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Social Studies 30-1

Explore the impact of liberal principles on economies from the early 20th century to post-World War II era, including events like the First Red Scare and the Great Depression. Discover key figures and policies that shaped economic ideologies.

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Social Studies 30-1

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  1. Social Studies 30-1 Chapter 6: The Evolution of Modern Liberalism

  2. Chapter Issue – To what extent do contemporary economic policies & practices reflect the principles of liberalism? • Question #1 – In what ways did economies in the first half of the 20th century reflect the principles of liberalism? • Question #2 – In what ways have economies reflected the principles of liberalism since World War II?

  3. American Economy at turn of century • Andrew Carnegie • John D. Rockefeller (picture at right) • Upton Sinclair – ‘The Jungle’

  4. Theodore Roosevelt • Government intervention for food safety • Meat Inspection Act (1906) • Pure Food & Drug Act (1906) • Square Deal – prevent large companies from abusing control over marketplace • Elkins Act (1903) – stop preferential treatment • Hepburn Act (1906)

  5. William Howard Taft • Break up trusts (large business conglomerates) • Sherman Anti-Trust Act (1890) – prevent collusion & monopolies • U.S. Supreme Court used Sherman Act to break up Standard Oil • Need government intervention (regulation) to maintain competition (a key component of classical liberalism)

  6. The First Red Scare • 1920s • Fear of communism • Created atmosphere of political conservatism

  7. Warren Harding (Republican) • 1921 elected • Political conservatism • “return to normalcy” • Isolationism • Nativism • Emergency Quota Act (1921) – immigration down 75% • Fordney-McCumber Tariff (1922) - protectionism

  8. PRESIDENT HARDING • Reduction of government involvement in citizens lives • Cut government expenditures by 20% • Revenue Act (1921) • Reduced income tax & repealed excess profits tax on corporations • Reduced government involvement in economy – ex. offered naval ships to private businesses for a song • Government supported businesses by breaking up strikes

  9. President Coolidge (Republican) • Replaced Harding in 1923 • Laissez – Faire • Economy prosper solely on basis of business leadership, not a result of state intervention • Tax Revenue Act (1924 & 1928) - personal income taxes reduced • Tax on wealthy slashed from 40 to 20% • Corporate tax cuts • Courts limited organized labor power & restricted anti-child labor laws

  10. Calvin Coolidge “After all, the chief business of the American people is business. They are profoundly concerned with buying, selling, investing and prospering in the world.”

  11. 1920s – ‘Roaring 20s’ • GDP goes from $74 billion in 1921 to $104 billion in 1929 • Mass production • Mechanization • Consumerism • Income disparity • 1917- 10% of population earned 40% • 1928 – 10% of population earned 49%

  12. ROARING 1920s • Per capita income increased • Increased worker productivity due to technology • Ex. Ford assembly line • 1925 – car manufactured every 10 seconds • 1926 Ford at right

  13. STOCK MARKET CRASH OF 1929 • Very little government regulation = insider trading • Stock prices manipulated • October 29, 1929 – ‘Black Tuesday’ • Single worst day in stock market history • Avg value of all stocks fell 37%

  14. 1930s • Stock market crash of 1929 • Buying on margin • High level of debt • Banks call in loans • Bank runs • Overproduction of some goods = low prices & now no demand • New tariffs (protectionism) • 1933 – 25% unemployment

  15. Great Depression • Wages did not increase as rapidly as did productivity • Demand for goods could no longer keep up with increased supply • Droughts in mid-west = dust bowl • Banks failed • Depression spread to other countries = discouraged consumers from buying U.S. goods • Protectionism & tariffs

  16. Great Depression cont… • Rich – poor gap • 5% of population earned 1/3 of countries personal income • 25% Unemployment • 100, 000 businesses went bankrupt • 5 000 banks failed • Wages fell 40%

  17. Different ideologies emerge • Extremism in Germany • Co-operative Commonwealth Federation (CCF) • Public ownership of industries & financial institutions

  18. Cooperative Commonwealth Federation • Founded in 1933 – J.S. Woodsworth • Democratic socialist party • Economic planning & nationalization of major industries to create more egalitarian society • Changed name to NDP in 1961 http://www.youtube.com/watch?v=gqpFm7zAK90&safety_mode=true&persist_safety_mode=1

