Essay:New Ordeal
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The New Ordeal describes the period of time between 1929 and 1949, when the American economy finally recovered from the Crash of '29. It encompasses the early stages of the Great Depression during President Herbert Hoover's term and the four terms of Franklin D. Roosevelt, the final term having been administered mostly by his successor, President Harry S. Truman. The New Ordeal also is sometimes refered to as the Great Ordeal or simply the Ordeal.
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Double double dip
During the twenty years of the New Ordeal, America experienced 2 double dip recessions, or essentially a second depression within the Great Depression, and World War II, a calamity that claimed the lives of 55 million people worldwide. Many of the nations involved in World War II resorted to "economic planning", as Economist Friedrich Hayek refered to it, to address the so-called "crisis in capitalism" in the 1930s.
The 1929-1949 recession had within it a recession from 1937-1943; 1933 to 1937 were recovery years stimulated by the New Deal government spending. However by 1937 the nation had nowhere near recovered to where it was in 1929. Manufacturing demand stimulated by WWII led to the 1943-1949 recovery, where finally, in 1949, the New York Stock Exchange recovered to the level it had been at 1929.
In 1929 the DJIA declined 90.0% over a duration 34 months. Six successive market crashes comprised this famed bear market: (1) September to November 1929 (DJIA fell 40% in this first phase). (2) April to June 1930. (3) September to December 1930. (4) March to May 1931. (5) July to January 1932. (6) March to July 1932. A new bull market then started immediately, as did a business recovery.
Business had topped out mildly, a month before the first crash; a gradual mild decline continued to April 1930, then fell sharply into a depression simultaneously with the end of the 1930 stock market rally. The business decline halted in December 1930, stayed level for 6 months, then plunged again in steep economic decline that didn’t lose its downward momentum for a full year, until July 1932. Business improved intermittently thereafter but still remained at depression levels through most of the decade of the 1930s except for a short recovery in 1936–37.
In 1934 a fall of 24.1% in the DJIA began again over 9 months. Then the market took seven more months to get back up to where 1934 began.
1937 DJIA declined 51.8% over 56 months. There were five crash phases: (1) August to November (DJIA fell 40% in this first phase). (2) February to March 1938. (3) January to April 1939. (4) May 1940. (5) October 1941 to April 1942. Business peaked out and fell violently, simultaneously with stocks. Economic indicators bottomed out 9 months later (May 1938). The recovery began mildly at first, but was later boosted by the World War II production boom which eventually lifted the country out of the Great Depression of the 1930s. The period 1941–42 contained the longest nonstop downswing crash (7 1/2 months) in history. Certain analysts call this two separate bear markets, one from September 1937 to March 1938, and the second from May 1940 to April 1942.
1946 DJIA declined 24.6% over 37 months. There was only one crash phase (August–September 1946), and the bottom was hit within 4 months. But the market moved sideways for almost three years and tested the 1946 low area three times. The final time was in 1949, after which the market rose almost without interruption for the next 12 years (160 to 741 in 1961).
During the Great Bear Market from 1929 to 1942, the Dow Jones Industrial Average (DJIA) had rallies of 48% (from November 13, 1929, to April 17, 1930), 94% (July 8, 1932, to September 7 of that year), 121% (February 27, 1933, to February 5, 1934), 127% (July 26, 1934, to March 10, 1937), 60% (March 31, 1938, to November 12 of that year), and 28% (April 8, 1939, to September 12 of that year). Yet, on April 28, 1942, the apex of the Malthusian catastrophe that was World War II, the DJIA was still at only 92.92, 76% below its September 3, 1929, high of 381.17. [1]
Economic planning
James Burnham, a former Trotskyite, discovered in 1941 that the "workers revolution" which allegedy was to overthrow the capitalist "exploiters", was in real practice a "managerial revolution" which replaced older 19th century owners of capital with twentieth century technocrats and managers. Burnham found that "workers in this mythical 'workers' state' were, the facts showed, a subject class far more heavily exploited than the workers under capitalism," and that the new managers in a planned economy "have curbed the masses and have instituted a social structure in which they are on top, not by virtue of private property rights in the instruments of production, but through their monopoly control of a state power which has fused with the economy." [2]
Roosevelt did not restore the economic system. He did not construct a new one. He substituted an old one which lives upon permanent crises and an armament economy. The system is more like the managed and bureaucratized, state supported system of Germany before World War I. Before this regime the United States lived in a system which depended for its expansion upon private investment in private enterprise. Today the US lives in a system which depends for its expansion and vitality upon the government. This is a pre-war European importation - imported at the moment when it had fallen into complete disintegration in Europe.[3]
Record keeping & construction trades
Record keeping and even economic definitions then were not what they are today. By using the Dow Jones Industrial Average (which is practically the only measurement available in real time that scans the entire period) the Dow did not get back to the level it was at in 1929 until 1949 (160 pts on the Dow). Other economic indexes either did not exist, or were developed later, often by guess work. For example, the oft quotes unemployment rate of 25% which peaked in 1932 is only guess work based upon observations in New York City. No one knows what the real national figures were, or what it actually had been in places like Arkansas or Oklahoma. Gross output figures such as GDP did not exist either.
It was not until 1949 that living standards and peacetime employment returned to something like it was prior to 1929. The New Ordeal is evident today throughout American cities where one can see a distinct gap in the building and construction trades that took place in the decades of the 1930's and 40's. Little was built beyond quonset huts, tin structures with a semi-circular shape and a timber frame underneath. And what was built was either extremely expensive, or built by the government usually for military purposes.
References
- ↑ Daniel Turov, Mixed Message, Barron’s, 21 May 2001, quoted in the Liethner Letter, Issue 1826 June 2001, retrieved 11 June 2007.
- ↑ James Burnham, The Managerial Revolution, Indiana University Press, Bloomingham 1966.
- ↑ The Roosevelt Myth, Book 3, Ch. 14, John T. Flynn, Fox and Wilkes, 1948.
- ↑ Richard Cockett, Thinking the Unthinkable: Think-Tanks and the Economic Counter-Revolution, 1931–1983, Harper Collins, London 1995, pg. 100.
Further reading
- Road to Serfdom, Friedrich A. Hayek, Reader's Digest Condensed Version, April 1945.
- Other People's Money, John T. Flynn, The New Republic, February 20, 1935.
- The New Ordeal, Freeman Tilden, The North American Review, v. 239, February 1935, p. 131-7.
- Ordeal by Planning, John Jewkes, Macmillan, New York, 1948. [1]
- The New Ordeal by Planning, John Jewkes, Macmillan and Co., Ltd., 1968.
- The Ordeal of Total War, 1939-1945, Gordon Wright, New York, Evanston, and London, Harper & Row, 1968.
- The Great Ordeal, TIME magazine, May. 14, 1945.
- Franklin D. Roosevelt: The Ordeal, Frank Freidel, Boston: Little, Brown and Company, 1954.
