The first New Deal 1933-1934

The introduction of the New Deal as an anti-crisis, socioeconomic program primarily aimed at the solution of burning social problems, such as the problem of unemployment. The new president apparently wanted to ease the social tension because the further deterioration of socioeconomic situation in the country could lead to unpredictable results and to the radicalization of the American society. At the same time, to achieve positive social changes the government needed to stabilize the situation in the national economy. In fact, today, it is possible to speak about the macroeconomic stabilization as the major goal of the first stage of the New Deal.

To put it more precisely, the first New Deal attempted to provide recovery from the destructing effects of the Great Depression through the development of special programs which were supposed to improve key macroeconomic factors and vitally important sectors of the national economy. In fact, the New Deal marked the start of the new state policy which implied the regulation of the economic development of the USA by the state. However, it does not necessarily mean that the state had established the total control over the national economy. In stark contrast, the New Deal preserved the open market economy in the USA, but it had changed the role of the state in the national economy. Special programs of agricultural and business regulation aimed at the revival of the national agriculture and business through the support of the state. In fact, the governmental regulations were needed to assist American farmers and business to recover from the economic depression because they could not do it independently on their own. At any rate, the growing number of bankruptcies was a serious threat to the national security since bankruptcies inevitably led to the growing unemployment and pauperization of the American population. The latter naturally undermined the stability in the society since the poor, being deprived of an opportunity to earn for living became dangerous social elements which could riot and threaten to the existing social order.

At the same time, the assistance to the agriculture allowed American farmers to recover from the crisis and increase the agricultural production. The regulation of business mainly aimed at the decrease of the fiscal pressure on business and stimulation of employment of new employees. However, in 1933, the business could not afford the employment of new employees at large scale even with the regulations introduced by the state facilitating the development of business. In order to solve the problem of unemployment, the government initiated a considerable enlargement of public works. Due to the public works unemployed got an opportunity to earn for living. Basically, the public works involved the construction of roads and the development of infrastructure.

It should be pointed out that the public works were funded by the state and, in such a way, the state facilitated the position of people who had lost their job in the result of the economic crisis. In addition, along with the partial solution of the problem of unemployment, public works encouraged the development of business because private companies were involved into the supply of materials for public works, such as road construction. On the other hand, the development of infrastructure facilitated trade and, therefore, produced a stimulant effect on the development of the national economy since the revival of trade naturally led to the increase of the production and the economic growth at large.

However, it is hardly possible to speak about considerable positive changes in the national economy in 1933-1934.

Nevertheless, the major goals of the first New Deal were met. The government regulations of agriculture and business created conditions for a steady recovery of both agriculture and business, the unemployment rate started to decrease due to the public works. Moreover, the government focused on the price stabilization to decrease the inflation. The latter, along with the decrease of unemployment rates, contributed to the macroeconomic stabilization of the USA.

At the same time, it should be said that the effective state regulation was achieved through the creation of a number of special state agencies which focused on a specific domain where the state assistance was needed. For instance, it is possible to mention the National Recovery Administration, the Deposit Insurance Corporation, the Agricultural Adjustment Administration, the Civilian Conservation Corps, and the Public Works Administration. In such a way, the government attempted to optimize the work in either direction where the state assistance and regulations were provided. Along with the creation of state agencies, the legislative changes were implemented, which mainly aimed at the insurance given from the part of the state to maintain the reliability of business and confidence of customers. In this respect, it is worth mentioning the Trade Agreement Act, the Housing Act, and numerous currency acts. Thus, the state regulation at the first stage of the New Deal primarily aimed at the stabilization of the national economy, including such important macroeconomic factors as unemployment and inflation.

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