This paper seeks to analyze and discuss whether the New Deal was an effective Answer to the Great Depression. This paper maintains that the New Deal was effective in addressing the problems of Great Depression from the political point of view, and which eventually helped America to solve the problems economically.
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I will proceed by knowing first what the Great Depression is and what is the New Deal. Wikipedia defined the Great Depression as “a worldwide economic downturn which started in 1929 (although its effects were not fully felt until late in 1930) and lasted through most of the 1930s.” It said that the depression centered in North America and Europe, but had damaging effects around the world and that the most industrialized countries were affected the worst, including the United States, Germany, Britain, France, Canada, and Australia. Wikipedia further described that cities around the world were hit hard, especially those based on heavy industry with unemployment and homelessness soaring, construction virtually halted in many countries, prices for agricultural crops fell by 40–60%, demand in mining and logging falling for lack alternative economic activity. It then told that the Great Depression ended at different times in different countries.
On the other hand, what is the New Deal? The Deal can be qualified as a collection of programs aimed at stimulating different sectors of the economy (like the Agricultural Adjustment Act and the National Industrial Recovery Act, Social Security System and many others). It was a solution made by the United States of America to address the Great Depression under the leadership of President Theodore Roosevelt.
Cyber Essays said “New Deal was not a particularly successful economic initiative, but it was definitely a political success, probably because its goal was to help the American people (even though the means used to accomplish that were never very clear). What proved more effective at bringing economic solutions to what was really an economic problem was the "Keynesian theory.” In 1938, Roosevelt, facing the semi-failure of his New Deal, finally gave in to an increasing number of his close advisors who were confident that Keynes' ideas would be more successful.” The article explained that the underlying theory to Keynes' ideas was that recovery could only come through fiscal expansion--in other words, running a bigger budgetary deficit. It added that the additional expenditures were pumped into the economy through a variety of government actions--like major public works--in order to stimulate demand by providing people with income.
The opposition centered on the economic aspect by arguing it is not the New Deal that help America recover economically but the Keynesian theory. The opposing side is arguing on the premise that one can separate economic issue from political issue.
Wikipedia seemed to confirm also the role of Keynesian when it said, “The Roosevelt administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued through most of 1938. Production declined sharply, as did profits and employment. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. Keynesian economists speculated that this was a result of a premature effort to curb government spending and balance the budget, while conservatives said it was caused by attacks on business and by the huge strikes caused by the organizing activities of the CIO and the American Federation of Labor (AFL).”
The President Roosevelt rejected an advice to cut spending, and decided big business was trying to ruin the New Deal by causing another depression. He considered it a "capital strike" that caused him to order the FBI to look for a criminal conspiracy, but they found nothing. He then moved to the other side using a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis. Attacks were made on automaker Henry Ford, steelmaker Tom Girdler, and the superrich "Sixty Families" whom were believed to be "the living center of the modern industrial oligarchy which dominates the United States.” Roosevelt then appointed Robert Jackson as the aggressive new director of the antitrust pision of the Justice Department.
The president then ignored the vitriolic pleas of the Treasury Department and responded to the urgings of the converts to Keynesian economics and others in his administration. He instead embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power.
As earlier stated, it is maintained that the New Deal was effective in so many was since it helped America recover economically and politically. This is confirmed by Wikipedia, when it said, “Thus, perhaps the strongest legacy of the New Deal, in other words, was to make the federal government a protector of interest groups and a supervisor of competition among them. As a result of the New Deal, political and economic life became politically more competitive than before, with workers, farmers, consumers, and others now able to press their demands upon the government in ways that in the past had been available only to the corporate world. Hence the frequent description of the government the New Deal created as the "broker state," a state brokering the competing claims of numerous groups.”
Making the people more active to participate politically is important to any right thinking democracy like the United States. It is the people who clamor for change and they tell their government what to do. President Roosevelt could have stayed in office if not for the people wanting to change. Empowering them politically could push them more to demand for their political rights.
I still maintain that the New Deal was effective despite the criticisms. In one maintains that the New Deal was not effective, it could sound like arguing that it lengthened or contributed to prolonging the Great depression. Hence to validate the truthfulness of about said thinking, Wikipedia said, “A 1995 survey of economic historians and economists asked "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression.” Of the economists 27% agreed and 51% disagreed. Of the economic historians, only 6% agreed and 74% disagreed. (the rest were in the partly agree/disagree group).”
The fact that the majority of economic historians and economists disagreed with the possibility of prolonging the depression is a proof that the New Deal was a great help to so solve the depression. It has it own use then to address a situation that was unique. In a sense, the government might have its eyes opened to the great problems of economy with Roosevelt eventually agreeing with the Keynesian theory.
The thing that could be said is that it might have prevented the US Economy to going down the drain further. This is confirmed by Wikipedia (2006) when it said, “Some economists argue that although the New Deal did not end the depression, all in all it helped to prevent the economy from decaying further by increasing the regulatory functions of the federal government in ways that helped stabilize previous trouble areas of the economy: the stock market, the banking system, and others. Others argue that it worsened the depression. All analysts agree the New Deal produced a new political coalition that sustained the Democratic Party as the majority party in national politics for more than a generation after its own end.”
It is maintained still maintained that the New Deal helped America not only politically but also economically in some aspects. The positive political effect was admitted and only in the economic aspect that there was issue. The living proof that New Deal has helped America is the Social Security System that still exists today. While it may be argued that one can separate economic issue from political issue it must be argued that the political success has caused American people to eventually realize that there are better ways of solving the economic problems on the premise that political success will eventually lead to economic success.
Another proof is Roosevelt's twelve years in office which allowed the US people to witness a rise in the power of the federal government as a whole. He was noted to have established the presidency as central of authority within the federal government, enabling various groups of citizens to challenge the powers of the corporations, hence making them politically strong leading the present US economic strength.
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