New Deal

The New Deal means a broad-based project set presented by Franklin Roosevelt, the former president of the U.S. The policy was pursued by the government, in order to overcome the large-scale economic crisis of the 1930s known as the Great Depression. 

The New Deal objective was to bring down the unemployment rate, establish the system of social security, and carry out financial system reform. 

Essence of the New Deal

In fact, a stock market crash happened on October 24th, in 1929. This historical event is known as Black Thursday. A sustained growth took a twist, as a break-neck fall of the whole economy came into play. Thus, the U.S. financial sector collapsed, producing an unprecedented unemployment rate. A crisis hit Wall Street the most, and, as a consequence, millions of market investors went broke. 

The stock market crash has also affected the industries. Factories and plants slowed down production, lowered wages and started laying off workers. Purchasing power has decreased, while the debt load of the population, on the contrary, has reached the critical level.

Roosevelt's inauguration of 1933 initiated the New Deal adaptation. The course included a range of government policies, aimed at alleviating the situation with unemployed labor, stimulating economic activity, along with providing consumer safety. 

Reforms, presented by the President’s administration in the New Deal, contemplated shifts in various spheres, including:

• Banking sector. Holidays for banks and their complete revision were announced to strengthen the system. As a result, authorities established the Federal Deposit Insurance Corporation (FDIC). It issued funds to depositors in the event of bank failure.
• Manufacturing industry. A national law for the production sector restored a pre-depression level. Subsequently, the fair competition rules have been developed to meet the market demands. So a minimum wage and a maximum working week were implemented.
• Social services. The most significant outcome was the introduction of social legislation in the U.S.: pensions, benefits for the unemployed, organization of public works, youth policy.
• Residential housing. The government paid considerable attention to residential development, in particular mortgage lending. Thus, in 1933, the first company was created to issue bonds for financing mortgages, the Homeowners Loan Corporation.
• Agriculture. The Farmers' Relief Bill proposed measures to deal with the crisis in the agricultural sector, associated with falling prices for products and the massive impoverishment. To balance supply and demand, part of the land was withdrawn from farming circulation. Rural communities received subsidies for these areas.

Background of the concept

The New Deal policy can be divided into two time frames. A first interval began in 1933, which coincided with the early years of Roosevelt’s presidency. The reforms focused  primarily on the rescue of the banking and financial systems. The gold standard has been abolished.

As a result, the New Deal measures helped the U.S. to come out of recession with minimal costs and strengthen its position on the international arena. State-monopoly capitalism has been further developed. In addition, the government policy presupposed a function of economic regulation.

In 1935, the course entered the second stage, which was characterized by a series of social reforms, in particular, the adoption of labor legislation. A social function of the state has been formed . As a consequence, in the process of the New Deal, presented reforms have improved the working and living conditions of employees.

After-effects of the New Deal

Accepted reforms contributed to economic stabilization of the U.S. The living standard of most Americans has risen, while their purchasing power has also increased. These measures led to manufacturers’ ability to sell more goods and services.

Alternatively, a massive growth in military spending in the run-up to World War II had a salutary effect on the economy. Defense orders required a large number of workers that eventually entailed the unemployment downturn.

Since then, social legislation of the New Deal, first adopted in the United States in the 1930s, has been a pillar for the functioning of the entire American society.