Economic History of the US: The Great Depression

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Table of Contents

Introduction
The Beginning of Reforms
Encouraging Reform during World War II
Capitalism after the World War II
Conclusion
References
Footnotes

Introduction

The New Deal is the title of economic policy, which was created to bring the state out of a deep crisis. This course was one of the most effective in history precisely because it covered all spheres of economy and social relations in the state. Roosevelt’s new program consisted of a large number of reforms, for the implementation of which Congress passed numerous laws and the president issued decrees. During the crisis, the authorities acted in concert for the benefit of the whole nation.

The main principles of the reformation were speed, efficiency, and effectiveness. The Roosevelt administration reformed all areas, from banking to industrial and social. The core of this concept was the thesis that capitalism is no longer a system capable of self-regulation and automatic exit from the crisis. Monopoly and social differentiation with low incomes of the majority of the population were opposed by the active redistribution of income through state tax and social policy mechanisms. Thanks to this, it was possible to stimulate demand and save thousands of companies from ruin. Also, the successful course of the United States had an impact on the European economy after World War II. Moreover, it operates an extremely vital role in optimizing resources during World War II. The government’s immediate and unprecedented action brought the state out of the crisis and preserved the system of capitalism.

The Beginning of Reforms

A significant point in the new deal was that President Roosevelt informed the citizens about the state’s current situation and further actions of the government. He performed speeches to explain to Americans that the economy and trade were in frightful crises. Numerous banks and businesses went bankrupt, and citizens lost money. The administration’s priority was to pass a law separating investment and commercial banks. Also, commercial banks were prohibited from guaranteeing investment loans, placement, and other securities transactions. It was the rescue of the banking system that was to become a platform for economic revival and an impetus for further reforms.¹Thus, the only way to save the country was to adopt expeditious and new decisions for the population. Therefore, the president used the radio to report on possible difficulties and achievements that have already helped the American people consolidate.

In order to restore the security of Americans in the new deal, Congress and the President began to enact new rules. First, a law was introduced that provided employment for most men. Thus, it was not necessary to involve the military to protect natural resources, and the civilian corps did this.² The great advantage of such public works was the development of infrastructure on a voluntary basis. Improving the state of agriculture and supporting farmers was extremely valuable for the new course. President Roosevelt signed the Tennessee Valley Authority, creating an agency that dealt with pressing issues. The innovative agency tackled the valley’s problems, such as floods, powering homes and businesses, and planting forests. Other responsibilities set out in the act included improving travel on the Tennessee River and promoting business and farming in the region. The establishment of the agency was the first attempt to meet the general development needs of a large region.

At the same time, the most positive changes in the region were due to the expansion of the electricity network. Electric lights and modern technology have helped farmers be more efficient and produce added goods. Also, the decision on full electrification let the region’s industry create extra jobs, which helped reduce overall unemployment³. In fact, such a decision required an infusion of funds and was extremely dangerous for the president. Nevertheless, it met expectations and led to an improvement in the economic situation in the region. Thus, this method was later offered in other parts of the state.

Moreover, even during the crisis, the government cared about those who lost all their savings during the banking change. Therefore, half a billion dollars in aid was allocated. In order to continue to create businesses and receive taxes, to stimulate development, it was necessary to find an additional source of income. Permission to sell beer helped to receive taxes and create more extra employment⁴.The significant achievement of the new course was the Wagner Act, which regulated the activities of trade unions. State and federal governments provided unreliable protection for organized workers, and employers often exploited them, as can be seen in the General Motors case⁵. Therefore, the law supported the formation of trade associations and required regard for workers’ rights. Thus, the chosen strategic plan allowed to gradually bring the state out of a protracted crisis.

Encouraging Reform during World War II

At the beginning of World War II, the United States economy was viable and dynamic. Therefore, to preserve capitalism and prevent the seizure of territory, the government developed a plan of protection. The main factor was already expanded industry, so the order to participate in defense was issued to all, regardless of race or religion. ⁶ It was aimed at the cohesion of the nation because only collective work in enterprises could provide an army. President Roosevelt founded an organization whose mission was to transform industries from peacetime to war. In order to allocate scarce materials and set priorities in resource allocation⁷. Such an organization allowed resources to be accumulated and used to provide an army.

