Free «The Great Depression and the New Deal» Essay

The Great Depression and the New Deal

The Great Depression was an economic crisis affected the USA and the world during 1928-early 1940s. The causes of depression are found in economic, financial banking and social spheres. On October 29, 1928 the Bull Market utterly collapsed. The causes of collapse were a crisis in banking system, failure to restructure financial resources and financial system of the country. Placing the 1929-1933 crisis in a broader contact, two basic central banking problems emerge: (1) the appropriate conduct of a central bank during a crisis of liquidity; (2) the appropriate conduct of central bank in the event of a collapse of investment expenditure ("a collapse in the marginal efficiency of capital"). In addition to these causes, decline in consumption and reductions in purchasing in Europe led to failure of the financial system in the USA. In order to support local producers and retailers, the US government introduced the Smoot-Hawley Tariff on imports. Among other important conditions were droughts which led to decline of agriculture and farming Mississippi Valley (Leuchtenburg 11).

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Domestic factors in America in 1930-1932, together with international financial panic, produced monetary and general economic crisis that for sheer horror, destructiveness, and longevity has seldom been equaled in economic history. Unemployment for as long as a year or more frequently wiped out the entire accumulated wealth of a family, destroyed mental stability and family bonds and permanently derailed the career and educational plans of the younger generation. People were ready for a change. Franklin D. Roosevelt was a Democrat while Herbert Hoover, the incumbent presidential candidate who had presided over these years of bitter destitution, was a Republican. In 1933, when Franklin Roosevelt took office, the Great Depression had reached its lowest point. Using his now-famous line in his inaugural speech on the east portico of the Capitol that wintry day, he told the nation that "the only thing we have to fear is fear itself" (Leuchtenburg 65).

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In an unprecedented 100 days of cooperation between the president and Congress, the federal government put an impressive series of measures into effect. Dubbed the "New Deal" by Franklin, the program included creation of the Federal Deposit Insurance Corporation and a series of federal programs intended to stimulate the economy and provide short-term jobs to get people back on their feet and believing in their country again. The main components of this program were relief, reform and recovery. The New Deal programs were controversial then and still are now, and many economists argue that they did nothing to reverse the economic trends of the depression on the larger scale. But on the individual scale, they did make a difference in many people's lives. Eleanor was solidly behind the social programs of the New Deal, and she believed, as Franklin did, that the time had come when the morale of the people needed to be lifted, and that until this happened, no rise from economic depression would be possible. FDR sensed an isolationism welling up among Americans and veered away from confronting this trend. For several years he had tiptoed around the country's growing isolationism by keeping silent. Another facet of the inflationary policy of the New Deal was in silver (Leuchtenburg 54). There was a welter of silver legislation, replete with the paraphernalia of mystique-laden metallic standards, but centered in its motive force in the political influence of the Silver Bloc. The recovery from 1933 or 1934 to the time of the 1937-1938 recession was limited: millions remained unemployed; business firms would have been delighted to produce billions of dollars worth of additional output at going prices; the enormous increase in the banking system's liquidity did not have traditional effects, The changes introduced by the New Deal program represented the recovery from depression which expanded total production and income in the economy and brought about once-and-for-all gains for low-income families and individuals.

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