The New Deal is a term that was popularized by Franklin Roosevelt. It had programs and measures that he came up with to cope with the problems experienced. These problems arose because of the great depression, which occurred in the United States in 1930.
The New Deal involved a number of reforms that were focused to deal with problems affecting the social, economic and government arenas. It was adopted by each state. It went a long way in helping the US as a country especially in pulling it out of this hard time. This is why it was considered as a major breakthrough in American history (Shlaes, 2007).
The social welfare system in America changed greatly during the 1930s. Before the changes, the local governments for each region distributed relief. Consequently, this led to the rise of various problems, as there were some scandals that arose. In 1933, the method was changed and the system was made much larger.
The parties that were involved in this were the federal, state and local government. Bureaucracy dominated the scene because of these actions. The permanent social welfare system that was developed by the social security act contributed significantly to this process (Jansson, 2012).
Social and economic conditions that led to the enactment of the New Deal programs
The great depression
This is one of the major problems that led to the need to adopt the New Deal. Various factors led to this. A key factor, which was a major cause of the great depression, was the stock market crash, which took place in the year 1929.
There was a major loss of about 40 billion dollars within a period of only two years (Shlaes, 2007) Stockholders had lost too much money; despite attempts to recover some of the losses, the gap could still not be filled. By 1930, the great depression became inevitable.
After the stock market crash, banks started failing. Over nine thousand banks closed, due to the difficulties they were experiencing. The remaining banks were not insured, and people lost their savings when the banks crashed. The remaining banks in order to remain afloat restricted the issuing of loans hence making it hard for most businesses to sustain themselves (Shlaes, 2007).
A major outcome of the great depression was unemployment. Due to the crash of the stock market and banks, many people lost their jobs. This was due to the rampant layoffs to maintain the businesses. Some businesses went bankrupt hence the workers from the failed businesses lost their jobs.
The decline of the buying of goods also led to unemployment. People became unsure of the situation after the stock market crash and bank failures. They decided to keep their money.
This, in turn, led to less production hence bringing down the need of a big workforce, which eventually led to a reduction in labor. Another blow to the economy was the policy to reduce the number of imports from Europe from entering the country.
Though this policy served to protect American companies, it led to a decline in trade between the countries, and eventually resulted to economic restrictions as the countries also held back in supplying resources that were needed by the US (Jansson, 2012).
Unemployment led to rural to urban migration as many people who were unemployed decided to move to urban centers to try their luck in getting jobs. Most people in the rural areas who are farmers experienced severe poverty. They had over exploited the soils and did not have the funds to invest in agriculture.
This led to a large influx of people moving to the urban centers, and this, in turn, led to an increase in population in the areas. The situation was further worsened by the fact that foreigners were also entering the country in large numbers to get jobs. These migrations led to the overpopulation of the urban centers.
Overpopulation led to overcrowding which resulted in a strain on the social amenities, as the services were not enough for the large population. This also resulted in an increase in the crime rate as certain people opted for unacceptable methods of getting income.
Some companies took advantage of this situation and employed underage children at a very low wage to save money. Housing also became a problem, as the houses available could not hold the large population. This led to homelessness as many citizens could not afford homes and the rent was unaffordable to them.
There was a big problem when it came to social welfare services. Non-profit organizations that volunteered and the local government did the provision of social welfare services.
This minimized welfare, and in most cases, it was discriminatory. African Americans were given almost no welfare assistance benefits (Barrow, 2007). The system at this time was also corrupt as most welfare money was misused and unaccounted for (Jansson, 2012).
New Deal Programs
There was the Emergency Banking Act. This was established immediately after President Roosevelt took over presidency. FDR issued an order for the closure of all the banks in the country. Congress had passed the emergency Banking Act that authorized the government to assess all the banks in terms of their sustainability.
This policy was meant to ensure that all the banks that were operating were legit and well managed. During the great depression, many banks had closed due to poor management and this greatly affected the economy and citizens (Jansson, 2012).
