Assess The Significance of The New Deal

Alfie Whyte

This essay will analyse the significance of the New Deal in the 1930’s and to what extent it had been
a success for the revival of the American economy after the stock market crash in 1929. The focus
will be mainly on its economic successes and significance, referencing to the impact it had on banks,
businesses and ordinary people. My view is that Roosevelt did not fully commit to the level of
spending required to effectively pump prime the economy with sustained investments in public
projects; he was at heart a conservative capitalist and his ambition was to restore American
capitalism. It was the demands of World War II that forced Roosevelt into committing the vast sums
required to move this leviathan into life.

Upon being elected in March 1933, Roosevelt inherited a most urgent matter: the American banking
system had been on the edge of collapse since the end of 1930, a rapid decline of investor
confidence caused carnage as they tried to retrieve their gold and currency deposits from U.S.
institutions. The morning FDR became president he issued “bank holidays” across all banks in 32
states as part of the Emergency Banking Relief Act, in those that remained open he enforced that
depositors could only withdraw 5% of their funds1. By doing so he gave both banks and investors
some breathing space and issued more currency to banks, in the form of loans, to those assessed as
having a strong asset book. This immediacy of this act shows its primary significance as confidence in
the banks was essential for economic stability, affecting both business and ordinary people.
Roosevelt’s “fireside chats” were also effective in restoring American confidence by explaining how
the banks “put their money to work”2 investing it in many forms of credit and other loans in order to
keep the wheels of both agriculture and industry turning. Solving this problem would take the
support of the public as stated by FDR: “it is up to you to support and make it work”3 in a fireside
chat to 60 million people4, showing the spread of impact when trying to restore confidence to people
across the country. This process of urgent action and explanation was a success as on March 13, 1933
twelve Federal Reserve banks successfully reopened5 which had significance in great depths as
people had protected money in a safely reopened bank which would invest in multiple businesses

1
Wall, W. L. (2016, December 22). The New Deal. Retrieved from
[Link]
[Link]

2
MCamericanpresident. (2010, October 26). FDR Fireside Chat 1: On the Banking Crisis. Retrieved from
[Link] [Link]

3
Ibid
4
Wall, W. L. (2016, December 22). The New Deal. Retrieved from
[Link]
[Link]

5
Ibid
which would benefit the economy. Roosevelt used a further range of methods to restore confidence
in U.S. banks such as the Glass-Steagall Act and the Federal Deposit Insurance Corporation Act (June
16, 1933) was applied to separate investment banking from commercial banking to protect
depositors from potential losses through stock speculation as it was deemed too risky. Glass-
Steagall aimed to prevent a repeat of the stock market crash in 1929 and the wave of commercial
bank failures. The significance of this act was widespread with a mixed nature because for small
businesses and investors it was helpful because commercial banking was ideal for them, it was low
risk, and the money was safely stored as a result of the insurance from the FDIC, assuring a basic
coverage of $2,5006. Conversely, for larger businesses, it was more negative as it prohibited bankers
from using depositors’ money to pursue high-risk investments. The legacy of the FDIC has proved to
be very significant as it is still in place today, now covering $250,000 per depositor, per account 7. The
significance of The New deal on banks was immediate and with great legacy as it was the initial focus
of the New Deal and some agencies such as the FDIC remain in the modern era.

The New Deal was significant in the world of business and commerce. A truly significant piece of
legislation was the National Industrial Recovery Act (NIRA) 16th of June 1933. It was a new labour and
consumer law built entirely on FDR’s cooperative mindset that limited competition whilst also
regulating industry for fair, rising wages and prices to promote economic recovery. The significance of
the NIRA was initially powerful and nationwide, promoting both benefits and challenges for business.
Firstly, companies were required to establish codes of fair practice, follow production quotas and
allow employees to form unions, thereby limiting the companies’ freedom. Secondly, the suspension
of antitrust laws and restrictions imposed on the ability of new companies to join the alliances,
allowed the existing businesses to form a cartel to fix prices and wages, thereby promoting a greater
stability8. This act proved contentious as business leaders called for guarantees for profit and security
for their investments, whereas government insisted on open pricing. Ultimately the code had a poor
legacy, it did not work as it resulted in higher prices that made the economic situation worse. Before
it was abolished by the Supreme Court for being unconstitutional (May 1935) NIRA exercised
significant power over large businesses and protected their workers.