  19. ON-TO-OTTAWA TREK • 1935 – Middle of Great Depression • PM R.B. Bennett (Conservative Party) • 800 Unemployed men in B.C. hit the trains to go complain to Ottawa & PM Bennett • R.C.M.P set off a riot when arrested leaders in Regina

  20. JOHN MAYNARD KEYNES • Wrote ‘The General Theory of Employment, Interest, & Money’ • Argued capitalism problems b/c extreme swings in business cycle • DEMAND-SIDE ECONOMICS

  21. DURING A RECESSION, GOVT SHOULD… • Governments should spend $ (gives jobs & income to more people) and reduce taxes (so people have $ to spend) • DEFICIT FINANCING – Spend more money than it collects in revenue via borrowing • Start public works programs • Provide social welfare – ex. Employment Insurance • This helps remove highs and lows of business cycles

  22. FISCAL & MONETARY POLICY • FISCAL – Government use of tax & spend to regulate & influence economy • MONETARY – Government regulation of supply of money to influence the economy (this affects interest rates)

  23. Roosevelt’s New Deal (Democrat) • John Maynard Keynes • Demand – Side Economics • More government intervention in economy • Inflation = raise taxes, cut govt spending, raise interest rates • Recession = cut taxes, increase govt spending, cut interest rates

  24. ROOSEVELT’S NEW DEAL • ELECTED PRESIDENT IN 1932 • IMPLEMENTED KEYNES IDEAS • ALPHABET LAWS • NRA: NATIONAL RECOVERY ADMINISTRATION • PWA: PUBLIC WORKS ADMINISTRATION • CCC: CIVILIAN CONSERVATION CORPS • TVA: TENNESSEE VALLEY AUTHORITY • SEC: SECURITIES EXCHANGE COMMISSION • FDI: FEDERAL DEPOSIT & INSURANCE COMMISSION • SSA: SOCIAL SECURITY ACT • NLRB: NATIONAL LABOR RELATIONS BOARD

  25. ROOSEVELT-AN EVALUATION • Failure – did not end the depression • Failure - Unemployment levels still high • Failed to reach the poor • Failure - Economy did not fully recover until WW II production • Success – laid foundation for American welfare system • Success – government recognized a responsibility to help unemployed and the needy • Success - government used deficit spending for first time to stimulate economy • Success - government now should take action in response to fluctuations in business cycle

  26. Canada in Depression • Created central bank – Bank of Canada – took over control of country’s money & use interest rates as a means of regulating the economy

  27. PM Mackenzie King (Liberal Party) • 1935 • More social programs & now a modern welfare state • Government projects – airstrips • Est. Trans – Canada Airlines – crown corporation (1937) • Created National Harbors Board • Reformed Canadian National Railway • Created CBC (1936) • Established 28 crown corporations • Bank of Canada a crown corporation (1938) • National Film Board (1939) • Unemployment Insurance Act (1940) • Family Allowance (1944) • National Housing Act (1944) • Mortgage Corporation (1946)

  28. Canada Postwar Economy • Social programs • Universal health care (1957) • Canada Pension plan (1966) • Foreign investment review agency (1974) • CRTC (1968) • Atomic Energy of Canada limited (1952)

  29. 1970s • Inflation • OPEC & oil embargo • Recession & inflation = stagflation • Cost to maintain programs high b/c inflation while tax revenues low b/c of recession

  30. Hayek & Friedman • Shift toward classical liberalism (modern conservatism) • Monetarism – Milton Friedman • Government to expand or contract money supply • Increase money supply too much = inflation • Both believed in price system or free markets while maintaining individual liberty

  31. SUPPLY SIDE ECONOMICS (Classical Liberals) • Neo conservative government – opposes government involvment in economy & empahsis on private enterprise • A.K.A Reaganomics & Thatcherism • Praised free markets • Dislike government regulations • Government run businesses – inefficient & wasteful • Support cuts in social spending • Support lower corporate taxes • Support privatization

  32. Supply - Siders (classical liberals) • Thatcher • Reagan • Ralph Klein • Mike Harris • Brian Mulroney

  33. INCREASE GOVT SPENDING LOWER TAXES LOWER INTEREST RATES (INCREASE MONEY SUPPLY) DECREASE GOVT SPENDING PRIVATIZATION REDUCE GOVT REGULATION LOWER TAXES LOWER INTEREST RATES DEMAND VS. SUPPLY SIDERS DURING A RECESSION

