During the start of the depression, Herbert Hoover was the U.S president and his efforts to save the country from the effects of the great depression were futile. Five years down the depression, Franklin Roosevelt became the U.S President in 1933. His first challenge was dealing with the depression that had affected a big percentage of the U.S economy. His immediate action to save the country was to strike what has been referred to as the New Deal. The deal consisted of recovery programs which were targeted to be initiated into the economy in the short-run. The deal consisted of work and economic assistance programs. This first new deal brought an end to the gold standard and also prohibition. The Gold standard was abolished since it prevented the federal government from controlling the interest rates and prohibited the government from lowering them. The major reason was that the gold standard only allowed for the increase of the rates in order to protect the dollar (Powell, 2004, p. 17). The short-term programs were also directed to reforming the banking system, the agricultural sector, employment and the industrial sector. Roosevelt then introduced the second set of a new deal which consisted of long-term assistance programs. These programs included the Social Security System, the Federal Deposit Insurance Corporation, Fannie Mae, the Federal Housing Administration, the Security and exchange commission and the Tennessee Valley Authority. The new deal programs were expected to reduce the unemployment rates through the various work programs. Housing programs were to reduce the housing crises by enabling banks to recall loans and regulate the mortgages. The security Agency programs acted to provide funds for education, food and also medical drugs.
These programs were not very effective since the economy experienced high levels of unemployment among other economic hardships in the years that followed. By 1940 the unemployment rates in the U.S economy were still high at 16%. Some economists and historians have actually argued that the programs were not very favorable to the economy and that they only served to deteriorate the situation of the depression (Powell, 2004, p. 25).
The new deals introduced by Roosevelt to curb the effects of the economy have been greatly debated if they were actually effective for their intended purpose (Powell, 2004, p. 24). The deals were criticized for being characterized with conservatism of the fiscal policy, contradictory of each other and were therefore considered not fit for economic recovery. Even though some of the policies introduced by Roosevelt still exist, most of them collapsed at the beginning of the Second World War as they were brought down by activists against the programs during that period.
References
- Jim Powell (2004). FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression. Three Rivers Press.
- Murray N. Rothbard (2000). America’s Great Depression. Ludwig Von Mises Institute