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Shijia Lian

Mrs. Lavender

U.S. History

Dec. 4, 2018

Out of the Great Depression

By the end of the 1920s, America was in her finest shape anyone had ever seen. Due to

the booming economy, every individual enjoyed a new high-income lifestyle in which new

means of both physical relief and spiritual entertainment were available. But this flourishing

situation wasn’t long lasting. On October 29, 1929, the bull market suddenly collapsed. Huge

amount of wealth evaporated day by day. Soon, the fear and chaos spread to the banking system,

making banks to shut down and cutting off people from their saving. The economy couldn’t

withstand this heavy combination and soon started a full-scale decline, heading to where

eventually nearly 13 million people lost their jobs. The nation had thereby entered a new era of

the Great Depression.

The Republican party, as it used to be, implemented a conservative left-alone policy on

the depression. The policy itself was a total failure and the GDP had declined to 75% of its

former size by the year of 1933. People soon started to lose faith in the current government. As a

result, President Franklin D. Roosevelt from the Democratic party won the election of 1932. He

promised to get the government more involved in this crisis. Shortly after he took power, he

made a series of effective radical reforms and programs entitled “The New Deal” intended to

solve the situation. The new deal programs, along with later pre-war preparation and policy

during WW2, ended the Great depression.


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When FDR was put in charge, the nation’s economy was at the all-time low. On the night

of the inauguration, FDR proposed his first reform as president to stabilize the banking system,

which, by this point, nearly no fully operating banks could be found. He declared the next day to

be a “bank holiday” for the examiners to evaluate each bank to determine which bank can be

reopened safely. This act led to a panic among the people because since then there wasn’t a

nationwide bank shut down, even though individual states had already done so. To stop the panic

and distrust, FDR set up his first “fireside chat” through the radio explaining the reasoning his

reform and assuring the safety of the new banks. The chat successfully regained people’s trust in

the banking system and money started to flow into banks again once they were reopened. In the

next 100 days, more New Deal programs were to be up and running. The Civilian Conservation

Corps set up in 1933 was the backbone of all those programs, and it was designed to create jobs

directly by setting up public construction and forestry projects. By the nation’s entry into WW2

in 1941, 4,500 working camps were established, 2.5 million people were employed, 3 million

trees were planted all under the name of the CCC. Another less successful program was the

Agricultural Adjustment Act which was responsible to solve the low price of agricultural

products. It paid the farmers to stop cultivating a portion of their land the in order to decrease the

supply to the market and thus increase the price. However, this, combined with the dust bowls,

would bring down the supply so much that people had trouble getting foods. FDR then drafted

the National Industrial Recovery Act, a large-scale attempt of recovery rather than relief. The

NIRA was designed to balance all the needs of the businesses, labors, and the unemployed so

that supply and price can be more favorable to people while the businesses are still in good shape

to develop. The National Recovery Administration(NRA) was created to enforce a healthy

competition in each industry and put more regulation on the economic planning of each
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company. As for the labors, the NIRA extended labors’ power to organize and bargain

collectively, also granted the NRA the authority to regulate the min/max wages in industries. For

the unemployed, the NRA and its subordinate agency Public Works administration set up many

construction projects with an enormous fund of 3.3 billion. Unfortunately, this particular act,

along with many other new deal programs, was determined unconstitutional by the supreme

court in 1935 and 1936. FDR responded by threatening the judge to switch to support the new

deal, while the court itself had already shifted to the liberal side by that time. This action led to

many criticisms, but the new deal had not ended yet. In replacement of the downed First New

Deal programs, a brand new series of programs were about to be set up.

In 1935, one of the key program of the Second New Deal, the Works Progress

Administration, was set up. Similar to the PWA and CCC, this program was another relief

program intended to create many jobs through public construction programs. The WPA focused

heavily on infrastructure building and also included many art programs. It hired a total of 8

million people and by that mean it was very successful. One thing to note about is the increasing

employment of minority groups in federal programs. For example, approximately 350,000

African Americans were enrolled in the WPA and another 350,000 in the CCC by this

point(Roosevelt Institute). Moreover, there was a subordinary agency called National Youth

Administration that helped and organized 4.5 million youth to get a job or provided them

financial support. Later in the year of 1935, FDR passed a new law called the Wagner Act to

protect labor union and ensure workers’ rights, which was mainly the right to organize, bargain,

and strike collectively. The act created the National Labor Relationship Board to enforce the act

with an additional responsibility to arbitrate disputes between an employee and an employer. The

act is regarded significant even to today because it enabled the government to interfere in labor
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disputes, protect the labor unions directly and protect the workers’ right to stand against unjust

employers. With all these programs working and improving the life of the people, FDR won the

election of 1936. The nation now started to recover slowly from the damage the great depression

has done due to the effect of the two New Deal since 1929. The unemployed population had

dropped to 5.3 million and the GDP was getting close to pre-depression era record by 1940.

