- Franklin D. Roosevelt and the New Deal
- Franklin Roosevelt's New Deal Essay
- How Successful was Roosevelt's New Deal? Essay example | Major Tests
- Roosevelt Understood the Power of a Public Option
- AP U.S. History Notes
Americans voted for Franklin Delano Roosevelt in on the assumption that the Democrats would dole out more federal assistance than Hoover and the Republicans had. Indeed, immediately after taking the oath of office, FDR set out to provide relief, recovery, and reform in his bundle of programs known as the New Deal.
On March 6 , , two days after becoming president, Roosevelt declared a five-day national bank holiday to close banks temporarily. Several days later, Congress passed the Emergency Banking Relief Act , which gave Roosevelt the power to regulate banking transactions and foreign exchange.
Franklin D. Roosevelt and the New Deal
The act also regulated lending policies and forbade banks from investing in the stock market. In March , Congress created the Civilian Conservation Corps CCC , which hired unemployed young men to work on environmental conservation projects throughout the country.
For a wage of thirty dollars a month, men worked on flood control and reforestation projects, helped improve national parks, and built many public roads. The critics emphasize the absence of a philosophy of reform to explain the failure of New Dealers to attack fundamental social problems. They demonstrate the New Deal's commitment to save capitalism and its refusal to strip away private property.
They detect a remoteness from the people and indifference to participatory democracy and call instead for more emphasis on conflict and exploitation. At first, the New Deal created programs primarily for men as it was assumed that the husband was the " breadwinner " the provider and if they had jobs the whole family would benefit. It was the social norm for women to give up jobs when they married—in many states, there were laws that prevented both husband and wife holding regular jobs with the government.
Many women were employed on FERA projects run by the states with federal funds. It hired single women, widows, or women with disabled or absent husbands. The WPA employed about , women and they were assigned mostly to unskilled jobs. Women also were hired for the WPA's school lunch program. The Social Security program was designed to help retired workers and widows but did not include domestic workers, farmers or farm laborers, the jobs most often held by blacks. However, Social Security was not a relief program and it was not designed for short-term needs, as very few people received benefits before The New Deal expanded the role of the federal government, particularly to help the poor, the unemployed, youth, the elderly and stranded rural communities.
The Hoover administration started the system of funding state relief programs, whereby the states hired people on relief. With the CCC in and the WPA in , the federal government now became involved in directly hiring people on relief in granting direct relief or benefits. Total federal, state and local spending on relief rose from 3. He and his wife were not on relief, but they were employed by the WPA as statisticians.
Franklin Roosevelt's New Deal Essay
Friedman said that Roosevelt deserved considerable credit for relieving immediate distress and restoring confidence. In a survey of economic historians conducted by Robert Whaples, Professor of Economics at Wake Forest University , anonymous questionnaires were sent to members of the Economic History Association.
Members were asked to disagree, agree, or agree with provisos with the statement that read: "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression". From to , the economy expanded at an average rate of 7. John Maynard Keynes explained that situation as an underemployment equilibrium where skeptic business prospects prevent companies from hiring new employees.
How Successful was Roosevelt's New Deal? Essay example | Major Tests
It was seen as a form of cyclical unemployment. There are different assumptions as well. According to Richard L. Jensen , cyclical unemployment was a grave matter primarily until Between and , structural unemployment became the bigger problem. Especially the unions successes in demanding higher wages pushed management into introducing new efficiency-oriented hiring standards.
It ended inefficient labor such as child labor, casual unskilled work for subminimum wages and sweatshop conditions. In the long term, the shift to efficiency wages led to high productivity, high wages and a high standard of living, but it necessitated a well-educated, well-trained, hard-working labor force. It was not before war time brought full employment that the supply of unskilled labor that caused structural unemployment downsized. At the beginning of the Great Depression, many economists traditionally argued against deficit spending.
The fear was that government spending would "crowd out" private investment and would thus not have any effect on the economy, a proposition known as the Treasury view , but Keynesian economics rejected that view. They argued that by spending vastly more money—using fiscal policy —the government could provide the needed stimulus through the multiplier effect. Without that stimulus, business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had.
Keynes visited the White House in to urge President Roosevelt to increase deficit spending. Roosevelt afterwards complained that "he left a whole rigmarole of figures — he must be a mathematician rather than a political economist". The New Deal tried public works, farm subsidies and other devices to reduce unemployment, but Roosevelt never completely gave up trying to balance the budget. The effects of federal public works spending were largely offset by Herbert Hoover's large tax increase in , whose full effects for the first time were felt in and it was undercut by spending cuts, especially the Economy Act.
