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Por­trait of Florence Owens Thompson with some of her children, an image that became known as Migrant Mother (1936). It was one of a series of pho­to­graphs ordered by the Farm Security Admin­is­tration to con­vince the American public of the need for the New Deal fol­lowing the Great Depression in 1929

1933

The New Deal in the United States

Faced with the economic and social consequences of the Great Depression following the stock market crash of 1929, Democratic President Franklin D. Roosevelt launched a series of unprecedented measures in 1933 to turn the country around. This policy, dubbed the « New Deal », marked a major break in American economic history.

Historical background to the New Deal

On Thursday October 24, 1929, known as « Black Thursday », stock prices on the New York Stock Exchange plummeted, with nearly 13 million shares sold. The fall continued until July 1932, when the Dow Jones reached its lowest point. Thousands of Americans who had invested in the stock market on credit could no longer repay their debts, bank failures followed, and production collapsed.

By 1933, a quarter of the working population was unemployed. Deflation further aggravated the situation: prices collapsed, wages fell, and the economy sank into recession. Roosevelt's election marked a turning point, with government intervention to overcome the crisis, after the initial reactions of President Hoover, who was more inclined to non-intervention.

The New Deal's major economic reforms

The New Deal was built around structural reforms designed to stabilize the economy:

  • Banking reform: temporary closure of all banks to prevent massive withdrawals, mergers of weak institutions, and creation of a deposit guarantee system via the Federal Deposit Insurance Corporation (FDIC).
  • Financial regulation: creation of the Securities and Exchange Commission (SEC) to monitor Wall Street and prohibit abuses.
  • Separation of banks: distinction between commercial banks (deposits) and investment banks (financial markets).
  • Monetary policy: abandonment of the gold standard in 1933 and devaluation of the dollar to boost exports.
  • Aid to farmers: subsidies to reduce cultivated areas, boost agricultural prices and restructure peasant debts.
  • Great works policy: the federal government begins financing infrastructure projects (schools, train stations, bridges, highways...) to stimulate activity and employment.

These measures aim to restore confidence in the financial system and revive production.

Social reforms and the creation of a welfare state.

 The New Deal also marks the birth of federal social protection in the United States, which was almost non-existent until then:

  • Creation of public jobs: through agencies like the Civilian Conservation Corps (CCC) or the Works Progress Administration (WPA), millions of Americans are employed in building roads, dams, schools, or in reforestation projects.
  • Unemployment insurance: implementation of benefits for unemployed workers.
  • Retirement: creation of Social Security in 1935, providing old-age pensions.
  • Regulation of work: laws guaranteeing a minimum wage, limiting working hours, and recognizing the right to unionize.

This social policy aims to mitigate the effects of the crisis and to strengthen national cohesion.

Assessment and legacy of the New Deal in the United States

The New Deal did not put an end to the crisis, but it profoundly transformed the United States by affirming the role of the federal government in the economy and increasing investment. Unemployment fell to 14% in 1937 but rose again to 19% in 1939. It was not until the Second World War and economic mobilization that unemployment fell permanently. Nevertheless, the New Deal consolidated the federal government's role in the economy, laid the foundations of the American welfare state and strengthened workers' rights. By introducing regulations and lasting social benefits, the New Deal remains a major turning point in the economic history of the United States.

FAQ - The New Deal and the Great Depression

What was the New Deal?

The New Deal was a series of economic and social reforms launched by Franklin D. Roosevelt in 1933 to combat the Great Depression in the United States.

What were the effects of the New Deal?

The effects of the New Deal were to reorganize the banking system, create public jobs, introduce social security and strengthen the role of the state, although unemployment was not completely eradicated until 1941.

Why is the New Deal important in the history of the United States?

Because it established the basis for economic intervention by the federal state and introduced social protections that are still in place today.



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