The Roaring 20s and the Great Depression

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The New Deal and the Wartime Economy

• Ing. Tomáš Dudáš, PhD.

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1933 situation report

• Every bank in the nation had closed its doors and
  no one could cash a check or get at their savings
• The unemployment rate was 25 and higher in major
  industrial and mining centers
• Farm prices had fallen by 50
• Thousands of mortgages closed down

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The New Deal

• Franklin Delano Roosevelt - 1933
• Two main goals help the troubled economy and
  introduce major reforms into capitalism
• 3 Rs
• giving Relief to the unemployed and badly hurt
  farmers
• Reform of business and financial practices
• promoting Recovery of the economy during the
  Great Depression

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"First New Deal 1933/34

• Banking acts
• On March 6, 1933, two days after becoming
  president, Roosevelt declared a five-day national
  bank holiday to close banks temporarily.
• On March 9, Roosevelt sent to Congress the
  Emergency Banking Act, drafted in large part by
  Hoover's Administration the act was passed and
  signed into law the same day.
• It provided for a system of reopening sound banks
  under Treasury supervision, with federal loans
  available if needed. Three-quarters of the banks
  in the Federal Reserve System reopened within the
  next three days. Billions of dollars in hoarded
  currency and gold flowed back into them within a
  month, thus stabilizing the banking system
• Congress created the Federal Deposit Insurance
  Corporation (FDIC), which insured deposits for up
  to 5,000
• The government suspended the gold standard for
  United States currency

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"First New Deal 1933/34

• Economy Act
• Improving the budget balance
• NIRA National Industrial Recovery Act
• "Code of Fair Competition
• NLRA - National Labor Relations Act
• Farm and rural programs
• The Federal Emergency Relief Administration
  (FERA) 500 million USD
• The Civil Works Administration (CWA)
• The Public Works Administration (PWA)
• The Agricultural Adjustment Act stabilized
  prices on farm produce through paying farmers to
  reduce their acreage under cultivation
• Repeal of Prohibition

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The Civil Works Administration (CWA)

• Built 800,000 km of roads.
• Built 40,000 schools
• Built 500 airports rebuilt 500 more
• Built 150,000 public toilets
• Paid people to sweep up leaves in the parks.
• Paid unemployed actors to give free shows.
• Hired 100 people to scare pigeons away with
  balloons from public buildings in Washington DC.

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The Public Works Administration (PWA)

• Built 70 of USA Schools.
• Built 35 of USA Hospitals.
• Built for river dams.
• Electrified the New York Washington railway.
• Built 50 military airports.
• Built two aircraft carriers.
• Built four cruisers destroyers for the US Navy.

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Social security - 1935

• Anglo-American society minimal security net
• Local level and not very generous
• The Social Security Act provided
• An income for the aged
• A scheme for unemployment compensation
• Relief aids to the aged, blind and dependent
  children
• USA was the last major industrial nation to adopt
  some form of comprehensive social insurance

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New Deal - conclusion

• Federal government directly provided services to
  the American people -- welfare state
• Vast centralization of national power
• Increase in power of the presidency
• Creation of a mixed economy market economy with
  government interventions
• Did the new deal stop the depression?

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Prosperity of Wartime

• The American GDP doubled between 1941 and 1945
• World War II produced demand for American
  products as early as 1940
• It became clear that the US must supply war goods
  for Great Britain
• Lend-Lease Act 1941
• By august 1945 the US was supplying war materials
  in value around 50 billion USD to its partners
  under this act
• Lend-Lease deliveries were greater than the sum
  of all federal expenditures between 1933 to 1939

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Financing the War

• Increased taxes
• Debt financing
• Rising government deficits (-29,1 billion USD in
  1945)
• Rising public debt (271 billion in 1945)
• The US government was selling bonds to the public
  (157 billion USD) and to the Federal Reserve
• Increase of the money-supply

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Change to command economy

• New war powers to the president
• 1940 National Defense Advisory Commission
• 1940 National Defense Research Council
• 1942 War Production Board and Office of Price
  Administration
• 1943 Office of War Mobilization
• Huge power of FDR
• In 1942 he sent 115 000 persons with Japanese
  ancestry into internment camps by an executive
  order

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Labor and materials

• The armed forces had 12 million soldiers by 1945
• 250 billion USD has been spent on these soldiers
  between 1941 and 1945
• The civilian nonagriculture labor force expanded
  by 30
• Unemployment vanished (1,2 in 1944)
• New people in the labor force women, teenagers,
  disabled, aged people