Did the New Deal Prolong the Great Depression? Essay

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New Deal Prolong the Great Depression?

The modern day economy is currently facing the biggest challenges it has faced since the Great Depression of the 1929 -- 1933. Much like then, the leaders of today are striving to develop and implement laws and reforms, with their main emphasis being on stability and prudence -- at least at a theoretical level.

The modern day economic crisis has emerged from within the American real estate sector and was deepened by the crush of the banking sector and the precarious morals of the Wall Street and soon spiraled to impact the entire global economy. But more than three years after the crisis broke out, the Wall Street power players do not seem to have learned their lessons. They continue to grant excessive bonuses to their executives and they disregard the prudential principles in the hope for easy gains.

It is often argued that the global economy was hit by yet another major crisis as the people and the economic community did not learn their lessons. And most of the players in the current business community could not have learned the lessons of the Great Depression since they were not even born then. This is was a new generation of economic players, who had to make their own mistakes.

While the mistakes regarding the economic crisis can be linked to generations and the need of each generation to make its claims, it is now a crucial moment in time when the crisis is leaving deep marks; when the solutions so far implemented are unable to generate the necessary results; and when a new approach to addressing the crisis is necessary. In such a setting then, it is essential to assess the means in which the Great Depression of '23 -- '33 was approached and to learn the lessons from the resolution of the time.

In 1933, the New Deal was set in motion. It represented an integrated set of reforms and policies which run their course up until 1936. Their scope was that of controlling the manifestation of the crisis which were still present, and preventing the crisis from further spreading. The New Deal was centered on three primary scopes: the offering of relief for the poor population, the support of economic recovery and the reform of the fiscal system to ensure that such crises are not recreated in the future.

The results of the New Deal are conflicting, or so are the perceptions of the outcomes, but fact is that the set of reforms has managed to contain the spreading of the crisis and the first year of implementation coincides with the last year of the depression. In such a context then, a question is being posed relative to the actual impact of the New Deal. It is as such wondered whether the New Deal helped resolve the crisis or whether it prolonged it. A debate is still undergoing between university professors Burton W. Folsom and Roger Biles. Accroding to Burton:

"The New Deal prolonged the Great Depression because its antifree market program of high taxes and special-interest spending to certain banks, railroads, farmers, and veterans created an antibusiness environment of regime uncertainty. […] Its agencies created an antibusiness environment that rejected free market capitalism with special-interest spending financed by high taxes" (Folsom, 2008).

Still, in the eyes of Biles, the New Deal represented a means of economic revival. He does agree that the New Deal was not a full blow and high magnitude and impact program, but it managed to attain the objective of not having yet another crisis break out. According to him:

"In spite of its minimal reforms and nonrevolutionary programs, the New Deal created a limited welfare state that implemented economic stabilizers to avert another depression" (Biles, 1991).

The New Deal was set in motion by President Franklin Delano Roosevelt, who still enjoys the reputation of the single American president who did not only deliver on his campaign promises, but he actually delivered more than he had promised.

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The New Deal included a wide array of measures, such as the development and introduction of new legislations within the banking system, the halting of bankruptcies or the creation of new jobs for the population.

Two years after it had been launched, the New Deal, which eventually came to be known as the First New Deal, was declared unconstitutional. The main grounds included the massive support it offered to corporations. In an effort to move away from this criticism, the Roosevelt administration created and implemented the Second New Deal. It was jumpstarted in 1935 and it focused more on social efforts to support the population, to protect it, to improve the public services, to create new jobs and to protect the employees.

Nonetheless, the actual results lingered. In 1939 for instance, the population was still struggling to get by; the jobs were scarce and the unemployment rate was above the 20 per cent mark. And the economic indicators looked as if things had in fact gotten worse than better throughout the past years and since the New Deal was implemented. The main argument in this sense is represented by the fact that the New Deal had centered on capital injections within the economy in order to prevent its collapse. Still, these money injections only weakened the economy and what appeared as revival was in fact a distorted perception of the unfortunate reality. Evidence in this sense stands the testimony of Henry Morgenthau Jr., secretary of treasury and President Roosevelt's best friend. Despite this friendship and his support in the program, Morgenthau was forced to declare:

"We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong… somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And enormous debt to boot!" (Folsom, 2008)

Seen through these lenses, the economy was not helped by the New Deal. And it was not only the economy, as the very society. People were poor and humiliated and many of them decided to take their own lives than be thrown away in "poor houses." But during the years of the New Deal, it was not only the rate of suicide which was increased, but also the general death rate. People got more reckless, were more concerned and more prone to accidents.

The 1930s decade was one with the highest death rates in the American history. The life expectancy decreased and the morale of the population plunged. In such a context then, it would be safe to argue that the New Deal in fact represented a prolonging of the Great Depression, rather than an actual resolution.

Still, from a different perspective, it could be argued that the New Deal -- with both of its First and Second versions -- represented an unpopular, yet necessary set of actions. Most of the historians agree that Franklin Delano Roosevelt was one of the greatest American presidents and they generally content that the New Deal was a step in the right direction.

"With only a few exceptions, historians lavish praise on Roosevelt as an effective innovator, and on the New Deal as a set of programs desperately needed and very helpful to the depressed nation" (Folsom, 2008).

Before Roosevelt came to office, the country did not have any formulated agenda to fight the depression. The government had not stepped in to take positive and integrated action to address the problem. The measures were….....

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