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[[Image:29-49.gif|right|250px|thumb|Dow Jones Industrial Averages, 1929-49.]]

[[Image:29-49.gif|right|250px|thumb|Dow Jones Industrial Averages, 1929-49.]]

[[Image:115yeardowgoldratio.gif|right|200px|thumb|Dow Jones Index in constant dollars relative to the price of gold. The chart is a good reflection of living standards throughout the period.]]

[[Image:115yeardowgoldratio.gif|right|200px|thumb|Dow Jones Index in constant dollars relative to the price of gold. The chart is a good reflection of living standards throughout the period.]]

The '''New Ordeal''' is the period of time between 1929 and 1949, when the American economy finally recovered from the [[Crash of '29]].  It encompasses the four presidential terms U.S. President [[Franklin D. Roosevelt]] had been elected to, 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'''.   

The '''New Ordeal''' is the period of time between 1929 and 1949, when the American economy finally recovered from the [[Crash of '29]].  It encompasses the four presidential terms U.S. President [[Franklin D. Roosevelt]] had been elected to, the final term having been administered mostly by his successor, President [[Harry S. Truman]].  The New Ordeal also is sometimes referred to as the '''Great Ordeal''' or simply the '''Ordeal'''.   

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During the twenty years of the New Ordeal, America experienced 2 deep 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.

During the twenty years of the New Ordeal, America experienced 2 deep 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]] referred 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.

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.

==Economic planning==

==Economic planning==

:'''''Main article'': [[Economic planning]]

:'''''Main article'': [[Economic planning]]

[[Image:Economicplanning.JPG|right|250px|thumb|Criticism of Economic Planning was surpressed; F. A. Hayek's ''Road to Serfdom'' was rejected for publication 3 times "on political grounds" <ref>Richard Cockett, ''Thinking the Unthinkable: Think-Tanks and the Economic Counter-Revolution, 1931–1983'', Harper Collins, London 1995, pg. 100.</ref>]]

[[Image:Economicplanning.JPG|right|250px|thumb|Criticism of Economic Planning was suppressed; F. A. Hayek's ''Road to Serfdom'' was rejected for publication 3 times "on political grounds" <ref>Richard Cockett, ''Thinking the Unthinkable: Think-Tanks and the Economic Counter-Revolution, 1931–1983'', Harper Collins, London 1995, pg. 100.</ref>]]

{{Cquote|Planning will become a function of the federal government; either that or the planning agency will supersede the government, which is why, of course, such a scheme will be assimilated to the State.|20px|20px|[[Rex Tugwell]]<ref>''The Principle of Planning and the Institution of Laissez Faire,'' Rexford G. Tugwell, The American Economic Review, vol. 22, no. 1, March 1932. [http://www.bartleby.com/73/147.html]</ref>}}

{{Cquote|Planning will become a function of the federal government; either that or the planning agency will supersede the government, which is why, of course, such a scheme will be assimilated to the State.|20px|20px|[[Rex Tugwell]]<ref>''The Principle of Planning and the Institution of Laissez Faire,'' Rexford G. Tugwell, The American Economic Review, vol. 22, no. 1, March 1932. [http://www.bartleby.com/73/147.html]</ref>}}

The New Deal did not promote economic recovery, rather it established a system which required a permanent crises to support a military industrial complex. The system resembled 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 economic expansion upon private investment in private enterprise. After World War II the US lived in a system which depended for its expansion and vitality upon the government. This is a system, based upon a pre-World War II European model created at the moment when it had fallen into complete disrepute and disintegration in Europe.<ref>[http://www.rooseveltmyth.com/book/fdrmyth_Chapter_Fifteen___The_Roosevelt_.htm ''The Roosevelt Myth'', Book 3, Ch. 14], John T. Flynn, Fox and Wilkes, 1948.</ref>

