GoldThe day after his inauguration, Roosevelt ordered the closure of all banks and halted all gold payouts. On his third day, he removed the U.S. from the gold standard, and took direct control of the dollar’s valuation - Roosevelt was then able to increase the value of the dollar when he wanted to increase spending or foreign investment, and devalue it to maintain economic control. The Gold Reserve Act of 1934 made private possession of gold illegal; citizens had to sell all their gold items to the government for a below-market price, which the government then used to print more money and stimulate spending (possession of gold remained illegal until 1975). Despite initial skepticism, it is widely accepted that FDR’s autocrat-like control of the dollar was key to restoring faith in the banking system and helped lay the foundation of economic recovery.
The New DealThe new financial regulations introduced under the New Deal were also a part of this foundation and helped prevent the uncontrolled lending or stock market volatility that contributed to the crisis. Only banks that were stable were allowed to reopen, and the President publicly encouraged citizens to trust the American banking system once more. In a move that was widely criticized, FDR appointed Joseph Kennedy (father of future-President John F. Kennedy) as the chairman of the newly-formed Securities and Exchange Commission (SEC), whose purpose it was to prevent market manipulation – this was controversial as Kennedy had made a fortune through the activities he was now in charge of preventing, but this is exactly why he was chosen. Within two years, Kennedy had restored investors’ faith in the stock market, the value of the DOW stabilized throughout 1934, and stock prices saw fairly consistent growth over the next few years.
Unlike all other industrialized countries by the 1930s, the U.S. was the only not to have any nationwide social welfare programs, which contributed greatly to the public’s suffering during the Depression. The New Deal then saw the creation of unemployment, healthcare, and pension systems that provided a safety net for many in the lower classes. A minimum wage was introduced, and the Wagner Act allowed workers to unionize and engage in collective bargaining. The government also created thousands of public works jobs that greatly expanded American infrastructure, such as roads, schools, hospitals, and parks.
Franklin D. Roosevelt came to represent the return of prosperity to the American people. He was very popular among much of the working- and middle-class, and he transformed the relationship between the president and the American people through a series of radio broadcasts known as the fireside chats. These proved essential in restoring the public’s faith in the country’s institutions, as the president communicated his actions, intentions, and thoughts directly with the public in a way that had never been done before. The New Deal policies were instrumental in the economic realignment of the two major parties in American politics, where the Democrats would now become the more fiscally liberal of the two (the social realignment was not realized until the 1960s).
Recovery misstepsDespite his popularity, the president did not enjoy the support of all groups, and his policies were viewed as socialist by many businessmen, the other branches of government, and emerging right-wing movements. In particular, the ability for workers to unionize was rejected by many employers, which led to widespread strikes and sit-ins and often brought industry to a standstill. Many general strikes in major cities were attended by hundreds of thousands of people, and often turned violent (sometimes fatal).
In contrast, unskilled workers, such as agricultural, domestic, or service workers, did not have the ability to unionize and it took longer for their fortunes to change. These workforces were disproportionately Black – while the New Deal did try to prevent discrimination on the grounds of gender or race, virtually no safeguards were put in place to enforce this, and Blacks faced additional discrimination when it came employment or the distribution of welfare. The realities of racial inequality was an issue often ignored or avoided by the Roosevelt administration, and it was not until the 1960s when Black Americans were granted many of the legal protections given to Whites in the 1930s.
End of the DepressionDespite these missteps, FDR remained extremely popular and won re-election in 1936, with over 98 percent of the electoral vote and over 60 percent of the popular vote. However, in 1937, as GDP returned to pre-Crash levels, the Roosevelt administration began cutting back on relief spending, and the country went into recession once more. Although overshadowed by the Great Depression, the 1937-38 Recession was still one of the worst downturns in U.S. history - in 1938, GDP fell by 3.3 percent, unemployment rose to 19 percent, and the Great Depression was extended by several years. Many economists believe that the New Deal accelerated recovery from the Depression, but the policies were never impactful enough to end the Depression outright. In fact, it would take another crisis entirely to finally bring the U.S. economy out of the depression – the threat and outbreak of war in Europe saw industrial production, unemployment, and GDP all return to pre-Crash levels by the time of American entry into the war in December 1941.
The exact extent of the roles played by the New Deal, international financial markets, and the Second World War in ending the Depression continue to be an area of debate among historians and economists, with no firm consensus. As the war drew to a close in 1945, many worried that the U.S. economy would slip back into decline or Depression, but, despite brief periods of recession, the post-war era was one of the most prosperous in modern history. It was not until the Great Recession in 2008 when unemployment and financial collapse reached comparable levels to the 1930s, but, almost one century later, the Great Depression remains the largest financial crisis in U.S. history.