Keynes' Influence Over Roosevelt Pre-WWII

President Franklin Delano Roosevelt of the United States faced a dilemma. The American frugality was in shambles. As the president, Roosevelt had to solve the problems and he relied on one mans theories to pressure him through. tin Maynard Keynes was an grave British economist during the twentieth century. His theories had a major impact on FDRs perspective on the American presidencys scrimping. In 1933, the United States, quite turn out of keeping with its constitution, embraced Keynesian scotch science with the announcement of the ? clean transmit. The newborn plentitude courses were created to invade the Great Depression. The following essay give discuss Keynes theories regarding get by with a recession and how the government should be involved. Upon ack straightwayledging these theories and studying whatsoever of the New Deal programs, it becomes obvious that Keynes economic altogethery influenced FDR. Lastly, this essay will analyze the New Deals success.

        Keynes made several theories regarding how a government should get involved during a countrys recession. The 2 most important ones are; the generate and demand theory, and the deficit elapseing. Keynesian economics is defined as the use of government expenditure to encourage economic activity by increasing demand for goods. Keynes was contrary to the ideas that sum generated demand. He demonstrated that supply often exceeded demand, thereof leading to unemployment, idle resources, social conflicts, and needless waste of serviceman potential (Kuttner: 1991, 26). This was close to reality. During the Great Depression, to a greater extent factories were out of business. Products were non world produced, and nearly one out of every intravenous feeding Americans was vacant. Men who could confine been spending their time working, or doing some(a)thing productive, now spent their time waiting outside soup kitchens. It was sure to say that during the stamp, human potential was wasted. In Keynes Collect literature (1989), he wrote that if demand fall short of supply, output may switch to run down to bring them sticker into balance, and so the possibility that the economic dodging bay find itself in stable equilibrium¦at a level down the stairs adequate employment (CW VII: 1989, 30). This meant that when demand decreases, supply moldiness(prenominal) decrease in aim to find the point of equilibrium. When supply decreases in order to find the new point of equilibrium, prices will rise. At this point, when supply must drop again, workers are pose off. In other words, as long as supply drops, unemployment will increase. With this theory, Keynes tried to explain the economic slump that many countries fell into after World War I (1914-1920). read for weapons and military equipment diminished severely. Factories laid-off workers that were not needed anymore.

In 1929, the American thrift suffered a downturn. Many quite a little were unemployed and had little bullion to spend. Business cut production, and workers were laid off. Keynes believed, in order for a government to get back into its feet, it must be willing to deficit spend, in order to get under ones skin demands for goods and services. Money must be given to consumers so it would be possible for them to buy goods and open fire economic growth. Keynes believed that direct res commona intervention to promote and subsidise new investments would be the yet means of escape from prolonged and perhaps interminable depression (CW XXI: 1989, 59-60). This meant that unless the government was willing to spend money on the parsimoniousness to stimulate growth, the countrys miserliness would suffer from depression nightlong than it was supposed to. In short, the government has to spend its way out of depression, otherwise, they would be trapped in a vicious wheel around of poverty. Keynes had difficulty directly influencing FDR regarding deficit spending. However, other members in the snow-covered House were easier to influence. In turn, those men sold Keynes idea to the President. shortage spending was essential, but it had to be at least a certain amount (Schlesinger: 1960, 407). For instance, if the government was only willing to spend $200 trillion per month, the nation would stay at the can of depression. If $300 zillion per month were spent, the countrys economy would improve, whereas $400 million would bring the country back into come upy. By arguing that an economy was like a mighty engine that needed the fuel of deficit spending to keep running at full throttle and create jobs for the Great Depressions unemployed masses, Keynes convinced Roosevelt to chuck out his long-held belief in equilibrise budgets. Roosevelt created programs designed to cooperate the economy during the depression with the help of Keynes theories. Keynes was a strong truster in putting money in into the hands of the people. The New Deal practiced the exact strategy. The Civil industrial plant Administration (CWA) began on November 8, 1933. similar all other programs, it was to provide temporary jobs. slightly four million people were employed raking leaves, shovelling snow, and working in parks. It ceased in March 1934 after spending $740 million. Roosevelt was putting money into the hands of people by giving them jobs. Since some people had money to spend now, they were able to buy more items. When more goods were bought, companies would produce more because demand was increasing. To increase supply, more workers were hired. This would be known as the ?trickle down effect, meaning that formerly the government gives its citizens money to spend, the economy will naturally recover itself. This wouldnt be possible unless the government was willing to spend money. The Works Progress Administration (WPA) created on May 6, 1935 was one of the largest programs Roosevelt created. Like all other New Deal programs, its goal was to slowly bring the economy back to pre-1929 levels. The WPA spent $11 one thousand thousand and employed over eight and one half million citizens over 1,410,000 projects between 1935 and its termination on 30 June 1943. The civilian Conservation Corps ( three hundred) was another New Deal program with 250,000 immediate jobs designed for men aged 18-25. The wages were $30 per month and $25 would be sent home. Jobs in the CCC included reforestation, road construction, flood control, and development of national parks. This program made use of Keynes theories again because human potential was not being wasted. Jobs were being created, thus curbing unemployment, and money being sent to the families meant that the ?trickle down effect would be put to use. The mens families would have money to spend, hence that would prevent social conflicts or riots.

