Just Finished Reading: The Great Depression & The New Deal – A Very Short Introduction by Eric Rauchway (FP: 2008) [131pp] 

The Great Crash of 1929 led directly to the Great Depression of the 1930’s - right? It might certainly seem that way but the direct cause and effect of both events is far trickier. There had been crashes before, sure not as bad or as deep or lasting so long as the one in ‘29 but they had happened and, after a short sharp recession, the economy had recovered. The thinking at the time, the prevailing idea of laissez-faire, suggested that if left alone the stock market as well as the larger economy would ‘self-correct’ in time. So, time was given then more time and then some more time. Instead of any self-correction things instead grew steadily worse. Pronouncements from politicians and industry leaders followed stating publicly that everything was fine and that people really should spend money. Meetings were held (again very publicly) between government and industry to show that they were ‘doing something’. Eventually, the Hoover administration decided that they really had to do something but it was too little and too late – their thunder’ had already been stolen by the Democratic candidate for President who promised a New Deal if elected: Franklin D Roosevelt. The problem was, even FDR had no clear idea what could be done, if anything, to bring the country back. 

Looking back with a ‘big picture’ lens it's easy to see the New Deal program as a coherent and coordinated response to the Great Depression. At the time it was nothing of the sort. FDR and his administration knew (as did most people) that ‘something’ needed to be done but there was only so much that could be done as well as only so much that would be allowed to be done. Despite the condition of the US, and the world, economy the idea of direct government intervention was still anathema to many. Even those most effected on the ground were loath to take charity or government handouts even if they desperately needed them. Yet still, something had to be done. The first order of business was to shore up the financial sector and restore confidence in the banks. Then there were incentives for business to invest and grow. Some things seemed to work and were expanded, others seemed not to work and were dropped. The Federal government extended aid and guarantees to the States for plans already drawn up and awaiting funds. States were encouraged to plan more projects and businesses were asked, encouraged and sometimes bullied into keeping their workers in employment even at shorter hours or reduced pay. Although things improved slightly, or stopped being so bad for so many, it still wasn’t enough. Nowhere near enough. The government would, it seemed, need to get its hands dirty. Over the coming years the Federal government started funding projects directly – to build roads, schools, dams and much else. It increased Social Security and began to directly influence business decisions. It was heavily criticised for inaugurating Socialism in America (whilst being nothing of the sort of course) but things did improve and keep on improving. But did the New Deal work? Did it end the Great Depression. The clear answer is No. Although things were improving as the 1930’s began to draw to a close it was the war in Europe which boosted job numbers and then the massive increase in defence spending prior to the attack on Pearl Harbor that pulled the economy out of Depression and laid the foundation for American financial dominance for the rest of the 20th century and beyond. 

I thought this was a useful follow up to my previous read on the Wall Street Crash and rounded off the subject nicely. Obviously in a mere 130 pages the author couldn’t do full justice to either the Depression nor the response to it – in America never mind the rest of the world – but he did manage to hit the highlights and, as always, provide a full bibliography for further reading. I’ll see if I can follow this up (at some point) with some of the different responses to the Depression in the UK, France and other places around the world. A very good (as these very often are) introduction to an interesting and important topic especially after the Crash of 2008. Recommended.