[click to view full size] The stock market crash of 1929 was the first major event in what became known as The Great Depression. There had been many earlier economic depressions in American history before 1929. In fact, the depression of 1893 was so severe that it was known at "The Great Depression" until the 1930s. The depression of the 1930s was more severe and lasted longer than any other economic downturn in American history. Human suffering was widespread, and it affected all aspects of the economy. Shopkeepers lost their stores and farmers lost their farms. Banks failed and savings accounts were wiped out. Investors lost their stock market investments. At one point nearly half of American home mortgages were in default.

The president in 1929 was Herbert Hoover. During WWI, Hoover had made a name for himself as head of the Food Administration, the agency in charge of rationing food and feeding the army. In the 1920s he was popular as the secretary of commerce. Contrary to popular belief, Hoover did take action to try and

end the depression. He urged congress to lower taxes so that people would have more money to spend on good and services, which would theoretically stimulate the economy. He called for more government spending on public works such as road construction or dams. This would raise the standard of living while at the same time create jobs for the unemployed. Congress did pass both of these measures, but they were too little to end the Great Depression. Hoover recommended voluntary guidelines to keep interest rates down for farmers, and for farmers to join cooperatives and grow smaller crops to help bring prices up, but neither the bankers nor the farmers will willing to follow these voluntary guidelines. [click to view full size]

Hoover did recognize that "depression" also had a psychological meaning. The country had lost confidence in the future. Hoover tried to encourage them to have faith, but he was unwilling to use the government as an effective tool to restore that confidence. Hoover did authorize loans to banks and big business, but he was not willing to provide federal assistance at the state or local level, to the farmers directly. He believed this would make the federal government too powerful. His beliefs made him appear hard-hearted to the American public, as if he didn't care about them. Some even began to blame him for the depression. These charges were unfair. Hoover cared deeply about the nation, but he sincerely believed his policies were the correct ones. And the depression was not an American phenomenon, but a global one. Many foreign economies were hit even harder than America's.

[click to view full size] Still, by the election of 1932, Franklin D. Roosevelt's cheerful, relaxed, almost carefree personality seemed just what the country needed. Roosevelt, a Democrat, was governor of New York. During his time in Albany Roosevelt had strayed from his elitist origins and had begun to take on the role of a reformer. Many of the programs he would introduce to help the country had their origins in New York. More than anything Roosevelt was ready to use the power of the federal government to a degree never seen before or since in American history.

Americans responded to Roosevelt and his call for a "new deal" for America. In November he easily defeated Hoover with 57% of the popular vote, and by an electoral count of 472-59. At that time, however, the Constitution provided for presidential inaugurations to take place in March, a full four months away. Meanwhile, the economy continued to freefall. Between December and February industrial production hit an all-time low. Suddenly, in February, people all over the country began to panic and rushed to the banks to pull out their savings. Because banks keep only a small percent of deposits on hand (the rest is loaned out and invested), there was not enough actual cash to cover these withdrawals. Banks had no choice but to close their doors. Many of them failed, completely wiping out the life savings of hundreds of thousands of average Americans.

The banking crisis turned out to be an advantage for Roosevelt. When he did finally take the oath of office on March 4, the country was ready to view the depression as a national emergency. Symbolically, inauguration day was dark and dreary. But Roosevelt's Inauguration Speech was positive and full of confidence. In part, he said: "This great nation will endure as it has endured, will revive, and prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself-nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance…" [click to view full size]

Even more significantly, when voters had elected Roosevelt in November, they had also swept the Democrats into majorities in both the House and the Senate. Roosevelt's fellow Democrats were ready to work with him to pass sweeping new legislation to meet this emergency. The president called for a special session of Congress to begin on March 9. It would last until June 16, exactly 100 days. During The Hundred Days, Congress passed numerous New Deal programs. The three goals of the New Deal were relief, recovery, and reform. Relief came first and was aimed at all Americans. Recover would then stimulate the economy and bring the country out of depression. Reform would prevent another such depression from ever happening again. The extraordinary amount of work in such a short amount of time had an immediate positive effect on the country psychologically. Americans felt they were finally getting a new start along with their New Deal.

[click to view full size] Even before the special session of Congress met, Roosevelt took action. To stop the rush of bank closings, he declared a bank holiday, closing all banks so that a general plan to protect the savings of the public could be developed. On March 12 he addressed the nation by radio in the very first of what would become known as the "fireside chats" to explain the bank holiday. During the Hundred Days, Congress passed new banking laws, the most important being the Federal Deposit Insurance Corporation (FDIC). The FDIC insured everyone's savings up to $5,000. If a bank closed, the federal government would reimburse your losses. This plan to restore public confidence in the bank worked.

The most important program created in the Hundred Days was the National Industrial Recovery Act (NIRA). The NIRA was supposed to stimulate private business by allowing manufacturers to cooperate with one another without fear of violating anti-trust/monopoly laws. Companies in every industry were supposed to draw up a list of rules and codes of conduct that would create fair competition between them. They were allowed to set production limits so that the market would not be flooded with unwanted goods. They could also fix prices to avoid cutthroat competition. In addition the codes would allow workers to freely join unions, establish minimum wage rates, and a limit on the maximum number of hours a worker could work per week. The industries would draw up these codes, but they would be approved, supervised, and enforced by the government through a component of the NIRA called the National Recovery Administration (NRA-not to be confused with the National Rifle Association). NRA officials made great efforts to persuade workers and employers to accept the new system. Listen to the lyrics of "NRA Blues" by Bill Cox (1933). Is he supportive of the NRA, or skeptical?

When Congress had dealt with the industrial problem they turned their attention to the farm problem by passing the Agricultural Adjustment Act (AAA). The basic idea of the AAA was to push produce prices up by cutting back on farm production. Under this plan the government rented farmland and left it fallow. This did benefit farmers, but some had trouble with the notion that farmers were essentially getting paid by the government to not work. [click to view full size]

[click to view full size]

Another important New Deal project was the Tennessee Valley Authority (TVA). The TVA plan called for the development and management of the entire Tennessee, a complex system of waterways affecting at least part of 8 different states. The TVA built dams, electrified rural areas, planted forests, and set aside land for parks and recreation, among other things. In November, 1933 FDR and Congress began work on the "Second New Deal," which included the Social Security Act. View The New Deal Outline for a complete list of Roosevelt's New Deal programs.