The purpose of Roosevelt’s First New Deal

I am sure you will have been advised to analyse Roosevelt’s New Deal (the first and the second together) by placing his initiatives under one of three categories: Relief, Recovery and Reform. This is quite right (I would advise the same), its an analysis that works. But here I am going to focus on a fourth characteristic, and again I am sure you will have already been advised to consider it: confidence.

In his inaugural speech, Roosevelt told the American people: ‘This great nation will endure as it has endured, will revive and will prosper. So first of all let me assert my firm belief that the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror which paralyses needed efforts to convert retreat into advance…. Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously.

So, Roosevelt set out two of his fundamental aims: restore confidence and get Americans working again. He followed this up, just eight days after that inauguration speech, with what would become regular radio broadcasts and which soon came to be known as the ‘fireside chats’. Roosevelt talked to the American people, explaining himself and reassuring them that they were in safe hands. They were incredibly successful, the huge gap that had been opened between President and people was closed, and confidence quickly returned.

Confidence needed to be restored at all levels of society. Although not the first agency to be established, help for the destitute was nevertheless a priority. Apart from Roosevelt’s genuine humanitarian concern for these poor people, they were also the very people that, if nothing was done, would be the first to turn to socialism, even communism as the only way out of their desperate plight. Roosevelt established the Federal Emergency Relief Administration (FERA) was established to help those thousands of Americans who were homeless, penniless and close to starvation. $500 million was made available for states to distribute where they felt it would have most affect. Most of the money spent on increasing the number of soup kitchens, providing clothing and employment schemes for the adults and getting the children into schools.

Roosevelt’s first act, however, was to restore confidence in the banking system. Since 1930 the banking system had lost credibility, more than 5,000 banks had been forced to close, confidence in banks had been shattered. Then, on March 4th, the very day of Roosevelt’s inauguration, the banks of New York closed their doors to business. Before the day was out, all the banks in thirty-eight states had closed for business. Nationally, banks had about $6 billion to meet $41 billion worth of deposits. The whole system was on the point of collapse. The basis of the problem was that savers had withdrawn their savings and businesses had been unable to repay their loans. So that, with no money coming in, banks were not able to function nor pay off their own creditors. And so, the day following his inauguration speech, Roosevelt moved decisively to resolve the crisis in confidence in the banking system. The result was the Emergency Banking Relief Act. Roosevelt’s ‘Brain Trust’ also came up with a set of rules and regulations regarding the sale and purchase of shares which became the Securities Exchange Act. So, confidence amongst the upper and middle classes began to be restored.

Confidence amongst the middle classes was also helped by the Home Owners Loan Corporation (HOLC) which helped over a million people keep their homes by providing additional loans, and the Federal Housing Administration (FHA) which set minimum standards of construction for new homes as well as exerting control over the mortgages new house owners would take. In a country in which home ownership was a fundamental part of the “American dream” this was an important move.

America needed its farmers and confidence in farming was in desperate need of restoring. Farmers were helped by two agencies: the Farm Credit Administration (FCA) and the Agricultural Adjustment Agency (AAA). The FCA made loans to farmers so that they would be able to keep their farms. This was soon extended to help evicted farmers buy their farms back. Whilst the overriding aim of the AAA was to increase farmers’ incomes. In this way it was hoped that farmers would want to continue to work the land and grow America’s food.

But what about getting people back to work. Roosevelt’s aim was to create short-term jobs to get money back in the pockets of workers and so kick-start the “normal” economy again by giving businesses the confidence to re-employ men. The Civilian Conservation Corps (CCC), created jobs for single men aged under twenty-five. Men signed on for six months which could be renewed if they still hadn’t found work. Whilst the Civil Works Administration (CWA) was created to help provide as many jobs as possible for the unemployed so as to help get them through the hard winter of 1933-4.

The principle behind what could be regarded as emergency acts (creating the CCC and the CWA) was bolstered by the National Industrial Recovery Act which established the Federal Emergency Administration of Public Works (later known as the Public Works Administration or PWA). For the NIRA also established the National Recovery Administration (NRA). Its aims were four-fold: To bring about an increase in workers’ wages so that they had more money to spend on goods. At the same time to increase the price of goods (which had reached rock bottom) thereby enabling factory owners to increase their profits, pay higher wages and employ more men. And also to give workers a fairer deal in the sense of shorter working hours and better working conditions. Finally, it hoped to end the cut-throat competition that seemed to be doing more damage than good, and to employers, employees and consumers.

So, I think you can see how restoring confidence should be a part of any analysis of Roosevelt’s initial New Deal. I haven’t included the Tennessee Valley Authority (TVA) in this piece as it was a regional initiative rather than a national one, but it is the subject of a complementary “short piece”.