The start of the New Deal (AQA GCSE History): Revision Notes
The start of the New Deal
Roosevelt's election victory and promise
Franklin D. Roosevelt achieved a decisive electoral victory because he offered Americans hope during the darkest period of the Great Depression. His campaign centred on a promise to deliver a "New Deal" for the American people - a comprehensive programme that would provide relief to different groups struggling in American society. When Roosevelt entered the White House, he committed to immediate "action, and action now," signalling a dramatic shift from the previous administration's more passive approach to the economic crisis.
Roosevelt's campaign promise of a "New Deal" was deliberately vague, allowing different groups of Americans to project their own hopes onto his proposed programme. This strategic ambiguity helped him win support from diverse constituencies who were all suffering from the Depression's effects.
Roosevelt's first 100 days - March 1933
Roosevelt demonstrated his commitment to action by taking three crucial steps immediately after taking office in March 1933. These actions targeted the most pressing problems facing America and showed his determination to tackle the Depression head-on.
The concept of measuring presidential effectiveness by the "first 100 days" began with Roosevelt's administration. His rapid implementation of major policies set a precedent that continues to influence how we evaluate new presidents today.
Restoring trust in the banks
The banking system was in complete collapse when Roosevelt took office. Over 5,000 banks had failed during the Depression, causing millions of Americans to lose their life savings. This created a crisis of confidence where people no longer trusted banks and kept their money at home, preventing banks from lending to businesses and individuals who needed capital.
Roosevelt's solution came through the Emergency Banking Act 1933. This legislation ordered all banks to close for four days, allowing government inspectors to examine their finances and determine which institutions were sound enough to reopen. Only banks that passed rigorous tests and had sufficient funds to operate safely were permitted to resume business.
How the Banking Inspection Process Worked:
Step 1: All banks closed for mandatory four-day "bank holiday" Step 2: Government inspectors examined each bank's financial records Step 3: Banks were categorised as:
- Sound enough to reopen immediately
- Needing reorganisation before reopening
- Too weak to save and must remain closed Step 4: Only approved banks were allowed to resume operations
The results were immediate and impressive. When banks reopened, $1 billion flowed back into bank accounts as public confidence returned. This single action helped stabilise the financial system and provided the foundation for economic recovery.
Finding money to help the unemployed
Unemployment had reached catastrophic levels, but the government lacked funds to provide meaningful assistance. Roosevelt needed to raise money quickly to help millions of jobless Americans while avoiding increased government debt.
The Economy Act 1933 addressed this challenge by reducing government spending in other areas. The act cut wages for people working in government positions and reduced spending on military forces by 15%. This unpopular but necessary measure freed up nearly $1 billion that could be redirected towards unemployment relief programmes under the New Deal.
While cutting government wages and military spending was politically difficult, Roosevelt understood that these sacrifices were necessary to fund unemployment relief. This decision demonstrated his willingness to make tough choices to help those most in need.
Ending prohibition
Prohibition had become deeply unpopular and was contributing to serious social problems. The ban on alcohol had led to organised crime, police corruption, and widespread social issues, while also depriving the government of potential tax revenue.
The Beer Act 1933 made it legal to manufacture and sell alcohol again. While this didn't completely end organised crime, it significantly reduced the power of criminal gangs. More importantly for the government, it created new jobs in the alcohol industry and generated tax revenue that could fund New Deal programmes.
The alphabet agencies
Roosevelt recognised that ending the Depression required expertise and coordination beyond what existing government departments could provide. He assembled a team of expert advisers, nicknamed the "Brain Trust," and created over 100 new government organisations to tackle different aspects of the crisis.
These new organisations became known as the "Alphabet Agencies" because they were commonly referred to by their initials. Each agency focused on specific problems and had the authority to implement solutions quickly and effectively.
The term "Alphabet Agencies" was initially used by critics who argued that Roosevelt was creating too many government organisations. However, supporters argued that complex problems required specialised solutions that existing departments couldn't provide.
Key alphabet agencies
Agricultural Adjustment Agency (AAA) - This agency addressed the crisis facing American farmers, who were producing too much food, leading to low prices and farmer bankruptcies. The AAA paid farmers to produce less, which helped raise prices and provided farmers with better incomes.
National Recovery Administration (NRA) - The NRA focused on improving conditions for industrial workers and businesses. It encouraged employers to agree to fair wages and working conditions while giving workers the right to join trade unions. This helped create a more stable relationship between workers and employers.
Federal Emergency Relief Agency (FERA) - FERA provided direct assistance to states, giving them $500 million to help homeless and malnourished Americans. The agency funded soup kitchens, provided blankets and clothes, and offered childcare support so parents could seek employment.
Priming the pump - Roosevelt's economic theory
Roosevelt's approach to ending the Depression was based on a specific economic theory often called "priming the pump." This concept suggested that government spending could kick-start economic recovery by creating a positive cycle of economic activity.
How "Priming the Pump" Theory Worked in Practice:
Step 1: Government creates jobs through New Deal programmes
↓
Step 2: Unemployed workers receive wages from government employment
↓
Step 3: Workers spend their wages on goods and services from local businesses
↓
Step 4: Increased demand encourages businesses to expand and hire more workers
↓
Step 5: More jobs create more consumer spending, continuing the cycle
↓
Result: Self-sustaining economic growth and recovery
This represented a revolutionary approach to government's role in the economy. Previous administrations had believed government should avoid interfering in economic matters, but Roosevelt argued that during a crisis, active government intervention was necessary to restore prosperity.
Roosevelt's "priming the pump" theory challenged traditional beliefs about limited government. This approach became the foundation for modern economic policies that accept government spending as a tool for managing economic crises.
Fireside chats - communicating with America
Roosevelt understood that successful implementation of the New Deal required public support and understanding. He made innovative use of radio technology to communicate directly with the American people, bypassing traditional media and political intermediaries.
Roosevelt delivered 28 radio broadcasts throughout his presidency, beginning just eight days after taking office with an explanation of the banking crisis. These broadcasts, known as "fireside chats," were scheduled for evening hours when families would be gathered at home. Roosevelt spoke in a conversational, clear tone that made complex policies understandable to ordinary Americans.
The term "fireside chats" was coined by a CBS radio executive, not by Roosevelt himself. The name perfectly captured the intimate, informal atmosphere Roosevelt created during his broadcasts, as if he were talking to each family in their own living room.
The fireside chats served multiple purposes. They explained Roosevelt's policies and built public confidence in his leadership. They also made Roosevelt extremely popular with voters, as people felt he was speaking directly to them about their concerns and challenges.
Timeline of major events
- March 1933 - Roosevelt takes office and begins first 100 days
- March 9, 1933 - Emergency Banking Act passed
- March 12, 1933 - First fireside chat explaining banking crisis
- March 20, 1933 - Economy Act reduces government spending
- March 22, 1933 - Beer Act legalises alcohol
- Throughout 1933 - Creation of Alphabet Agencies including AAA, NRA, and FERA
Key Points to Remember:
- Roosevelt won the 1932 election by promising immediate action - his "New Deal" offered hope to Americans suffering from the Depression
- The first 100 days established three key priorities - restoring banking confidence, funding unemployment relief, and ending prohibition
- The Alphabet Agencies represented a new approach to government - over 100 specialised organisations tackled specific Depression-era problems
- "Priming the pump" theory justified government spending - Roosevelt believed government investment would create jobs and stimulate private economic activity
- Fireside chats revolutionised political communication - Roosevelt used radio to explain policies directly to citizens, building crucial public support for New Deal programmes