The New Deal as a solution to the Crisis of 1929

The New Deal as a solution to the Crisis of 1929

Behind the Crisis of 1929, many countries turned towards totalitarian regimes to get out of the catastrophic financial situation in which they found themselves. However, in United States They decided to bet on a change in the nation's politics and the November 1932 elections were won by the Democrat F.D. Roosevelt. The Democratic Party was known for holding a interventionist economic policy, so the new president aimed to curb the negative consequences (unemployment, drop in consumption) that had occurred after the “crack”Stock exchange three years ago.

Roosevelt he surrounded himself with what they called "brain trust”, That is, a team of liberal politicians and reformers who were inspired by the theories of the English economist John Maynard Keynes. For the new team, the Crisis of 29 it is the result of a surplus of production and insufficient consumption. Therefore, they advocate a “new distribution of income", Called"New Deal”, Which reduces production capacity while increasing purchasing power. There are three main measures that are included within this change of course.

First, there are the financial measures. In order to stop the chain of bank failures, they authorize the Federal Reserve to grant banks credits on discounted securities and effects. In other words, they approve the use of inflation, which is legalized in April 1933.

It also has a social section: the fight against unemployment. In May 1933, the payment of federal subsidies to the different states was authorized for them to distribute aid to the unemployed. Combined with this policy, they began to great public works in the most backward regions of the country. They were not random constructions, but aimed at offering possibilities for future employment, as for example in Tennessee, where hydroelectric dams and irrigation systems were created.

In September 35, the “Social Security Act”, A law that devised aid for retirees and the unemployed. All of these measures were financed by taxes on beverages and on undistributed income from companies. On the negative side, a budget deficit was generated that ended up disappearing with the country's recovery.

By last, production and income policy was clarified. After a series of obstacles imposed by the Supreme Court (dominated by the Republican Party), Roosevelt wins again at the polls in 1936 and decides to create three new laws: the second AAA (agriculture law), the National Labor Relations act (fixed union power) and the Fair Labor Standard act (general framework of labor contracts and 40 hours of work). With this new legislation, it was forced to reduce agricultural and industrial production, while new, more solvent incomes were set.

The consequences of the New Deal they have been perceived to this day. American companies have had strong solid structures for decades. The powers of the federal State were increased vis-à-vis the different States, apart from the increase in freedom of enterprise. Unionism and workers gained more power with the creation of a second union center (Committee for Industrial Organization). In addition, the number of unemployed fell from 14 million to 7.5 million between 1933 and 1937.

Definitely, By 1940, the situation had been almost totally reversed and, although it was far from recovering full prosperity, the truth is that Roosevelt saved American capitalism through strict state control. The United States pursued a much more conservative policy and it was not until outcome of World War II when they got a new boost that would give them back welfare and would grant them world political hegemony during the second half of the 20th century.

Passionate about History, he has a degree in Journalism and Audiovisual Communication. Since he was a child he loved history and ended up exploring the 18th, 19th and 20th centuries above all.


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