Crisis of 1929 and the New Deal in the United States of America

Explanation of the 1929 crisis in the United States and the New Deal. Roosevelt’s reforms to revive the economy with Keynesian theories


Crisis of 1929 and New Deal in the United States of America – Source: Getty-Images

The knots of the economy and finance were intertwined in the great crisis that broke out in October 1929 , with the collapse of the New York Stock Exchange , which neither the means of finance nor those of the state could remedy, so that thousands of companies failed and unemployment rose to the point of affecting 25% of the active population (about 13 million Americans) in 1934.

In the elections of 1932, the candidate of the Democratic Party, Franklin Delano Roosevelt , was elected president , who received the votes of the middle classes, peasants, workers, the unemployed, ie those sectors most exposed to the crisis. Roosevelt, a man of great personal prestige , embodied the hopes for the rebirth of the American economy and the development of society. The electoral platform was the slogan of the New Deal (“new course”).

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Crisis of 1929: history and characteristics of the Great Depression




In the first phase of the New Deal the objective was set to restore credit, to relaunch industrial and agricultural production, to attack unemployment, and all this with a rapid and all -out shock therapy (the ” Hundred Days “). In the financial sector, the newly elected Roosevelt placed controls on banks and the stock market, the starting point of the crisis ; he moved towards the devaluation of the dollar, abandoning parity with the European currencies.

In the second phase , started in 1935, before the elections reconfirmed Roosevelt as president with an overwhelming majority, the reform activity took on social security and quality of life (unemployment agency, unemployment insurance and old age insurance) as a commitment. , recognition of trade union rights, rehabilitation of homes and cities). One of the most extensive interventions of public power in the economic field took place with the establishment of the Tennessee Valley Authority , a federal agency for the hydroelectric exploitation of that area.

The New Deal implemented a policy of budget deficit and increased public spending as a lever to guide development and reduce income gaps between the social classes, which was considered by some to be the practical application of the theories of the economist John Maynard Keynes . In economic terms, the New Deal turned out to be a partial success (for example, per capita income in 1940 was less, but slightly, than in 1929); in political terms he managed to reconcile economic recovery and the expansion of democracy.


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