The New Deal, instituted by President Franklin D. Roosevelt in 1933, and conventionally dated as having continued until the outbreak of the European war in 1939, marked an epochal change in American domestic policy and in the role of the Federal government in American life. It also marked a major transition in Western economic thought. Until the New Deal era, the range of economic choices available was starkly simple: classical orthodoxy or Marxism. For policymakers in Western countries, that was effectively no choice at all, so for practical purposes classical laissez-faire economics reigned supreme. Government was admitted to no major role in economic life.
In contrast, from the time of the New Deal on, the role of government in Western economies was a given. For a generation after the New Deal, the fiscalist economic theory of John Maynard Keynes was dominant enough to amount to a new orthodoxy.
After years of economic prosperity and growth, fears of a postwar depression receded. Keynesian fiscal techniques, plus such built-in stabilizers or "cushions" as social security payments and unemployment compensation, it was increasingly held, had "solved" the problem of depression. (Rosenof, 1975, p. 4)
Only in the 1970s, with the onset of prolonged stagflation, did confidence in partially evaporate Keynesianism (Rosenof, 1975, p. 4). However, even the alternative of monetarism admitted an active if less direct government role in the economy. Moreover, at least in the United States, the recovery of the 1980s may be credited largely to Keynesian policy in a military guise.
Because the New Deal was followed by a generation of Keynesian dominance, the New Deal itself has often been read retrospectively as a Keynesian experiment, and the door through which Keynesian theory entered the halls of government. Certainly the New Deal era brought a vast expansion of the direct governmental role in American economic life...