The New Deal did not promote economic recovery, rather it established a system which required a permanent crisis to support a military industrial complex. The system resembled 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 economic expansion upon private investment in private enterprise. After World War II the US lived in a system which depended for its expansion and vitality upon the government. This is a system, based upon a pre-World War II European model created at the moment when it had fallen into complete disrepute and disintegration in Europe.<ref>[http://www.rooseveltmyth.com/book/fdrmyth_Chapter_Fifteen___The_Roosevelt_.htm ''The Roosevelt Myth'', Book 3, Ch. 14], John T. Flynn, Fox and Wilkes, 1948.</ref>

===Cartelization===

===Cartelization===

Enforcement of the Anti-trust Act was considered as an essential instrument to prevent [[cartel]]s and trusts in restraint of trade which had been viewed as deadly to the system of [[free enterprise]]. On the [[United States presidential election, 1932|campaign trail in 1932]] Franklin Roosevelt called loudly for its strict enforcement. Yet immediately upon Roosevelt's accession to office the Anti-trust Act was suspended in order to cartelize every industry in America on the Italian [[fascist]] corporative model. <ref>''The Roosevelt Myth'', John T. Flynn, Fox and Wilkes, 1948, Book 1, Chapter 4, [http://www.rooseveltmyth.com/cgi-bin/framed/2767/book/fdrmyth_Chapter_Four___The_New_New_Deal.htm ''The New New Deal''].</ref>  

Enforcement of the Anti-trust Act was considered as an essential instrument to prevent [[cartel]]s and trusts in restraint of trade which had been viewed as deadly to the system of [[free enterprise]]. On the [[United States presidential election, 1932|campaign trail in 1932]] Franklin Roosevelt called loudly for its strict enforcement. Yet immediately upon Roosevelt's accession to office the Anti-trust Act was suspended in order to cartelize every industry in America on the Italian [[fascist]] corporative model. <ref>''The Roosevelt Myth'', John T. Flynn, Fox and Wilkes, 1948, Book 1, Chapter 4, [http://www.rooseveltmyth.com/cgi-bin/framed/2767/book/fdrmyth_Chapter_Four___The_New_New_Deal.htm ''The New New Deal''].</ref>  

The [[National Recovery Act]] (NRA) and the [[Agricultural Adjustment Act]] (AAA) were plans to take the whole industrial and agricultural life of the country under the wing of the government, organize it into vast farm and industrial cartels, as they were called in Germany, corporatives as they were called in Italy, and operate business and farms by economic planning schemes dictated and carried out under the supervision of government. This, at the time, the was known as [[fascism]]. In those days fascism was not yet defined as [[anti-­Semitism]]. <ref>''The Roosevelt Myth'', Book 1, Chapter 7, [http://www.rooseveltmyth.com/book/fdrmyth_Chapter_Seven___An_Enemy_Is_Welc.htm ''An Enemy Is Welcomed''], Flynn, 1948.</ref>

The [[National Recovery Act]] (NRA) and the [[Agricultural Adjustment Act]] (AAA) were plans to take the whole industrial and agricultural life of the country under the wing of the government, organize it into vast farm and industrial cartels, as they were called in Germany, corporatives as they were called in Italy, and operate business and farms by economic planning schemes dictated and carried out under the supervision of government. This, at the time, was known as [[fascism]]. In those days fascism was not yet defined as [[anti-­Semitism]]. <ref>''The Roosevelt Myth'', Book 1, Chapter 7, [http://www.rooseveltmyth.com/book/fdrmyth_Chapter_Seven___An_Enemy_Is_Welc.htm ''An Enemy Is Welcomed''], Flynn, 1948.</ref>

===Managerial state===

===Managerial state===

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." <ref>James Burnham, ''The Managerial Revolution'', Indiana University Press, Bloomingham 1966.</ref>

James Burnham, a former [[Trotskyite]], discovered in 1941 that the "workers revolution" which allegedly 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." <ref>James Burnham, ''The Managerial Revolution'', Indiana University Press, Bloomingham 1966.</ref>

