The New Deal is a blanket term for a set of policies enacted by President Franklin Delano Roosevelt.
Details of the New Deal's policies will be discussed further, however as a general summary the New Deal was a Keynesian endeavor. It sought to do the opposite of what supply-side economics had done.
The central tenant of supply-side economics is that the government will assist business through loans and tax cuts. This would allow them to expand and hire more workers, thus creating jobs.
While this works occasionally, it is a flawed theory. Increasing supply does not necessarily increase demand in a stagnant economy, and with companies unable or unwilling to pay the typical high industrial wage, the new jobs would be detrimental to an economy devastated by overproduction, with workers once again producing but not necessarily buying.
Roosevelt's system of "pump priming", influenced heavily by John Maynard Keynes, works on the opposite principle, attacking the issue from the other direction. The New Deal sought to create jobs, chiefly government jobs, and to ensure that those who had jobs were paid high wages. This increased the buying power of the consumer, prompting businesses to produce and create their own jobs to keep up with the renewed demand. This would renew business, and make the intentionally temporary public works jobs unnecessary.
The New Deal was called socialist, and criticized for hurting businesses by supporting labor and increasing regulation, but the ultimate goal was the long term reestablishment of business. Not all New Deal policy was perfectly related to the above model, as many policies focused on reducing surplus goods, and simply relieving the extreme poverty experienced by many Americans, but that was the guiding theme. And it is difficult to argue that the New Deal was successful, and while the New Deal may not have ended the Depression, it was Keynesian economics that ultimately did.
Details of the New Deal's policies will be discussed further, however as a general summary the New Deal was a Keynesian endeavor. It sought to do the opposite of what supply-side economics had done.
The central tenant of supply-side economics is that the government will assist business through loans and tax cuts. This would allow them to expand and hire more workers, thus creating jobs.
While this works occasionally, it is a flawed theory. Increasing supply does not necessarily increase demand in a stagnant economy, and with companies unable or unwilling to pay the typical high industrial wage, the new jobs would be detrimental to an economy devastated by overproduction, with workers once again producing but not necessarily buying.
Roosevelt's system of "pump priming", influenced heavily by John Maynard Keynes, works on the opposite principle, attacking the issue from the other direction. The New Deal sought to create jobs, chiefly government jobs, and to ensure that those who had jobs were paid high wages. This increased the buying power of the consumer, prompting businesses to produce and create their own jobs to keep up with the renewed demand. This would renew business, and make the intentionally temporary public works jobs unnecessary.
The New Deal was called socialist, and criticized for hurting businesses by supporting labor and increasing regulation, but the ultimate goal was the long term reestablishment of business. Not all New Deal policy was perfectly related to the above model, as many policies focused on reducing surplus goods, and simply relieving the extreme poverty experienced by many Americans, but that was the guiding theme. And it is difficult to argue that the New Deal was successful, and while the New Deal may not have ended the Depression, it was Keynesian economics that ultimately did.