What was the New Deal during the Great Depression?

The New Deal was a comprehensive and broad set of government-directed projects introduced by President Franklin Delano Roosevelt in an attempt to help the United States economy emerge from the Great Depression. It launched in the early 1930s and was designed to bolster the United States economy, reduce unemployment, provide a social safety net, and instill confidence in the government’s ability to protect its citizens.

Key Takeaways

• The New Deal was a series of domestic programs introduced by President Franklin D. Roosevelt in an attempt to end the economic ravages of the Great Depression.
• The New Deal also attempted to curb the excesses of untrammeled capitalism through such policies as setting minimum wages, regulating working conditions, promoting labor unions, and bolstering retirement security.
• The New Deal made the government’s role in steering the economy more important.

Understanding the New Deal

The stock market crash of 1929 began on October 24—a day known as Black Thursday. It brought a period of roaring growth to a sudden halt. Companies and banks across the United States started failing, and the unemployment rate skyrocketed to the point that nearly a quarter of the workforce was unemployed.

President Franklin Roosevelt launched the New Deal after taking office in 1933. It consisted of a variety of government-funded programs aimed at getting people back to work, as well as legislation and executive orders that propped up farmers and stimulated business activity.

The New Deal engendered controversy by introducing a number of radical reforms and increasing the government’s role in guiding the economy. Several of its programs were ultimately declared unconstitutional by the U.S. Supreme Court, including two major pillars: the National Recovery Administration (NRA)—which set working conditions, minimum wages, and maximum hours, while guaranteeing the right of labor to bargain collectively—and the Agricultural Adjustment Administration (AAA), which intended to stabilize farm prices.

Public opinion was for the New Deal, though, and, as a result, in February of 1937 Roosevelt tried to increase the number of Supreme Court justices in order to prevent future programs from being shuttered. Though he failed in this court-packing attempt, he succeeded in his objective. In May 1937, the Supreme Court declared the Social Security Act to be constitutional by a five-to-four vote after one of its justices changed his anti–New Deal stance. No other New Deal program was ever again judicially invalidated by the court.

The New Deal was enacted in two parts: the first in 1933 and the second in 1935.

History of the New Deal

The New Deal is often broken into two segments. The “first” New Deal was launched in 1933 during the initial two years of the Roosevelt presidency. In addition to the NRA and AAA, it consisted of measures to stabilize the banking system (Emergency Banking Act), ensure bank deposit security (Banking Act of 1933, known as the Glass-Steagall Act), and increase confidence in the stock market (Securities Act of 1933).

The “second” New Deal, in 1935, introduced perhaps the program’s greatest and most enduring legacy: government-sponsored retirement plans in the form of Social Security. It also increased government employment (Works Progress Administration) and minimum wages (Fair Labor Standards Act).

Was the New Deal a Success?

Historians credit the New Deal with some success in reviving the country’s fortunes. The economy did slowly recover during the 1930s, confidence was restored to the banking system through federal deposit insurance, working conditions were improved, and labor unions strengthened the hand of workers.

It was World War II, however, that ultimately provided the impetus to get America fully back to work. The unprecedented spending worldwide on ships, arms, and planes propelled the country into full employment—a feat that the New Deal programs, despite their best efforts, were unable to achieve on their own.

The displacement of the American work force and farming communities caused families to split up or to migrate from their homes in search of work. "Hoovervilles," or shantytowns built of packing crates, abandoned cars, and other scraps, sprung up across the nation. Residents of the Great Plains area, where the effects of the Depression were intensified by drought and dust storms, simply abandoned their farms and headed for California in hopes of finding the "land of milk and honey." Gangs of unemployed youth, whose families could no longer support them, rode the rails as hobos in search of work. America 's unemployed citizens were on the move, but there was no place to go that offered relief from the Great Depression.

What was FDR's program to end the Great Depression?
With the country sinking deeper into Depression, the American public looked for active assistance from the federal government and grew increasingly dissatisfied with the economic policies of President Herbert Hoover.

