The Great Depression
The long-term effects of the New Deal are enormous.
Hi, I'm Frank Couvares for About.com, and I'm here to talk to you about The Great Depression.After the stock market crash of 1929, the American economy goes into a dizzying free fall, along with the economies of the rest of the capitalist states of the world. Between 1929 and 1933, the Gross National Product declines by 46 percent. Real income declines by 48 percent. Unemployment reaches around 25 percent by 1933.Franklin Delano Roosevelt runs on a Democrat line in 1932 on the promise of a New Deal for Americans. On entering the White House with a big majority in the Senate and the House, he has pretty much a free hand. In the first hundred days - the famous "First Hundred Days" of his New Deal - endless numbers of bills are passed. They're the most productive Congress ever.What do these bills do? Well first, relief. The Federal Emergency Relief Act did something the federal government had never done before: it gives money directly to poor people to spend. For many, but to FDR, it's an experimental program. He'll try anything to bring Americans out of the Great Depression.But many of these programs are dedicated to restructuring the American economy. For example, banking reform: for the first time, the federal government ensures bank deposits. In the Glass-Steagall Act, it separates speculative and investment banking from the ordinary banking of deposits and loans.By 1934, things have gotten so bad in the Great Depression that the politics of the country are moving leftward fairly rapidly. The American public is registering its willingness to go further and further against economic and political orthodoxy. The result is that FDR himself moves leftward, and the Democratic Party in the House and the Senate move leftward, and we get the great Second New Deal programs in 1935.The Wagner Act, the National Labor Relations Act, and the Social Security Act, which guarantees older Americans relief from their old age.By the end of 1936 to into 1937, unemployment drops to 14, 14 ½ percent. For most Americans, it's good news. It's a sign that FDR's policies are working. The economy doesn't really pull out of the Depression until World War II.Nonetheless, despite all that, the long-term effects of the New Deal are enormous. Social Security alone must be credited with a significant part of the boom in the 1950s economy. The creation of a bigger, more active state, and more regulatory state, had stabilizing effects on the American economy.Thanks for watching. To learn more, visit us on the web at About.com.