Roosevelt Understood the Power of a Public Option
According to Keynesians like Paul Krugman , the New Deal therefore was not as successful in the short run as it was in the long run. Following the Keynesian consensus that lasted until the s , the traditional view was that federal deficit spending associated with the war brought full-employment output while monetary policy was just aiding the process. In this view, the New Deal did not end the Great Depression, but halted the economic collapse and ameliorated the worst of the crises. More influential among economists has been the monetarist interpretation by Milton Friedman as put forth in A Monetary History of the United States , [ citation needed ] which includes a full-scale monetary history of what he calls the " Great Contraction.
Friedman especially criticized the decisions of Hoover and the Federal Reserve not to save banks going bankrupt. Friedman's arguments got an endorsement from a surprising source when Fed Governor Ben Bernanke made this statement:. Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve.
We did it. We're very sorry. But thanks to you, we won't do it again. Monetarists state that the banking and monetary reforms were a necessary and sufficient response to the crises. They reject the approach of Keynesian deficit spending. You have to distinguish between two classes of New Deal policies. One class of New Deal policies was reform: wage and price control, the Blue Eagle, the national industrial recovery movement.
I did not support those. The other part of the new deal policy was relief and recovery Those parts of the New Deal I did support. Ben Bernanke and Martin Parkinson declared in "Unemployment, Inflation, and Wages in the American Depression" that "the New Deal is better characterized as having cleared the way for a natural recovery for example, by ending deflation and rehabilitating the financial system rather than as being the engine of recovery itself".
Challenging the traditional view, monetarists and New Keynesians like J. Bradford DeLong , Lawrence Summers and Christina Romer argued that recovery was essentially complete prior to and that monetary policy was the crucial source of pre recovery. According to Bernanke, there was also a debt-deflation effect of the depression which was clearly offset by a reflation through the growth in money supply.
While Milton Friedman and Anna Schwartz argued in A Monetary History of the United States that the Federal Reserve System had made no attempt to increase the quantity in high-powered money and thus failed to foster recovery, they somehow did not investigate the impact of the monetary policy of the New Deal. The Roosevelt administration had chosen not to sterilize the gold inflow precisely because they hoped that the growth of money supply would stimulate the economy.
Replying to DeLong et al. Vernon argues that deficit spending leading up to and during World War II still played a large part in the overall recovery, according to his study "half or more of the recovery occurred during and ". Eggertsson and Christina Romer, the biggest primary impact of the New Deal on the economy and the key to recovery and to end the Great Depression was brought about by a successful management of public expectations.
The thesis is based on the observation that after years of deflation and a very severe recession important economic indicators turned positive just in March when Roosevelt took office. Consumer prices turned from deflation to a mild inflation, industrial production bottomed out in March , investment doubled in with a turnaround in March There were no monetary forces to explain that turnaround. Money supply was still falling and short-term interest rates remained close to zero. Before March , people expected a further deflation and recession so that even interest rates at zero did not stimulate investment.
However, when Roosevelt announced major regime changes people [ who? With those expectations, interest rates at zero began to stimulate investment just as they were expected to do.
AP U.S. History Notes
Roosevelt's fiscal and monetary policy regime change helped to make his policy objectives credible. The expectation of higher future income and higher future inflation stimulated demand and investments. The analysis suggests that the elimination of the policy dogmas of the gold standard, a balanced budget in times of crises and small government led endogenously to a large shift in expectation that accounts for about 70—80 percent of the recovery of output and prices from to If the regime change had not happened and the Hoover policy had continued, the economy would have continued its free-fall in and output would have been 30 percent lower in than in Followers of the real business-cycle theory believe that the New Deal caused the depression to persist longer than it would otherwise have.
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Cole and Lee E. Ohanian say Roosevelt's policies prolonged the depression by seven years. They claim that the New Deal "cartelization policies are a key factor behind the weak recovery". They say that the "abandonment of these policies coincided with the strong economic recovery of the s".
The underlying assumptions of this theory are subject to numerous criticisms and the theory is unable to posit any convincing explanations for the initial causes of the Great Depression. The economic reforms were mainly intended to rescue the capitalist system by providing a more rational framework in which it could operate. The banking system was made less vulnerable. The regulation of the stock market and the prevention of some corporate abuses relating to the sale of securities and corporate reporting addressed the worst excesses.
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Roosevelt allowed trade unions to take their place in labor relations and created the triangular partnership between employers, employees and government. David M. Kennedy wrote that "the achievements of the New Deal years surely played a role in determining the degree and the duration of the postwar prosperity ". Paul Krugman stated that the institutions built by the New Deal remain the bedrock of the United States economic stability.
Against the background of the — global financial crisis , he explained that the financial crises would have been much worse if the New Deals Federal Deposit Insurance Corporation had not insured most bank deposits and older Americans would have felt much more insecure without Social Security. The New Deal banking reform was weakened since the s.