New Deal

The New Deal was the programme of relief, recovery and reform with which President Franklin D. Roosevelt answered the Great Depression in the United States between 1933 and the late 1930s. It created dozens of new federal agencies, regulated banking and the stock market, put millions of unemployed people to work and laid the foundations of the American welfare state. It also remade American politics, building a Democratic coalition that dominated presidential elections for a generation.

After the Wall Street Crash of 1929, the American economy collapsed. Between 1929 and 1933 manufacturing output fell by a third, prices dropped by about a fifth, and unemployment rose from 4 per cent to 25 per cent. About 9,500 banks, some 40 per cent of the total, failed, and farm incomes more than halved. There was no national unemployment insurance or old-age pension, and private charity and local governments could not cope. Accepting the Democratic nomination in 1932, Roosevelt promised "a new deal for the American people", and he defeated President Herbert Hoover in a landslide.

When Roosevelt took office on 4 March 1933, banks across the country were closed or restricting withdrawals. He shut them all, and on 9 March Congress passed the Emergency Banking Act, under which sound banks reopened under Treasury supervision; within three days three-quarters of Federal Reserve banks were open again. In a burst of legislation over the next hundred days, Congress approved almost every measure he asked for. The Banking Act of 1933 created federal deposit insurance, after which bank failures became rare. The gold standard was suspended, prohibition was ended, and new laws required companies selling shares to publish verified accounts, with a Securities and Exchange Commission following in 1934.

Historians call the programmes of 1933 and 1934 the First New Deal, built around the "three Rs" of relief, recovery and reform. The Civilian Conservation Corps put young men to work on public land, the Public Works Administration funded thousands of buildings, roads and dams, and the Tennessee Valley Authority promoted electric power and economic development across the Tennessee River basin. The National Recovery Administration let industries draw up codes of fair competition, and the Agricultural Adjustment Administration paid farmers to limit production in order to raise prices.

When the Supreme Court struck down some early measures and pressure grew for bolder action, a more progressive Second New Deal followed from 1935. The Social Security Act created retirement pensions, unemployment insurance and aid for needy children. The Wagner Act guaranteed workers the right to join unions and bargain collectively, and union membership grew rapidly. The Works Progress Administration employed more than 8.5 million people, building roads, schools and bridges and hiring writers, artists and actors. The Fair Labor Standards Act of 1938 set a minimum wage and maximum hours and banned most child labour.

In 1937 Roosevelt's plan to add new justices to the Supreme Court failed, and a sharp recession pushed unemployment back up to 19 per cent by June 1938. After the 1938 elections a coalition of Republicans and conservative Democrats blocked further reform. The programmes also reflected the racial order of the time: many were segregated, and in the historian Anthony Badger's words they routinely discriminated against Black Americans in the South, even though Black voters moved in large numbers to the Democrats from 1936.

Economists and historians still argue over how far the New Deal ended the Depression; most agree that full employment returned only with American entry into the Second World War in December 1941. Its lasting legacy lay in social security, deposit insurance, labour rights and a much larger role for the federal government.

Our 1930 and 1938 maps show the United States at the start of the Depression and in the later New Deal years.