The Great Depression had a devastating impact on the American economy and the American people. President Hoover’s inactivity and belief in waiting things out left the United States in economic turmoil and in search of a new more dynamic leader. That leader was Franklin Delano Roosevelt who took over the presidency on January 20, 1933. This was without a doubt one of the most difficult and critical times to assume that office.
The depression had hit its peak, our economy was in total collapse, unemployment rose to 30%, inflation was high, and GDP was down by 50% (Dinkins, 2001). But, inspired by optimism and hope, FDR brought a new plan into light. Contraire to Hoover’s classic economic beliefs, Roosevelt focused on “pump priming” economics, based in the Keynesian economic philosophy. President Roosevelt felt it was crucial to invest in the people and to instate government programs in order to boost the economy. In accordance with this philosophy, he added that the economy had to be built from the bottom up and not the top down. Roosevelt would achieve economic growth and stability through submitting large quantities of legislation which came to be known as the New Deal.
When FDR took over the presidency in 1933, there was much controversy about which type of economic intervention he should pursue in order to combat the Great Depression. President Herbert Hoover and many of the presidents that came before him followed the laws of classic economics. Hoover’s ideas were largely based on Say’s Law or supply creates its own demand (Miller, 2001, pg 247). For this reason, Hoover was very slow to use any government intervention when the nation’s economy fell into a depression. It was his belief that in time the economy would recover on its own; by simply generating goods and services, the willingness to consume those and other goods and services would be generated. Franklin D. Roosevelt was of a much different thinking of that of his predecessors. In 1933, the United States was in urgent need of coordinating supply and demand. FDR had a new economic vision which ultimately generated governmental responsibility in the performance of the economy (Barber, 1997). The president would achieve this goal by requiring the federal government to formally accept responsibility for promoting maximum employment, production, and purchasing power (Barber, 1997). By passing legislation that allowed government intervention in the economy; And, in the true form of Keynesian economics, Roosevelt was able to increase aggregate spending without raising the price level (Miller, 2001, pg 254).
In 1932, while still campaigning for the presidency, FDR noted, “These unhappy times call for the building of plans that rest on the forgotten, the unorganized but the indispensable units of economic power . . . that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.” At the time of this speech, America was still in the midst of the Great Depression and a time leading up to the New Deal, government had often been the handmaiden of business, and many presidents had shared the values of businessmen (Leuchtenburg, 1988). Roosevelt, on the other hand, made it clear that he did not share those same values. FDR believed that big business was not what would save the country from the Great Depression. It was much more important for the United States to focus on the lower classes of society and start rebuilding the economy from the bottom. In his inaugural speech, given on March 4, 1933, President Roosevelt said, “Our greatest primary task is to put people to work.” In saying this, he was not referring to America’s businessmen; rather he was talking about the farmers, the industrial workers, and the simple man. The president went on to add that definite efforts to raise the values of agriculture products would, in turn, increase the power to purchase the output of our cities. This would be the economy basis for the “New Deal” that he would use to stimulate and rebuild the American economy.
During the first 100 days of his presidency, FDR pushed numerous pieces of “New Deal” legislation through Congress. These economic measures were taken in order to attack the problems of the Great Depression on three separate levels. First, emergency measures, such as social relief programs and make-work programs of all kinds were instated. This would give urgently needed jobs to millions of Americans and prevent them from literally starving (Cramer, 2000). For the first time, the United States had established a concept of minimum wage, insurance for the unemployed, healthcare for all classes of society, abolished child labor, and allowed for work unions to be established. Secondly, the president and Congress passed legislation focused on reconstructing and developing the country’s totally ruined infrastructure (Cramer, 2000). Most noted is the Tennessee Valley Authority (TVA), an agency created to build dams in the Tennessee River valley, creating jobs, more stable irrigation, and cheap hydroelectric power. Lastly, reform measures were taken to avoid another depression and insure citizens against returning economic disasters. With this, FDR set up permanent agencies such as the Securities and Exchange Commission (SEC), designed to monitor stock market activity and ensure against fraud, and the Federal Deposit Insurance Corporation (FDIC), intended to insure depositors money. More widely known is the Social Security Act, which allows for the elderly of our society to always be provided enough money to survive.
Franklin Delano Roosevelt entered the presidency at an extremely trying time for the American economy. It was up to him to turn this nation around and bring it out of the Great Depression. FDR did exactly that, and he did it at a dizzying pace with economic policies that paid no respect to standard rules or previous economic wisdom (Barber, 1997). It was Franklin D. Roosevelt’s “New Deal” along with Keynes’ “pump priming” economics led this country out of the Great Depression and into a new era for the economy and society. Today, we have come to the realization that true individual freedom cannot exist without economic security and independence. President Roosevelt gave this country that economic security and independence with the New Deal. In doing so, he armed the American people with a right to a job, a right to minimum wage, a right for every family to live in a descent home, a right to adequate medical care, a right to a good education, and most importantly a right to protection against the economic fears of old age and unemployment (Leuchtenburg, 1988). President Franklin Delano Roosevelt’s economic legacy lives on. He delivered this nation from the Great Depression and gave the American people a “New Deal”, a deal which allows us to live under the economic “freedoms” we still enjoy today.