The Great Depression: Roosevelt's New

Deal

Richard Canales 1
The Great Depression: Roosevelt's New
Deal

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The Great Depression: Roosevelt's New
Deal

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The Great Depression: Roosevelt's New
Deal

Over-speculation: When stocks are priced higher than their actual value. This value is
determined by the expected profitability and projected growth of a business.
Recession: A period when less spending occurs and market value declines. This is less
severe than an economic depression. This recession indicated that the market was
overvalued, which put investors on edge and made them eager to sell stocks before the
crash hit.
When investors rush to sell their stocks all at once, the overall supply of stocks increases,
outpacing demand and causing the value of each stock to decrease. Because the stocks
were overvalued in the first place, the drop in price was much steeper than in normal
market conditions. This led to bankruptcy for many investors.

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The Great Depression: Roosevelt's New
Deal

When the average American sees the stock market crash, they usually begin to save their
money for fear of unemployment or economic hardship. This means less people are buying
products, and businesses respond by cutting back production. This means they need less
workers and seek to cut their costs by laying off employees. If there are large numbers of
unemployed workers at once, it becomes harder to find a job. Because there is a surplus of
readily available labor, business can cut wages without fear of employees quitting in
protest. This massive unemployment and lower wages further reduces consumer spending,
creating a downward spiral for the entire market.

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The Great Depression: Roosevelt's New
Deal

Federal social welfare programs were virtually non-existent at the time of the Great
Depression. Private charities, religious organizations, and local governments were
traditionally relied upon to support those in need.
The Great Depression quickly strained these traditional forms of welfare as never-before-
seen levels of unemployment and homelessness hit the country.
By 1930, banks were beginning to collapse. At the time, there was no guarantee that
money invested in a failing bank could be recovered, so people began to flood their local
banks to withdraw their money. Because banks typically invest this money in profitable
enterprises, they could not readily liquidate their cash without going bankrupt. This led
thousands of banks to fail across the nation. Because banks provide loans and investment
services, this made it harder for businesses and individuals, especially farmers, to sustain
themselves.

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The Great Depression: Roosevelt's New
Deal

Although Hoover began to change his attitude towards relief at the end of his term as
president and began to initiate several programs that would later be realized as part of the
New Deal, it was too little, too late. Public attitude soured towards Hoover: the clusters of
makeshift shacks that sprang up in cities were derogatorily nicknamed “Hoovervilles.”

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The Great Depression: Roosevelt's New
Deal

FDR ran as a Democrat on a platform that offered relief, reform, and recovery. This was
popular with the public who had lost faith in Hoover and Republican policies and
leadership. FDR won by a landslide and support for his policies was strong: America was
ready to experiment with the progressive ideals of the New Deal.

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The Great Depression: Roosevelt's New
Deal

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The Great Depression: Roosevelt's New
Deal

FDR took office amid the largest economic crises in US history. His first step was to calm the
public and restore order with a four day “bank holiday.” This was not really a “holiday,” but
the name had popular appeal. The true purpose of the holiday was to stem the tide of bank
runs that were collapsing thousands of banks. FDR used the time to pass overnight
legislation through Congress that would strengthen banks and restore public confidence.
The move was a great success: when the banks reopened on March 13th, deposits
surpassed withdrawals.

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The Great Depression: Roosevelt's New
Deal

FERA offered both direct relief and relief through public works programs. The program also
offered education to increase the potential of workers and improve the chances that they
would get hired. Alongside soup kitchens, the program also offered food stamps and school
lunches.

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The Great Depression: Roosevelt's New
Deal

Although it would eventually be declared unconstitutional, the NRA greatly expanded the
role of government in business. The NRA was responsible for coordinating business leaders
to establish regulatory codes. It was criticized for favoring larger businesses—they would
not be subjected to antitrust laws if they agreed to implement the codes.

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The Great Depression: Roosevelt's New
Deal

The FDIC was intended to prevent future bank runs by offering consumer protections. If
people knew the money they had invested could be recovered, they would not rush to
withdrawal their savings and cripple banks.
The SEC created more transparent markets to protect investors, discourage fraudulent
activity, and prevent over-speculation.

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The Great Depression: Roosevelt's New
Deal

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The Great Depression: Roosevelt's New
Deal

The Supreme Court ruled the NRA unconstitutional in 1935 which led FDR to restructure
the New Deal. This second phase was less drastic than the first due to political realities and
suffered from several missteps by FDR.
FDR attempted to reassert his power and influence by increasing the number of Supreme
Court justices in a highly unpopular move. This damaged his reputation and strengthened
his opponents.
Despite signs of steady recovery thanks to deficit spending, FDR was overeager to begin
cutting back. In addition to the new Social Security taxes, billions of dollars were thus
removed from circulation. Without cash to “prime the pump,” the market entered another
recession in 1937
Although FDR was able to restart recovery by 1938 through renewed spending,
Congressional enthusiasm and support for his policies fell. FDR also lost valuable support
among the middle class, which perceived his tolerance towards unionization and strikes
negatively.

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The Great Depression: Roosevelt's New
Deal

The WPA employed people in a variety of roles: writers, artists, photographers, journalists,
and construction workers were provided work through the administration. They were often
assigned to projects (such as building highways, dams, and bridges) that benefitted the
public good.

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The Great Depression: Roosevelt's New
Deal

AKA National Labor Relations Act

Collective bargaining is an action taken by a group of workers to negotiate with employers
with the goal of improving working conditions or resolving complaints.
The Wagner Act protected employees from being fired for attempting to unionize or for
participating in a union. It also established the federal government as an arbitrator in
disputes between workers and employers.
The act excluded agricultural and domestic workers, however.

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The Great Depression: Roosevelt's New
Deal

Social Security was intended to reduce poverty among the elderly, assist their dependents,
and support those who could not work. It was funded through payroll taxes.

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The Great Depression: Roosevelt's New
Deal

This act sought to improve working conditions across the country. Children were prohibited
from hazardous work, such as mining, and from working during school hours.

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The Great Depression: Roosevelt's New
Deal

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