Roosevelt created many other programs just like the ones listed above, all with the corresponding intentions; to bring the American economy back to pre-1929 levels. With the creation of all these programs, it was obvious that deficit spending must have occurred. The usual Works Administration, which created jobs such as the building of roads and public buildings, spent $3.3 trillion. In 1934, the sodding(a) national debt was $34 billion. Without Keynes and his economic theories, which helped Roosevelt create the New Deal programs, America might have never gotten out of the depression. If Roosevelt ignored Keynes theories, and American economy would not be where it is now at the present moment.

FDR was prospered in applying Keynesian economics to his New Deal programs. No consequence what Roosevelt did, had he not given up his beliefs of keeping a balanced economy, it would have failed. However, the President was persuaded to give deficit spending a try. Until 1930, federal deficit never exceeded 5% of the gross domestic product. However, in 1936, the federal deficit was 13% of GDP. amongst the years 1933 and 1935, the economy improve, though it was not up to pre-1929 standards. During those two years, the gross national product rose from $74.2 billion in 1933 to $91.4 billion in 1935. Manufacturing salaries and wages increased from $6.



24 billion in 1933 to over $9.5 billion in 1935, with average weekly pay going from $16.73 to $20.13. The money supply, as currency and demand deposits, grew from $19.2 billion to $25.2 billion. onwards the New Deal was put into play, the unemployment rate was at 24.5 part. One in every four Americans was out of a job and with little hope of getting one. After the New Deal was implemented, the unemployment rate during 1935 fell to 20.1 percent and 14.3 percent in 1937.

One could say that America was on its way to recovery. Before 1929, the unemployment rate was at 3.2 percent. Roosevelt noticed the change in the economy between 1933 and 1935. Still being a firm believer of laissez-faire government, he started to cut back on some programs. The WPA experienced the largest cut. As a result of Roosevelts attempts of having a balanced budget, the economy slipped rapidly during the winter of 1937-1938. The unemployment rate jumped to 19 percent in 1938. Due to the recession of 1937-1938, Roosevelt started spending more money again on the New Deal programs. In July 1938, the economy began to recover, and in 1939, statistics showed that the economy regained 1937 levels. Nevertheless, it wasnt until 1941 that the unemployment rate fell to 13.8 percent (Kuttner: 1991, 27). That, however, would have been attributed to the United States involvement with the oncoming World War II.

In conclusions, Franklin Delano Roosevelt of the United States was able to defeat the Great Depression with the help of a British economist, John Maynard Keynes. Relying on Keynesian economics, Roosevelt created the New Deal program in order to combat the depression. though FDR was a firm believer in balanced budgets and laissez-faire, he managed to follow Keynes theories regarding supply and demand, and deficit spending. During 1936, the federal deficit was 13 percent of GDP. Using Keynes two most important theories, Roosevelt created ? busywork programs such as the Civilian Conservation Corps and the man Works Administration. Roosevelt took these theories and applied it to his programs correctly. As a result, the economy improved and the unemployment rate was lowered. Though it did not restore the economy back to pre-1929 levels, it was a start. In fact, the New Deal was so successful that even though the economy has had four separate recessions since 1937, the economy did not collapse in the scale of 1929-1939. This is because a develop of safeguards, mostly put in place during the New Deal in the 1930s, that makes a 1930-style collapse of a nations financial system highly unlikely (Peterson: 1981, 18).

Bibliography 1.         Keynes, John Maynard. The Collected Writings of John Maynard Keynes. London: Macmillan, for the Royal Economic Society, 1989.

2.         Kuttner, Robert. The End of Laissez-Faire. New York: Alfred A. Knoph Inc., 1991 3.         Peterson, Wallace C. reserved Depression. New York: W.W. Norton & Company, 1981.

4.         Schlesinger, Arthur Jr. The Politics of Upheaval. The Age of Roosevelt. Boston: Houghton Mifflin Company, 1960.

5.         Taller, Terry. Marketing, A Canadian Perspective 2nd Edition. Toronto: McGraw-Hill Ryerson Limited, 1989.

Websites: 1.         Landry, Peter. Biographies. http://www.blupete.com/Literature/Biographies/ philosophy/Keynes.htm 2.         Rothschild, Michael. Closing the Loop. http://www.bionomics.org/text/resource/articles/closing_the_loop.html 3.         http://www.libarts.sfasu.edu/ report/134_Unit%207B.html 4.         http://mciunix.mciu.k12.pa.us/~udhsweb/aphistory/file1012.htm

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