Economic Shifts: The New Deal and War Communism

The Impact of the New Deal

After the failure of the Hoover administration to recover from the Great Depression, Democrats won the election through Franklin D. Roosevelt. He implemented an innovative policy to boost consumption and investment known as the New Deal.

This consisted of two distinct phases:

• The First New Deal (1933): Focused primarily on economic measures.
• The Second New Deal (1935): Focused on social measures.

Key Economic Pillars

The New Deal was based on several strategic interventions:

• Finance: Sought to redress the monetary and credit situation by forbidding the hoarding and export of gold, devaluing the dollar to raise domestic prices, and protecting bank deposits to avoid excessive credit for the stock market.
• Agriculture: Proposed limiting crops (with compensation) in order to decrease the amount of surplus. Farmers were guaranteed a minimum price.
• Industry: Organized state intervention in industry and established rules for private companies. Minimal profits and fair wages for workers were guaranteed.
• Fiscal Policy: Established a progressive system of tax collection.

Social Protections of the Second New Deal

Social measures of the second New Deal were aimed at the social protection of citizens. These policies set a maximum working time of 40 hours per week and abolished child labor, in addition to creating support systems for the unemployed.

The Implementation of War Communism

Following the Civil War generated by the confrontation between Soviet forces, measures were initiated to create a communist society. This involved the socialization of the economy, control of industrial production, and the distribution of land.

Socialization and Economic Control

The implementation of these measures altered the monetary, financial, production, employment, and consumption systems. Furthermore, they changed foreign relations and led to the disappearance of technicians and entrepreneurs. The measures taken can be summarized as follows:

• Socializing the economy, employment, and consumption.
• Control of production and distribution of land.
• Collectivization of the means of production.
• Rejection of foreign products.

Consequences of the Policy

The consequences of these actions were that companies had no financial autonomy, no control over production costs, and lacked profit and loss accounts. The state failed to manage the operation of small enterprises and workshops, and the result was the cessation of production for the majority. During War Communism, inactivity caused shortages in many firms and a decreasing number of industrial workers.

Agricultural Shifts and the 1921 Crisis

The Decree on Land was one of the first acts of the new regime, by which large property was abolished and land was distributed to those who demanded it, under the condition of not using hired labor. This solution generated supply problems, with a decrease in agricultural supply and surpluses for the cities. When the Civil War ended in 1921, the USSR's economy was plunged into disaster, as it had been at war since World War I and inflation was increasing.