The New Deal: Economic Recovery and Policy Shifts

The New Deal: Transforming the U.S. Economy

The New Deal was a policy that resonated deeply with the global crisis of the 1930s. U.S. President Franklin D. Roosevelt implemented these measures, which fundamentally challenged the essential aspects of classical capitalism.

Roosevelt's Rise and Policy Shift

Roosevelt's decisive victory over Herbert Hoover in the November 1932 presidential election marked a radical change in U.S. policy. As one of the most popular presidents in American history, he was re-elected four consecutive times. His success stemmed from his ability to restore public confidence through novel economic and social measures intended to revive production and stimulate demand.

Breaking Economic Liberalism

By intervening directly, the government broke the tradition of state inhibition characteristic of classical economic liberalism:

• Banking Reform: Strengthened government control to improve consumer protection.
• Employment Programs: The administration hired unemployed workers for public projects, providing acceptable wages to approximately 7 million people.
• Agricultural and Labor Support: Aimed to retrieve prices for farmers and established collective agreements, minimum wages, and reduced working hours.

Monetary and Legislative Action

Public investment replaced the shortage of private investment in major projects. Monetary actions included:

• Suspending the convertibility of the dollar in May 1933.
• Devaluing the currency by 40% in January 1934 to control inflation and stimulate consumption.
• Monitoring stock market activity and implementing production quotas for companies and the agricultural sector.

Social Security and Labor Rights

The New Deal introduced legislation to eliminate social injustices, including:

• The creation of the first federal unemployment insurance and pension systems.
• Setting minimum wages and maximum working hours.
• Establishing labor unions as partners to entrepreneurs, despite opposition from big business.

Legacy and Global Context

Although productive activity improved after 1932, it did not fully exceed pre-1929 levels until the onset of World War II, which created the demand necessary to end the crisis. While the U.S. struggled, other economies like Japan and Germany expanded by 1938. In France, the Popular Front alliance attempted similar social recovery measures, mirroring the spirit of the New Deal.