How did Franklin Delano Roosevelt deal with the Great Depression? Did his response stimulate the economy?
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Franklin D Roosevelt introduced a series of measures to lift US economy out of the great depression. Many of these actions come under the New Deal program introduced by him. The extent of effect New Deal had on actually ending the recession is subject to different assessment. However it is agreed by most of the experts that it had major effect on relieving the economic hardships caused by the depression.
Soon after assuming charge as US president in 1933, Roosevelt set in motion to tackle the depression on priority. From March 9 to June 16, 1933 he Got the Congress to passed a series of laws aimed at providing relief to victims of depression, and reforming business, financial, and agricultural practices. Because of great significance of these laws and the swiftness with which they were passe this session of Congress became known as The Hundred Days.
The laws relating to banking and securities together with direct control over some of the banks, helped to restore public confidence in the banking and financial system considerably.
He also took action to increase the earning of farmers. This involved among other actions, restricting the farm production. These methods have been criticized for restricting production. However fact remains that the farmers' income increased.
Roosevelt took various measures for developing an enforcing codes of fair practices for business. These codes helped to improve condition of labour by assuring them minimum wages, restricting working hours, and increasing their bargaining position through trade unions. The codes also had provision for assuring minimum quality standards for products and setting minimum prices for products.
In 1935 Congress passed additional laws for reform and for relief. These laws facilitated the introduction of New Deal. An important feature of New Deal was to Undertake major projects to increase government Spending to create jobs and the total disposable income available to the people. This kind of huge spending also increased confidence of businessmen who became more positive in taking steps to expand their business activities.
FDR was a fantastic politician who related well to the people of America in a difficult economic time. But it's important to remember the New Deal was not his idea - the plan was actually devised by his brain trust, a group of economic advisers, businessmen, and industry leaders who knew how the economy worked. FDR labeled the plan and sold it to Congress and the public.
The New Deal concentrated on three areas: Relief, which provided jobs and food aid to those most in need by 1933; Recovery, which preserved the major industries and economic sectors we would need to survive the Depression and rebuild the economy later (banking, agriculture, housing, etc.); and Reform, to change the laws and regulate the economy so that future Depressions could be prevented.
Spending government money to do these things is called "Keynesian economics" after George Maynard Keynes, a member of the Brain Trust. It worked, but it was short term, and only helped the economy as long as the government kept spending.
Depressions are not uncommon. Previous to the Great Depression, there were depressions in 1819-20, 1839-43, 1857-60, 1873-78, 1893-97, and 1920-21. America recovered from the depression at the end of World War I in less than two years. Those depressions were caused by government policies that created easy money and credit. Business men took this easy money and credit and spent it on unwise developments and bad investments. When these began to collapse, depression ensued. As soon as depression weeded out the badly managed companies, prosperity returned.
The proper question is why was the Great Depression of long duration and not short like most or all others?
Some economists say the Great Depression was a series of four depressions, back to back, with different causes, but the first one started just like previous ones: government making money and credit too easy so that there was over investment. The subsequent ones were caused by unwise government efforts to correct the first one.
In previous depressions, the Fed had raised interest rates so that poorly managed companies collapsed, leaving only well-run companies to carry on business in the U.S. But during the Great Depression, the Fed lowered interest rates so that poorly managed companies would survive. This only prolonged the agony. The eventual, inevitable correction took place, but only after a long time. The executive branch also intervened in a massive way that it never had before.
Both Herbert Hoover and Franklin D. Roosevelt were presidents during the Great Depression. They increased government spending without increasing taxes, thereby creating huge budget deficits. Many economists say their deficits made the Great Depression longer. Roosevelt called his big-spending, The New Deal.
The New Deal created a great many new government agencies. The government became much bigger. These new agencies regulated many aspects of Americans' lives. These new agencies cost lots of tax dollars to run. Had those tax dollars remained in peoples' pockets, the people would have spent them for things that they needed. By taking those tax dollars from people, they were spent for the support of bureaucrats. A lot of economists say this made the Great Depression longer instead of shorter.
Franklin Delano Roosevelt dealt with the Great Depression by implementing a whole package of initiatives that came to be known as the New Deal.
The New Deal included programs for all sorts of things. There were programs to give relief to people put out of work by the Depression and to try to end some of the conditions (like excess agricultural production) that started the Depression. There were reforms to prevent another Depression from happening.
The programs did stimulate the economy -- the economy did improve. However, they did not manage to end the Depression. The Depression only ended when the US started to gear up for WWII.
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