The USA – The New Deal Essay

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In the 1920’s America was the richest and most powerful country in the world and its industry was booming. However in 1929 disaster struck.

The Wall Street Crash plunged America into deep depression, and the rest of the world followed suit. The 1920s were known as the ‘boom years’ or the ‘roaring twenties’. The twenties saw American people, having a great time and enjoying the highest living standards the world had ever known. One factor resulting in the boom was that the USA is a massive country with affluent natural resources.This meant that it did not need to import raw materials and did not need to export all its goods. Other countries were not relied upon, as the home market was rich and growing.

In addition, the Americans had provided aid for many European countries during the war. They had also been main suppliers of arms, and munitions. This long lasting one-way trade gave American industry a real boost. In addition to this, while the European powers fought, America took over their trade around the world.

American exports to Europe increased dramatically. The making of cars also provided many more jobs directly, for example sales people.It also gave factories more work as many different materials were used during manufacture. In turn this meant roads had to be built. This industry alone was the single biggest employer in the 1920s. The Republican Party ruled during the boom years.

From 1920 through to 1932, all the American presidents were Republican and they dominated the Congress. As Republicans the government policy was to interfere as little as possible with the everyday lives of the people. Therefore businessmen were left alone to run their businesses how they wished with out any strict government laws.As more people made money from business; more people bought goods from others.

That was where the wealth stemmed from. However the wealth did not trickle down to the poorest people. Despite the prosperity, there were still many poor Americans. In the big industrial cities in the north, such as Pittsburgh and Chicago, immigrants laboured for long hours and very little money, in sweat shops, steel mills and slaughterhouses. In the south it was the agricultural business that was suppressed. Thousands of poor farmers, black and white worked from sunrise to sunset and earned hardly enough to scrape a living.

One of the reasons why farm income had dropped from $22 billion in 1919 to just $13 billion in 1928 was that before the war Europe had been the biggest market but due to the large repayments it had to make to America and the costs of war, it could not afford the importation of such goods. The wealth, which was said, ‘would trickle down to everybody’, never reached these kinds of people. One of the main reasons for this was employers could pay workers as little money as they wished, and make them work as long as they wished.This was due to the fact that there were always immigrants looking for work so there would always be someone else to take your place if you did not comply with the employer’s demands. There was no such thing as trade unions to stand up for them, and there was no social security.

However all this was going to change, due to the problems the depression caused and the introduction of the New Deal. The main reason that Roosevelt introduced the New Deal was the depression. Primarily the cause of this depression was the Wall Street Crash in 1929. In the spring of 1929 the stockbrokers in Wall Street were happy.

Business was soaring. The Republican Party’s Herbert Hoover had just been elected President. Hoover was a strong supporter of businessmen, as he believed that it was their hard work and knowledge that had made America so prosperous in the last few years. Hoover claimed that soon all poverty would be wiped out and that everyone would be rich.

Many people believed him, but it was not to be. By 1929 buying shares had become so popular that many people borrowed large amounts of money from the banks, so they could buy shares for a fairly low price and then, as profits rose, sell them at one much higher.In 1920 there had been only 4 million shareholders but in 1929 there were 20million. Buying shares was a sort of fever that had gripped the Nation. However by the autumn of 1929 some people were beginning to harbour doubts about this new hobby.

There were so many shareholders and profits had slowly begun to slow down, until eventually they begun to fall. On Thursday 24th October 1929 – Black Thursday – 13 million shares were sold at a fraction of the price they had been bought. Then on the following Tuesday -Terrifying Tuesday – a further 16. 5 million were sold.By the end of the year 1929 the value of all shares had dropped by a massive $40,000 million. Thousands of shareholders, especially those that who had borrowed large amounts of money from the bank, were facing debt and ruin.

Many people were so desperate they committed suicide. Thus ended the boom years and Americas prosperity. Throughout the next three years American industry sank deeper and deeper into depression. Many people thought up their own individual reasons as to why this disaster had happened. Some blamed the blindness of the government, whilst others said it was the greed of industries and stockbrokers.These factors probably did contribute to the Wall Street Crash, but in actual fact there was a more underlying cause.

Basically American industries were producing more goods than could be sold. The people who could afford goods such as cars and radios had already purchased them. The working class people could not afford them, because their wages were still not high enough, and until they were paid more, industry would not continue to rise. The Wall Street Crash had made people very uncertain about the financial situation in future.

Even those people with enough money for cars and radios, saved their money. Overseas sales dried up completely.During the boom America had lent money to European countries such as Britain. Now America was facing the Great Depression the American government wanted the money they had loaned back.

This meant these countries had no extra money, as they had not boomed during the 1920s. Therefore America could not export its goods to Europe, as they too could not afford the high prices that America demanded. People began to lose confidence in banks. Many banks had given loans out for people to buy shares, but now that these people were bankrupt they could not repay the banks.

Many banks actually had to close down themselves, as they too became bankrupt.In the banking crisis of 1929, 659 banks had failed. As they failed people stopped trusting them, withdrew their savings and closed their accounts. During 1930, things did not pick up and a further 1352 banks befell to bankruptcy. In 1932, European countries were also having problems with their banks.

This had a disastrous knock on effect within the USA and panic set in. A billion dollars was withdrawn from banks all over the country. People either kept their money at home or in safe deposit boxes. Many Americans believed their only security was the currency, consequently a further 2294 banks closed in 1931.Unsold goods piled up in factory warehouses. This forced factory owners to lay off many workers, and cut back its production.

