immediate relief and economic recovery, (1933–1934) and
the Second New Deal (1935–1938) , which focused on long-term reform
and social equity.
The New Deal pursued the "Three Rs": relief to alleviate immediate
suXering, recovery to revitalize the economy, and reform to prevent future
crises. The Three Rs of the New Deal—Relief, Recovery, and Reform—
represent the core objectives of President Franklin D. Roosevelt’s policies
implemented during the 1930s to address the economic and social crises
of the Great Depression. These guiding principles shaped the programs of
the First New Deal (1933–1934) and the Second New Deal (1935–1938),
providing a framework for alleviating immediate suXering, restoring
economic stability, and preventing future crises.
Relief focused on providing immediate assistance to millions of
Americans suXering from unemployment, poverty, homelessness, and
hunger caused by the Great Depression. The goal was to oXer direct aid
and create jobs to alleviate distress, stabilize families, and restore dignity
to those hardest hit by the economic collapse.
Recovery aimed to stimulate economic growth, restore industrial and
agricultural productivity, and stabilize financial systems to lift the nation
out of the Depression. The focus was on boosting consumer spending,
raising prices, and revitalizing key sectors like agriculture, industry, and
banking.
Reform aimed to implement long-term structural changes to prevent
future economic crises, address inequalities, and strengthen the economic
and social framework. These measures sought to regulate financial
markets, protect workers, and establish a social safety net.

Causes of the New Deal

1. Economic Collapse of the Great Depression

The Great Depression was the most severe economic downturn in modern
history, triggered by the stock market crash of October 1929.
• Industrial Decline: Industrial production plummeted by nearly 50%
between 1929 and 1933. Factories closed, and industries like steel
and automobiles saw massive layoXs.
• Trade Collapse: Global trade contracted as countries adopted
protectionist policies, such as the U.S. Smoot-Hawley Tariff Act of
1930, which raised tariffs and reduced exports. U.S. exports fell from
$5.2 billion in 1929 to $1.7 billion by 1933, further weakening
industries.

2. Banking Crisis

The banking system’s collapse was a central driver of the Great Depression
and a key catalyst for the New Deal. Between 1929 and 1933, over 9,000
banks failed, representing nearly one-third of U.S. banks. This crisis had
profound effects:

• Loss of Savings: Bank failures wiped out $7 billion in depositors’

savings (equivalent to over $140 billion in 2025 dollars), devastating
individuals and families. For example, in 1931, the failure of the
Bank of the United States in New York alone cost depositors $200
million.
• Credit Freeze: As banks collapsed, credit became scarce, stifling
business investment and consumer spending. Small businesses,
unable to secure loans, closed, while farmers faced foreclosure due
to lack of credit.
• Bank Runs: Panic-driven withdrawals, or "bank runs," accelerated
failures, as depositors rushed to retrieve savings before banks
collapsed. By early 1933, public confidence in the banking system
had evaporated.
• State-Level Bank Holidays: By March 1933, 38 states had declared
"bank holidays," temporarily closing banks to prevent further runs.
 This paralyzed the financial system, halting transactions and
deepening the economic crisis.

3. Mass Unemployment and Social Distress

The Great Depression caused unprecedented unemployment, peaking at

25% in 1933 (approximately 12.8 million workers), compared to 3.2% in
1929

• Widespread Poverty: Unemployed workers could not afford basic

necessities, leading to hunger, homelessness, and malnutrition
• Homelessness and Shantytowns: Millions lost homes to
foreclosure, leading to the rise of "Hoovervilles"—shantytowns
named after President Herbert Hoover, blamed for the crisis.

4. Failure of Laissez-Faire Policies

The Hoover administration (1929–1933) adhered to a laissez-faire

philosophy, emphasizing limited government intervention and voluntary
cooperation from businesses to address the Depression. These policies
proved inadequate. Public and political sentiment shifted toward
government intervention to stabilize the economy and provide relief.

5. Political Mandate:

Roosevelt’s landslide victory in the 1932 presidential election reflected a

public demand for bold action. His campaign promise of a "new deal for
the American people" set the stage for sweeping reforms.

