New Deal

History glossary

Topic: The Making of a Global World · NCERT: Beyond NCERT

Meaning

The New Deal was the set of programmes and laws started by US President Franklin D. Roosevelt from 1933 to fight the Great Depression. It gave relief to the poor and jobless, helped farms and businesses recover, and reformed banks and the stock market so a crash would be less likely to happen again. It matters because it marked the first time the US government took clear responsibility for jobs, welfare and the health of the economy. Many states in the 20th century, including newly independent India, later followed this idea of an active state.

Explanation

Background — why a New Deal was needed

  • The Great Depression began around 1929 and lasted till the mid-1930s. Production, jobs, incomes and trade all fell sharply.
  • The trigger was the stock market crash of 1929. Between Black Thursday (24 October) and Black Tuesday (29 October) 1929, the Dow Jones fell from 305.85 to 230.07 points [1].
  • The banks broke down.
  • Banks cut lending and called back loans they had already given.
  • Families could not repay, so they lost homes, cars and goods bought on hire purchase.

  • By 1933, over 4,000 banks had closed. About 110,000 companies collapsed between 1929 and 1932.

  • Farmers were trapped by overproduction. Prices fell, so each farmer grew more, so prices fell even further.

  • Trade shrank. The Smoot-Hawley Tariff Act (June 1930) raised import duties. Other countries hit back, and world trade fell about 65 per cent between 1929 and 1934 [2].
  • Roosevelt won the 1932 election by promising Americans a "new deal". He took office in March 1933, when the banking system was close to collapse.

Main features — the "3 Rs"

Historians usually group the New Deal under three aims:

  • Relief: help for the jobless and the hungry right away.
  • Civilian Conservation Corps (CCC, 1933): young men were given jobs planting forests and protecting soil.

  • Works Progress Administration (WPA, 1935): the government paid people to build roads, bridges, schools and public buildings. This is called public works.

  • Recovery: getting farms and factories running again.

  • Agricultural Adjustment Act (AAA, 1933): farmers were paid to grow less, so crop prices could rise again. It aimed straight at the overproduction trap.
  • National Industrial Recovery Act (NIRA, 1933): set codes for fair prices, wages and working hours in industry.

  • Tennessee Valley Authority (TVA, 1933): a public body that built dams to control floods and supply cheap electricity to a very poor region.

  • Reform: changing the system so the crash would not happen again.

  • Emergency Banking Act (1933): banks were closed for a short "bank holiday", checked, and only the sound ones were allowed to reopen.
  • Glass–Steagall Act (1933): separated ordinary banking from risky share dealing. It also set up the FDIC, which insured people's bank deposits, so they stopped rushing to pull out their money.
  • Securities and Exchange Commission (SEC, 1934): a body to regulate (watch over and control) the stock market.
  • Social Security Act (1935): gave old-age pensions and unemployment insurance.
  • Wagner Act (1935): gave workers the legal right to form trade unions and to bargain together.

How it changed over time

  • First New Deal (1933–34): quick action on banks, farms and industry. The first busy months are known as the "Hundred Days".
  • Second New Deal (1935–36): a bigger push towards welfare and workers' rights, through Social Security, the Wagner Act and the WPA.
  • The Supreme Court pushed back. It struck down the NIRA in 1935 and the first AAA in 1936, ruling that they gave the federal government too much power. Some of these programmes were later brought back in a new form.
  • The recovery was uneven. The US had a modest recovery by 1935, but the economy fell back in the recession of 1937–38, after government spending was cut.

Results

  • Partial economic success. Banks became stable again and unemployment came down. But full recovery came only with the huge government spending of World War II. That is the standard textbook view.
  • A lasting change in the role of the state. For the first time, the US government accepted that it had a duty to provide jobs, welfare and economic stability.
  • Lasting institutions. Social Security, the FDIC and the SEC still exist.
  • Link to ideas. The New Deal's spending matched the thinking of John Maynard Keynes, who argued that governments should spend during a slump. Keynes set this out fully in his General Theory (1936). Most historians, however, say Roosevelt worked by trial and error and did not follow a single theory.

Time, place and evidence

  • Period: 1933 to about the late 1930s. It is usually split into the First (1933–34) and Second (1935–36) New Deals.
  • Place: the United States. The TVA worked in the Tennessee River valley, one of the poorest regions in the country.
  • Key people:
  • Franklin D. Roosevelt — US President, who led the programme.

  • John Maynard Keynes — the British economist whose ideas matched the New Deal's spending. The same Keynes believed that India's gold exports during the Depression helped the world recover.

  • How we know:

  • The Acts passed by the US Congress and the records of the agencies they created.
  • The Supreme Court judgements that struck down parts of the programme.

  • Roosevelt's "fireside chats", radio talks in which he explained his policies straight to the public.

  • Syllabus note: NCERT Class 10 Ch 3 covers the Depression but not the New Deal by name. The New Deal is "Beyond NCERT", but it is a standard world-history topic.

Don't confuse with

  • Smoot-Hawley Tariff Act (1930): this came before the New Deal, under President Hoover. It raised import duties and made the Depression worse [2]. The New Deal was the response to the Depression.
  • Marshall Plan (1947): US aid to rebuild Europe after World War II. The New Deal was a domestic programme inside the US during the 1930s.
  • Bretton Woods (1944): a conference that set up the post-war world money system (the IMF and the World Bank). The New Deal reformed America's own banks and markets.
  • Fair Deal: the reform programme of President Truman after 1945. Only the New Deal (1933) belongs to Roosevelt.

Prelims Hooks

  • The New Deal was launched by Franklin D. Roosevelt in 1933 in response to the Great Depression.
  • Its aims are summed up as the "3 Rs": Relief, Recovery and Reform.
  • Social Security Act (1935) = old-age pensions and unemployment insurance. It belongs to the Second New Deal.
  • Tennessee Valley Authority (1933) = a public body that built dams for flood control and cheap electricity.
  • Trap: the Smoot-Hawley Tariff Act (June 1930) was not part of the New Deal. It came earlier and worsened the slump [2].
  • Correct order: Wall Street crash (1929) → Smoot-Hawley Act (1930) → New Deal begins (1933) → Keynes's General Theory (1936).

Mains Points

  • The New Deal changed the role of the state. Before it, governments were expected to leave the economy alone. After it, the state was expected to provide jobs, welfare and bank safety. This idea of an active state shaped the post-war welfare states and influenced planning in newly independent countries such as India.
  • Its record is mixed, and historians still debate it. It stabilised banks, cut unemployment and created lasting institutions such as Social Security. But recovery was incomplete: a recession hit in 1937–38, and full employment came only with World War II spending. Critics on one side said it gave the government too much power, and the Supreme Court agreed in some cases. Critics on the other side said it did too little.
  • Contrast with colonial India. The US government spent money and helped its farmers. In India, the colonial government refused to cut revenue demand, even though wheat prices had fallen by 50 per cent. This gap shows how a colonial state put Britain's needs first. It also helps explain why rural distress in India fed into Civil Disobedience instead of leading to relief.

Related concepts

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Sources

  1. 1What were the causes of the Great Depression? / Causes of the declinebritannica.com · tier 3
  2. 2Smoot-Hawley Tariff Act | History, Effects, & Factsbritannica.com · tier 3