Roosevelt Recession

3 Key excerpts on "Roosevelt Recession"

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  The Climax of Capitalism

  The U.S. Economy in the Twentieth Century

  • Tom Kemp(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  Thus, at any rate in its early years, the New Deal owed nothing to the 'deficit-spending' and 'pump-priming' remedies for depression of the sort proposed by the British economist J. M. Keynes and advocated also by American economists like Alvin Hansen. Keynes showed that a market economy docs not necessarily bring about the full employment of labour and resources because of the deficiency in demand which it tends to generate. Government spending can, and should, fill the gap; by its overall regulation of demand, the state can thus bring about a higher level of employment than would result from the free operation of market forces. Hansen was the best-known advocate of these theories in the United States, urging that fiscal policy should be used to prevent depression. These ideas gradually made their way in the economics profession, achieving the status of a new orthodoxy from the 1940s until the 1970s, when they came under increasing criticism. Roosevelt was not a follower of Keynes, but the British economist did have some influence on the thinking of the New Dealers. The recession of 1937 (see below) appeared to be a confirmation of the Keynesian analysis and the policy of government deficit spending as an anti-cyclical remedy.

  Immediately after his inauguration, Roosevelt had to deal with the breakdown of the banking system. His response was to declare a national bank holiday and secure the passage of an emergency banking act to prop up ailing banks with state funds. The public having been reassured by the first of his broadcast 'fireside chats', confidence in the banks came back and they were re-opened within a week. Roosevelt followed this with an economy measure: ex-servicemen's pensions and the pay of federal employees were cut. Prohibition was ended and the breweries and distilleries were back in legitimate business. Thereafter, during the rest of the first hundred days of his administration, a stream oflegislation was passed, constituting the first version of the New Deal. The new economic policy was represented above all by the National Industrial Recovery Act (NIRA), the Agricultural Adjustment Act (AAA) and the Securities Act. Drawn up in haste and under pressure, they received widespread support and were taken as an indication that the administration intended to deal with the depression as a national emergency.

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  Recession Prevention Handbook: Eleven Case Studies 1948-2007

  Eleven Case Studies 1948-2007

  • Norman Frumkin(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  Then absolute declines appeared from June to December 1948. In contrast to consumer durables, this decline in housing starts was not triggered by an economic policy change. Thus, it appeared as a market-driven phenomenon, as noted in Chapter 1 under Business Cycles and Recessions. I consider the weakness in new housing construction, and its secondary effects on spending for consumer durables, an important contributing factor to the onset of the recession, though no economic policy change contributed to the decline in new housing construction. Also, demographic changes in the population appeared in slowdowns in marriage and birthrates, which lessened population growth, and in family migration around the country. I believe the decline in population growth and in family geographic migration lessened inflationary pressures and the demand for goods, services, and housing, which contributed to bringing on the recession. These demographic changes reflected market and social changes, but were not driven by economic policy changes. Appendix 2.1. The Economy Before 1948 As a general note of historical background, I discuss three aspects of the U.S. economy preceding the onset of the 1948–49 recession: • Evolution of the New Deal economic policies during the 1930s • Military enormity of World War II in relation to the U.S. economy • Postwar economy Evolution of New Deal Economic Policies The New Deal under President Franklin Roosevelt evolved during the 1930s in three stages. The National Industrial Recovery Act (NIRA) epitomized the “First New Deal.” The NIRA authorized industry codes sanctioning agreements among businesses not to lower prices on particular products below an established rate. The floor on prices was intended to encourage businesses to invest, thereby stimulating economic growth and employment. This program, by its nature, ignored enforcement of the antitrust laws, thus lessening price competition among companies

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  Meltdown

  A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout Will Make Things Worse

  • Thomas E. Woods, Jr.(Authors)
  • 2009(Publication Date)
  • Regnery Publishing

    (Publisher)

  18 By the middle of 1920 the downturn in production had become severe, falling by 21 percent over the following twelve months. Conditions were worse than they would be in 1930, after the first year of the Great Depression. Yet scarcely any American even knows that such a slowdown occurred. That’s probably because, compared to the Great Depression of the 1930s, it was so short lived. Unlike those terrible times, in which the federal government confidently announced its intentions to navigate our way out of it, the market was allowed to make the necessary corrections, and in no time the economy was back to setting production records once again.

  Not surprisingly, many modern economists who have studied the depression of 1920–21 have been unable to explain how the recovery could have been so swift and sweeping even though the federal government and the Federal Reserve refrained from employing any of the macroeconomic tools—public works spending, government deficits, inflationary monetary policy—that conventional wisdom recommends as the solutions to economic slowdowns. The Keynesian economist Robert A. Gordon admitted that “government policy to moderate the depression and speed recovery was minimal. The Federal Reserve authorities were largely passive. . . . Despite the absence of a stimulative government policy, however, recovery was not long delayed.”19 Another economic historian briskly conceded that “the economy rebounded quickly from the 1920–1921 depression and entered a period of quite vigorous growth,” but chose not to comment on this development, which would appear to fly in the face of his own preference for monetary and fiscal stimulus.20

  Compare the U.S. response to that of Japan. In 1920, the Japanese government introduced the fundamentals of a planned economy, with the aim of keeping prices artificially high. According to economist Benjamin Anderson, “The great banks, the concentrated industries, and the government got together, destroyed the freedom of the markets, arrested the decline in commodity prices, and held the Japanese price level high above the receding world level for seven years. During these years Japan endured chronic industrial stagnation and at the end, in 1927, she had a banking crisis of such severity that many great branch bank systems went down, as well as many industries. It was a stupid policy. In the effort to avert losses on inventory representing one year’s production, Japan lost seven years.”21

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