10.2 New Deal Programs and Their Effects on Business
4 min read•july 30, 2024
The New Deal reshaped American business during the . FDR's programs aimed to provide relief, recovery, and reform through massive government intervention. From banking regulations to public works projects, these initiatives fundamentally altered the relationship between government and the private sector.
The long-term impacts of New Deal policies continue to influence American business today. Social Security, labor laws, and financial regulations established during this era remain cornerstones of the modern economy. The New Deal's legacy of government intervention during crises still shapes economic policy debates.
New Deal Programs
First and Second New Deal Phases
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Key Terms to Review (26)
Agricultural Adjustment Act: The Agricultural Adjustment Act (AAA) was a U.S. federal law enacted in 1933 as part of the New Deal, aimed at boosting agricultural prices by reducing surpluses. The AAA sought to achieve this by paying farmers to reduce crop production and livestock numbers, thereby stabilizing prices and increasing farmers' incomes during the Great Depression. This program marked a significant government intervention in the agricultural sector, altering the relationship between the government and farmers, and influencing agricultural business practices for years to come.
Banking crisis: A banking crisis refers to a situation where a significant number of banks face insolvency, leading to widespread panic, withdrawals, and a loss of public confidence in the banking system. This crisis often triggers economic downturns, as the collapse of financial institutions restricts credit flow, resulting in decreased consumer spending and investment. It is intricately linked to major economic events such as the Great Depression and plays a critical role in shaping government responses through financial reform and recovery programs.
Civilian Conservation Corps: The Civilian Conservation Corps (CCC) was a New Deal program established in 1933 that provided jobs for young men during the Great Depression while also promoting environmental conservation. This program focused on projects such as reforestation, park maintenance, and soil conservation, which aimed to combat the environmental degradation caused by the Dust Bowl and deforestation. By employing around three million young men, the CCC not only supported families financially but also left a lasting impact on America’s natural resources and national parks.
Emergency Banking Act: The Emergency Banking Act was a key piece of legislation passed in March 1933 aimed at stabilizing the American banking system during the Great Depression. This act allowed the federal government to close insolvent banks and reorganize those that were solvent, instilling confidence in the financial system. By providing a framework for bank regulation and oversight, it helped restore public trust and ultimately played a crucial role in the recovery of the U.S. economy.
Fair Labor Standards Act: The Fair Labor Standards Act (FLSA) is a landmark piece of legislation enacted in 1938 that established minimum wage, overtime pay, recordkeeping, and youth employment standards in the United States. This act was a direct response to the harsh working conditions and exploitative practices that many workers faced, highlighting the growing demand for labor reforms and protections for workers' rights. By setting fair compensation and working hours, the FLSA played a critical role in shaping labor movements and improving working conditions during a time of economic change.
Federal Deposit Insurance Corporation: The Federal Deposit Insurance Corporation (FDIC) is a United States government agency created in 1933 to provide deposit insurance to depositors in U.S. commercial banks and savings institutions. It was established during the Great Depression to restore public confidence in the banking system by protecting depositors' funds, ensuring that even if a bank failed, customers would not lose their savings. This security helped stabilize the banking sector and fostered an environment conducive to economic recovery.
First New Deal: The First New Deal refers to a series of economic programs and reforms enacted by President Franklin D. Roosevelt in response to the Great Depression, primarily between 1933 and 1934. This initiative aimed to provide immediate relief, stimulate economic recovery, and reform financial systems to prevent future depressions. The programs under the First New Deal focused on alleviating unemployment, stabilizing the banking system, and boosting agricultural production, thus significantly impacting American business practices during the period.
Glass-Steagall Act: The Glass-Steagall Act was a law enacted in 1933 that separated commercial banking from investment banking in the United States. It aimed to restore public confidence in the financial system following the Great Depression by preventing banks from engaging in risky investment activities that could jeopardize depositors' funds. This separation played a crucial role in reshaping the banking landscape and addressing issues of financial stability and consumer protection.
Great Depression: The Great Depression was a severe worldwide economic downturn that lasted from 1929 to the late 1930s, marked by massive unemployment, widespread poverty, and a significant decline in economic activity. It had profound impacts on labor movements, government policy, and the financial sector, reshaping the American economy and society during and after this tumultuous period.
Job creation: Job creation refers to the process of generating new employment opportunities within an economy, which can occur through various means such as government programs, private sector growth, and entrepreneurship. This term is crucial for understanding how economic policies can stimulate growth and improve the overall well-being of a society by reducing unemployment and fostering economic stability. Job creation is often linked to broader economic initiatives that aim to revitalize industries and support emerging sectors.
Keynesian Economics: Keynesian economics is an economic theory that emphasizes the role of government intervention in stabilizing the economy, particularly during periods of recession or economic downturn. It argues that active fiscal policy, including government spending and tax adjustments, can help manage aggregate demand to promote economic growth and reduce unemployment.
Labor rights: Labor rights are the legal and human rights relating to the treatment of workers, encompassing the right to fair wages, safe working conditions, and the freedom to organize into unions. These rights are essential for protecting workers from exploitation and ensuring they have a voice in negotiations with employers. Over time, labor rights have evolved in response to changing economic conditions, making them a crucial aspect of social justice and equality within the workforce.
