Great Depression and New Deal

Americans developed a tendency to invest savings and earnings in speculative ventures. One way of making money during the 1920s was to buy stocks and shares. Prices of these stocks and shares constantly went up, so investors kept them for a short-term period and then sold them at a good profit. On October 29, 1929 (the Black Tuesday) the Stock Market crashed. It had lost 47 percent of its value in twenty-six days. Although less than one percent of the American people actually possessed stocks and shares, the Wall Street Crash was to have an enormous impact on the whole population. Business houses closed their doors, factories shut down and banks failed. By 1932 approximately one out of every four Americans was unemployed. The big disparity between the country's productive capacity and the ability of people to consume was the core of the problem. The Great Crash was the beginning of a deep, worldwide economic crisis - the Great Depression.

Soon after he was elected as a president, Franklin Delano Roosevelt introduced a series of measures, called the New Deal. The main ideas of the New Deal were recovery from the economic depression and stabilization of the national economy to prevent severe economic crises in the future. Under the New Deal industrial enterprises and farmers were given subsidies to be able to restrict their production, farm surpluses were purchased by the Government and banks received government support too. Within three months, the historic Hundred Days, Roosevelt enacted a number of laws to help the economy to recover. New jobs were created by the construction of roads, airports, bridges, and public buildings. The program reduced unemployment from 17 million to 8 million. In addition, the New Deal also included social and labor legislation.

The cornerstone of the New Deal was the Social Security Act of 1935. It created a system of insurance for the aged, disabled and unemployed. The system was based on employer and employee contributions. Roosevelt also banned unfair employer practices and protected the workers´ right to collective bargaining. These measures made Roosevelt extremely popular. He was the only American president who served three terms and was elected to a fourth. Although the economy improved, the Roosevelt's New Deal programs did not end the Depression.