Prior to the Great Depression, the prevailing economic orthodoxy held that the government should have as little to do with the economy as possible. Governments had an important role to play in setting the rules and establishing the legal framework in which businesses operated, but that was pretty much it. Once the system had been established, the government should get out of the way and allow businesses without hindrance in a free-market system.

The enormous prosperity enjoyed by the United States during the 1920s appeared to vindicate this laissez-faire approach. However, in the wake of the Wall Street Crash and the Great Depression to which it would lead, it became clear that the old orthodoxy had outlived its usefulness and that a new approach was needed.

Franklin Delano Roosevelt offered just such an approach when he came to office in 1933. His economic policy, which became known as the New Deal, was based on a massive, unprecedented level of government involvement in the economy, not just in terms of regulation, but in creating jobs.

When FDR took over, the unemployment rate in the United States was a catastrophic twenty-five percent. It was clear to him and his advisers that the private sector was too weak to be able to create enough new jobs necessary to reduce this staggeringly high number.

To that end, FDR established the Public Works Administration (PWA), which spent billions of dollars of taxpayers' money in building large-scale construction projects such as dams, bridges, schools, and hospitals. In spending vast sums of public money like this, the Roosevelt administration believed that it could cut the unemployment rate, as many workers who would otherwise be unemployed would now have something to do. It also believed that the PWA could substantially increase levels of industrial production, which had taken a severe hit during the Great Depression.