The New Deal is perhaps the most famous and maybe even the most influential body of political policies ever passed in the United States. A work fashioned under President Franklin Roosevelt, the New Deal was combined legislation and executive action. It was instituted in response to the Great Depression that hit America during the 1920s and 1930s. The idea behind the New Deal was to provide immediate relief for the country’s fiscal problems, provide for long-term investment in order to bring about recovery, and provide for lasting reform so that the problems that caused the Great Depression would never happen again. The New Deal helped to blunt the force of the Great Depression, and it is still felt today in its legacy on financial regulation and in defining the role of government as an active participant in producing economic growth.
The Great Depression was caused, at least in part, by the stock market crash that took place a few years before. The stock market crashed because of wide deregulation in the financial industry, allowing bankers to run wild without many rules to keep them from wrecking the economy. When the Great Depression came about, people were plunged into life-altering poverty. All of a sudden, few people had jobs, and the lines in front of soup kitchens were very long. America looked bad in the short and long-term, with little plan for the immediate future or for how to change its stars over the long-term.
The New Deal’s effect on the Great Depression was two-fold. In one way, the policies helped to stunt the development of certain problems brought on by the economic collapse. It invested immediately in government-created jobs that hoped to get people back into the workforce. The federal government poured money into a host of social programs, as well. People were quite literally starving in the street, and the New Deal did everything in its power to ensure that those people were given precisely what they needed in order to survive. At the same time, the New Deal was designed to fix the long-term issues caused by the Great Depression. It invested in America’s infrastructure, including roads, bridges, and the like. In addition, the New Deal focused on fixing the deregulated markets, providing more structure for a market that was previously unstructured. This helped to ensure more public confidence in the banking system, thus restoring some of the hope that had been lost by the general public during the economic crash.
While the New Deal’s primary impact was felt nearly one century ago, its impact is still relevant today. Today, there is significant government intervention in the business world. While some argue that the government should do more in restricting the activities of financial firms, it is clear that with laws like Dodd-Frank, the government is more than willing to place restrictions on banks and other financial institutions (Acharya, 4). The New Deal’s legacy helps to make this possible, even today. On top of that, the New Deal is an important piece of policy because it has helped to shape perception on the role that government can play in recovery. The economic downturn of 2008 caused America to seek answers. When President Barack Obama was elected, he passed legislation that was not exactly like the New Deal, but still pushed the government’s role in investing in recovery. Prior to the passage of the New Deal policies, there was some uncertainty over what role government could and would play (Chafe, 11). After the New Deal, there was very little doubt that government could be a positive force.
- Acharya, Viral V., et al. Regulating Wall Street: The Dodd-Frank Act and the new architecture of global finance. Vol. 608. John Wiley & Sons, 2010.
- Chafe, William Henry, ed. The Achievement of American Liberalism: The New Deal and Its Legacies. Columbia University Press, 2013.