Essay about 3 to 4 pages explain what did the New deal strengthen or weaken the usa capitalism
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October 29, 1929, or "Black Tuesday," marks the day the U.S. stock market came crashing down, initiating the most severe economic crisis in U.S. history, now known as the Great Depression. By 1933, gross domestic product (GDP) per capita in the U.S. had fallen nearly 29%, and the average unemployment rate had risen from 3.2% to 25%.1 2
Amid this economic contraction, Franklin Roosevelt campaigned for the U.S. presidency on the promise of a “new deal” for the American people. He won the 1932 election by a landslide and began a series of reforms that, while reducing income inequality failed to pull the economy out of its depressed state—it would take the Second World War for that to finally happen.
KEY TAKEAWAYS
The New Deal of the 1930s helped revitalize the U.S. economy following the Great Depression.
Economists often credit the New Deal with shortening the length and depth of the depression, while others question its impact on an otherwise weak recovery.
Ushered in by Franklin D. Roosevelt, the New Deal was an enormous federally-funded series of infrastructure and improvement projects across America, creating jobs for workers and profits for businesses.
Today, the legacy of the New Deal remains with programs like Social Security still in place.
The First 100 Days
Upon taking office in 1933, Roosevelt went straight to work on implementing reforms he hoped would stabilize the economy and provide jobs and financial relief to the American people. In his first 100 days in office, he put into effect many major laws, including the Glass-Steagall Act and the Homeowners Loan Act.3 He also implemented a number of job creation schemes like the Federal Emergency Relief Act (FERA) and the Civilian Conservation Corps (CCC).4
The most significant piece of legislation, however, was the National Industrial Recovery Act (NIRA). Roosevelt believed economic recovery depended upon cooperation at the expense of competition, and consequently, the NIRA was specifically designed to limit competition while allowing both prices and wages to rise.5
The act allowed for industries to form a cartel, under the condition these industries would raise wages and allow for collective bargaining agreements with workers. The NIRA stayed in effect until 1935 when it was ruled by the Supreme Court to be unconstitutional.6
The Second New Deal
The Supreme Court repealed the NIRA because of its suspension of antitrust laws and the tethering of collusive activity with the payment of higher wages.6 Strongly disagreeing with the new ruling, Roosevelt managed to get the National Labor Relations Act (NLRA) passed in 1935, which, while re-instituting antitrust legislation, did strengthen a number of labor provisions.7 And in practice, the government largely ignored the new antitrust laws.
Under the NLRA, workers had even greater power to engage in collective bargaining and demand higher wages than under the NIRA. The new act also prohibiting firms from engaging in discriminating among employees based on union affiliation, forcing them to recognize the rights of workers in government and company unions alike. The National Labor Relations Board (NLRB) was established to enforce all aspects of the NLRA.7
Following the passing of the NLRA union membership rose dramatically from about 13% of employment in 1935 to about 29% in 1939. While doing much to improve the bargaining power of the average worker, which in conjunction with a number of tax rate increases on top incomes helped to reduce income inequality, the NIRA and NLRA failed to pull the U.S. economy out of its depressed state.
A Weak Recovery
While the economy had somewhat recovered, it was far too weak for the New Deal policies to be unequivocally deemed successful. In 1933, at the low point of the contraction, GDP was 39% below the trend before the stock market crash of 1929, and by 1939, it was still 27% below that trend.8 9
Likewise, the number of private hours worked was 27% below trend in 1933 and was still 21% below the trend in 1939. Indeed, the unemployment rate in 1939 was still at 19% and would remain above pre-Depression levels until 1943.10 11
For some economists, the weakness of the recovery is a direct result of the Roosevelt government’s interventionist policies. Harold L. Cole and Lee E. Ohanian argue that the anti-competitive policies of linking collusive practices to higher wage payments made the recovery much worse than it should have been. For them, unemployment remained high because of the increased bargaining power of unionized workers and the high attendant wages.12
Ultimately, Cole and Ohanian argue the abandonment of these anti-competitive policies coincides with the strong economic recovery of the 1940s.12