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In 1933, the United States was in the midst of the worst economic crisis in its history. Millions were unemployed, banks were collapsing, and Americans were losing faith in the institutions that had once promised prosperity.
A newly elected president entered office promising bold action and launched an unprecedented series of experiments that would forever change the relationship between Americans and their government.
Some programs succeeded, others failed, and their legacy remains controversial nearly a century later.
Learn more about the New Deal on this episode of Everything Everywhere Daily.
The prosperity of the 1920s fueled optimism across the United States as renters became owners and millions of people bought their first car. Stock prices soared throughout the decade, doubling in value in just five years and encouraging more people to invest in stocks to build wealth.
However, everything changed when the stock market crashed on October 24, 1929, known as Black Thursday. Prices fell so fast that the tickers lagged hours behind the torrent of sales.
The New York Times characterized the damage from the selloff the following week as a “nationwide stampede to unload.” The same General Electric stock that had sold for $400 the previous week had been cut in half by Tuesday the 29th.
What began with the stock market’s collapse turned into a full-blown economic depression by 1930. Despite optimism that markets would recover and stock prices would improve, they didn’t. GE’s stock, which peaked at $400, traded for less than $10 by 1932. Between 1929 and 1933, the nation’s nominal Gross National Product fell by more than half, while unemployment climbed from approximately 3% to 25%.
As the economy cratered during his presidency, Herbert Hoover expanded federal intervention but remained reluctant to provide direct federal relief to individuals, preferring voluntary cooperation, local assistance, and programs designed to stabilize businesses and financial institutions.
Hoover viewed the downturn as a temporary blip. These cycles had long been part of American History, and he pointed to a two-quarter decline in 1921 to build confidence and obscure the disaster’s true scale.
Hoover’s solutions largely focused on persuading bankers and business leaders not to cut wages or jobs. The promises he secured from business leaders not to lay off workers collapsed as revenues plummeted.
The Federal Reserve initially eased credit after the 1929 stock market crash, but its failure to prevent a severe contraction in the money supply contributed to the Depression’s worsening.
Efforts to control shipping and power prices and to encourage widespread commitments from state governments to ramp up public works projects failed. Hoover responded with more federal intervention than any previous president, but his actions fell short of halting the disaster.
As his popularity plummeted, in 1931 Herbert Hoover reportedly asked Treasury Secretary Andrew Mellon for a nickel to call a friend. Mellon supposedly flipped him a dime and said, “Here’s a dime—call both of them.”
Herbert Hoover was well-intentioned, but his name became a synonym for the depression.
His opponent in the 1932 presidential election, the Democratic Governor of New York, Franklin D. Roosevelt, offered little in the way of specifics on how to solve the crisis, but he spoke with optimism and charisma.
His true genius lay in his ability to build a coalition and bring people together, and he would need that skill to launch what he called the New Deal, the ambiguous program he had promised on the campaign trail.
While accepting his party’s nomination for President, Roosevelt promised, quote. “I pledge you, I pledge myself, to a new deal for the American people.”
The New Deal was vague, but it reflected Roosevelt’s belief that government’s purpose was to serve a central role in times of great crisis.
Roosevelt won in a landslide in the 1932 election, carrying 42 of 48 states. He got right to work on calming the anxious nation in his inaugural address on March 4th, 1933, when he said, The only thing we have to fear is fear itself.
Throughout the address, Roosevelt called for action. The speech initiated a period known as the Hundred Days initiative that created much of the early New Deal framework.
The vision that became the New Deal grew out of long-term collaboration among business and political leaders from both parties, as well as academics and intellectuals. Through this collaboration, Roosevelt’s program ultimately rested on three pillars: relief, recovery, and reform.
The relief initiatives were emergency measures designed to feed the starving and put wages in pockets through public works, stopping the spread of homelessness.
The recovery initiatives tried to restart the economy and stabilize industry.
The reform programs were safeguards meant to prevent future economic collapse.
Roosevelt’s first target was the banking crisis. He immediately decreed a one-week bank holiday, halting bank runs and allowing banks to stay afloat. During the recess, Congress rushed through the Emergency Banking Act, instituting institutional inspections designed to restore public trust in banks.
Roosevelt drove the point home in his first Fireside Chat, using the radio to speak directly to Americans and rally national support for his programs.
The administration followed up with the Glass-Steagall Act, which reshaped American finance by creating the Federal Deposit Insurance Corporation to protect everyday savings.
The Agricultural Adjustment Act was one of the New Deal’s most successful programs. The program sought to bring desperately needed relief to farmers. Farmers had lost their purchasing power as prices plummeted and markets for their crops evaporated.