The implementation of this program was to ensure that such a scenario would not happen again. The formation of the FDIC – the Federal Deposit Insurance Corporation – was implemented to insure bank credits worth 5000 US dollars. This greatly boosted the banking sector.
It reassured the citizens that banks were safe and in case of any complications, compensation was guaranteed. Good banks were then re-allowed to reopen and in a very limited time span, the citizens re-deposited their money in the banks (Venn, 1998).
The Social Security Act was another program in the New Deal package. It aimed to give welfare services and benefits to those who needed assistance. It was established after a careful scrutiny of the problems the citizens were experiencing and how the government would chip in to support them. It included the provision of pensions after a citizen was no longer employed.
This was to ensure that the retiree could still be getting some money to help them through their problems. It also included benefits for survivors of industrial accidents; there was unemployment insurance, aid for mothers who were dependant and their siblings. It also catered for the physically challenged (Jansson, 2012).
This Act assured the citizens of peace of mind in case these unexpected and unavoidable circumstances happened. This policy was very effective as it responded to the problems of the disadvantaged groups in the society and in turn offered millions of citizens’ security.
This Act has had a huge impact on the current welfare policy as the current policy has adopted most of this principles and ideologies into its system. Most if not all of these policies may be currently adopted into the current welfare policy. The only difference is that they have been re-modified to fit the current conditions.
A number of organizations were also set up to help in the implementation of the New Deal. An example of one of the organizations is the Home Owners Loan Corporation (HOLC). HOLC was set up to deal with the issue of home ownership. Many people were experiencing this common problem because of unemployment. This made many people appear unable to afford homes and eventually led them to lose their jobs.
This organization was formed to prevent specifically people from losing their jobs. It did this by refinancing mortgages of average paid citizens who owned homes. This was helpful in the regulation of home repossessions (Jansson, 2012).
Another organization that was set up was the Federal Emergency Relief Administration (FERA). Harry Hopkins managed this. The agency funded depleting relief agencies. It gave out five million dollars in two hours. This program also funded public work programs.
The main reason this program was set up was so that it could help in sustaining the other relief programs that were experiencing financial difficulties. Getting finances was a major problem during this time as not many groups were willing to fund these agencies. Relief agencies aided a lot as they helped the people significantly, especially the needy.
These organizations have had a huge impact on the current social welfare policy. From their establishment the government still gives home financial aid to the citizens who are not in a position to finance their home mortgages, it also funds banks and in turn influences the low cost of mortgages. The government also makes an initiative to fund relief agencies when they experience problems.
The New Deal marked a significant turning point in American history. Its adaptation resulted in the pull of America from a hard financial time. Before the implementation and enactment of the New Deal, the country was going through a number of social and economic conditions that were not favorable to the citizens.
These conditions were the great depression, unemployment, rural to urban migration, overcrowding, crime etc. The main reason that led to the need for reforms through the New Deal was the great depression. This caused many problems in the country (Venn, 1998).
Its implementation was dependent on a number of programs. These programs were focused on key aspects that were affecting the people. Three important programs that were incorporated in this plan was the Emergency Banking Act, which was aided by the formation of the Federal deposit insurance corporation (FDIC).
The second program was the Social Security Act. Some organizations were also set up as programs this included the Home Owners Loan Corporation and Federal Emergency Relief Administration (FERA).
These programs have also influenced and affected the current social welfare policy. The current social welfare policy has been created based on the ideologies and aspects dwelt on at that time. The basic ideas remain the same, but the only difference is in the addition of more policies and the restructure of the old ones, to fit the current social and economic conditions.
Barrow, F.H. (2007). Forrester Blanchard Washington and his advocacy for African Americans in the new deal. Social Work, 25(4), 201-208
Jansson, B. S. (2012). The reluctant welfare state. Belmont, CA: Wadsworth.
Shlaes, A. (2007). The forgotten man: A new history of the great depression. New York: HarperCollins Publishers.
Venn, F. (1998)The new deal, Edinburgh, England: Edinburgh University Press.