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As the people rallied from the initial shock and sought to examine the sources of their difficulties, they began to recognize unhealthy trends that had been unobserved beneath the prosperous facade of the 1920's. The core of the trouble had been the immense disparity between the productive powers of American industry and the ability of the American people to consume. Great innovations in productive techniques had been made during and after the war, with the result that the output of American industry had soared far beyond the purchasing capacity of American workers and farmers. The savings of the wealthy and middle classes, increasing far beyond the possibilities of sound investment, had been drawn into frantic speculation on the stock market or in real estate. The stock market collapse, therefore, had been merely the first of several detonations in which a flimsy structure of speculation had been leveled to the ground.
The presidential campaign of 1932 took the form of a debate over the causes and possible remedies of the Great Depression. Herbert Hoover, whose misfortune it had been to enter the White House only eight months before the stock market crash, had struggled tirelessly to set the wheels of industry in motion again, but he had done so within the limits of a traditional conception of the proper role of the federal government which prevented him from taking drastic action. His Democratic opponent, Franklin D. Roosevelt, already popular as governor of New York state during the developing crisis, argued that the depression had grown out of underlying flaws in the American economy which had been aggravated by Republican, policies during the Twenties. President Hoover replied that the American economy was fundamentally sound but that it had been disturbed by the repercussions of a worldwide depression, the causes of which could be traced back to the World War. Behind this argument lay a clear implication: Hoover would prefer largely to depend on the natural processes of recovery to take place, while Roosevelt was prepared to use the authority of the federal government for bold experimental remedies. The election resulted in a smashing victory for Roosevelt, who received 22,800,000 votes to Hoover's 15,700,000.
To the problems of the hour the new President brought an air of cheerful confidence which quickly rallied the people to his banner. Before he had been long in office, that bewildering complex of reforms which is known as the New Deal was well on its way. Actually this was a sharp acceleration of certain types of reform that had been growing for fifty years. In a certain sense, it can be said that the New Deal merely introduced into the United States types of reform legislation that had already been familiar to Englishmen, Germans, and Scandinavians for more than a generation. Moreover, it represented a culmination of a long-range trend towards the abandonment of laissez-faire, which could be traced back to the regulation of the railroads in the 1880's and the flood of state and national reform legislation of the Wilson-Theodore Roosevelt era. What was most novel about it was the speed with which it accomplished what elsewhere had taken whole generations. Many of the New Deal reforms were hastily drawn and weakly administered; some of them actually contradicted each other. But some confusion was natural when a situation so difficult was being remedied in such haste. During the entire New Deal period, despite all its speed in decision and execution, the democratic process of public criticism and discussion was never interrupted or suspended; indeed, the New Deal brought a sharp revival of interest in his government on the part of the individual citizen.
When Roosevelt took the presidential oath, the banking and credit system of the nation was in a state of paralysis. With astonishing rapidity the sound banks were reopened for business. A policy of moderate currency inflation was launched in order to start an upward movement in commodity prices and also to afford some relief to debtors. More generous credit facilities were made available, both to industry and agriculture, through new governmental agencies. Savings bank deposits up to $5,000 were insured. Severe regulations were imposed upon the manner in which securities could be sold in the stock exchange.
In agriculture, far-reaching reforms were instituted. After the Agricultural Adjustment Act (passed by Congress in 1933) was nullified three years later by the Supreme Court as unconstitutional, Congress passed a more effective farmrelief act, providing that the government make money payments to farmers who would devote part of their land to soil-conserving crops or otherwise cooperate in the long-range agricultural goals of the program. By 1940, nearly six million farmers had joined in this program and were receiving federal subsidies. The new act likewise provided loans on surplus crops, insurance for wheat, and a system of planned storage to ensure an "ever normal granary" for the nation and the farmers. As a result of these measures, the prices of agricultural commodities rose, and economic stability for the farmer began to seem possible.
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