The New Deal

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The effectiveness of the New Deal in addressing and ending the Great Depression

Summary:

The New Deal was partially effective in addressing the Great Depression by providing immediate relief and implementing reforms that stabilized the economy. However, it did not fully end the Great Depression; it was the economic boom caused by World War II that ultimately revitalized the U.S. economy and reduced unemployment significantly.

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How successful was the New Deal in responding to the Great Depression?

The Great Depression began on October 24, 1929 with the stock market crash on Black Thursday. By the time that Franklin Delano Roosevelt became president in 1933, almost 25 percent of the American labor force was out of work, the banking system was in shambles, factories had shut down, and people had lost many homes and farms to foreclosure.

The New Deal was the fulfillment of FDR's promise to swiftly alleviate the plight of the American people. Upon assuming office, he immediately declared a four-day banking holiday so that the run on banks would stop. At the end of the holiday, only banks that were solvent were allowed to reopen. Many new federal agencies were created to address the needs of the people affected by the Great Depression.

For instance, the Tennessee Valley Authority brought electricity to rural areas and provided jobs. The Civilian Conservation Corps helped the environment while...

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providing jobs to young people. The Works Progress Administration also provided many jobs in areas such as construction. The Agricultural Adjustment Administration stabilized farm prices. The Social Security Act guaranteed pensions for millions of older Americans. These are examples of the many projects that FDR's administration took as part of the New Deal.

These programs each targeted diverse sectors of the economy, and they were successful in their various limited areas. However, despite the prodigious efforts of the Roosevelt administration to put an end to the Great Depression through the New Deal, it dragged on. One hindrance was the opposition to New Deal policies by Roosevelt's conservative political adversaries. They attempted to invalidate these New Deal policies by having the Supreme Court declare them unconstitutional. FDR, in turn, threatened to add more liberal judges to the court.

Ultimately, the New Deal programs that Roosevelt initiated helped to improve the lives of millions of Americans affected by the Great Depression, but they did not end the Depression itself. The Great Depression did not end until after the attack on Pearl Harbor on December 7, 1941. The stimulation to American industry brought on by World War II brought an end to the Great Depression.

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Economies can be self-fulfilling prophecies. Sometimes doing things that raise consumer confidence will cause the consumers to spend more, which stimulates the economy. Whatever wide-reaching, immediate effects the New Deal had, it provided jobs for some people and a light at the end of the tunnel. A depression is not just economic, it's emotional too. Having something is sometimes all people need to get started.
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It depends what your expectations are, right?  If you were expecting, either then or now, that the New Deal was to have "fixed" the economic crisis of the Great Depression, than obviously it failed.  If your goal was to prevent such a catastrophe from ever happening again, then it was a stunning success.  Others might simply argue the New Deal programs got America through a bad economic time so that recovery was possible, and revolution averted.  So it depends on what the criteria or definition of success is.

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Whilst statistics such as the unemployment rate and the GDP are important, I do think we need to look wider to see the impact of the New Deal. Let us remember that the situation that was faced by America was incredibly bleak and desperate. The New Deal tried to do something to alleviate the situation and helped many people. Yes, the employment rate and GDP did take a long time to recover, but perhaps that would be expected given the gravity of the situation. Any reflection of the health of a state is only partial, and this needs to be remembered.

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It is very hard to argue that the New Deal was an completely successful response to the Great Depression.  The unemployment rate in the US did not return to 1929 levels until 1941.  The same is true for the Gross Domestic Product.  Since these are two major gauges of economic health, it seems clear that the New Deal did not solve the problems of the Depression.

Of course, it is quite possible to argue that things would have been worse had it not been for the New Deal.  Unemployment and GDP numbers in 1939 and 1940 were better than they were in 1932.  So this argues for the idea that the New Deal was at least somewhat successful.

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The New Deal did not end the Great Depression; but it did provide relief and hope to those who suffered from it.  The New Deal's program had three elements: Relief, Recovery, Reform. Relief was in the form of the Bank Holiday which allowed people to catch their breaths and ended the runs on banks. Later organizations, such as the Civilian Conservation Corps and the Public Works Administration put people back to work; and Social Security and the Glass Steagal Act which created the Federal Deposit Insurance Corporation provided some insurance against it happening again. Still, private employment did not return as quickly as might have been hoped, and a number of New Deal programs were declared unconstitutional by the Supreme Court. It was the outbreak of World War II, not the New Deal, which ended the Depression. Still, it gave people hope and restored their confidence.

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It is difficult to fully answer if the New Deal solved or ended the Great Depression.  World War II "interrupted" this process.  This made it fundamentally challenging to assess if the Great Depression was eliminated because of the New Deal.

Given this reality, it seems that personal ideology becomes critical.  If one believes in the free market and its laissez faire principles, the New Deal did not end the Great Depression.  Scholars who embrace this position point to several factors that influence their position.  The New Deal did not create sustainable employment.  The New Deal's programs did not solve the issue of unemployment, making the Great Depression a sustained reality. For example, in 1939,  U.S. unemployment still exceeded 20% while European countries, according to a League of Nations survey, averaged only about 12%.  At the same time, some suggest that the New Deal did not end the Great Depression because it prevented capital investment and the enhancement of supply- side economics. For this reason, it is suggested that after World War II, Congress voted against another version of the New Deal.  After the war, Congress reduced income taxes, easing the process back into a laissez faire style process whereby the Great Depression could not revisit the nation's economy.  The post- War prosperity was not assisted by a host of government approaches, but rather through economic freedom and alleviation of taxes to trigger capital investment and paths of revenue development.

Those who believed that the Great Depression was the ultimate repudiation of the free market without any sense of external influence would suggest that the Great Depression was critical in ending the Great Depression.  Thinkers in this camp would argue that many of the aspects we now come to take for granted in our economic system were established by the New Deal.  Social Security, the establishment of the FDIC, and the power of the Securities and Exchange Commission were all remnants of the New Deal that have become part of the modern definition of capitalism. Some would further argue that the New Deal ended the Great Depression because it focused a great deal of government action and revenue toward it.  The establishment of a prosperous economic system required attention and revenue that average citizens could not devote to it. Such a level of intense government energy is seen as the only possible way in which the Great Depression could have been solved. Without it, there was no sign of a possible alleviation of suffering on such a massive and seismic level.

It is in this suspended paradigm where the answer to the question lies.  The presence of political ideology as well as the sudden shift to wartime production makes it impossible to fully assess the legacy of the New Deal in solving the Great Depression.  Somewhere within both polarities, the individual is positioned.  Thus, it becomes more of a reflection of the individual's perception and ideological perspective than anything else.

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Was the New Deal successful in ending the Great Depression?

The New Deal clearly did not end the Great Depression.  The New Deal definitely ameliorated the problems connected to the Depression, but it definitely did not end the Depression.

We can tell that the New Deal did not end the Depression because unemployment levels and GDP levels did not return to pre-Depression levels during the time of the New Deal.   Instead, they only returned to those levels after 1939.  What really got the economy back on track, sad to say, was World War II.  With men getting drafted into the military (even before war was declared) and with factories ramping up production for the US military and for Lend-Lease, the war was a huge boon to the US economy.

The Depression would surely have been longer and deeper if it had not been for the New Deal.  The New Deal provided relief to people in need and started the US economy on the way to recovery.  However, it is not at all clear if it could have gotten the economy back to pre-Depression levels had it not been for the war.

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