Embed Size (px)
Citation preview
The Economics of the Great Depression and the New Deal
Dr. Gary QuinlivanDean of the Alex G. McKenna School of Business, Economics, and Government
Saint Vincent College
Great Depression
0
5
10
15
20
25
30
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Pe
rce
nt
0
200
400
600
800
1000
1200
Bil
lio
ns
of
Do
lla
rs
Unemployment
Real GDP
Percent Change in Real GDP
-15
-10
-5
0
5
10
15
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Stock Market Crash of 1929
Jeremy J. Siegel, Stocks for the Long Run, McGraw-Hill, 1998
Burton G. Malkiel, A Random Walk Down Wall Street, Norton, 1999.
October DJIA Close
050
100150200250300350400450500
19
22
19
24
19
26
19
28
19
30
19
32
19
34
19
36
19
38
19
40
19
42
19
44
19
46
19
48
19
50
19
52
19
54
0
5
10
15
20
25
30
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Pe
rce
nt
0
50
100
150
200
250
300
DJI
A I
nd
ex
Unemployment
October DJIA Close
Bank Failures
Bank Failures
0
500
1000
1500
2000
2500
3000
3500
4000
4500
19
22
19
24
19
26
19
28
19
30
19
32
19
34
19
36
19
38
19
40
19
42
19
44
Hoover Response
1. 1930 Smoot-Hawley Tariff
2. 1930: 1% tax cut for one year
3. 1930: $400 million in public work expenditures
4. 1932: Huge increase in taxes
5. 1932: Reconstruction Finance Corporation
Foreign Trade Policy
Smoot Hawley Tariff of 1930 and Trade Reform Act of 1934
0
1
2
3
4
5
6
7
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Bill
ion
s o
f N
om
inal
Do
llars
Exports
Imports
Higher Taxes: Hoover and FDR
0
10
20
30
40
50
60
70
80
90
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
MT
R i
n P
erc
en
t
0
5
10
15
20
25
30
Un
em
plo
yme
nt
Ra
te i
n P
erc
en
t
Low MTR
High MTR
Unemployment Rate
FDR: It’s the Private Sector’s Fault
Private Sector Expenditures
0
10
20
30
40
50
60
70
80
901
92
9
19
30
19
31
19
32
19
33
19
34
19
35
19
36
19
37
19
38
19
39
19
40
Bill
ion
s o
f D
olla
rs
Consumer Expenditures
Gross Investment
Fixed Investment
FDR’s New Deal 1933-35
1. Banking Act of 1933: FDIC
2. AU stock Nationalized
3. Federal Farm Mortgage Corporation & Home Loan Corporation
4. First Agricultural Adjustment Act
5. TVA
6. Federal Emergency Relief Act (FERA 5-12-33)
7. Public Works Administration (Harold Ickes--Dept. of Interior)
8. Works Project Administration in 1935
9. Securities Act 6/33--created SEC in 6/34
10. 6/33 National Industry Recovery Act
11. Bank Act of 1935
FDR 1935-36: Higher Taxes, Fed support of Unions & Expansion of the Welfare State
1. SS Act of 1935
2. Wagner Act of 1935
3. 8/35 Guffney-Snyder Act
4. 1936 Walsh-Healey Act
5. 1936: Tax on Retained Earning & Higher MTR
6. Fair Labor Standards Act
7. 1938 2nd AAA
8. Federal bureau of Mines
9. Federal Control over Interstate Pipelines & Trucking, and Air Travel
Depression of 1937-38
Fiscal Policy: Government Expenditures
Federal Government Reponse
0
5
10
15
20
25
30
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Pe
rce
nt
0
1
2
3
4
5
6
7
8
9
10
Bil
lio
ns
of
Do
lla
rs
Unemployment Rate
Total Federal Outlays
0
200
400
600
800
1000
1200
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Bill
ions
of D
olla
rs
0
0.05
0.1
0.15
0.2
0.25
G/G
DP Real GDP96 Chained
G/GDP
0
1
2
3
4
5
6
7
8
9
1019
29
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
Bill
ion
s o
f Do
llars
Federal Government Expenditures
State and Local GovernmentExpenditures
-10
-5
0
5
10
15
20
25
30
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Unemployment Rate
Fed Deficit as % of GDP
Federal Government Expenditures
0
200
400
600
800
1000
1200
1400
1600
1800
19
32
19
33
19
34
19
35
19
36
19
37
19
38
19
39
19
40
Mill
ion
s o
f D
olla
rs
National Defense
Public Welfare
Highways
Public Education
Fiscal Policy: Taxes
The Federal Government Response
0
5
10
15
20
25
30
Pe
rce
nt
0
1
2
3
4
5
6
7
8
Bil
lio
ns
of
Do
lla
rs
Unemployment Rate
Total Tax Receipts
0
5
10
15
20
25
30
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
Pe
rce
nt
0
10
20
30
40
50
60
70
To
tal
Da
ys
Unemployment Rate
Tax Freedom Day
0
5
10
15
20
25
30
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
0
2
4
6
8
10
12
14
16
18
20
Unemployment Rate
Personal Taxes as a Percent ofTotal Personal Income
-60
-40
-20
0
20
40
6019
29
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940P
erc
en
t
-2
0
2
4
6
8
10
Bil
lio
ns
of
Do
lla
rs
Effective Corporate Tax Rate
Unemployment Rate
Adjusted Corporate Profits
Monetary Policy
-15
-10
-5
0
5
10
15
20
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Pe
rce
nt
0
20
40
60
80
100
120
Bil
lio
ns
of
Do
lla
rs
% change M1
Nominal GDP
-15
-10
-5
0
5
10
15
20
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
% Change M1
% Change P
-15
-10
-5
0
5
10
15
20
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
0
200
400
600
800
1000
1200
% Change M1
Real GNP
References
Milton Friedman and Anna J. Schwartz, A Monetary History of the United States: 1857-1960, Princeton University Press, 1963. Chapter 7 & 8.
Michael R. Darby, Macroeconomics: The Theory of Income, Employment, and the Price Level, McGraw Hill, New York, 1976, Chapter 10.
Bennett T. McCallum, Monetary Economics: Theory and Policy, Macmillan, 1989.
R.A. Mundell, AA Reconsideration of the Twentieth Century,@ American Economic Review, July 2000, pp. 327B339.
Gene Smiley, Rethinking the Great Depression, Ivan R. Dee, 2002.
Gary M. Quinlivan and Brian Surkan, For Freedom and Prosperity: Philip M. McKenna and the Gold Standard League, Center for Economic and Policy Education, 1999.