Roosevelt indirectly provided significant support to businesses with his programmes of public works
starting with infrastructure improvement projects that benefited commerce and industry, this was
widely significant in great depths as it employed 8.5 million people over the course of eight years 9.
The New Deal’s Public Works and Works Progress administrations facilitated local projects with
grants and loans from a huge revenue of $3.3 billion10. This was significant nationwide as it produced
new roads and electrified railways along with the associated bridges and tunnels required, all went
to improve the transportation networks. The huge hydroelectric dam projects produced cheap and

6
Hadley, D. (2018, September 20). 7 New Deal Programmes Still in Effect Today. Retrieved from [Link]
programs-still-in-effect-today-4154043:
7
Ibid
8
Cavendish, R. (2008). The First of the Hundred Days. History Today V58, 1-3.

9
Wall, W. L. (2016, December 22). The New Deal. Retrieved from
[Link]
10
Ibid
reliable power for both business and domestic consumers. Costs were lowered for both parties
because consumers now had more disposable income available to spend on consumer goods which
would benefit the economy. Roosevelt believed that these such projects were doubly valuable as
they created much needed employment and improved the infrastructure for business. Additional to
the funds for local projects, Roosevelt also created direct federal aid in the form of the Tennessee
Valley Authority Act which was deeply significant in both the long and short term because it
established a corporation that built power stations in the Tennessee Valley. The TVA was intended as
both a grand power supplier and a regional, economic development agency that would assist the
modernisation of the region’s economy and society. The activities of the TVA were widely significant
as they covered seven states for a total of 104,000 square kilometres in an area with a population of
7 million people11. The TVA proved to be one of the true successes of the New Deal. The dams have a
legacy for being the sixth-largest power supplier and the largest public utility in the public today 12
showing its significance in the long term. Overall, the New Deal was of varied significance for
businesses as it created both opportunities and challenges.

Arguably the most significant aspect of The New Deal was the effect it had on ordinary people. The
great depression led to a drastic change in attitude for the public in terms of spending and
consumerism. Between the years 1929 and 1932, GDP declined by 25% and unemployment rose by
20%13. To tackle these issues, Roosevelt implemented relief spending and public works but to little
avail as the mechanics of this federal support was flawed. Unemployment was a major concern and
to combat this Roosevelt urgently introduced a range of interventionist measures in his first 100 days
in office. These measures were widely significant, employing people across the nation and they
included: The Civil Conservation Corps (March 1933) hired 3 million workers over 9 years14, the
Federal Emergency Relief Act (May 1933) funded a wide variety of jobs and the National Industrial
Recovery Act (June 1933) which focused on employment in a huge programme of public works.
However, their significance was limited as not all Americans benefitted equally: the primary
beneficiaries were white men and women, whereas many black families did not qualify for the
minimum wage regulations or were even dispossessed by the large-scale public works projects.

To further address the need to build confidence and security, Roosevelt sought to intervene in the
housing market. During the 1930’s the nation experienced a sharp rise in mortgage delinquencies
and foreclosures. To tackle this issue, FDR created the Home Owners’ Loan Corporation which
refinanced home mortgages to prevent foreclosure as well as expanding home buying opportunities
and, at its peak, it had nationwide significance as it held mortgages to roughly 10% of all homes in
America15and the significance of this was that all borrowers felt more secure about their financial
status.

11
Amadeo, K. (2022). New Deal Summary, Programs, Policies and Its Successes. FDR's New Deal, 1-5 and 8-11.

12
Ibid
13
Fishback, P. V. (2014). The Impact of New Deal Spending and Lending During the Great Depression. The Reporter, 1-5.

