New Deal

The Great Depression

The 1920s witnessed a widespread prosperity unfamiliar to anyone then living, and many believed that the stock market, which fueled much of this economic good fortune, would continue to rise indefinitely. All this changed in a 7-day span in October 1929, in which the Dow-Jones Industrial Average declined a total of 16%; in a 3-week period the stocks whose value it measured would lose 39% of their value on average.

In the next few years, 5,000 banks failed and three quarters of investors' assets—which included not only the portfolios of the high rollers, but also neighborhood bank deposits, retirement nest eggs, and university endowments—would simply disappear. Between 1929 and 1933, 100,000 businesses failed and annual corporate profits fell from $10 billion to $1 billion. Throughout the course of the Depression, real GNP fell 30% and net investment actually became negative (i.e., businesses were using up inventory faster than they were producing new goods). The subsequent decade would wreak havoc on Americans at every level of wealth: In one 2-year period, 600,000 people lost their homes to foreclosure. Rural Americans were hit particularly hard: Agricultural income fell by two thirds, and 400,000 farmers from the soil-depleted Dust Bowl states of Oklahoma, Arkansas, and Texas attempted to relocate to more hospitable climates in the West. Perhaps most significant, unemployment peaked at an unheard of 24% and did not fall below 14% during the entire decade of the 1930s.

During this period, President Herbert Hoover (1929–1933) was philosophically opposed to government economic intervention, convinced that the best solution to the Depression was to let markets self-adjust to a new economic equilibrium. Many voters, however, perceived this attitude as a lack of concern, and Hoover's few belated attempts to address popular anxieties tended to backfire. When thousands of World War I veterans occupied the Washington Mall to urge that they receive a promised bonus ahead of schedule, Hoover ordered that they be removed by federal troops, who rousted them out with tear gas, tanks, and bayonets. The unpopular decision sealed his political fate; Roosevelt's subsequent victory was a landslide in the electoral college.

The First 100 Days

Historians generally agree that Roosevelt's political philosophy offered less of a contrast with Hoover's than did his personal style: FDR's warm optimism contrasted significantly with his predecessor's stark, spartan optimism. Roosevelt's other chief political asset was temperamental: The New Deal was animated less by an overarching set of principles than an experimental attitude that confronted problems with a variety of approaches and programs. In the period known as the first 100 days, the brand-new president put these qualities to good use in working with Congress to craft a dizzying array of legislation that addressed the country's most immediate needs.

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