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.

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Presentation transcript:

Rethinking the Great Depression Part II: The New Deal The Depression of Anemic Recovery of The Effects of WWII on the Economy

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

FDR & Economic Policy Banking Relief Jobs TVA AAA NRA

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

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

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

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

Anemic Recovery: By 1940, back to where we were in 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 From , Net Investment = -$3 bill. Contractionary monetary policy.

Effects of WWII on the Economy U r : decreased to <2% by 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.

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?

Rethinking the Great Depression Part II: The New Deal The Depression of Anemic Recovery of The Effects of WWII on the Economy