National Industrial Recovery Act: The National Industrial Recovery Act (NIRA) was a key piece of legislation enacted in 1933 as part of the New Deal, aimed at stimulating economic recovery during the Great Depression. It sought to promote industrial growth, improve labor conditions, and raise consumer purchasing power through the establishment of codes of fair competition for industries, which included regulations on pricing, production, and wages.
National Labor Relations Act: The National Labor Relations Act (NLRA), also known as the Wagner Act, was enacted in 1935 to protect the rights of workers and promote collective bargaining. This law empowered employees to form unions and engage in collective activities without fear of employer retaliation, thus reshaping labor relations in the United States. It laid the foundation for future labor reforms and influenced worker rights by establishing the National Labor Relations Board (NLRB) to oversee union elections and investigate unfair labor practices.
National Recovery Administration: The National Recovery Administration (NRA) was a key New Deal agency established in 1933 to promote economic recovery during the Great Depression. The NRA aimed to stimulate industrial growth and improve labor conditions by encouraging businesses to create fair competition codes, which set standards for production, wages, and hours. This initiative was part of a broader strategy to stabilize the economy, reduce unemployment, and foster cooperation between businesses and labor unions.
New Deal Legacy: The New Deal Legacy refers to the long-term effects and lasting impact of the New Deal programs implemented during the Great Depression, particularly on American business practices and government policies. This legacy shaped future economic strategies and regulatory frameworks, influencing how businesses operate and how government interacts with the economy. The New Deal introduced reforms that addressed unemployment, economic instability, and social welfare, which have continued to resonate in modern American society.
Public Works Administration: The Public Works Administration (PWA) was a New Deal agency established in 1933 that aimed to stimulate the economy through large-scale public works projects. By providing jobs and improving infrastructure, the PWA played a significant role in the recovery from the Great Depression, promoting economic growth and improving living standards across the nation.
Recovery vs. Reform Debate: The recovery vs. reform debate refers to the discussion around the priorities and effectiveness of New Deal programs during the Great Depression, where 'recovery' focused on immediate economic revitalization and job creation, while 'reform' emphasized long-term structural changes to prevent future crises. This debate highlighted differing philosophies on government intervention in the economy and shaped the trajectory of American economic policy.
Regulation of banks: Regulation of banks refers to the set of laws and guidelines established to govern the activities and operations of banking institutions. This regulatory framework aims to ensure the stability and integrity of the financial system, protect consumers, and prevent financial crises, particularly evident during significant economic downturns. The regulation of banks became especially crucial during the Great Depression, prompting reforms that shaped the banking landscape in the United States.
Second New Deal: The Second New Deal refers to a series of programs and reforms initiated by President Franklin D. Roosevelt in 1935 aimed at providing relief, recovery, and reform during the Great Depression. This phase built upon the first New Deal by expanding federal government intervention in the economy and introducing more ambitious social welfare initiatives, such as social security and labor rights. It significantly reshaped the relationship between the government and American businesses, leading to lasting changes in economic policy and regulation.
Securities and Exchange Commission: The Securities and Exchange Commission (SEC) is a U.S. government agency established in 1934 to regulate the securities industry and protect investors. The SEC's creation was a direct response to the stock market crash of 1929 and the subsequent Great Depression, aiming to restore public confidence in the financial markets by enforcing transparency, fairness, and accountability among public companies and their securities transactions.
Social Security Act: The Social Security Act, enacted in 1935, was a landmark piece of legislation aimed at providing financial assistance to the elderly, unemployed, and disabled citizens in the United States. It established a social insurance program designed to provide benefits and support during times of economic hardship, fundamentally transforming the relationship between the government and its citizens. The Act had significant implications for business practices and labor relations, as it marked a shift towards greater federal responsibility for welfare and economic security.
Tennessee Valley Authority: The Tennessee Valley Authority (TVA) is a federally owned corporation established in 1933 as part of the New Deal, aimed at improving economic development and providing electrical power to the Tennessee Valley region. It was created to address the dire economic conditions during the Great Depression, bringing jobs, flood control, and affordable electricity to one of the most impoverished areas in the United States. By harnessing the power of the Tennessee River and its tributaries, the TVA not only provided essential resources but also played a key role in transforming the region's economy and environment.
Unionization: Unionization is the process by which workers come together to form a union, an organized group that negotiates with employers on behalf of its members for better wages, benefits, and working conditions. This collective bargaining power fundamentally reshapes labor relations and influences corporate management practices. As industries evolved and corporate structures became more complex, the need for workers to band together increased, especially during economic downturns when their rights and protections were often at risk.
Wagner Act: The Wagner Act, officially known as the National Labor Relations Act of 1935, is a foundational piece of labor legislation in the United States that protects workers' rights to organize, join unions, and engage in collective bargaining. This act marked a significant shift in labor relations by establishing the National Labor Relations Board (NLRB), which oversees and enforces labor rights, helping to strengthen the role of unions and improve workers' conditions during a time of economic turmoil.
Works Progress Administration: The Works Progress Administration (WPA) was a New Deal agency established in 1935 that aimed to create jobs and provide economic relief during the Great Depression. It was one of the largest and most ambitious programs of its time, employing millions of Americans in public works projects such as construction, arts, and infrastructure improvement. The WPA significantly impacted business by stimulating demand for materials and labor while fostering public investment in essential services and facilities.