The New Deal was a mixture of sometimes-conflicting programs: some aimed at relieving distress, some aimed at restoring full employment, and some aimed at preventing a recurrence of the Great Depression. In retrospect, the New Deal might have done better had it followed Keynes’s advice and concentrated on relieving distress and maximizing the aggregate monetary and fiscal stimulus rather than trying to reform individual markets. In any case, the New Deal left an indelible imprint in four ways. First, it created a wide array of institutions and programs that continue to shape our economic life: the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Federal National Mortgage Association (Fannie Mae), minimum wages and other workplace regulations, Social Security, unemployment compensation, and agricultural price supports among many others. Some of these institutions were small in terms of federal expenditures and achieved their goals mainly by imposing rules and regulations; others such as Social Security and agricultural price supports meant vast new expenditures. Big government arrived in the 1930s and the role of state and especially local government shrank in relative terms (Wallis 1984). Second, the New Deal created an idealistic spirit among young people that would bear fruit in the form of additional liberal legislation passed years later, especially during the Kennedy-Johnson years. Third, the New Deal created the presumption that people could look to Washington for solutions to their economic difficulties. True, people had often turned to Washington for help before 1929— for example, to reduce foreign competition, to subsidize railroad construction, and to relieve the victims of fire. But before the New Deal potential reforms had to overcome the presumption that the existing political and economic institutions, including the free market, were fundamentally sound. The New Deal reversed the burden of proof, leaving it to the defenders of the status quo to show that market forces could solve a problem to which the attention of the public had been drawn by a crisis.
The fourth and perhaps most important legacy of the New Deal is, paradoxically, what it did not do: It did not try to overthrow capitalism. With the nation in turmoil and its economy in ruins, socialism or at least widespread nationalization of commerce and industry might have been instituted in 1933. The basic instinct of the Roosevelt administration and its supporters, however, was to reform and conserve the system. Americans are good poker players. In 1933 they did not want to play a fundamentally different game; they just wanted a New Deal.
World History