In his speech accepting the Democratic Party nomination in 1932, Franklin Delano Roosevelt pledged "a New Deal for the American people" if elected. Following his inauguration as President of the United States on March 4, 1933, FDR put his New Deal into action: an active, diverse, and innovative program of economic recovery. In the First Hundred Days of his new administration, FDR pushed through Congress a package of legislation designed to lift the nation out of the Depression. FDR declared a "banking holiday" to end the runs on the banks and created new federal programs administered by so-called "alphabet agencies" For example, the AAA (Agricultural Adjustment Administration) stabilized farm prices and thus saved farms. The CCC (Civilian Conservation Corps) provided jobs to unemployed youths while improving the environment. The TVA (Tennessee Valley Authority) provided jobs and brought electricity to rural areas for the first time. The FERA (Federal Emergency Relief Administration) and the WPA (Works Progress Administration) provided jobs to thousands of unemployed Americans in construction and arts projects across the country. The NRA (National Recovery Administration) sought to stabilize consumer goods prices through a series of codes. Through employment and price stabilization and by making the government an active partner with the American people, the New Deal jump-started the economy towards recovery.

What did the letters in all those "alphabet agencies" stand for?

The New deal "alphabet agencies":

AAA , Agricultural Adjustment Administration, 1933

BCLB , Bituminous Coal Labor Board, 1935

CAA , Civil Aeronautics Authority, 1938

CCC , Civilian Conservation Corps, 1933

CCC , Commodity Credit Corporation, 1933

CWA , Civil Works Administration, 1933

FCA , Farm Credit Administration, 1933

FCC , Federal Communications Commission, 1934

FCIC , Federal Crop Insurance Corporation, 1938

FDIC , Federal Deposit Insurance Corporation, 1933

FERA , Federal Emergency Relief Agency, 1933

FFMC , Federal Farm Mortgage Corporation, 1934

FHA , Federal Housing Administration, 1934

FLA, Federal Loan Agency, 1939

FSA , Farm Security Administration, 1937

FSA , Federal Security Agency, 1939

FWA , Federal Works Agency, 1939

HOLC , Home Owners Loan Corporation, 1933

MLB , Maritime Labor Board, 1938

NBCC , National Bituminous Coal Commission, 1935

NLB , National Labor Board, 1933

NLRB , National Labor Relations Board, 1935

NRAB , National Railroad Adjustment Board, 1934

NRA , National Recovery Administration, 1933

NRB , National Resources Board, 1934

NRC , National Resources Committee, 1935

NRPB , National Resources Planning Board, 1939

NYA , National Youth Administration, 1935

PWA , Public Works Administration, 1933

RA , Resettlement Administration, 1935

REA , Rural Electrification Administration, 1935

RFC , Reconstruction Finance Corporation, 1932

RRB , Railroad Retirement Board, 1935

SCS , Soil Conservation Service, 1935

SEC , Securities and Exchange Commission, 1934

SSB , Social Security Board, 1935

TNEC, Temporary National Economic Committee, 1938

TVA, Tennessee Valley Authority, 1933

USEP, United States Employment Service, 1933

USHA, United States Housing Authority, 1937

USMC, United States Maritime Commission, 1936

WPA, Works Progress Administration, 1935

WPA, Name changed to Works Projects Administration, 1939

Did the New Deal end the Great Depression? 
Roosevelt's New Deal recovery programs were based on various, not always consistent, theories on the causes of the Depression. They targeted certain sectors of the economy: agriculture, relief, manufacturing, financial reforms, etc. Many of these programs contributed to recovery, but since there was no sustained macroeconomic theory (John Maynard Keynes's General Theory was not even published until 1936), total recovery did not result during the 1930s.