The Agricultural Adjustment Act of 1933 was part of a broader farm relief law that combined measures to raise agricultural prices with provisions addressing farm debt and emergency financing.
The most controversial part of the bill paid farmers to reduce their output, as reduced supplies would increase crop prices. Farmers struggled to accept the program as being paid to not produce was counter to everything they had known. It was also difficult to accept that a solution to starvation involved destroying milk, during a time when people so desperately needed it.
Perhaps the most popular long-term program was the Tennessee Valley Authority. The Tennessee Valley Authority was established in 1933 to develop the Tennessee River watershed through flood control, improved navigation, and hydroelectric power generation, bringing electricity and economic development to a region spanning portions of seven states.
Before the TVA, much of the region was without electricity and lacked many modern conveniences.
At a time when government assistance was associated with Marxism, work programs that built public works were wildly popular.
The Civilian Conservation Corps checked all the boxes and, as a bonus, satisfied Roosevelt’s long-standing interest in conservation. The program put jobless young men to work transforming public land, focusing on national parks, public forests, and flood-control projects. With an original budget for only 250,000 workers, the program endured until WWII and served a total nearly 3 million men.
Over its lifetime, the Civilian Conservation Corps contributed to major projects such as Skyline Drive in Shenandoah National Park and the construction of Red Rocks Amphitheatre in Colorado, while also building trails and improving facilities throughout America’s national parks. They also planted more than 3 billion trees!
Through the Civilian Conservation Corps and its companion programs, the Works Progress Administration, Civil Works Administration, and Public Works Administration, the government provided an estimated 15 million jobs to struggling workers during the New Deal.
Roosevelt saved the boldest initiative for the end of his first hundred days when he unveiled the National Industrial Recovery Act. The NIRA sought to stabilize the private sector by raising prices, regulating production, improving wages, and reducing competition between businesses.
Congress authorized the nation’s leading industrialists from across multiple industries to collude to devise codes for fair competition, encouraging them to set standard prices and organize market share. The NIRA immediately faced intense scrutiny as many saw in it the centralized economic planning of a Marxist economy.
The legislation also delivered a major victory for organized labor by establishing minimum wages and maximum hours, while affirming the legality of unions and collective bargaining, goals which labor had been fighting for since the Civil War.
Despite all the new programs, progress in turning the economy around was slow. Success was limited, with occasional glimmers of hope, but long-term solutions seemed out of reach.
By 1934, the public grew weary of the lack of progress. The expanding agricultural crisis unfolding on the Great Plains during the Dust Bowl created demands for more action. Radical opposition to Roosevelt began to emerge, which spurred him into action during the Second Hundred Days, which began in 1935.
Francis Townshend, a physician from Long Beach, California, developed what he called an “old age revolving pension”. Townshend believed this program would provide security for older Americans while also stimulating the overall economy.
Under Townshend’s plan, every person aged sixty or older who had retired would receive a $200 check each month. To receive the next month’s payment, they would have to spend the previous month’s payment.
Townshend hoped to turn America’s over-60 population into an army of consumers who would retire earlier and pave the way for a younger workforce.
The movement gained significant traction, and eventually prompted Roosevelt to push for the passage of the Social Security Act of 1935, which became the largest government program in American History.
Roosevelt’s version of social insurance differed from Townsend’s proposal because the Social Security Act of 1935 established an old-age insurance system for covered workers, financed by payroll taxes paid by both employees and employers.
The program didn’t stop there; it also contained provisions to provide direct relief to the impoverished and mothers of dependent children.
To combat joblessness on a massive scale, the Works Progress Administration put millions of Americans back to work on vital public infrastructure, while its innovative cultural projects employed writers, actors, and artists.
The program left a lasting legacy still visible today. New Deal public works funding helped construct the Triborough Bridge and LaGuardia Airport in New York, the San Antonio River Walk, and Florida’s Overseas Highway connecting Key West to the mainland.
Beyond the impact of its “Alphabet Soup” programs, many of which were ultimately retired, the New Deal permanently reshaped the role of the American Government.
While the New Deal was largely popular and resulted in the reelection of Roosevelt in both 1936 and 1940, it didn’t end the great depression. In 1937 and 1938, the economy contracted again, and unemployment returned to approximately 20%.
It was the massive expansion of wartime production, beginning with orders from European countries and accelerating after American entry into World War II, that finally brought the economy back to full employment. By 1942, the United States had essentially eliminated the mass unemployment that characterized the Depression.
The New Deal may not have ended the Great Depression, but it offered assistance to millions and perhaps more importantly, fundamentally changed the role of the Federal government.
Nearly a century later, Americans still live with the institutions, laws, and political debates that emerged during the New Deal.