1933

The New Deal in the United States

In order to tackle the social and economic consequences of the 1929 stock market crash and subsequent crisis, the newly elected President Franklin Roosevelt introduced a series of measures, known as the New Deal, in 1933. These included:

financial sector reforms: closure and merger of a large number of banks, introduction of a guarantee on customer deposits, securities regulation, separation of retail banking and securities activities;

the payment of compensation to farmers who reduced their output, in order to raise prices, and a rescheduling of their debt;

funding of public works to create jobs, such as reforestation projects (jobs for young people), and infrastructure projects (roads, dams);

introduction of unemployment benefits and retirement pensions;

suspension of the gold standard and devaluation of the dollar;

policies to limit excessive competition between manufacturers: introduction of floors on prices, quantities and wages;

extension of workers’ freedom of association and encouragement of the signature of collective agreements.

These measures are often described as Keynesian. In fact there was no clearly defined underlying doctrine - they were merely a pragmatic response to an explosive social situation and the perceived threat of deflation.

The measures brought about a lasting transformation in the economy and in American society as a whole (they notably strengthened the role of the Federal Government). Unemployment, which had risen to 25% of the workforce in 1933, fell to 14% in 1937, although it subsequently rose again to 19% in 1939, just before the outbreak of World War II.