Following the 1937 recession, Roosevelt adopted Keynes' notion of expanded deficit spending to stimulate aggregate demand. In 1938 the Treasury Department designed programs for public housing, slum clearance, railroad construction, and other massive public works. But these were pushed off the board by the massive public spending stimulated by World War II. Even after 1938 private investment spending (housing, non-residential construction, plant and equipment) still lagged. It was war-related export demands and expanded government spending that led the economy back to full employment capacity production by 1941.

More Information on the Great Depression:
The beginning ofAmerica's "Great Depression" is often cited as the dramatic crash of the stock market on "Black Thursday," October 24, 1929 when 16 million shares of stock were quickly sold by panicking investors who had lost faith in the American economy.  But some sectors of the American economy, such as agriculture, had been in difficulty throughout the 1920s. 

At the height of the Depression in 1933, 24.9% of the nation's total work force, 12,830,000 people, were unemployed. Wage income for workers who were lucky enough to have kept their jobs fell 42.5% between 1929 and 1933.  

It was the worst economic disaster in American history. Farm prices fell so drastically that many farmers lost their homes and land. Many went hungry.   

Faced with this disaster, families split up or migrated from their homes in search of work. "Hoovervilles"-shanty towns constructed of packing crates, abandoned cars and other cast off scraps-sprung up across the nation. Gangs of youths, whose families could no longer support them, rode the rails in boxcars like so many hoboes, hoping to find jobs. "Okies," victims of the drought and dust storms in the Great Plains, left their farms and headed for California, the new land of "milk and honey."  America's unemployed were on the move, but there was really nowhere to go. Industry was badly shaken by the Depression. Factories closed; mills and mines were abandoned; fortunes were lost. Business and labor alike were both in serious trouble.

Unable to help themselves the American people looked to the federal government. Dissatisfied with President Herbert Hoover's economic programs, the people elected Franklin D. Roosevelt as their president in 1932 after a campaign that promised activism and "bold persistent experimentation."  Early on in his administration he assembled the best minds in the country to advise him. This group of men was known as the "Brains Trust."

Within one hundred days the President, his advisors and the U.S. Congress passed into law a package of legislation designed to help lift the troubled nation out of the Depression.

Roosevelt's program was called the "New Deal." The words "New Deal" signified a new relationship between the American people and their government. This new relationship included the creation of several new federal agencies, called "alphabet agencies." The AAA (Agricultural Adjustment Administration) was designed to raise farm prices; the CCC (Civilian Conservation Corps) to give jobs to unemployed youths and to improve the environment; the TVA (Tennessee Valley Authority) to bring electricity to those who never had it before; the FERA (Federal Emergency Relief Administration), which later became the WPA (Works Progress Administration), gave jobs to thousands of the unemployed in everything from construction to the arts; the NRA (National Recovery Administration) drew up regulations and codes to help revitalize industry and legalized the workers' right to unionize; the FSA (Farm Security Administration), which was created later, provided for the resettlement of the rural poor and better conditions for migrant laborers.

Later on came the creation of the Social Security System, unemployment insurance and more agencies and programs designed to help Americans during times of economic hardship.

Under President Roosevelt the federal government took on many new responsibilities for the welfare of the people. The New Deal marked a new relationship between the people and the federal government, which   had never existed to such a degree before.

Although the New Deal was criticized by many both in and out of government, and seriously challenged by the U.S. Supreme Court, it received the overwhelming support of the people. Franklin D. Roosevelt was the only president in U.S. history to be elected for four terms of office.

Despite all the President's efforts and the courage of the American people, the Depression hung on until 1941, when America's involvement in the Second World War resulted in the drafting of young men into military service, and the creation of millions of jobs in defense and war industries.

The Great Depression tested the fabric of American life as it has seldom been before or since. It caused Americans to doubt their abilities and their values. It caused them to despair. But they weathered the test, and as a nation, emerged stronger than ever, prepared to take on the new challenges of a world at war.  

What was the New Deal and what did it accomplish?

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