Success or Failure?

The Depression was so unusual, in every way, that it has prompted endless debate. Did the New Deal really help? If so, why did it take so long, and why did unemployment persist so long after the rebound was clearly underway?

Some believe that the government should never attempt to relieve individual hardship, as it leads to dependence. Others argue that Roosevelt just didn't go far enough. He didn't go big enough to achieve convincing success.

There's no way to settle the issue, but there's plenty of evidence to sift through. Clearly, 1933 was the big year of turnaround. America hit rock bottom just as Roosevelt was taking office, and began recovering soon after.

The next four years paint a picture of blistering recovery which, for whatever reason, did not include bringing unemployment back down to normal levels. The charts presented below help fill out the picture.
New-Deal spending, 1930s

  Trying Everything
Roosevelt is often dismissed as someone willing to try anything, and everything. No previous President had attempted to harness the federal government as an engine of economic recovery. There was no blueprint. An argument can be made that Roosevelt could have stopped after halting the banking crisis. Once banks stopped failing, perhaps the recovery would have followed naturally, without further stimulus. Today, most economists argue for prompt and aggressive stimulus whenever economic conditions turn down. The jury is still out on this approach.

New Deal economic Recovery, 1930s

  The Long View
Clearly, 1933 is the turning point, while GDP, the broadest measure of national economic health, has almost fully recovered by 1939 (top left). Other measures are slower to recover, including unemployment (lower left). Trade with Europe is the perhaps the biggest laggard (lower right). This may be related to very high tariffs, which America passed in 1930 to discourage competition from imports. European nations, however, are also still mired in a lasting Depression. Only Hitler's Germany had been able to resume strong economic growth, in part by also launching large government spending programs, in 1933. This includes building the world's first modern national highway system, way ahead of other nations.


New Deal family assistance, 1930s

  Money Reaches Families
There's little question that New-Deal programs helped individual families struggling with the loss of income. The charts above show that government aid was consistently high throughout the entire pre-World War II period. At any one time, more than 3 million workers were receiving income due to participation in one of the government's many spending programs (lower left). All this new income was cycling through the economy, benefiting local business. In addition, by the time America was finally drawn into World War II, an astonishing 90% of all families with an unemployed worker were receiving some form of assistance. Sometimes this was in the form of food (upper right).


New Deal manufacturing rebound, 1930s

  Business is Back
The strongest rebound is in manufacturing, which suffered the steepest declines early in the Depression. Machinery and equipment sales have recovered 90% by 1937 (lower left), while sales of home appliances zoom to levels roughly double pre-crash levels (center bottom). Somewhat surprisingly, auto sales are still down by nearly 20%. This may reflect the fact that cars are so expensive, compared to other products. Spending on other forms of transportation are up smartly, especially ship-building and rail car production (lower right). The economy actually enters another mini-slump in 1937, which cuts into these gains. But sales recover again by 1939.


New Deal forests and campgrounds, map

  Infrastructure Lasts
One aspect of New-Deal spending which is rarely discussed involves the permanent upgrades to American infrastructure. These remain long after the spending eventually ends, during the war years of the 1940s. The map above shows 35 major dams (in RED), which continue to provide flood control, electricity, and water for irrigation and navigation to large regions. None had existed 10 years previously. Large areas in the West are opened to new development by the 100,000 miles of new access roads built by CCC crews, mostly in national forests (in GREEN). American families still enjoy summer visits to hundreds of state parks which are also the work of the CCC. All those picnic tables were paid for by Uncle Sam.


Government stimulus spending, 1930s

  Efficiency isn't the Priority
When considering the question of whether government money was well spent, all aspects must be considered. Surely, a fair percentage of New-Deal spending is wasteful to some degree. You can't unleash huge amounts of money, quickly, without some falling into pockets which were not the intended targets. Still, the money is spent, and it ends up in someone's pocket. It's hard to see how this wouldn't have helped promote recovery. We still grapple with similar questions today. Similarly large sums of public money have been committed in recent times to building out infrastructure, and lessening the impact of disasters like the Covid pandemic. Only time will tell how much benefit will remain permanent.