Why Roosevelt introduced the New Deal

Topic: BusinessTime Management
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Last updated: November 13, 2019

In the 1920’s many changes took place. Crime, poverty, religious and racial differences were still a serious problem. Anti immigrant groups were springing up all over the country after World War I the Ku Klux Klan (KKK) became very popular in the 1920s.

Founded in 1865 by William Nathan Bedford, The KKK began a campaign of terror against free blacks and their white supporters, and got their way by means of racial violence, terror, murder and lynching. Roosevelt wanted to solve racial differences and bring America together. There was also an ever growing gap between the two classes.There seemed to be a north south divide in America with the majority of the public in the north being wealthy professional workers, but the south being populated by poor agriculturalists that had to work a lot harder for less money. Roosevelt wanted to shrink the gap to once again bring America together. Roosevelt thought the New Deal could combat these problems. He introduced The Fair Employment Act which required that all federal agencies included in their contracts with private employers a provision obligating the employers not to “discriminate against persons of any race, color, creed, or nationality in matters of employment.Also The National Housing Act was passed by Congress in 1934 and set up the Federal Housing Authority (FHA).

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This agency encouraged banks, building and loan associations, to make loans for building homes, small business establishments, and farm buildings. If the FHA approved the plans, it would insure the loan. Roosevelt also set up the Agricultural Adjustment Act (AAA). The AAA paid farmers not to grow crops and not to produce dairy produce such as milk and butter. It also paid them not to raise pigs and lambs.

The money to pay the farmers for cutting back production of about 30% was raised by a tax on companies that bought the farm products and processed them into food and clothing. It seemed to many Americans that at the start of 1929 the boom years would never end. Roosevelt’s predecessor, Herbert Hoover believed that he had conquered poverty but there were great weaknesses in the economy that would eventually lead to the demise of the prosperity that so many had took for granted.The boom years after WW1 meant that America became the world’s richest country, this meant that there was a mass production of consumer goods. By 1927 there was an over-production due to a fall in demand because people weren’t spending a lot of their wages on consumer goods and also most people already had one of everything. Due to the country’s rich economy people were encouraged to buy shares and by on credit.

Banks were prepared to lend money to people investing in stocks as the stock market kept going up.Therefore people borrowed more and more money that caused stock prices to skyrocket to unrealistic highs. The rapidly rising share prices just gave people more confidence and persuaded more people to borrow money to invest. This was then followed by company’s loss of income because due to the over-production this then led to people being made redundant. This sent the economy into a downwards spiral and by 1928 people ‘in the know’ sold their shares. October 1929, known as ‘Black Tuesday’ panic set in, people started to rapidly sell their shares.As 12,894,650 shares were traded in the space of one day, this selling panic was due to people trying desperately to cash in their shares before they became completely worthless. Over the next few days more than 30 million shares were traded and the majority of investors were ruined as share prices collapsed beneath them.

As the banks had lent out a lot of money to stock market investors, many went bust. A total of 10,000 banks collapsed worldwide. A huge factor was lack of money in the economy. So Roosevelt wanted to get people back to work to help solve the problems.

Around 12 million people lost their jobs in the space of months, people became depressed and angered as they could not put food on the table for their family. The Wall Street crash caused over 20,000 companies and businesses to go bankrupt, with over 1600 banks having to be closed down due to bankruptcy. 23,000 people committed suicide in a year, this was no coincidence, it was because they didn’t think anything could be worse than living in these conditions with no money.

This was a horrific figure and an all time record.The depression affected the majority of people’s living conditions; money wasn’t coming into the households, leaving people hungry and desperate for work. It left many families that were seen to be ‘middle class’ families before the depression out on the street, homeless. As the days went by more and more people with illness’ and diseases increased, due to them being malnourished because of lack of income. Also medicine to treat their needs was far too expensive. So they had to suffer or die because they could not afford the treatment necessary for them to get better.Because of the Great Depression, the cost of many items went up to an extreme amount of money, therefore, even more people could not afford simple everyday things. This was not helped by the fact there was no unemployment pay at the time.

So people who were not working were left completely on their own to sort themselves out. Roosevelt thought that the New Deal could help solve this problem and by solving this problem he would set aside a significant factor as to why the country was in such a bad state.For three months, Roosevelt proposed, and Congress passed, a series of important bills that attempted to deal with the problem of unemployment. These bills helped a number of people get back to work. He also introduced something called the Works Projects Administration (WPA). The purpose of the WPA was to give wages to people currently unemployed.

By 1936 over 3. 5 million people were employed on various WPA programs. The New Deal arrived at a time when America desperately needed leadership to drag it out of the hole it was in. No other organization of government was able or willing to cope with this responsibility.Franklin Roosevelt promised hope and change, and America believed him.

Even though the New Deal was practical and many new ideas were tried out and failed. Its guiding principle throughout was that it was the national government’s duty to look after the whole nation. The New Deal was evolutionary, but needed a brilliant man such as Roosevelt to guide and lead the movement in order to achieve the success that it did. Without Roosevelt, a plan similar to the New Deal would have occurred, but may not have ever reached the greatness and success without his genius and charisma.

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