Franklin Roosevelt confidently won the US presidential elections in November 1932 – he became president-elect. In the interval between the election and Roosevelt’s inauguration, the American banking system completely collapsed, and the world economy collapsed even more. From 1932-1933, both in the world in general and in the United States in particular, sentiments in favor of a dictatorial form of government were growing. Observing the regimes of Hitler, Mussolini and Stalin from the outside, many in America called for their imitation. Roosevelt believed that the government not only can but must achieve the subordination of private interests to collective interests. He considered it possible to replace the struggle of selfish interests with the cooperation of the parties. He also believed that economic life in the early twentieth century was characterized by critical imbalances that deprived a significant portion of the population of their livelihoods. The discussion below will address the question of the New Deal went too far in providing aid to Americans or not far enough.
The image of Franklin Delano Roosevelt is of great importance for the economic history of the United States, including its symbolic meaning. The period from 1929 to 1941, including the Great Depression and the New Deal, is undoubtedly one of the most important in American history. For economists, historians and political scientists, it is not so much what Roosevelt did. Specifically, that is important, but rather the fact that his New Deal is viewed in most cases as the ultimate argument in favor of state regulation of the economy (Powel, 2003). Modern economists and historians cite the Great Depression as a textbook example of what laissez-faire politics can lead to.
One hundred days – this was the name of the surge in legislative activity that was observed at the beginning of Roosevelt’s presidential term. During this period, Roosevelt sent 15 letters to Congress and, in turn, signed fifteen new laws. Such presidential activity was unprecedented and unsurpassed in the history of the United States – where the confrontation between the president and Congress has a long political history.
By May 1933, none of the many emergency measures provided positive stimulus to the US economy: the net effect of budget cuts and tax increases was clearly deflationary. Realizing this, Roosevelt began looking for funds to stimulate industry. At the same time, industry representatives were unable to agree on what steps should be taken. The president himself at that moment had nothing to offer to fight unemployment (Long, 1934). And Roosevelt instructed several groups at once, who knew nothing about each other’s activities, to prepare proposals for a bill on the restoration of industry.
Statistics have revealed other aspects of the impact of depression. Thus, faced with an uncertain future, young people postponed or canceled their plans to marry: the rate of new alliances fell by 22%. There are fewer children in married couples – by 15% compared to 1929. Despite the efforts of the New Deal, the unemployment rate never fell below 14% in the 1930s. The average over the decade was 17%. The Great Depression was not replaced by the New Deal: the new political program only slightly softened the ongoing economic crisis.
Throughout 1935, Roosevelt saw danger to his reform program, a program he believed was financially sound and politically cautious. By that time, the president had been preparing for a new reform campaign for over a year, and the attacks on the New Deal were the reason for its implementation. And this new policy, centered on security, has fundamentally changed the role of the federal government in the lives of ordinary Americans.
The Emergency Relief Appropriation Act of 1935 is a significant law; the presidential administration has requested an unprecedented amount of authority and the largest allocation in American peacetime history: $ 4 billion in new funds. Roosevelt resolutely refused to distribute financial or food aid to the unemployed since it caused the spiritual and moral decay of the nation; the president compared such aid to a drug. At the same time, he suggested that work fostered a sense of self-esteem in a person and clarified that the proposed measures would help to employ approximately 3.5 million unemployed.
Social security has become a key part of the new reform agenda. The idea of getting rid of unnecessary workers “- especially those over 65 years old – gradually found more and more supporters. The system of government-guaranteed old-age pensions was moving from the field of marginal economic thought to a priority direction. Until late 1932, the American Federation of Labor continued to insist on direct negotiation of benefits between worker and employer (Long, 1934). The United States was virtually the only modern industrialized country without a nationwide social safety net. Wisconsin alone had an unemployment insurance program created in 1932.
The president’s insistence that the workers themselves should do their part created potential litigation risks, as the constitution did not give Congress the authority to engage in the insurance business. A sophisticated payout system, in proportion to previous earnings, was borrowed from the private insurance model as more acceptable to American society. The problem of people approaching retirement age remains (OpenStax, 2021). Workers who are already 45 years old did not have the technical ability to form significant reserves for their retirement. In 1939, all indicators of the state of the economy were worse than in 1929, which meant a complete failure of the interventionist programs of the New Deal of Roosevelt. He prolonged the Great Depression, did not bring America out of it. Many supporters of Roosevelt acknowledge the ineffectiveness of his programs, continuing to believe that the New Deal programs contributed to the creation of social policy. If the goals of these programs are the growth of the welfare of the poor and the general growth of the welfare, then Roosevelt also failed to achieve them.
For example, although unemployment decreased during this time due to an increase in the number of military personnel nevertheless, the total number of unemployed and military personnel remained at the same level. At the same time, the distribution of gasoline, tires, coffee, milk, cheese, canned food, footwear, meat, sugar, and typewriters by coupons was introduced. This situation can hardly be called an increase in prosperity (Powel, 2003). It should not be forgotten that prices during a war are not market prices. They are set by the state, so the GDP indicator during a war does not say anything. The GDP was recalculated on the basis of market prices, and its decline from 1941 to 1943 was obtained.
Thus, Congress sharply cut government spending, which became a source of growth in investment, consumption and entrepreneurial activity. Keynesian fears that the American economy in peacetime will face massive unemployment and an epidemic of violence did not materialize. Hence, Roosevelt could have been prolongated and enhanced his policy in order to achieve success.
References
OpenStax. (2021). U.S. Web.
Powel, J. (2003). Tough questions for defenders of the New Deal. CATO Institute. Web.
Long, H. P. (1934). Every man a king and Share our wealth. The American Yamp Reader. Web.