The Great Depression and the New Deal
The Wall Street Crash, 1929
On 24 October 1929 — “Black Thursday” — panic selling gripped the New York Stock Exchange. Share prices had been rising artificially throughout the 1920s, fuelled by buying on the margin. When confidence collapsed, investors raced to sell. By 29 October — “Black Tuesday” — the market had lost around 25 per cent of its value in days. Banks that had invested depositors’ money in shares now collapsed in turn, wiping out savings and triggering a chain of business failures.
The Wall Street Crash began on 24 October 1929 (“Black Thursday”) and worsened on 29 October (“Black Tuesday”). Within three years, around 13 million Americans were unemployed — roughly one in four workers.
Life During the Depression
By 1932, unemployment had reached approximately 25 per cent. Thousands of families lost their homes. The makeshift shanty towns that sprang up on the edges of cities became known as Hoovervilles — a bitter reference to the president many blamed for the crisis. Breadlines and soup kitchens became a feature of American cities. Farmers in the Midwest faced a double blow: banks repossessed farms while drought turned the Great Plains into a “Dust Bowl”, driving hundreds of thousands of “Okies” westward.
President Herbert Hoover was a firm believer in rugged individualism — the belief that government welfare would undermine Americans’ self-reliance. He refused to provide direct federal relief, fearing it would make people dependent on the state. His main measure, the Reconstruction Finance Corporation (RFC, 1932), gave loans to banks and large businesses, but the benefit was slow to reach ordinary Americans.
When around 20,000 First World War veterans marched on Washington in the summer of 1932 to demand early payment of a bonus promised for 1945, Hoover sent the army to clear their camps. Images of soldiers attacking veterans destroyed what remained of his popularity. In the November 1932 election, Roosevelt won 57 per cent of the popular vote.
Roosevelt and the New Deal
Franklin D. Roosevelt took office in March 1933 with the USA in the grip of a banking crisis. His inaugural address promised action: the government would treat the Depression as a national emergency equivalent to war. Roosevelt’s approach rested on three aims — Relief, Recovery and Reform — later called the “3 Rs”.
Roosevelt’s New Deal had three aims: Relief (immediate help for the unemployed and poor), Recovery (restarting the economy) and Reform (changing laws to prevent another crash). These goals drove the creation of the “alphabet agencies” during the Hundred Days of legislation in 1933.
The Hundred Days and Alphabet Agencies
Between March and June 1933 — the “Hundred Days” — Roosevelt pushed an extraordinary programme through Congress. He immediately declared a four-day bank holiday to stop panic withdrawals, then used radio “fireside chats” to reassure the public. Key agencies created in this period included:
The Civilian Conservation Corps (CCC, 1933) put young unemployed men to work planting trees, building roads and maintaining national parks. Over its lifetime it employed approximately 3 million men. The Agricultural Adjustment Administration (AAA, 1933) paid farmers to reduce overproduction, raising crop prices. The National Recovery Administration (NRA, 1933) set codes for fair wages, prices and working conditions in industries, though the Supreme Court struck it down in 1935 as unconstitutional.
The Tennessee Valley Authority (TVA, 1933) was one of the boldest measures — a federal body that built dams and hydroelectric power stations across seven states, bringing electricity to rural areas and creating thousands of construction jobs. The Works Progress Administration (WPA, 1935), created in the Second New Deal, employed millions on public works including roads, schools and hospitals, and also funded writers, artists and musicians.
The Second New Deal, 1935
By 1935 Roosevelt faced criticism from both the left and right. Senator Huey Long argued the New Deal had not done enough for the poor; business leaders complained of excessive government interference. Roosevelt responded with the Second New Deal. The Social Security Act (1935) established unemployment insurance and old-age pensions for the first time in American history. The Wagner Act (1935) guaranteed workers’ right to join trade unions and bargain collectively.
Opposition to the New Deal
Not everyone welcomed Roosevelt’s programme. Many Republicans and business leaders argued it amounted to socialism and damaged free enterprise. The Supreme Court declared several agencies unconstitutional. Critics like Huey Long called it too conservative. When Roosevelt tried to “pack” the Supreme Court with sympathetic justices in 1937, Congress blocked him — a significant political setback. Despite these tensions, the New Deal permanently changed expectations of what the federal government should provide for citizens.