==Crash of 1937==

==Crash of 1937==

===Double-dip recession===

===Double-dip recession===

When FDR was inaugurated for his second term in March 1937 [[national income]], [[payroll]]s, and industrial production<ref>League of Nations Monthly Bulletin of Statistics, June, 1936. Percentage change 1929 to March 1936, United States -21.8%, rank number 13.</ref> were still 20 per cent below the 1929 figure and construction was still only about one third what it had been in 1929 when the nation had a booming economy due to massive speculation that would ultimately lead to the stock market crash. By June, 1937 the [[U.S. Treasury]] reported relief payments were less than in the same period the preceding 12 months, however this was not so. The Treasury merely shifted relief payments to other accounts. REleif payments were, in fact, larger than the year before. The Treasury made a practice of "cooking the books" to produce phony numbers. Stock prices declined and by September the dire reality could be no longer hidden. By the end of October 1937 the market crashed. The U.S budget was running a [[deficit]] at the time of $300,000,000 a month.

When FDR was inaugurated for his second term in March 1937 [[national income]], [[payroll]]s, and industrial production<ref>League of Nations Monthly Bulletin of Statistics, June, 1936. Percentage change 1929 to March 1936, United States -21.8%, rank number 13.</ref> were still 20 per cent below the 1929 figure and construction was still only about one third what it had been in 1929 when the nation had a booming economy due to massive speculation that would ultimately lead to the stock market crash. By June, 1937 the [[U.S. Treasury]] reported relief payments were less than in the same period the preceding 12 months, however this was not so. The Treasury merely shifted relief payments to other accounts. Relief payments were, in fact, larger than the year before. The Treasury made a practice of "cooking the books" to produce phony numbers. Stock prices declined and by September the dire reality could be no longer hidden. By the end of October 1937 the market crashed. The U.S budget was running a [[deficit]] at the time of $300,000,000 a month.

===Class warfare===

===Class warfare===

DNC Chairman [[Jim Farley]] recalled on a meeting with Roosevelt on March 28, 1938. FDR told Farley he would have "to go in for pump priming or relief," but complained he could not spend on local projects because the states and cities did not want any more buildings and institutions which they would have to pay for in perpetuity. States and localities were having trouble paying the bills on New Deal projects already built. Many [[WPA]] projects approved by the federal government were abandoned because the states and cities could not raise the money to support and occupy them.  

DNC Chairman [[Jim Farley]] recalled on a meeting with Roosevelt on March 28, 1938. FDR told Farley he would have "to go in for pump priming or relief," but complained he could not spend on local projects because the states and cities did not want any more buildings and institutions which they would have to pay for in perpetuity. States and localities were having trouble paying the bills on New Deal projects already built. Many [[WPA]] projects approved by the federal government were abandoned because the states and cities could not raise the money to support and occupy them.  

In the 1938 Congressional elections Harry Hopkins oversaw spending programs with no regard for economic utility to meet the immediate political necessities of an election, but the growth of debt could not go on indefinitely. And the New Dealers problem was complicated by pressure from within thew Democratic party to balance the budget.

In the 1938 Congressional elections Harry Hopkins oversaw spending programs with no regard for economic utility to meet the immediate political necessities of an election, but the growth of debt could not go on indefinitely. And the New Dealers problem was complicated by pressure from within the Democratic party to balance the budget.

New capital made available for investment amounted to $348,000,000 in 1935. This was less than 1/10th of the amount available in 1929.  By contrast, the British economy had nearly recovered to its 1929 levels by 1935, and the amount available for investment was almost twice as much as the United States.

New capital made available for investment amounted to $348,000,000 in 1935. This was less than 1/10th of the amount available in 1929.  By contrast, the British economy had nearly recovered to its 1929 levels by 1935, and the amount available for investment was almost twice as much as the United States.