  34. CUT GOVT SPENDING INCREASE TAXES UNRESTRICTED MARKET WILL EVENTUALLY BRING INFLATION UNDER CONTROL DEMAND VS. SUPPLY SIDERS DURING INFLATION

  35. REAGANOMICS – SUPPLY SIDE • CUT INCOME TAX BY 25% • CUT BILLIONS FROM THE FEDERAL BUDGET • 1981: SPENDING ON 20 GOVT PROGRAMS CUT $101 BILLION • 1983: CUT $84.5 BILLION • 1984: CUT $71 BILLION • FOOD-STAMP PROGRAM – CUT BY $2 BILLION (ABOUT 20%) & OVER 800 000 CUT FROM PROGRAM • 3 MILLION CHILDREN CUT FROM SCHOOL-LUNCH PROGRAM & 20% CUT TO PROGRAM • SCHOOL MILK PROGRAM CUT 80% • MEDICAID WAS CUT BY $2 BILLION • JOB TRAINING & JOB CREATION PROGRAMS CUT IN HALF

  36. REAGANOMICS CONT…. • REDUCED FEDERAL ENVIRONMENTAL, HEALTH, AND SAFETY REGULATIONS B/C REDUCED BUSINESS PROFITS & DISCOURAGED ECONOMIC GROWTH • SUPPLY-SIDERS AGAINST DEFICIT BUDGETING & SUPPORT BALANCED BUDGETS • REAGAN HAD SOME SUCCESS IN CUTTING INFLATION & UNEMPLOYMENT • REAGAN HAD CHOICE TO CUT MILITARY BUDGET, INCREASE TAXES, OR CUTS TO WELFARE & SOCIAL PROGRAMS. • HE CUT WELFARE PROGRAMS & INCREASED MILITARY SPENDING BY 13% = DEFICIT TRIPLED B/T 1985-1988

  37. Reaganomics – Classical Liberalism • Stagflation – high inflation & low production • Cut personal & business taxes • Reduced regulations (controls on businesses) • Aka trickle-down economics • 1972-1977 – 10% of population earned 33% of total income • 1987 – 10% of population earned 41% of total income

  38. REAGANOMICS-EVALUATION • Failure – highest debt in U.S. history (at that time) • Failure - Increased rich-poor gap • Failure - De-regulated economy = boom & bust cycles • Failure - led to decline in middle class • Failure – bailed on the less fortunate • Success – reduced inflation & unemployment • Success – increased production • Success – rest of world moved towards market economies

  39. THATCHER – SUPPLY SIDER • Great Britain after WW II led by Labor Party, went left (socialism) until 1970s • Government nationalized coal industry, rail transportation, part of automotive industry, airlines, telephones & other utilities and petroleum • Created a ‘cradle to grave’ system

  40. THATCHER CONT… • THATCHER PRIVATIZED: • ROLLS ROYCE • BRITISH AIRPORTS • ROYAL ORDINACE FACTORY • PARTS OF NATIONAL BUS CORPORATION • LEYLAND TRUCK & BUS CO • CATERING AT BRITISH RAIL STATIONS • SOLD SHARES IN BRITISH PETROLEUM • WATER, ELECTRICY & MUNICIPAL SPORTS CENTERS

  41. THATCHER CONT… • ATTACKED ORGANIZED LABOR – PROHIBITED WILDCAT STRIKES, PICKETING, & STRIKES REQUIRED ONLY BY APPROVAL OF A SECRET BALLOT • UNION MEMBERSHIP FELL FROM 54% IN 1979 – 40% IN 1988 • REDUCED INFLATION FROM 18% TO 3% • CUT INCOME & CORPORATE TAX RATES • 670 000 FEWER STATE EMPLOYEES • 20% FEWER CIVIL SERVANTS • GOVT FIRMS WHICH LOST MONEY NOW MAKE MONEY IN PRIVATE SECTOR • UNEMPLOYMENT DROPPED

  42. Thatcherism – A return to the ideals of Classical Liberalism • Sold social housing in a program that encouraged those who rented council flats to buy them • Privatized many utility companies • Took hard line with unions – ex. coal miners strike

  43. THATCHERISM-EVALUATION • Success because economic growth • Success - Inflation came down • Success - Less strikes • Success - Taxes lowered • Failed because still a rich – poor gap

  44. Blair’s Third Way • 1997 • Mixed economy • Government increased government spending on health care & education & introduced minimum wage • Introduced tuition fees for post-secondary education

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