The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. The Great Depression started after a major fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29, 1929, known as Black Tuesday.

Economic And Political Consequences Of Great Depression

The Great Depression had devastating effects on both rich and poor countries. Personal income, tax revenue, profits and prices dropped, while international trade fell by more than 50%. Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%. In the political sphere, the great depression was considered as one of the prominent causes for the rise of totalitarian regimes that led to world war 2.

New Deal Of FDR

The new deal is a set of economic and social welfare measures taken by president Roosevelt to tackle the great depression and revive the American economy. Based on Keynesian principles of state spending, this policy is credited with creating massive employment and preventing further decline in the economy. The new deal was introduced with three aims:

1. Relief: To give direct help to poverty-stricken millions who were without food and homes. To fulfil this aim several steps like starting soup kitchens, loans for households in danger of losing their homes, slum clearance and building new homes etc. were taken up. To provide agricultural relief, a farmers relief act was passed where the government paid compensation to farmers who produced less. The social security act was passed to provide old-age pensions and unemployment insurance.
2. Recovery: The objective of this aim is to reduce unemployment, stimulate the demand for goods, and get the economy moving again. With this aim in mind several steps like The Civilian Conservation Corps, passing of The National Industrial Recovery Act, the establishment of FEMA, The works progress Administration were taken up.
3. Recovery: The intention behind this aim is to take steps to prevent a repeat of the economic disaster. Numerous financial and banking sector reforms like creation of SEC to regulate stock markets, providing insurance to depositors money. Apart from this, several reform measures to improve working conditions like The Wagner Act, Fair labour standards Act were passed. Under the Wagner Act, trade unions were given the legal foundation and the right to bargain with management.

Did New Deal Introduce Socialism?

The major criticism against the new deal came from businessmen who accused FDR of encouraging socialism. State governments also resented the extent to which the federal government was interfering in state affairs, effectively harming the federal spirit and centralizing the governance. However, a close look at the new deal and its implications are necessary to come to a definitive conclusion on this aspect.

1. The new deal was accused of being socialist because of measures taken by Roosevelt like increase in taxation, regulations of wages and working hours, liberalization and giving excessive powers of bargaining to trade unions.
2. He also introduced social welfare measures like old-age pensions and unemployment insurance schemes. Steps like government support to industries and government taking over of banks temporarily were seen by critics as the socialization of the USA.
3. While these policies made critics allege that the president is appeasing the left, socialists in the democratic party and outside were also not happy with the president, as they felt the measures of the new deal were not radical enough. Left felt that too much power was still left in the hands of big business.

Fdr Rationale For Socialistic Policies

1. While the accusations and counter-accusations about the new deal being socialistic and not being socialistic enough were running thick and fast, FDR himself stated, “I am fighting Communism… I want to save our system, the capitalist system…”
2. The measures of a new deal which has socialistic leaning were introduced when US capitalism was in a huge slump, and workers’ struggles and radical dissent were running at a high pitch. The measures were victories for those struggles and for that dissent, but they were far short of socialism, meaning the social ownership and democratic control of the majority industry and banks.
3. Roosevelt pointed out that to save capitalism from chaos… it was necessary… to grant to the American working class the much-belated economic concessions which the fellow workers in the advanced European countries had obtained in struggle years and decades before.
4. The national mood amid depression is gradually turning left, with radical left-leaning politicians gaining ground at local and state elections and gradually gaining popularity at the national level.
5. Sensing danger to the very political foundation of America, FDR co-opted left. Roosevelt shifted to the left in rhetoric and, to some extent, in policy, consciously seeking to steal the thunder of his populist critics.

As FDR himself stated, the goal of the new deal is to save capitalism from communism. Thus the new deal is pragmatic and is intended to do two birds with one stone. It aims to revive the American economy while also fighting back the rising radical left-wing in American politics. While many European nations doing the same turned into fascist and totalitarian governments, FDR tactically co-opted the left to preserve capitalism. The biggest consequence of this co-opting left is it gave rise to the Welfare state model of polity that is widely followed now across the world.