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The New Deal and the Wartime Economy

The New Deal and the Wartime Economy. Ing. Tom áš Dudáš, PhD. 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

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The New Deal and the Wartime Economy

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  1. The New Deal and the Wartime Economy Ing. Tomáš Dudáš, PhD.

  2. 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

  3. 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

  4. "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

  5. "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

  6. 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.

  7. 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.

  8. 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

  9. 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?

  10. “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

  11. 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

  12. 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

  13. 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

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