If not, then... now you know.
I'm also about to finish my BA in English, so I'll be able to get a job teaching English if there are no history positions. But that's not really what I'm writing about.
This is what I'm going to write about...
Glenn Beck, a tearful and moronic Fox News commentator, as well as other Republican commentators and congresspeople, have all criticized President Obama for comparing the current economic crisis to the Great Depression. Somehow saying that this economy is the worst since the Great Depression, while factually true, is unbecoming for a President. After 8 years of a President trying to put a rosy face on a horrific war, sagging economy, and the loss of American prestige around the globe, I'm very glad to have a President who can tell me the truth.
I can handle it, Barry. Give it to me straight.
Well, not everyone can handle it, apparently.
I have also heard gross misrepresentation of historical facts. The biggest distortion, heard time after time on Fox News, is that President Franklin D. Roosevelt did not end the Great Depression with the ultra-socialist New Deal policies, therefore disproving Keynesian economics altogether. While it is true that the New Deal policies did not cure the Great Depression, for many years it did alleviate some of the crisis. What is also true is that World War 2 ended the Great Depression, a fact that Obama critics point out in order to doomsay down his stimulus package and soon-to-be budget. The fact that World War 2 ended the Great Depression actually proves that President Obama's plans have some chance of working, not the other way around.
Let's begin with some background on the lead up to the Great Depression...
Following World War 1, the American economy was struggling to recover. Most of the European nations saw their economies collapse, but the United States, for the most part, had only to contend with rising prices and inflation. In 1921, however, the economy stumbled: over 100,000 businesses went bankrupt; 5 million Americans lost their jobs; and 453,000 farmers were forced to abandon their land. Part of this economic tumult was a result of labor strife and discontent with labor policies and practices.
However, by 1922, the economy rebounded and expanded in an unprecedented way. This had a lot to do with leaps in technology that allowed for a 60% increase in manufacturing output. The major industry, at this time, was the auto industry, thanks to Henry Ford's innovative assembly line. Increased mobility made it possible for greater and faster transportation of goods, products, and resources. It also connected the rural areas with the urban, and increased demands for suburban housing. Advances in aviation and railroads also made transportation faster and more efficient, which helped spur the economy forward.
As the economy grew, and goods were easier and cheaper to produce, people were beginning to consume goods at a scale previously unseen in this country. This rise in consumerism also led to the creation of our modern advertising industry. Thanks in part to the development of the radio, mass-produced magazines, and the emerging movie industry, the advertising industry was one of the most successful of the decade. The "Roaring Twenties," as the decade has come to be known, was really more of a period of conspicuous consumption for only a small portion of society.
The other, larger, part of society was able to buy goods through the use of credit. Half of the families, by 1929, were unable to buy any of the consumer goods that had been created out of technological advances. That inability to have access to purchasing power caused a decline in profits for companies, which only made it increasingly difficult to provide jobs and adequate wages for employees. The other major problem with the American economy was the focus on the construction and automobile industry. As fewer and fewer people purchased cars (the others either already owned a car or were unable to buy one) the profits for those industries fell sharply in the final years of the 1920's. As banks began to suffer financially with the rise in defaulted loans, they began to call in on loans that borrowers were unable to pay. During the 1920's, banks were recklessly loaning money to people who were not likely to ever pay back the loan. As defaults began pouring in, they tightened their rules on whom they would lend to, further worsening the growing crisis. Throughout the decade banks were gambling in the stock market with other people's money, and as the stock market crashed they lost significant portions of people's money. But it was also the debt of foreign nations that weighed the American economy down. Many European nations owed the U.S. huge sums of money, which they, too, were unable to pay off. So, stupidly, U.S. bank loaned huge sums of money to European countries in order to pay off the older debts. Protective tariffs in the U.S. also made it difficult for Europeans to sell their goods in the American market, making it that much more difficult for their economies to recover. On top of all this, the United States began to lose their edge in the trade industry. As Europe began to recover from WW 1, they relied more on domestic goods and agriculture and less on imported American goods and agriculture. By the end of the 1920's, two-thirds of the American people were at or below the poverty line. The so-called "Roaring Twenties" were nothing more than a gilded hollow shell.
When President Herbert Hoover came into Office, the economic disaster had not yet dawned. He was a conservative "self-made" man, which fit into the national narrative-- rags-to-riches-Horatio-Alger baloney. However, when the stock market crashed on October 29, 1929, the American people went totally batshit. People jumped out of windows, men left their families, and people were making hurried runs to the banks to withdraw their cash-- only making the situation worse. President Hoover tried to calm the American people by reassuring them that prosperity was just around the corner, or that the economy wasn't really all that bad. In a series of bad public relations moves, President Hoover made appearances at baseball games to throw out the first pitch, distributed pictures of him fly-fishing, and engaged in activities that he hoped would convey to the American people that he was confident in the American economy.
Instead, he only proved to the American people that he didn't give a damn about their suffering. He was a self-made man. He wanted all Americans to pull themselves up by their boot-straps (even if they didn't own boots) and make themselves rich. He was not about to offer any meaningful government assistance. His conservative values would not be compromised for the sake of the American people.
So, in 1932 he was out on his ass.