Major Features of the New Deal

First New Deal (1933–1934)
The First New Deal was launched in the immediate aftermath of
Roosevelt’s inauguration in March 1933, during a period of acute economic
distress. Its primary goals were to provide immediate relief to the
unemployed, stabilize the financial system, and promote economic
recovery. This phase was characterized by rapid legislative action during
the "First Hundred Days" of Roosevelt’s presidency, a period of
unprecedented government activity. The programs addressed urgent
needs while laying the groundwork for broader economic stabilization.

1.Financial Reforms
The banking crisis of 1933, marked by widespread bank failures and loss of
public confidence, necessitated urgent reforms to stabilize the financial
system and prevent future collapses.

• Emergency Banking Act (1933):

On March 5 FDR ordered all banks to dose for four days. At the end
of this so called bank holiday on 9 march1933, he proposed an
Emergency Banking Act authorized the federal government to
reorganize insolvent banks and restore public trust.
The Treasury Department inspected banks, allowing solvent
institutions to reopen with federal backing. Roosevelt’s first "fireside
chat" reassured Americans, encouraging them to redeposit savings.

Impact: Within days, over 75% of banks reopened, and deposits

exceeded withdrawals, restoring confidence. The act prevented
further financial collapse and stabilized the banking system,
enabling credit to flow again.

• Glass-Steagall Act (1933):

Enacted in June 1933, the Glass-Steagall Act aimed to prevent
speculative banking practices that contributed to the 1929 crash. It
created the Federal Deposit Insurance Corporation (FDIC) to insure
bank deposits. The FDIC insured deposits up to $2,500 (later raised),
protecting small savers and separated commercial banking (e.g.,
loans and deposits) from investment banking (e.g., stock trading).

Impact: The FDIC restored public confidence, with insured deposits

encouraging savings. By 1934, bank failures dropped significantly.
The separation of banking functions limited speculative excesses.

• Securities Act (1933) and Securities Exchange Act (1934):

A few measures adopted during the Hundred Days took a tougher
approach to businesses. The 1929 crash had produced a strong
antibusiness reaction. A Senate investigation of Wall Street in 1932-
1934 discovered chat none of the twenty Members of the Morgan
 Bank had paid any income tax in 1931 or 1932. Reflecting the public
mood, Congress in 1933 passed federal Securities Act that regulated
the stock market to prevent fraud and speculative bubbles. The
Securities Act required companies to disclose financial information
when issuing stocks while the Securities Exchange Act created the
Securities and Exchange Commission (SEC) to oversee markets and
enforce transparency.

Impact: The acts restored investor confidence by reducing stock

market manipulation and insider trading.

2.Relief Programs

The First New Deal prioritized direct assistance to millions of

Americans suffering from unemployment, poverty, and
homelessness. Relief programs aimed to provide immediate aid
while creating jobs to restore dignity and economic activity.

• Civilian Conservation Corps (CCC):

Launched in April 1933, the CCC employed young men aged 18–25 in
conservation and infrastructure projects, such as reforestation, soil
erosion control, and national park development. It aimed to reduce
urban unemployment and improve the nation’s natural
resources. The CCC enrolled over 2.5 million men over its nine-year
existence, housing them in camps managed by the U.S. Army.
Workers earned $30 per month, with $25 sent to their families,
ensuring economic benefits reached households, while the
remaining $5 was given to the worker as personal spending money.

• Federal Emergency Relief Administration (FERA):

Established in May 1933, FERA provided federal grants to states and
local governments to fund relief efforts, including food, clothing, and
shelter for the unemployed and needy. Unlike earlier efforts that
focused on indirect aid or loans, FERA provided direct cash relief—a
bold and controversial approach at the time. FERA distributed over
$3 billion in grants (equivalent to roughly $60 billion in 2025 dollars)
to states, which then allocated funds to local relief agencies. It
supported work relief programs, preferring to employ individuals
rather than provide direct handouts to preserve self-respect.
 Impact: FERA assisted millions of families, providing immediate
relief to those hardest hit by the Depression. FERA marked a shift
toward federal responsibility for welfare, setting a precedent for later
programs like the Works Progress Administration.