Hence, despite the fact that much of the state’s income was spent on financing hostilities, the state grew economically. It is through the unification of all employees and ensuring the elimination of discrimination. At the end of the war, a law was passed that provides broad guarantees for veterans, which included free education and housing loans.⁸ Also, the high level of economic development due to Roosevelt’s policy allowed to creation of a Marshall Plan for the rehabilitation of Europe⁹. Thus, capitalism continued to exist in the United States and became a prospect for Europe.

Capitalism after the World War II

Keynesian aimed to introduce dynamic changes in order not only to maintain a balance between the consumption of goods and their production. It also aimed to develop certain industries and attract investment. Accordingly, for successful development, it was necessary to identify the most profitable sectors of the economy.¹⁰ To achieve this, it is essential to analyze the demand of society and the most-funded industries in the market. The evolution of cooperatives also took place in accordance with consumer requirements. Thus, they began to compete with supermarkets.¹¹ Mass production and stores of natural products competed for buyers. Also, despite the new methods of economics, the principles of capitalism have been preserved. Thus, the question of a possible form for economic profit and effective protection of workers’ rights arose again.

Until the 1960s, residents of some regions still received food stamps. At the same time, however, the government has funded many social programs related to education and medicine for the poor.¹² The members of the cooperatives also tried to establish the rights of workers for the united cooperatives as producers of ecological products¹³. Although more prosperous buyers could afford to buy products in cooperatives, the middle and poorer classes chose cheaper goods. This choice enabled buyers to obtain better products, and sellers had the opportunity to compete. Rising inflation in the late 1960s and declining profits led to the decline of Keynesian management.

Conclusion

The Great Depression became an essential milestone in the economic history of the United States, which led to a change in the government’s course towards the use of the mixed economy model. Recognize to fast and effective means; it was possible to stabilize the situation in a short time. Reforming the social and industrial fields has also helped restore workers’ rights and provide funding for the region’s development. Changes in the banking system allowed banks to be divided into deposit and investment, i.e., investment banks were not permitted to engage in risky investments. Thus, the banking system was strengthened. Which in turn let the state prepare for World War II and its aftermath. At the same time, cooperative production existed on a par with supermarkets. Accordingly, there was an extensive choice for consumers and opportunities for improvement for producers. Thus, even though the new deal suffered, it helped to overcome the Great Depression and stabilize the economy by the end of the 1960s. Therefore, it was the chosen course that allowed not only to preserve capitalism but also to improve the economic situation of the country.

References

Davis, C. Joshua. 2017. From Headshops to Whole Foods. New York: Columbia University Press.

Hoover, Roosevelt and the Beginning of the Great Depression.

Hyman, Louis, and Baptist Edward. 2014. American Capitalism: A Reader. New York: Simon & Schuster.

The Rise of American Labor and the New Deal.

The Rise of Keynesian Economic Management.

World War II and the End of the New Deal.

Footnotes

Hyman, Louis, and Baptist Edward, American Capitalism: A Reader. (New York: Simon & Schuster, 2014), 354.
Hoover, Roosevelt and the Beginning of the Great Depression, 12.
Hoover, Roosevelt and the Beginning of the Great Depression, 11.
Hyman, Louis, and Baptist Edward, American Capitalism: A Reader. (New York: Simon & Schuster, 2014), 357.
The Rise of American Labor and the New Deal, 11.
World War II and the End of the New Deal, 5.
Hyman, Louis, and Baptist Edward, American Capitalism: A Reader. (New York: Simon & Schuster, 2014), 373.
World War II and the End of the New Deal, 7.
Hyman, Louis, and Baptist Edward, American Capitalism: A Reader. (New York: Simon & Schuster, 2014), 378.
Hyman, Louis, and Baptist Edward, American Capitalism: A Reader. (New York: Simon & Schuster, 2014), 384.
Davis, C. Joshua., From Headshops to Whole Foods. (New York: Columbia University Press, 2017), 254.
The Rise of Keynesian Economic Management, 5-7.
Davis, C. Joshua., From Headshops to Whole Foods. (New York: Columbia University Press, 2017), 257.

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