Back in the old world, a new great war had broken out after the invasion of Poland. The

U.S. then started to prepare for a possible war against Fascism. Right after the war started in

Europe, a few war preparedness agencies had been formed from scratch. These included the

Office for Emergency Management, the National defense advisory Commission, the Office of

Production Management, and the Supply Priorities Allocation Board. None of them was able to

transform the nation’s civilian economy to war economy at the time because of a common

conflicting internal leadership - those agencies usually consisted of civilian businessmen or

managers, who wanted more civilian production, and reform-minded former new deal program

personnel, who wanted wartime production(Tassava). Despite the limited success economic

convention, Congress passed the Lend-Lease Act which allowed the U.S. to support the allies by

trading, leasing or giving them equipment, raw material, fuel.

After the attack on pearl harbor and the U.S. entered the war in 1941 though, things

started to change. Many new deal programs were reformed and found a role in mobilization and

new agencies were set up. Businesses underwent a smooth shift to war goods production with

much less resistance after the attack; for example, some of the automobile factories shifted to

produce tanks and planes and some silk ribbon factories shifted to make parachutes. The War

Production Board and the Office of War Mobilization were the ones responsible to oversee the

transition and balance the production for civilian needs and military needs. The defense
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spending, of course, increased dramatically, from 5% of the GDP in 1941 to 37% in

1945(Tassava). So in order to fund the war effort, the Department of the Treasury established the

war bond and also extended the taxation scope to virtually every citizen. The effect of the

enlargement was significant, the taxation pool grew for 4 million to around 40 million people

and the tax income went from 8.7 billion dollars in 1941 to 83 billion dollars in 1945, 20% of the

national GDP(Tassava). The overall tax rate was also raised as well, an extreme example of this

was that a person with an annual income of 1 million dollars needed to pay a 94% income tax.

With this new demand, investment and concentration of resources, the productivity of the war

industry grew furthermore. Most of the war goods production count had grown 10 times or more,

as well as all kinds of raw material. At the same time, the unemployment rate decreased to only

1.2% of the total labor force in 1944 as new jobs were created both in the industry and the

military. The minority groups, again, were not left out. 8% of the employed were African

Americans where the proportion of total population for black people was 10%(Kennedy, 775).

There were also 19 million women working and 2 million of them did work for the industry.

During the span of 1941 to 1946, the government regulated strictly the inflation rate at around

3% by limiting both price and wage increases. It was very successful when the 65% wage

increase for average workers was taken into account, resulting in the standard of living in some

of the urban areas even increased during the course of the war. As the side effect of the war,

people the Hollywood and its movie industry boomed again as average workers started to buy

movie ticket due to relatively low income and lack of common consumer goods.

At the end of the war, the GDP and income per capita had significantly exceeded the pre-

depression era, while the labor union, the federal government, and business owner had built up a

better cooperation tie, the economy looked better than ever. No doubt, The World War Two
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speeded up the recovery of the U.S. By this means, World War Two had done a great deal for

American people on ending the great depression. And the New Deal was essential for restoring

people’s confidence in the government, stabilizing the country, and enabling the natural

economic recovery in the country. The two factors together effectively and decisively ended the

Great Depression.

Work Cited:

Arnesen, Eric. EBSCOhost, search.ebscohost.com/

login.aspx?direct=true&db=khh&AN=128509215&site=hrc-live. Accessed 1 Oct.

2018.
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History.com Editors. "Civilian Conservation Corps." HISTORY, A&E Television

Networks, 11 May 2010, www.history.com/topics/great-depression/

civilian-conservation-corps. Accessed 19 Dec. 2018.

Schwartz, Eric. "The Great Depression." ["Super Power: Americans Today"].

Super Power: Americans Today, Nov. 2004, pp. 26-41. EBSCOhost,

search.ebscohost.com/login.aspx?direct=true&db=khh&AN=15684521&site=hrc-live.

Tassava, Christopher. “The American Economy during World War II”. EH.Net

Encyclopedia, edited by Robert Whaples. February 10, 2008. URL

http://eh.net/encyclopedia/the-american-economy-during-world-war-ii/

Louis Johnston and Samuel H. Williamson, "What Was the U.S. GDP Then?" MeasuringWorth, 2019,

http://www.measuringworth.org/usgdp/

Kennedy, David M. Freedom from Fear: The American People in Depression and War, 1929-1945. New

York: Oxford University Press, 1999.