• PWA(PUBLIC WORK ADMINISTRATION):

Created under the National Industrial Recovery Act in June 1933, the
PWA funded large-scale infrastructure projects to create jobs and
stimulate economic activity. It focused on durable, long-term
projects like highways, dams, and public buildings. Directed by
Secretary of the Interior Harold Ickes, the PWA allocated $3.3 Billion
in various project in order to provide employment opportunities
along with building of modern American infrastructure.

Impact: The PWA employed millions indirectly through construction

contracts, boosting industries like steel and cement. Its projects
modernized American infrastructure, with lasting benefits.

3. Economic Recovery Programs

The First New Deal sought to revive industry and agriculture,

addressing deflation, unemployment, and declining production
through government intervention.

• National Industrial Recovery Act (NIRA):

Passed in June 1933, the NIRA aimed to stabilize industry by reducing
cutthroat competition and promoting fair labor practices. It created
the National Recovery Administration (NRA) to develop industry-
specific codes setting wages, hours, prices, and production quotas.
The NRA, symbolized by the Blue Eagle emblem, collaborated with
businesses and labor to draft codes for industries like steel, textiles,
and automobiles. The aim was to promote recovery by breaking the
cycle of wage dues, falling prices, and layoffs.

Impact: The NRA raised wages and reduced hours in some

industries, improving worker conditions. For example, textile workers
saw a 30% wage increase in some regions. However, the codes often
favored large corporations, and enforcement was inconsistent. The
Supreme Court declared the NIRA unconstitutional in 1935
 (Schechter Poultry Corp. v. United States), citing overreach of federal
power.

• Agricultural Adjustment Act (AAA):

Enacted in May 1933, the AAA sought to boost farm incomes by
addressing agricultural overproduction, which had driven down crop
prices. It paid farmers to reduce production of crops like wheat,
corn, and cotton, funded by a tax on food processors. The AAA
subsidized farmers to plow under crops and slaughter livestock,
reducing supply to raise prices. For example, in 1933, 6 million pigs
were destroyed to stabilize pork prices. The program also offered
loans to prevent farm foreclosures.

Impact: Farm incomes rose by 50% between 1932 and 1936, and
crop prices stabilized. However, the program disproportionately
benefited large landowners, and tenant farmers, especially African
Americans, often faced eviction as landowners reduced acreage. The
Supreme Court struck down the AAA in 1936 (United States v. Butler),
but a revised version continued.

• Tennessee Valley Authority (TVA):

The most innovative program of the Hundred Days was the
Tennessee valley Authority (TVA). Created in May 1933, the TVA was a
regional development program to modernize the impoverished
Tennessee Valley through hydroelectric dams, flood control, and
economic development. The TVA built 20 dams, including the Norris
Dam, generating affordable electricity for rural areas. It also provided
jobs, reforested land, and developed recreational areas. The
program worked with local communities to improve agriculture and
education.

Impact: The TVA electrified rural homes, with 75% of Tennessee

Valley households gaining electricity by 1940. It created thousands
of jobs and boosted industries like fertilizer production. However, it
displaced some communities due to dam construction and faced
opposition from private utility companies.

PROBLEMS PERSISTED
 • High Unemployment: Despite programs like the CCC and PWA,
unemployment remained high at 20.1% in 1935, with millions still
jobless due to the limited scope and temporary nature of relief
efforts.
• Incomplete Economic Recovery: Industrial production was 20%
below 1929 levels, and the NIRA’s failure- small buisnesses objected
that codes drafted under NRA favoured bug corporations
• Agricultural Disparities: The AAA boosted farm incomes by 50% but
favored large landowners and its crop reduction payment actually
hurt the tenant farmers and sharecroppers, especially African
Americans, displaced or without aid.
• Social Inequities: Racial and gender disparities persisted, with
programs like the CCC excluding women and minorities facing
limited access to relief due to discriminatory local administration.
• Legal Setbacks: The Supreme Court struck down the NIRA (1935)
and AAA (1936), disrupting industrial and agricultural recovery efforts
and limiting federal authority.