14
Cavendish, R. (2008). The First of the Hundred Days. History Today V58, 1-3.

15
Fishback, P. V. (2014). The Impact of New Deal Spending and Lending During the Great Depression. The Reporter, 1-5.
Scholars have criticised significance of the relief spending and public works programme, thinking that
they can be seen as having a negative impact - they did not increase the number of jobs and money
was wasted. The depth of significance was minimal due to a lack of strong positive employment
effects, unemployment never fell below 10 percent over the course of the decade16. The New Deal
programmes set to save the economy were funded by tripling federal taxes from $1.6 billion to $5.3
billion in 194017: personal income taxes, inheritance tax and excise taxes directly affected most
Americans and corporate taxes indirectly impacted upon possible employment. The significance of
the taxes was very powerful in a negative way as the taxes were major job destroyers, greatly
reducing people’s spending and employers having less revenue for paying wages. In terms of width
and depth the significance of both unemployment and FDR hammering taxpayers caused millions to
have less money, resulting in reduced job opportunities as employers couldn’t afford new employees
and didn’t need them as demand for products and services was depressed. This has been described
as ‘a classic case of the seen versus the unseen’18 as the interventionist spending of Roosevelts
programmes were highly visible, whereas the jobs destroyed by New Deal taxes were not; however,
one could argue that the feel-good factor of these highly visible programmes was valuable for all
Americans in motivating much-needed confidence in the economy.

In conclusion, Roosevelt's New Deal was of immense significance in addressing the economic
challenges of the Great Depression: it stabilised the banking sector, regulated business practices, and
provided substantial support to ordinary people. In terms of short-term relief and long-term
structural reform, it succeeded and irrevocably altered the relationship between the capitalist
market, the people and their government. Roosevelt’s interventionist approach was in clear contrast
to Hoover’s laissez-faire philosophy; it was the kind of dramatic change that was required to interrupt
the intense depression of the early 1930’s. Immediate rescue and regulation of the banking system
was achieved, and the legacy of these regulations are still active in the modern-day activities of the
FDIC and SEC. The Public Works policies worked to satisfy an immediate need and were superseded
by work in support of World War II, whereas the improvements enacted for workers by the NRIC
have endured and remain in place today. For ordinary people, the New Deal was a double-edged
sword as it both created and suppressed employment as people suffered high levels of taxation. In
considering the strength of the economic recovery, in terms of hard data, unemployment remained
painfully high and the economic growth sluggishly slow. Roosevelt’s policies at times seemed to work
in opposition to his goals and the lack of full commitment to the Keynesian active fiscal philosophy
led to underspending and this, combined with a strangling tax regime, potentially extended the
depression unnecessarily. An effective assessment of the New Deal’s overall significance can be
established by comparing its economic successes at restabilising the economy to that of the activity
in support or World War II over ten years later. It was only in meeting the demands of mobilisation
for World War II that Roosevelt engaged in large scale deficit spending and full employment was
achieved; during the war 17 million new civilian jobs were created, industrial productivity increased
by 96%, and corporate profits after taxes doubled.19

16
Johnston, M. (2018, July 10). The Economic Effects of The New Deal. Retrieved from [Link]:
[Link]
17
Fishback, P. V. (2014). The Impact of New Deal Spending and Lending During the Great Depression. The Reporter, 1-5.

18
Ibid

19
Goodwin, D. (1992, October 1). The American Prospect. Retrieved from [Link]
nomic-breakthrough-world-war-ii/:
1999 words not including title or footnotes.

Bibliography
Amadeo, K. (2022). New Deal Summary, Programs, Policies and Its Successes. FDR's New Deal, 1-5
and 8-11.

Brown, M. (2011). The Effects of the New Deal. Retrieved from [Link]:
[Link]

Cavendish, R. (2008). The First of the Hundred Days. History Today V58, 1-3.

Fishback, P. V. (2014). The Impact of New Deal Spending and Lending During the Great Depression.
The Reporter, 1-5.

Goodwin, D. (1992, October 1). The American Prospect. Retrieved from

Hadley, D. (2018, September 20). 7 New Deal Programmes Still in Effect Today. Retrieved from
[Link]
[Link]

Hardman, J. (2008). The Great Depression and the New Deal. Poverty and Prejudice: Social Security at
the Crossroads, 1-2.

Johnston, M. (2018, July 10). The Economic Effects of The New Deal. Retrieved from
[Link]: [Link]
[Link]

MCamericanpresident. (2010, October 26). FDR Fireside Chat 1: On the Banking Crisis. Retrieved
from [Link] [Link]

Wall, W. L. (2016, December 22). The New Deal. Retrieved from