Difference between revisions of "Essay: New Ordeal"
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===Managerial state=== | ===Managerial state=== | ||
− | During the Second World War, the US economy, due to the demands of the conflict, became very much a command economy. Ford, Chrysler, General Motors, Packard, and Studebaker all ceased the production of civilian automobiles by the end of February, 1942. Instead, they fulfilled government contracts that required them to build tanks, aircraft, and vehicles for military use. They also turned out engines for aviation and naval use. | + | During the Second World War, the US economy, due to the demands of the conflict, became very much a command economy. Ford, Chrysler, General Motors, Packard, and Studebaker all ceased the production of civilian automobiles by the end of February, 1942. Instead, they fulfilled government contracts that required them to build tanks, aircraft, and other vehicles for military use. They also turned out engines for aviation and naval use. |
− | + | Durable goods were not easily obtainable by civilians during the conflict. Gibson refrigerator for example, still produced refrigerators and freezers, but only for the government. Part of their factory was dedicated to the production of gliders for carrying troops in the D-Day invasion of June, 1944. | |
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==Crash of 1937== | ==Crash of 1937== | ||
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===The Second New Deal=== | ===The Second New Deal=== | ||
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==Stagnationism== | ==Stagnationism== | ||
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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). | 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). | ||
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==Further reading== | ==Further reading== | ||
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*''Franklin D. Roosevelt: The Ordeal'', Frank Freidel, Boston: Little, Brown and Company, 1954. | *''Franklin D. Roosevelt: The Ordeal'', Frank Freidel, Boston: Little, Brown and Company, 1954. | ||
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Revision as of 17:15, October 21, 2011
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.
Contents
During the two decades between 1929 and 1949, America experienced two recessions, and World War II, which 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 Depression had within it a recession from 1937-1938; 1933 to 1937 were recovery years stimulated by the New Deal government spending. However by 1937 the US economy had not recovered to the levels of 1929. Manufacturing demand stimulated by WWII and the pent up post-war demand for durable consumer goods fueled the 1941-1949 recovery, until finally, in 1949, the New York Stock Exchange reached the level it had been at prior to the crash of October, 1929.
From 1929-1932, the DJIA declined 90.0% over a period of 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 did not 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.
Economic planning
- Main article: Economic planning
“ | 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. | ” |
The New Deal attempted, unsuccessfully, to promote economic recovery. Instead, it established a system which created a dependent class of Americans. The system resembled the managed and bureaucratized state supported system of Germany before World War I. Prior to the implementation of the New Deal, the United States economic system relied on private investment in private enterprises as its primary means of expansion. After World War II the US lived in a system which depended for its expansion and vitality upon the government. [2]
Cartelization
Enforcement of the Anti-trust Act was considered as an essential instrument to prevent cartels and trusts in restraint of trade which had been viewed as deadly to the system of free enterprise. On the campaign trail in 1932 Franklin Roosevelt called loudly for its strict enforcement.
The National Recovery Act (NRA) and the Agricultural Adjustment Act (AAA) were plans to place the industrial and agricultural sectors of the United States under the wing of the government,
Managerial state
During the Second World War, the US economy, due to the demands of the conflict, became very much a command economy. Ford, Chrysler, General Motors, Packard, and Studebaker all ceased the production of civilian automobiles by the end of February, 1942. Instead, they fulfilled government contracts that required them to build tanks, aircraft, and other vehicles for military use. They also turned out engines for aviation and naval use. Durable goods were not easily obtainable by civilians during the conflict. Gibson refrigerator for example, still produced refrigerators and freezers, but only for the government. Part of their factory was dedicated to the production of gliders for carrying troops in the D-Day invasion of June, 1944.
Crash of 1937
By 1937, the DJIA had 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. The recovery from the 1937-1938 recession began mildly at first, but not until the World War II production boom was the country lifted out of the Great Depression.
The Second New Deal
All during the winter and spring of 1938 a group of young instructors from Harvard and Tufts were busy on a book which they called An Economic Program for American Democracy. which appeared in October, 1938. These instructors had been moving under the guidance of Dr. Alvin H. Hansen,[3] The theory propounded may be briefly stated thus: The expansion of the American economy came to an end in 1929. Before that it had grown primarily because technological expansion went forward on an amazing scale. But all this came an end. Population now increased at a slower rate. The theory continued: Government spending on the First New Deal had been proved to be a powerful tonic. People realized that government pump priming could lead to a self-sustaining economic recovery. The government set up built in stabilizers to maintain prosperity, such as the Federal Deposit Insurance Corporation (FDIC).
By 1938 Roosevelt embarked on a massive defense appropriations buildup; the Administration would advance 30% to a defense contractor when placing an order. The National City Bank reported an increase of overall business profits in the year 1939 over 1938 of 63.6%, and in its December 1940 Bulletin showed for 284 companies "directly affected by war and defense program" a rise of 79.2%. The Wall Street Journal reported, "Betterment in profits was naturally more pronounced, as a rule, in those industries benefiting directly or indirectly from the European conflict." [4]
Stagnationism
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).
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.
Further reading
- Franklin D. Roosevelt: The Ordeal, Frank Freidel, Boston: Little, Brown and Company, 1954.