Employers also dramatically reduced the wages of those who still worked for them. By 1931 eight million Americans were unemployed, and received no unemployment money from the government. Many were forced to live on charity and lost homes and money to buy food. People would spend hours queuing for bread or soup that was donated by the people who could afford it.

These places were commonly known as ‘breadlines’. Unfortunately in 1932 things were still not improving; 12 million people were now unemployed.In many places as many as four in ten people were out of work. Between 1928 and 1933 industrial and farm production decreased by a massive 40 per cent, and the average wage fell by over 60 per cent. As people lost their jobs or had reduced wages, they bought less and industry suffered. By 1932 America was trapped in a vicious circle and was engulfed in the most serious economic depression the world had ever seen.

Farmers were also hit terribly during the depression. The 1920s had not been kind to them anyway. Farmers could no longer sell their produce, whether if be potatoes, wheat, milk or beef.With the growing number of people out of work and the low wages, the farmers previous customers in the city, could no longer afford these goods. If they could they were bought at only a fraction of the price.

The same was true with overseas customers. When farmers could not pay their mortgages and other debts many were thrown off their land. Some grew so desperate that they would get a group of farmers together, gather their shotguns and make hanging nooses, to drive away the men whose job it was to take away their farms. Obviously America was trapped in a terrible situation.Something needed to be done.

The government had to intervene, but Hoover would not do so as he believed handing out money would not encourage people to be independent. Nonetheless most American people were so desperate that they did not listen to Hoover’s pessimistic views. Franklin D. Roosevelt had been the Governor of New York. He was a democrat, and in 1932 the Democratic Party elected him to run against President Hoover in that years Presidential Election. Roosevelt visited towns and cities all over the country, promising a New Deal, to help get America out of the depression.

He soon became the clear favourite and replaced Hoover as US president on March 4th 1933. Hoover, a conservative had believed in self-help, and unlike Roosevelt, accepted no responsibility for the welfare of the state. Roosevelt’s New Deal changed the philosophy of America, and its previous foundations. During his election campaign Roosevelt, promised the American people a New Deal. Essentially it was to get the American economy back on its feet.

Roosevelt’s aims were apparent from the very start. He was going to use the full power of the US government in an attempt to end the depression, and subsequently end unemployment.Although the idea of the New Deal was a total change in American philosophy Roosevelt felt that this sort of radical action was necessary to lift America out of the depth of despair. He drew up four main points. The first was to get the American people back to work.

When the New Deal began 24. 9% of the entire labour force were unemployed. This figure was the highest it had been for years and the highest it would be for years to come. His second point was to protect the American people’s savings. Roosevelt did not want a repeat of the Wall Street Crash, when entire savings, became worthless.He wanted to set up social security for his workers.

This was to provide relief for the sick, disabled, ill and the unemployed, and his fourth and final aim was to get the American industry back on its feet, and to end the oppression for the agricultural business. In his first hundred days in presidency Roosevelt worked around the clock with his advisers. From his very first day Roosevelt moved straight into action. Many ordinary people had lost faith in banks; so on the day following his inauguration Roosevelt closed all the banks, and ordered them to remain closed until government officials had checked them.

After a few days 5000 trustworthy banks were granted permission to re-open, and were even funded by the government when necessary. Whilst this was going on Roosevelt’s advisers were devising some rules and regulations that the banks had to follow. They were to ensure that the reckless speculation that had caused the Wall Street Crash would never occur again. The two measures put in place were named, the Emergency Banking Act, and the Securities Exchange Commission.

These first two measures gave the American people a taste of what was going to come with this New Deal.During the whole Hundred Days Congress, people were not really aware of what was happening, but they were aware that something was going on. During these first hundred days, Roosevelt sent fifteen new proposals to congress, and all fifteen passed. This gives people an idea of how many serious changes were made. There was an urgent need for some kind of relief for the poorest American People. The Federal Emergency Relief Administration quickly set up soup kitchens, blankets, employment schemes and nursery schools.

For this project a sum of 500million dollars was spent. Roosevelt believed the most urgent matter was to get people back to work.He was particularly concerned about jobless teenagers. Young men and sometimes girls would steal rides on freight trains, so that they could travel round the country and look for jobs. In attempt to help these young people Roosevelt set up an organisation known as the Civilian Conservation Corps – CCC for short.

Roosevelt created jobs for the CCC workers cutting fire-lanes through forests, strengthening riverbanks against flooding, and planting trees. The workers lived in special camps, where they were provided with food, shelter, and a wage of dollar a week, from the government.Most young people sent the money home to their families, who also needed all the help they could get. Young people would sign on for periods of six months, and then if they could still not find work it would be renewed.

By August 1933 it was really beginning to work and thousands of teenagers had found work all over the country. The scheme ended in the early 1940’s. By this time 2. 5 million young men had served in the CCC. As historians we can compare Roosevelt to the likes of Hitler. Many of their policies were alike, and involved similar principles.

Hitler set up the Hitler Youth. This was similar to the CCC in many respects.In Germany between the ages of 18 – 25 young people lived in Labour Camps and worked for a small wage food and shelter. It was part of the Hitler Youth campaign. The men were trained as soldiers and everyone had to support Hitler.

Unlike the Hitler Youth in the CCC young people were free to leave when they wanted and it was not compulsory. Following the almost immediate success of the CCC Roosevelt set up many similar schemes to help reduce unemployment. The American people knew these New Deal organisations by their initials, and they were soon commonly known as the ‘alphabet agencies’.

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