7.5 Conclusion

Compared to the massive borrowing and spending of the war years, the New Deal may appear little more than a “holding action” that prevented conditions from deteriorating beyond the nadir of 1933. The president himself was hardly a radical, and most of the provisions of the New Deal borrowed from previous ideas about monetary policy and earlier programs such as the War Industries Board. In addition, the New Deal only reluctantly embraced Keynesian ideas, and budget deficits remained relatively small until the outbreak of war.

However, the idea that the federal government could and should use its power to regulate private industry during peacetime represented a fundamental shift away from the laissez-faire traditions of the past. Programs such as the WPA offered direct employment when the private sector faltered, signaling a radical change in the expectations of the federal government. Some federal programs such as Social Security were completely new and represented a transfer of responsibility for the care of the elderly and the infirm from individual families and cities and states to the federal government. For the first time in US history, the powers and size of the government expanded significantly during a time of peace. As a result, many New Deal programs continued after World War II ended in 1945.

The United States would officially remain neutral in that war until the Japanese attack on Pearl Harbor. Between 1939 and 1941, this neutrality was a thin façade as Roosevelt believed America must use its potential industrial might to aid Britain and other Allies in their fight against the totalitarian regimes of Germany and Japan. By the end of 1939, unemployment had dropped to its lowest level of the decade as US workers began constructing the “arsenal of democracy” that would supply the armies of America’s allies. Roosevelt hoped that selling weapons and food would solve the two biggest crises of the late 1930s: the dual invasion of Europe and Asia and the lingering economic stagnation throughout America. In so doing, the United States would prosper, and the world would be able to defend itself without direct US military intervention. To this end, the United States tolerated the deficits and intervened in the economy as never before.

Perhaps ironically, Roosevelt promised to deal with the Depression as if it were “an invading foe” upon taking office in 1933. In 1941, the United States was attacked, and the federal government received nearly unlimited power to manage the economy. In hindsight, the same methods used to transform the economy would have likely ended the Depression much sooner. At the same time, one must consider whether such extraordinary governmental power would have been tolerated in a time of peace.