The Great Depression and the response to it marked a major turning point in American history. Herbert Hoover (U.S. pres. 1929–1933) and his administration initially reacted to the stock market crash and economic decline with dogged optimism but limited action. When the financial crisis struck Europe with full force in summer 1931 and boomeranged back to the United States, banks failed and unemployment soared. In 1932 industrial production fell to about 50 percent of its 1929 level.

In these desperate circumstances Franklin Delano Roosevelt (U.S. pres. 1933–1945) won a landslide presidential victory in 1932 with promises of a “New Deal for the forgotten man.” Roosevelt’s basic goal was to preserve capitalism by reforming it. Rejecting socialism and government ownership of industry, Roosevelt advocated forceful federal government intervention in the economy. His commitment to national relief programs marked a profound shift from the traditional stress on family support and local community responsibility.

As in Asia, Africa, and Latin America, American farmers were hard hit by the Great Depression, and agricultural recovery became a top priority. Roosevelt’s decision to leave the gold standard and devalue the dollar was designed to raise American prices and save farmers. Innovative programs, such as the 1933 Agricultural Adjustment Act, aimed to raise prices and farm income by limiting production. For a while, these measures worked.

Roosevelt then attacked mass unemployment, by creating over a hundred new federal agencies. These launched a vast range of public works projects so the federal government could directly employ as many people as financially possible. The most famous agency was the Works Progress Administration (WPA), set up in 1935. The WPA employed one-fifth of the entire U.S. labor force at some point in the 1930s, and these workers constructed public buildings, bridges, and highways.

Following the path blazed by Germany’s Bismarck in the 1880s (see “The German Empire” in Chapter 24), the U.S. government in 1935 established a national social security system with old-age pensions and unemployment benefits. The 1935 National Labor Relations Act declared collective bargaining to be U.S. policy, and union membership more than doubled. In general, between 1935 and 1938 government rulings and social reforms chipped away at the privileges of the wealthy and tried to help ordinary people.

Despite undeniable accomplishments in social reform, the New Deal was only partly successful as a response to the Great Depression. At the height of the recovery in May 1937, 7 million workers were still unemployed (down from a high of 15 million in 1933). A reduction in federal government spending only worsened the economic situation, causing a recession in 1937–1938. Unemployment was still a staggering 10 million when war broke out in Europe in 1939. The New Deal brought fundamental reform, but it never did pull the United States out of the depression; only the Second World War did that.