The charming, eloquent, and compassionate Franklin D. Roosevelt won the election 1932 with the promise of a New Deal... he wasn't quite sure what the new deal was, at the time, but to the American people it sounded a hell of a lot better than nothing, which is what President Hoover had given them. Roosevelt won a resounding victory, with 57.4% of the popular vote and 472 electoral votes to Hoover's 40% popular vote and 59 electoral votes. On inauguration day, as Hoover and Roosevelt sat together in the Presidential limo, Hoover, in no mood to talk, sat pouting, while the newly elected president waved to the throngs of people with his hat, as they hoped to catch a glimpse of the man they hoped would bring change.
And change he brought.
His first 100 days in office were the busiest in the history of the nation, with many bills submitted to congress to insure banks (FDIC) and keep them afloat (the Emergency Banking Act), revamp agriculture through the Agricultural Adjustment Administration, restricted speculation with the Glass-Steagall Act, made it easier for laborers to bargain collectively, created the National Recovery Administration to spend large sums of money on public works, and the creation of the Tennessee Valley Act, which allowed for the construction of dams in order to generate electricity. Of course, over the years there were many other programs such as Social Security and the creation of the Securities and Exchange Commission (SEC). All of this had the effect of creating confidence in President Hoover, who had demonstrated his willingness to experiment with different policies in order to solve the financial crises. And the American people needed it: at least 25% of the American workforce was unemployed (this figure is probably low), another third of the population was underemployed, and natural disasters in the mid-west were forcing farmers to head out west in search of jobs. Many people who were without homes were forced to live in tent communities called Hoover-villes, named after the reviled Herbert Hoover. The Great Depression also had a huge impact on families and the self-confidence of many. Americans had swallowed all the baloney about Horatio Alger and rags-to-riches tales, so when the economy collapsed many people blamed themselves for their abject poverty, instead of the corporate and banking fat cats who brought the economy down. This self loathing caused many men to commit suicide or to leave their families out of shame. This was indeed the darkest period of history since "the Dark Ages, and it lasted 400 years," as John Maynard Keynes once famously remarked after being asked if there was any time comparable to the Depression the country was in.
John Maynard Keynes, a British economist, developed the theory that government intervention in the market, which could lead to booms and head-off recessions. It was the Keynesian theory of economics that prevailed in the Roosevelt administration, as they attempted to tackle the Great Depression and rein in out of control markets. At the time, his policies were attacked as "socialist" and many argued that they would not work. Many today also argue that Keynesian economics did not pull the economy out of the Depression. Ah, but they are oh so wrong.
By 1937, there were signs of improvements in the economy. The national income jumped to $72 billion from the $40 billion in 1932. Millions of people were put to work, causing the unemployment rate to drop to 15%. Labor unions were gaining strength, child labor was outlawed, and a minimum wage was established. Though these improvements seem meager, it is only because there were conservative within President Roosevelt's cabinet that were always attempting to water down his bills and reduce the amount of money he wanted to spend. This became even more evident in 1937 when the economy took a turn for the worse. The conservatives in his cabinet pointed to the improving economy as evidence that they should reduce government spending, an argument which convinced President Roosevelt. Almost immediately, the economy tanked. The economy began to recover in 1938 when the President approved a $5 billion public works bill, a recovery that took nearly 5 months. In 1938, FDR created the Fair Labor Standards Act, which established a 40-hour work week. By this time, the banking industry had been turned around and strengthened, laborers and farmers were given unprecedented power and protection, the stock market was safe-guarded against irresponsible speculation, and the elderly and pitifully poor were provided safety nets that did not previously exist.
What really ended the Great Depression, however, was the emergence of World War 2. Critics of Keynesian economics point to this fact as evidence that his theory failed to end the Depression. However, the Keynesian theory is prooven true by this truth.
The United States was pulled into war after the Japanese sneak attack on Pearl Harbor on December 7, 1941. Overnight, the huge unemployment, deflation, and slump in manufacturing vanished because the U.S. government spent unprecedented sums of money in diverse industries, which was exactly what Keynes had predicted would happen. For example, the federal budget had been only $9 billion in 1939, but it leapt to $100 billion by 1945, and the gross national product soared to $166 billion. The government spent $321 billion dollars-- an amount that doubled the combined government expenditures over its 150 year history and ten times as much as the government spent in World War 1. Personal incomes increased by 100% as nearly 15 million men and women were put to work. This huge influx in government money into vital wartime industries caused-- at its peak-- many companies to produce twice as much as the Axis powers produced, and a lot more than the U.S. government actually needed.
In short-- Keynesian economics was prooven to work through the massive government spending of World War 2, contrary to what conservatives would have the public believe.
As President Obama prepares to spend massive sums of government money to revive the economy, the American public would be wise to remember the lessons of the Great Depression and World War 2.
The first lesson is to not allow conservative critics to water down and stem government spending. That will not only delay and inhibit growth, but it could also lead to a worsening of the economy. The second lesson is that massive public work projects and an influx of government money into the economy will create jobs and raise all boats. It will be painful in the short term, but we can either have a long recession that could turn worse, or we can spend a significant sum of money and force the economy into the black.
Right now, President Obama is our FDR while the grumpy Republican nay-sayers are our Hoover. We all should support his economic policies-- not because we're dopey Obamamaniacs who are blinded by his "charm," but because history has shown that the policies he is pursuing work.
God bless, America.
:)
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