The New Deal & Governance
The series of governmental initiatives directed towards social reform and economic rehabilitation collectively known as The New Deal were put into place by Franklin Delano Roosevelt. As far back as his nomination speech, Roosevelt recognized that winning the Presidency would effectively charge him and his staff with the responsibility of nationwide economic reform and social relief, pledging “a new deal for the American people. ” Such a responsibility had become critical following Great Depression, itself born from an economic downturn resulting from the stock market crash of 1929.
In the period between that crash, known also as Black Tuesday, and 1933, unemployment had risen from an admirable 4% to a staggering 25% and outputs from the manufacturing sectors dwindled by a third and deflation was rampant. Given the amount of controversy and debate which continues to persist over The New Deal’s successes or failures, it is often contended whether this pledge was little more than a byline by which to expedite ascension to office, despite the fervor attended to New Deal-oriented policy changes.
However, it is widely agreed that regardless of motivation or intentions, the New Deal initiatives effectively addressed economic decay and social panic by increasing the level of involvement which the government had in economic matters. The spirit of New Deal initiatives has its roots in progressive era reform, which saw government changing from a largely laid back entity that concerned itself primarily with the rights of citizens to protecting them, effectively acquiring a more paternalistic disposition towards governance.
For example, the controversial Eighteenth Amendment, which brought Prohibition into being, was designed to address concerns regarding the ostensible ill effects that unrestrained alcohol consumption had on society. While Prohibition was inevitably revoked after the realization that it led to the criminalization of a large sector of civil society and the rise of criminal distribution rings, it still provides a useful pre-New Deal instance of government assuming a more protectionist role.
Following his inauguration into the Presidency, Roosevelt and his people declared a four day banking holiday to buy the necessary time to develop a recovery plan. However, beyond the security of banking assets, it was necessary to restore banks’ ability to operate on solvent terms, but without resorting to measures that could possibly result in currency devaluation. Together with the Brain Trust, a collection of legal professors serving in an advisory capacity, Roosevelt developed the Emergency Banking Act. It was passed with such momentum that it went from introduction to signature in less than a day.
It called for an evaluation of banking assets and the issuance of Federal Reserve notes based on the results as well as giving power to the Treasury Secretary to prevent the hoarding of gold reserves and freeze currencies and gold bullion in exchange for paper. The Emergency Banking Act was soon followed by the 1933 Banking Act, which led to the formation of the Federal Deposit Insurance Corporation and allowed the Federal Reserve to regulate interest rates on savings accounts. In effect, it strengthened the regulatory capacity of the government in fiscal matters, though such powers were later repealed by later administrations.
(Degler, 421; Schlesinger, 7) Volpe also notes that having witnessed the momentum by which the Emergency Banking Act was implemented, Roosevelt recognized the potential receptiveness of Congress towards additional initiatives. In the face of such cooperative sense of urgency, The Hundred Days, a period in which he had daily meetings with Congress for 100 consecutive days, began. These Hundred Days saw the rise of many initiatives, including but not limited to the Agricultural Adjustment Act, the Civilian Conservation Corps, the Federal Emergency Relief Association, and the Tennessee Valley Authority.
Both the Federal Housing Administration and the Tennessee Valley Authority continue to operate with some measure of success in their goals. The former has maintained an excellent historical record of operations, having steadied home prices during the 80s, supported housing for the elderly and handicapped in the 60s and kept private apartments afloat during the 70s energy crisis. The latter has helped regulate and combat much of the unfair practices and pricing schemes of privately owned power generation companies.
It has also endorsed modern agricultural practices which helped alleviate some of the problems encountered by farmers and effectively given attention to development of regions largely neglected in favor of the political and urban centers of the United States. There is a temptation to write off the New Deal as a moderated form of socialism, yet even doing so does not abnegate its crucial role in challenging many of the economic assumptions that existed before, resulting in the realization that government intervention need not be problematic if it is in the service of the people.
However, this is not to suggest that legislative trends that reduce the importance of state governments are desirable. It is crucial for states to maintain the limited amount of sovereignty that is necessary to their independence from the federal government, not just because it is provided for by the Constitution, but because it fairly regulates the amount of power it has over state matters as well as freeing it of the burden of micromanagement.
However, given the focused totality of crises facing the American government, it may be necessary in the immediate short term for the federal government to retain its importance in handling many concerns facing Americans today. That said, it is difficult to imagine a future scenario in which states are more important than the federal government. This is not to say that state governments will become irrelevant, for they would never surrender all of their authority to a federal government, nor would it be wise to burden the federal government with the task of overseeing such a large geographical territory.
Biles, Roger. A New Deal for the American People. DeKalb: Northern Illinois University Press, 1991. Degler, Carl. Out of Our Past: The Forces That Shaped Modern America. New York: Harper Collins, 1983. Leuchtenberg, William. Franklin D. Roosevelt and the New Deal. New York: Harper Perennial, 1963. Monroe, Albert. “How the Federal Housing Administration Affects Homeownership. ” Cambridge, MA: Harvard University Department of Economics. November 2001. Accessed July 21, 2008 from: http://www. jchs. harvard. edu/publications/governmentprograms/monroe_w02-4. pdf