Second New Deal (1935–1938)

The Second New Deal emerged in response to criticisms that the First New
Deal favoured big business and failed to address persistent unemployment
and inequality. Launched after the 1934 midterm elections, which
strengthened Democratic control of Congress, this phase emphasized
social welfare, labour rights, and long-term economic security.

1. Social Welfare and Relief

The Second New Deal expanded relief efforts and introduced permanent
social welfare programs to protect vulnerable populations and ensure
economic stability.

• Works Progress Administration (WPA):

Established in April 1935, the WPA was the largest New Deal
employment program, designed to provide jobs for the unemployed
in public works and cultural projects. It aimed to create immediate
employment while producing lasting public benefits. Over its 9 year
life, WPA employed more than 8 million Americans and constructed
 or improved vast numbers of bridges, roads, school ,post offices,
and other public facilities.

Impact: The WPA reduced unemployment and improved

infrastructure, with projects like schools and hospitals benefiting
communities nationwide.

• Social Security Act (1935):

Signed in August 1935, the Social Security Act was a landmark in
American social policy, creating a federal safety net for retirees, the
unemployed, and other vulnerable groups. It included old-age
pensions, unemployment insurance, and aid to dependent children,
the disabled, and the blind. The act established a payroll tax(taxes on
employee earning) to fund pensions, with benefits starting in 1940.
Unemployment insurance was administered by states with federal
oversight, while aid programs supported families in need. The
program was designed to be self-sustaining through contributions.

Impact: By 1940, millions of elderly Americans received pensions,

reducing poverty among retirees. Unemployment insurance provided
temporary support for workers, and aid programs assisted families,
though coverage was limited for minorities and agricultural workers.
The act faced criticism for its regressive payroll tax but became a
cornerstone of the welfare state.

2. Labor Reforms
The Second New Deal prioritized workers’ rights, responding to
growing labor unrest and the influence of unions.

• National Labor Relations Act (Wagner Act, 1935):

Enacted in July 1935, the Wagner Act guaranteed workers’ rights to
form unions, engage in collective bargaining, and strike. It created
the National Labor Relations Board (NLRB) to enforce these rights
and mediate labor disputes. The NLRB investigated unfair labor
practices, such as employer intimidation of union organizers, and
oversaw union elections. The act empowered workers to negotiate
better wages and conditions, particularly in industries like steel and
automobiles.
 Impact: Union membership grew from 3 million in 1933 to 9 million
by 1940, strengthening organized labor. The Wagner Act transformed
labor relations, giving workers a stronger voice and shaping modern
labor laws. It remains a cornerstone of American labor policy.

• Fair Labor Standards Act (1938):

Passed in June 1938, this act established a federal minimum wage, a
40-hour workweek with overtime pay, and restrictions on child labor
for industries engaged in interstate commerce. The initial minimum
wage was set at 25 cents per hour, rising to 40 cents by 1945. The act
applied to about 20% of the workforce initially, excluding agricultural
and domestic workers, many of whom were minorities.

Impact: The act improved wages and working conditions for millions,
particularly in low-wage industries like textiles. It reduced child labor
in factories, though exemptions limited its scope. By 1940, overtime
pay encouraged shorter workweeks, improving work-life balance.

3. Economic and Tax Reforms

• Revenue Act (1935):

Known as the "soak the rich" tax, the Revenue Act of 1935 increased
income taxes on high earners and corporations, aiming to
redistribute wealth and fund New Deal programs. The act raised the
top income tax rate to 75% for incomes over $5 million and increased
corporate taxes.

Impact: The act generated modest revenue, as few Americans

earned high incomes during the Depression. It faced fierce
opposition from wealthy elites and businesses, who labelled it
punitive. However, it symbolized a commitment to economic equity.

• Rural Electrification Administration (REA):

Created in May 1935, the REA aimed to bring electricity to rural
areas, where only 10% of households had access in 1930, compared
to 90% in urban areas. The REA provided low-interest loans to
cooperatives and utilities to build power lines and infrastructure. By
1940, it had electrified 40% of rural homes, with 1.5 million
households gaining access.
 Impact: Electrification transformed rural life, enabling farmers to
use modern equipment, improving productivity, and enhancing living
standards with appliances like refrigerators. It also supported rural
businesses and schools.

