New Deal

• Author: Jeffrey Lehman, Shirelle Phelps

Page 232

"I pledge you, I pledge myself, to a new deal for the American people." In July 1932, FRANKLIN DELANO ROOSEVELT said these words to the delegates at the Democratic National Convention, who had just elected him the party's candidate for president of the United States.

Roosevelt's New Deal was a response to the tumultuous events of the years leading to his nomination. After WORLD WAR I, the people of the United States experienced unprecedented prosperity. Consumers of all income levels were buying goods "on time" by putting a few dollars down and paying a few dollars a month. Record numbers of people were also using the installment-buying concept to purchase stocks. The number of stockbrokers grew from fewer than 30,000 in 1920 to more than 70,000 in 1929. Stockbrokers allowed their clients to "buy on margin," meaning that a customer only had to pay 10?15 percent down on a stock, with the BROKER lending the client the rest and being repaid when the stock went up in value. By 1929, the skyrocketing prices in the STOCK MARKET indicated continued prosperity to some economists, but to others it signaled impending doom. So much investment had been done on margin that stockbrokers had borrowed money from banks that by then were also heavily in debt. Stock prices began rapidly dropping in September 1929, and on "Black Thursday," October 24, 1929, they plummeted beyond all belief, devastating thousands of brokerage houses. By the following Tuesday, October 29, virtually all stocks were worthless. Millionaires became paupers overnight. People who had invested their savings woke up to find themselves penniless. This was the start of the Great Depression.

HERBERT HOOVER was the president at the time of the great stock market crash. He initially refused to believe that there was a problem, and even in April 1930, when more than three million people had lost their jobs, he continued in vain to reassure people that everything was fine. Because people were afraid of losing their jobs and running out of money, they refused to engage in the free-spending ways of the past and chose to save rather than to spend their money. This behavior, in turn, created a new cycle of problems. Because many banks had failed during the crash, people no longer trusted them, and kept their money at home, which depleted the supply of capital that banks needed. People also refused to buy new products and instead repaired old ones. Because few people were buying new products, companies were forced to close and to lay off employees. Many people were evicted from their homes for failing to make payments, and often several members of extended families lived together. The number of HOMELESS PERSONS soared, as did cases of malnutrition. President Hoover still remained firm in his stance that government aid was not an option. He believed that private charity could take care of those individuals who could not take care of themselves and that the ingenuity of private business would cure the ills of the country, not government intrusion. The American people resented President Hoover's attitude. The camps of makeshift shacks in which many people lived after being evicted were called Hoovervilles, and slogans such as Hard Times Are Hoovering over Us were heard everywhere. By December 1931, the unemployment rate was more than 13.6 million, a third of the labor force. When President Hoover sent military troops with bayonets and tear gas to disband the Bonus Army?a group of World War I veterans who had come to Washington, D.C., to seek early payment of a promised bonus for fighting in the war?his approval among U.S. voters plunged irrevocably.

Although the Republicans knew that the Democratic presidential candidate would more than likely win, they nominated Hoover again in 1932. The Democratic nominee, Franklin D. Roosevelt, won all but six states and...