NEW DEAL

NEW DEAL

NEW DEAL

NEW DEAL

“I pledge you, I pledge myself, to a new deal for
the American people.” In July 1932, FRANKLIN
DELANO ROOSEVELT said these words to the del-
egates at the Democratic National Convention,
who had just elected him the party’s candidate
for president of the United States.
Roosevelt’s New Deal was a response to the
tumultuous events of the years leading to his
nomination. After WORLD WAR I, the people of
the United States experienced unprecedented
prosperity. Consumers of all income levels were
buying goods “on time” by putting a few dollars
down and paying a few dollars a month. Record
numbers of people were also using the install-
ment-buying concept to purchase stocks. The
number of stockbrokers grew from fewer than
30,000 in 1920 to more than 70,000 in 1929.
Stockbrokers allowed their clients to “buy on
margin,” meaning that a customer only had to
pay 10–15 percent down on a stock, with the
BROKER lending the client the rest and being
repaid when the stock went up in value. By 1929,
the skyrocketing prices in the STOCK MARKET
indicated continued prosperity to some econo-
mists, but to others it signaled impending
doom. So much investment had been done on
margin that stockbrokers had borrowed money
from banks that by then were also heavily in
debt. Stock prices began rapidly dropping in
September 1929, and on “Black Thursday,”
October 24, 1929, they plummeted beyond all
belief, devastating thousands of brokerage
houses. By the following Tuesday, October 29,
virtually all stocks were worthless. Millionaires
became paupers overnight. People who had
invested their savings woke up to find them-
selves penniless. This was the start of the Great
Depression.
HERBERT HOOVER was the president at the
time of the great stock market crash. He initially
refused to believe that there was a problem, and
even in April 1930, when more than three mil-
lion people had lost their jobs, he continued in
vain to reassure people that everything was fine.
Because people were afraid of losing their jobs
and running out of money, they refused to
engage in the free-spending ways of the past and
chose to save rather than to spend their money.
This behavior, in turn, created a new cycle of
problems. Because many banks had failed dur-
ing the crash, people no longer trusted them,
and kept their money at home, which depleted
the supply of capital that banks needed. People
also refused to buy new products and instead
repaired old ones. Because few people were buy-
ing new products, companies were forced to
close and to lay off employees. Many people
were evicted from their homes for failing to
make payments, and often several members of
extended families lived together. The number of
HOMELESS PERSONS soared, as did cases of mal-
nutrition. President Hoover still remained firm
in his stance that government aid was not an
option. He believed that private charity could
take care of those individuals who could not
take care of themselves and that the ingenuity of
private business would cure the ills of the coun-
try, not government intrusion. The American
people resented President Hoover’s attitude. The
camps of makeshift shacks in which many peo-
ple lived after being evicted were called
Hoovervilles, and slogans such as Hard Times
Are Hoover-ing over Us were heard everywhere.
By December 1931, the unemployment rate was
more than 13.6 million, a third of the labor
force. When President Hoover sent military
troops with bayonets and tear gas to disband the
Bonus Army—a group of World War I veterans
who had come to Washington, D.C., to seek
early payment of a promised bonus for fighting
in the war—his approval among U.S. voters
plunged irrevocably.
Although the Republicans knew that the
Democratic presidential candidate would more
than likely win, they nominated Hoover again in
1932. The Democratic nominee, Franklin D.
Roosevelt, won all but six states and received 22
million votes, as compared to Hoover’s 15 million. Roosevelt came from a wealthy family, had
served as assistant secretary of the navy and as
governor of New York, and had battled polio
courageously. His promised “new deal”was anx-
iously awaited.
The day after he was inaugurated, Roosevelt
requested a special session of Congress to con-
vene and declared a week-long bank holiday. He
guaranteed that at the end of one week’s time,
banks that the government found to be sound
and secure would reopen. Roosevelt also
announced a MORATORIUM on the export of
gold. Because foreign investors required trading
to be done in gold (paper money was believed to
be too risky) the combination of the morato-
rium and the bank holiday effectively put the
economy of the United States on hold. After the
week had passed, Roosevelt held the first of his
famous “fireside chats” via the radio to reassure
the American people. As promised, the majority
of the banks reopened. Many people followed
Roosevelt’s advice and again placed their money
in the banks. During those same first weeks,
Roosevelt and Congress worked together to
repeal PROHIBITION, allowing the sale and con-
sumption of alcohol to resume.
These moves were only the beginning of what
is referred to as the Hundred Days. More legisla-
tion was passed during the first hundred days of
Roosevelt’s presidency than had been passed in
any similar period of any previous presidency.
Roosevelt worked with young lawyers, professors,
and social workers to create legislation that was
meant to get people working and spending once
again. To relieve the immediate need for food and
shelter, Roosevelt ushered through Congress the
Federal Emergency Relief Administration, which
granted $500 million in aid to the states for dis-
tribution to people in need.
Next came congressional approval of Roo-
sevelt’s Civilian Conservation Corps Act (ch.
383, 50 Stat. 319). The government paid young
men between the ages of 18 and 25 for six
months to one year to do construction or con-
servation work. The men built bridges, dams,
and roads and planted more than 17 million
acres of new forests. They were paid $30 per
month and were required to send most of their
money home to their families.
The Agricultural Adjustment Act of 1933
(AAA), 7 U.S.C.A. §§ 601 et seq., also was passed
during these first hundred days. Farmers were
growing large surpluses of crops such as wheat
and corn, and these surpluses drove prices down
even though the farmers’ expenses were rising.
The AAA sought to reduce the surplus of crops
by paying farmers not to grow them. Although
some Americans questioned this practice
because so many people were starving, the the-
ory of the plan bore out, and by 1936 farmers
were receiving $1.02 per bushel of wheat, as
compared to the 38 cents per bushel that they
had received in 1932.
Toward the end of the hundred days, Con-
gress enacted the NATIONAL INDUSTRIAL
RECOVERY ACT OF 1933 (NIRA), (ch. 90, 48 Stat.
195) and created the National Industrial Recov-
ery Administration to implement the act’s goals.
The legislation’s main goal was to stimulate dor-
mant factories and industries and to get people
back to work. The National Industrial Recovery
Administration believed that the best way to do
this was to create a series of codes (746 in all)
that companies had to follow in the market-
place. These codes regulated everything from a
minimum hourly wage to the maximum num-
ber of hours per week that an employee could
work. They controlled advertising and business
production and output. Fearing a return of the
high unemployment rate, one code forbade
industry from developing technological
advances that would lead to employee layoffs.
NIRA represents the first direct government
involvement in business operations. It allowed
industries and business to engage in previously
prohibited monopolistic price-fixing so that one
manufacturer could not underprice its goods to
drive a competitor out of business. The legisla-

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