Their thesis was as follows. The people do not spend all of the income they receive on consumable goods and services. Each year they save great sums. These savings are thus withdrawn from the function of spending. They must be brought back into the stream of spending some way or the system collapses. The orthodox method of accomplishing this in the past has been through private investment. People who save and who do not wish to spend their money for food or clothes or consumable goods are willing to invest it. If they invest it they put it into what are called capital goods—goods designed to produce other goods such as houses, buildings, machinery, etc. If they do this the money is used to create jobs, experts, technicians, etc., and this gets into the hands of people who will consume it. To keep the capitalist system going there must he a continuous flow of all savings into investment—into new industries and the expansion of old industries. That was considered a perfectly sound theory for many years. It was the basis of the opinion of those who appealed to President Roosevelt in 1933 to adopt a program that would encourage business expansion, instead of making war on business and killing investment.  

Their thesis was as follows. The people do not spend all of the income they receive on consumable goods and services. Each year they save great sums. These savings are thus withdrawn from the function of spending. They must be brought back into the stream of spending some way or the system collapses. The orthodox method of accomplishing this in the past has been through private investment. People who save and who do not wish to spend their money for food or clothes or consumable goods are willing to invest it. If they invest it they put it into what are called capital goods—goods designed to produce other goods such as houses, buildings, machinery, etc. If they do this the money is used to create jobs, experts, technicians, etc., and this gets into the hands of people who will consume it. To keep the capitalist system going there must he a continuous flow of all savings into investment—into new industries and the expansion of old industries. That was considered a perfectly sound theory for many years. It was the basis of the opinion of those who appealed to President Roosevelt in 1933 to adopt a program that would encourage business expansion, instead of making war on business and killing investment.  

The New Deal economists, however, as John Flynn cited, were just learning this important principle. But the Brain Trustersd concluded that a continuous flow of savings into private investment was no longer possible. This is possible only when business men wish to borrow funds for new enterprises and expansion of old ones. But this would happen again, they said. Expansion on a sufficient scale in new enterprises and expanding old ones is hopeless because the economy has reached the end of its expansion era, as described above. The only way to avoid the inevitable collapse of the system, they proposed, wass for the government to step in and borrow those sums which business refused to borrow and to spend the money on all sorts of welfare, educational, social and other public enterprises.

The New Deal economists, however, as John Flynn cited, were just learning this important principle. But the Brain Trusters concluded that a continuous flow of savings into private investment was no longer possible. This is possible only when business men wish to borrow funds for new enterprises and expansion of old ones. But this would happen again, they said. Expansion on a sufficient scale in new enterprises and expanding old ones is hopeless because the economy has reached the end of its expansion era, as described above. The only way to avoid the inevitable collapse of the system, they proposed, was for the government to step in and borrow those sums which business refused to borrow and to spend the money on all sorts of welfare, educational, social and other public enterprises.

Government spending had already plunged the nation into debt to the tune of nearly $40 billion. Continuous spending of funds borrowed by the government would mean a continuous expansion of the government debt. Government debt, they argued, is not like private debt. It does not have to be paid. The government can keep it afloat indefinitely by redeeming old bonds with new bonds. Moreover the interest on the government debt will not be a burden. "The debt is due by the people to themselves," they said. The people owe the debt. The people own the bonds which represent the debt. The government taxes the people to pay the interest on the bonds. It takes the taxes out of the pockets of the people and then pays it back to them in the form of interest. It is just taking it out of one pocket and putting it in the other.

Government spending had already plunged the nation into debt to the tune of nearly $40 billion. Continuous spending of funds borrowed by the government would mean a continuous expansion of the government debt. Government debt, they argued, is not like private debt. It does not have to be paid. The government can keep it afloat indefinitely by redeeming old bonds with new bonds. Moreover the interest on the government debt will not be a burden. "The debt is due by the people to themselves," they said. The people owe the debt. The people own the bonds which represent the debt. The government taxes the people to pay the interest on the bonds. It takes the taxes out of the pockets of the people and then pays it back to them in the form of interest. It is just taking it out of one pocket and putting it in the other.