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THE FUNDAMENTAL SHIFT IN 1930 THAT CHANGED THE ROLE OF THE
FEDERAL GOVERNMENT
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The Fundamental Shift in 1930 That Changed the Role of the Federal Government
Introduction
The great depression occurred from 1929-1933. The worst economic catastrophe of the
20th century led to high unemployment rates, a drop in the goods manufactured, 80 percent of
banks locked down, and the stock market failed. There is no specific agreeable cause of the great
depression, but the economists claim that it stemmed from the stock market crash. When the
stock market crashed, demand for commodities reduced, forcing firms to cut output, and
discharged workers to survive the harsh economic times. Loss of jobs led to reduced income
made it hard for borrowers to repay their loans1.They were defaulting, which led many into
bankruptcies that led to banks' failure, increasing the unemployment rates.
Moreover, the drought experienced played a role in the worsening economic conditions,
and President Hoovers' hands-off approach in dealing with this crisis did no good. This period
characterized a fundamental shift after President Roosevelt took over in 1933, creating a safety
net to help recover the dire conditions. This paper discusses the actual change in the National
government's role in rescuing the economy and people's relief during hardships.
The New Deal programs
In 1932, the New York governor Franklin Roosevelt vowed to stop the economy's downward
curve using the Federal Government. As many Americans were tired of President Hoover, he
was elected the president. As a new president, Roosevelt used his first 100 days to wage war
against the economy by proposing comprehensive reforms. The first New deal that began from
1
Efraim Benmelech, Carola Frydman, and Dimitris Papanikolaou, "Financial Frictions and Employment
the Great Depression," 2017, np, doi:10.3386/w23216.
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1933-1934 focused on reprieving for the jobless through job creation, salvaging the economy
through government spending, and reforms through regulatory legislation. President Roosevelt
First new deal extended the scope of the government2. It shifted the American political culture
around the principle that the government is responsible for its citizens' welfare. During the first
100 days, from March-June 1933, congress, at the directive of Roosevelt, approved several
legislative reforms to address the banking crisis, unemployment, and weak business
performance. The new policies include:

The Agriculture Adjustment Administration (AAA) acts to offer relief to farmers by
providing them subsidies to reduce the cost of production that helped raise the prices of
their produce.

The Civilian Conservation Corps-The CCC act offered jobs to young men to work in
government land to curb the high unemployment rate.

The Federal Emergency Relief Act-This policy gave grants to states paying salaries to
government workers and offered direct aid to the poor.

The National Recovery Administration Act aimed to improve businesses’ profits, set
minimum wages for workers’ and established industry codes to eradicate discriminatory
practices. It also permitted employees to join labor unions for a collective bargain3.

The Federal Deposit Insurance Corporation-This policy reassured individuals that the
government would refund their deposits in bankruptcy. It invigorated the functions of a
bank.
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3
Ben S. Bernanke, Essays on the Great Depression (Princeton: Princeton University Press, 2009), 23
David M. Kennedy and Lizabeth Cohen, The American Pageant (Boston: Cengage Learning, 2012), 32
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
Securities and Exchange Commission- This law provided for government regulation and
oversight on the stock market.
These efforts restored American citizens' confidence but did not end the depression. President
Roosevelt launched a second set of programs to improve the economic crisis4. The programs
became the Second New Deal that aimed to increase employee protection and build
comprehensive financial security. The legislation in the Second new deal was:

The Works Progress Administration (WPA)-This initiative hired many citizens to work in
public projects, particularly in the construction of highways, bridges, and employing
artists.

The Wagner Labor relations Act allowed workers to form labor unions to bargain for
their pay collectively.

The Social security Act (SSA)-This act required employees to pay a social security trust
fund deducted from their monthly pay. After retirement, they would receive monthly
deposits from this trust fund5.

The Fair Labor standard Act-This act delegated a 40hr working hours in a week, fixed an
hourly minimum wage rate, and discouraged child labor.
President Roosevelt New Deal aimed to revive the economy by encouraging consumer demand.
It embraced the Keynes fiscal approach of government spending to promote economic growth.
However, the New Deal was partially successful, but the United States fully recovered from the
4
Don Watkins, "The Great Depression and the Role of Government Intervention," The Ayn Rand Institute,
last modified September 3, 2019, https://ari.aynrand.org/the-great-depression-and-the-role-of-governmentintervention/.
5
The New Deal, "The New Deal (article)," Khan Academy, accessed October 22, 2020,
https://www.khanacademy.org/humanities/us-history/rise-to-world-power/great-depression/a/the-new-deal.
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economic crisis after World War II due to massive military spending. This New Deal left a
legacy in the United States as crucial elements of the laws are still in places like the minimum
wage, social security system, and child labor and collective bargaining rights through labor
unions.
Conclusion
In conclusion, some of the factors that historians believed to have caused the Great
depression were; the Wall Street stock market crash, free markets, bank failures, drought, and
Hoovers' high wage policy. President Roosevelt's policies restored confidence in the banking
system and led the United States to begin an economic recovery. The New deal put in place
programs that offered relief to the unemployed and the economy's recovery through government
spending and job creation. While the policies did not stop the great depression until during
World War II, it played a vital role in establishing and recovery of falling businesses, Banks, and
manufacturing companies, and the high level of unemployment. Moreover, it found some laws
that are still in use, especially in the labor laws like the Social security act and the collective
bargaining power of workers through a labor union. This depression shows the importance of
government intervention in recovering an economy through fiscal policies and laws.
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Bibliography
Benmelech, Efraim, Carola Frydman, and Dimitris Papanikolaou. "Financial Frictions and
Employment during the Great Depression." 2017. doi:10.3386/w23216.
Bernanke, Ben S. Essays on the Great Depression. Princeton: Princeton University Press, 2009.
Kennedy, David M., and Lizabeth Cohen. The American Pageant. Boston: Cengage Learning,
2012.
The New Deal. "The New Deal (article)." Khan Academy. Accessed October 22, 2020.
https://www.khanacademy.org/humanities/us-history/rise-to-world-power/greatdepression/a/the-new-deal.
Watkins, Don. "The Great Depression and the Role of Government Intervention." The Ayn
Rand Institute. Last modified September 3, 2019. https://ari.aynrand.org/the-greatdepression-and-the-role-of-government-intervention/.