Solutions in the United States Notes

Background

1. When the Great Depression struck in 1929, the United States was unprepared for its scale and duration.
2. President Hoover (1929–1933) clung to traditional laissez-faire principles, believing voluntary cooperation would restore stability. His cautious approach deepened public despair.
3. In contrast, Franklin D. Roosevelt’s New Deal (1933–1938) represented a decisive ideological shift toward government intervention, social reform, and economic regulation.
4. Though the New Deal did not end the Depression entirely, it fundamentally reshaped American political life.

Herbert Hoover (1929–1933): Voluntarism and Limited Intervention

Nature of Policies

1. Philosophy of Government
   1. Believed in individual self-reliance and voluntary cooperation between business, labor, and government.
   2. Feared direct relief would weaken American character and create dependency.
2. Initial Measures
   1. Federal Farm Board (1929): Attempted to stabilize agricultural prices by buying surplus crops. It failed as prices continued to fall.
   2. Encouraged local charities and private businesses to maintain employment and wages voluntarily.
3. Public Works Efforts
   1. Supported limited infrastructure spending such as the Hoover Dam to stimulate jobs and regional development.
   2. Authorized Reconstruction Finance Corporation (RFC, 1932) to lend to banks, railroads, and industries.
4. Monetary and Fiscal Policy
   1. Opposed large-scale government spending or deficit financing.
   2. Raised taxes through the Revenue Act (1932), worsening deflation.

Efficacy and Assessment

1. Economic Results
   1. Unemployment reached 25% by 1933; over 9,000 banks failed.
   2. Relief programs were local and inadequate.
   3. Business and agricultural recovery efforts collapsed under deflationary pressures.
2. Social Unrest
   1. The Bonus Army March (1932) (WWI veterans demanding early pension payments) was violently dispersed, damaging Hoover’s reputation.
3. Legacy
   1. Hoover’s policies were too cautious and too late; his faith in voluntarism failed against systemic crisis.
   2. However, his creation of the RFC laid groundwork for later New Deal institutions.

Franklin D. Roosevelt (1933–1939): The New Deal and Active Government

Nature of Policies

1. Philosophy and Approach
   1. Roosevelt’s New Deal aimed to provide Relief for the unemployed, Recovery for the economy, and Reform to prevent future crises.
   2. Emphasized experimentation: “bold, persistent experimentation.”
2. The First New Deal (1933–1935): Emergency Response
   1. Emergency Banking Act (1933): Restored confidence by inspecting banks and reopening solvent ones.
   2. Glass–Steagall Act (1933): Created the Federal Deposit Insurance Corporation (FDIC) to protect savings.
   3. Agricultural Adjustment Act (AAA): Reduced crop output to raise prices, compensating farmers for not planting.
   4. National Industrial Recovery Act (NIRA, 1933): Encouraged fair competition and minimum wages through the National Recovery Administration (NRA).
   5. Civilian Conservation Corps (CCC) and Public Works Administration (PWA): Created jobs in conservation and infrastructure.
   6. Tennessee Valley Authority (TVA): Provided flood control, electricity, and modernization to the rural South.

1. The Second New Deal (1935–1938): Social Reform and Regulation
   1. Wagner Act (1935): Legalized unions and collective bargaining.
   2. Social Security Act (1935): Established pensions, unemployment insurance, and disability benefits.
   3. Works Progress Administration (WPA): Created millions of public jobs in arts, infrastructure, and education.
   4. Wealth Tax Act (1935): Raised taxes on corporations and the wealthy to fund social programs.

Assessment

1. Short-Term Impact
   1. Hoover’s voluntarism failed to prevent economic collapse.
   2. Roosevelt’s policies revived public confidence and stabilized key institutions, though unemployment persisted.
2. Long-Term Impact
   1. The New Deal permanently expanded federal power in economic and social life.
   2. Established precedents for modern welfare states and crisis management (Keynesian policies).
   3. Despite limited recovery, it transformed American political culture. Citizens now expected government protection during hardship.