Franklin D. Roosevelt’s New Deal is usually treated as an example of successful government regulation of the economy. After Roosevelt’s death, his image was glorified. Until recently, only a few scholars knew the facts forming a completely different image of the New Deal. In this paper, the New Deal programs (regulating industry, agriculture, labor market and financial markets, started by Herbert Hoover) are investigated as a result of a policy which extended the Great Depression. The main lesson is that any attempts to introduce a “New New Deal” can only create negative consequences for the economy. The article examines the actions of the Administrations created by Roosevelt during the Great Depression, which were regulating minimum wages, prices, and level of production.
A special role was played by the National Recovery Administration (NRA), which
had unprecedented power, combining the executive, legislative and judicial branches of
the government. It was an unusually interventionist policy for the United States, which
resulted in very slow and painful recovery of the US economy. The Great Depression began as a usual phase of the economic cycle, caused by the credit expansion by the Federal Reserve System, which increased the money supply by 62% from 1921 to 1929. It would have ended in a year, like the crisis of 1921, had it not been for Hoover’s and Roosevelt’s interventionist policies. The American people agreed to the policy of centralization during the Great Depression, because public opinion was prepared for this by intellectuals of the Progressive Era. They were able to convince the public that the Era of the active role of the State had come to the United States. Intellectuals were using their authority to fuel the destructive programs of the New Deal. The glorification of Roosevelt’s image is largely a result of an alliance between the Big State and intellectuals.
Was the New Deal Contractionary?