There are various other acts and reforms passed regarding better
housing facilities like US Housing Authority , banking sectors, farm
facilities like farm security administration etc

ECONOMIC PLANNING OR
EXPERIMENTATION
Arguments Supporting the New Deal as Economic Planning:

1.Expanded Government Role in Economic Coordination: The New Deal

marked a shift toward centralized government intervention in the U.S.
economy, moving away from laissez-faire traditions. The federal
government actively sought to regulate industries, stabilize prices, and
manage labor relations, indicating a planned effort to restructure
economic activity.
2. Strategic Response to Crisis: The New Deal addressed the Great
Depression through coordinated initiatives targeting unemployment,
banking instability, and agricultural distress. This systematic approach,
with programs designed to interlock (e.g., relief, recovery, and reform),
reflects deliberate economic planning to restore stability
3. Long-Term Structural Reforms: The introduction of enduring
institutions, such as Social Security and financial regulations, suggests a
planned vision for a more stable and equitable economic system, rather
than merely short-term fixes.

Arguments supporting economic experimentation

1.Pragmatic and Experimental Approach: The New Deal was often

described by President Roosevelt himself as “bold, persistent
experimentation.” FDR famously said, “Try something. If it fails, admit it
frankly and try another.” Many initiatives were tested without a clear
blueprint, and some were abandoned or revised when they failed,
suggesting a lack of cohesive planning. Example: The NIRA’s NRA was
struck down by the Supreme Court in 1935 for overstepping federal
authority. Its failure and subsequent pivot to other strategies show the New
Deal’s experimental, rather than strictly planned, nature.

2.Response to Immediate Pressures: Many New Deal actions were driven

by urgent political and economic pressures, such as mass unemployment
or public unrest, rather than a comprehensive, pre-designed plan for
economic restructuring.

3.Inconsistent and Reactive Measures: The New Deal’s diverse initiatives

sometimes conflicted, suggesting a lack of unified planning. Example: In
1937, Roosevelt’s attempt to balance the federal budget by cutting
spending (e.g., reducing PWA and WPA funding) triggered a recession
within the Depression, undermining earlier recovery efforts. This policy
reversal highlights a reactive, unplanned approach.

CONCLUSION
As a form of economic planning, the New Deal fundamentally reshaped the
relationship between the federal government and the national economy. For
the first time in U.S. history, Washington assumed a central role in regulating
markets, managing production, stabilizing prices, and providing social
safety nets. Initiatives such as the NRA, AAA, Social Security Act, SEC, and
FDIC institutionalized long-term planning mechanisms that would influence
U.S. economic policy for generations. These measures aimed not only to
address the immediate economic collapse but also to build a more resilient,
equitable, and regulated economic order.
Simultaneously, the New Deal was deeply experimental in nature.
President Roosevelt and his administration did not operate from a single
ideological framework or economic doctrine. Instead, they embraced a
pragmatic, adaptive approach, frequently testing new ideas, adjusting
policies, and sometimes abandoning or reshaping programs in response to
public needs, political opposition, and judicial review. This dynamic
approach led to a fluid, responsive style of governance—an innovation in
itself during a time of national emergency.
Ultimately, the New Deal did not represent a fully centralized or state-
controlled economy like those in some European nations at the time, but it
undeniably introduced the United States to the concept and practice of
coordinated economic governance. It carved out a middle path between
unregulated capitalism and total economic control, giving rise to a mixed
economy model that became the foundation for postwar prosperity.
In this way, the New Deal's significance lies not only in the policies it
implemented, but in the philosophical shift it initiated—a shift toward the
belief that government has a vital and active role to play in ensuring
economic stability, protecting the vulnerable, and promoting public welfare.
This dual identity—planned yet experimental—is what makes the New
Deal both a groundbreaking moment of innovation and a lasting pillar of
modern American government.