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Posted on April 20th, 2012, by

The late 1920s 1930s were marked by a profound economic crisis that struck the USA. This period is known as the Great Depression which produced a significant impact on the development of the USA in the 20th century and contributed to considerable, institutional changes in the USA. In this respect, it should be said that the Greta Depression led to the change of the state policy in relation to the national economy. The government, being traditionally neutral in regard to the development of national economy, had started to play a more active role in the economic development of the country. Such a shift to the state interference into the national economy resulted from the implementation of the New Deal by President Roosevelt, who attempted to improve the socioeconomic situation in the country in such a way.

In fact, the New Deal had changed the economic history of the USA and changed the traditional relationship between the state and economy. Namely, the relationship between the state and business as well as between the state and citizens were changed. In this respect, it should be said that for the first in the American history, the state had started to play an active regulatory role and the governmental policies were socially oriented. This means that the government focused on the well-being of its citizens, instead of the protection of basic legal norms and maintenance of the existing socioeconomic and political order. Hence, due to the introduction of the New Deal the state started to play a key role in the economic and social affairs of the nation.

Historical background

On analyzing the historical background of the introduction of the New Deal, it should be said that it was a kind of emergency economic program that was introduced to help the nation to recover from the Great Depression and its negative socioeconomic effects. In actuality, the late 1920s the early 1930s were the period of a profound economic crisis provoked by the slowdown of the economic development, decrease of the business activities, the crisis of the overproduction, decrease of trade and the financial crisis, which struck in 1929 and launched the economic crisis.

The Great Depression led to the growing unemployment rate, galloping inflation, and considerable drop of the national GDP. In such a situation, the country needed economic reforms which could improve the situation consistently and revive the national economy.

However, traditional approaches based on the principle of economic liberalism did not work. As a rule, the American government tended to perform the role of a distant observer in relation to the national economy minimizing its impact on business and economic development of the country. Basically, such a position of the state was favorable for the development of business. In fact, it is due to the economic liberalism, the USA managed to take one of the leading economic positions in the world, but the liberal economic policies of the state proved to be absolutely ineffective in the epoch of economic crisis, which struck at the unparalleled scale.

The Great Depression was one of the most serious economic crises in the history of the USA. In such a situation, the governmental neutrality in relation to the economic development of the country and social affairs did not bring the desirable effect the fast economic revival due to the free development of business. In stark contrast, the situation grew more and more difficult to the extent that the public protests and the rapid pauperization of the country raised the problem of riots and social disobedience nationwide. The social tension was mainly provoked by the high unemployment rate and frozen trade since, on the one hand, employees did not have work and, hence, they could not earn for living, while businessmen could not sell their products and services because the market was oversaturated, while the buying power of Americans was extremely low. In such a situation, companies had to fire their employees to save costs or, what is more, many companies fell in bankruptcy and since they could not afford competition and rapid downfall of sales rates. This means that business could not employ a large number of people and job cuts led to the unemployment and growing dissatisfaction of the population with the action or, to put it more precisely, inaction of the state.

The economic crisis naturally influenced the national politics and brought to power President Roosevelt who promised to improve the socioeconomic situation in the country and surmount the crisis. In fact, the economic program suggested by Roosevelt to Americans during his electoral campaign was called the New Deal and, as he won the elections, Roosevelt started to implement this program. At this point, it should be said that the socioeconomic were essential for the US at the epoch.

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