How Effective was the New Deal?

A year into Obama’s stimulus act debate is still raging over whether the plan has been effective in pulling the American economy out of recession. I remain sceptical as the statistics make it doubtful that the stimulus is working still, we are only a year into this and I believe a more proper assessment could be done at the time of the next election in 2012. With the stimulus becoming front and centre in the news again we are seeing debate over the New Deal emerge. Was the New Deal effective in bringing America out of the depression? The statistics do not paint a very promising picture for New Deal advocates.

First off, the effectiveness of the New Deal was being debated during the time of FDR and continues to this day. Whether or not someone believes it was effective is likely to depend on their political views. Failures of the New Deal may not actually be blamed on the New Deal itself, but rather a lack of support for all the proposals that made up the New Deal. I’m simply going to stick with the statistics rather than delve into various political views to come up with answers for why the New Deal worked or did not.

After having read through the following information I developed the sense that the New Deal was not effective in actually pulling America out of the Depression.

“The number of unemployed in 1929 was estimated at less than four percent, but by 1933 the unemployment rate had jumped up to approximately 25. The New Deal was designed for complete economic recovery during the depression. However, the New Deal did not achieve full economic recovery. It actually had a limited economic impact. The New Deal failed to lower the unemployment rate below 14 percents. However, the New Deal did help maintain an average of 17 percent level the unemployment throughout the 1930s” Fearon, Peter. 2007. "KANSAS HISTORY AND THE NEW DEAL ERA." Kansas History 30, no. 3: 192-223

“Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. Keynesian economists speculated that this was a result of a premature effort to curb government spending and balance the budget, while conservatives said it was caused by attacks on business and by the huge strikes caused by the organizing activities of the Congress of Industrial Organizations (CIO) and the American Federation of Labor (AFL)” Leuchtenburg p. 242-3

Employment levels appeared to improve only slightly from the 1933 high of 25%, though a strong economy is not one where unemployment sits at 14%. Things would not improve until World War II. “Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war.” Today’s stimulus supporters will certainly point out that the World War II recovery was a result of massive spending, which is true. However, the spending in this case was heavily focused on manufacturing weapons for war as opposed to the New Deal and today’s stimulus which focuses on a wide and massive range of spending initiatives.

Economic historians appear to be split on the effects of the New Deal.

“1995 survey of economic historians asked whether "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of those in economics departments 27% agreed, 22% agreed with provisos, and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed”

"EH.R: FORUM: The Great Depression". Eh.net. http://eh.net/lists/archives/eh.res/feb-1997/0010.php. Retrieved 2008-10-11.

I believe the issue with the New Deal is that it wasn’t simply one single program aimed at repairing economy but a wide range of programs and reforms. The result is that it becomes difficult to determine what programs were effective and what weren’t, if all we do is examine it as a whole to say whether or not it worked. For now I have to remain sceptical on the effects of the New Deal. The dismal employment numbers during the 30s have me leaning to the side that says it was not effective. Today it seems that the effectiveness of the New Deal will remain a political talking, either it worked or didn’t. If we are to draw a conclusive and solid assessment of the New Deal then every single program and reform would have to examined individually to determine its’ affects on the economy. We could discover exactly what worked and what didn’t and use that knowledge to fine tune the current recovery effort in America.