1. Rethinking the Great Depression Part II: The New Deal The Depression of 1937-1938 Anemic Recovery of 1938-1940 The Effects of WWII on the Economy

2. FDR & Economic Policy No particular economics expertise. Change = f(academic advisors) The problem of “underconsumption/ overproduction” (?) Industrial planning Reform vs. Recovery

3. FDR & Economic Policy Banking Relief Jobs TVA AAA NRA

4. 1933 Economic Rebound Gold inflows; banks rebound. March to July Non-durables Production +35% Durables+83% Unemployment-5%

5. 1933 Economic Slide AAA & NRA kick in. July to November Non-durables Production -19% Durables-32% Unemploymentno change

6. Back to July 1933 … Industrial codes & price fixing.Date: Durables Production July 1935 Manufacturing Production August 1935 UnemploymentOctober 1934

7. The Depression of 1937-1938 U r : decreased to 12% by 1937... then, back to 20% Production rising... now falling by 67% (dur.) Stock prices rising... now down 50% Downturn worse than 1920-21 & 1929-30 !!! Why? FDR continues attacks on business. Fed raises reserve requirements. Labor laws raise labor costs.

8. Anemic Recovery: 1938-1940 By 1940, back to where we were in 1937. U r : decreased but still around 15%. Durable mfg. at 96% of July 1929 level. Housing construction reached 1929 levels... in 1951 !! Why? Regime Uncertainty Net Investment = -$18 billion 1931-1935. From 1930-1940, Net Investment = -$3 bill. Contractionary monetary policy.

9. Effects of WWII on the Economy U r : decreased to <2% by 1943. Gov’t. spending rises by almost 900%. Rise in Consumption spending. Economic recovery as prescribed by Keynes. Were we better off? Unemployed  military. Rationing and price controls. Increased taxes. Increased money supply.

10. Consequences of the Great Depression An end to the gold standard. --Increased monetary destabilization. --Culminated with inflationary 1970s. Increased Federalism. --Size of federal gov’t. still growing. --S&L getting 25% from feds. Growth in the Regulatory State. --What isn’t “interstate commerce?” --Cap & Trade next? Rise of the Welfare State. --Can SS continue?

11. Rethinking the Great Depression Part II: The New Deal The Depression of 1937-1938 Anemic Recovery of 1938-1940 The Effects of WWII on the Economy