The Great Depression Essay Sample

The Great Depression Pages
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The global crisis of the 1930’s world depression elicited a multitude of economic and political responses. In their attempts to confront the situation, both the Unites States and Germany utilized generally varying policies. As two different political systems with contrasting historical backgrounds, the economic and social values both countries attested to varied greatly. As a democracy, the United States approached the Depression with great caution and unwillingness to sacrifice the constitutional foundations in search of a solution. However, the German’s, who had only recently suffered under the leadership of the newly formed Weimar Republic, chose a far more totalitarian approach to the crisis. Nevertheless, both nations also demonstrated a great many similarities in their approach to the crisis, particularly in their initial support of monopolies and their strikingly similar agricultural plan.

Under the National Socialist Party, a new economic order referred to as the “third way,” was introduced to the German nation. Declaring it to be distinct from both socialism and capitalism, the institutional structure was to be based upon the goals of ending unemployment, stopping the hyper-inflationary trend, and rearming Germany. There was also a denunciation of liberal capitalism, favoring instead a system of state controlled capitalism. Hitler utilized a series of four-year plans aimed initially at combating unemployment and eventually at the preparation for war (Kindleberger, 238). Additionally, The Nazi’s believed that the interests of the whole must be safeguarded from those of the individual. Though they did not go as far as to dissolve the right to private property, they most certainly circumvented it.

When compared to the New Deal policies of the US, the Nazi response to the Depression contrasts sharply in its goals and actions. The Nazi’s strove to implement a fascist government and thereby effectively destroy democracy. Furthermore, their policies incorporated the exploitation and eventual annihilation of certain ethnic groups, particularly the Jews. Finally, the overall goal of the Nazi economic system was the preparation and mobilization for of war. Nonetheless, there do arise a few similarities between the US and Nazi responses to the Depression and the results they achieved.

First, both Hitler and FDR had replaced political leaders who had proven incapable of managing the growing economic crisis facing the world during the 1930’s. Much like the New Deal’s FERA and WPA programs, Hitler also used public works projects, directed by the National Labor Service, to create jobs for the German people. However, unlike the US, very little support was given to citizens in terms of direct aid. Unemployment was further attacked through conscription, beginning March 1935, and the by development of parastatal bodies, such as the storm troopers and the SA (Kindleberger, 236). By 1937, Hitler had dramatically lowered unemployment from 6 million in October 1933 to 1.2 million in February 1937 (Kindleberger, 238).

The two programs had also showed an initial support for big business, associating corporations with stability and order. With Germany, relationships with big business were accomplished mainly through cartels. Hitler proceeded to bring industry under the control of the Nazi party; forcing corporations to become the instrument of state control, but stopping short of nationalizing industry. It was a policy strikingly similar to the practice of associationalism in the US. Under the New Deal, programs, such as the NRA, strove to accomplish many of the same goals as Germany. The NRA allowed the government to coordinate the activities of industries and thereby effectively regulate competition.

However, by 1935, Hitler had abandoned his support of big business and FDR too had embarked upon his 2nd New Deal. Following Brandeisian economic philosophy, the 2nd New Dealers viewed big business as both socially dangerous and inefficient. Instead, the new programs “urged a return to a more competitive society, not to the anarchy of unrestricted profiteering, but to ‘regulated economics’ ” (Leuchtenburg, 148). Germany had also abandoned monopolies, favoring increased business regulation instead. In 1936 the government curtailed managerial decision making rights. Furthermore, in 1938, the Nazi government finally imposed limits upon the cartel system; particularly the powerful steel and automotive industries.

Amongst the labor policies, both Nazi Germany and the United States undertook generally different paths. Under FDR, section 7(a) of the National Recovery Administration, NRA, was passed. The section guaranteed the right to collective bargaining and determined that the industrial code agreements would set minimum wages and maximum hours. Though initially criticized for its inadequacy, the principle of the reform proved to be more important. The bargaining rights achieved by labor under section (7a), though ineffective under the NRA, would be expanded and improved under the Wagner Act in 1935. Although the Nazi policies shared the goal of achieving full employment, they never afforded laborers greater political power or rights. However, they did grant laborers cheap holidays, medical and housing insurance, and instituted regulations on wages and working conditions, similar to the regulations created by the NRA. Nevertheless, bans were issued on any form of bargaining and dissent was brutally suppressed. In 1933, the SS seized all offices of trade unions, officials were arrested, and union property was confiscated. In addition, Social Honor Courts were created to deal with worker agitation (Kindleberger, 237).

In the agriculture sector, both Nazi and New Deal policies shared the mutual goal of organizing agriculture. Under the New Deal, FDR issued the AAA in 1933, which following the ‘domestic allotment’ plan dealt with the fundamental problems of depressed prices and mounting surpluses. The act provided farmer’s with the price supports they had desperately needed (Leuchtenburg, 48). The AAA was supplemented with the Farm Security Act, which promised to hold back mortgage companies and law officials from closing down farmers. Germany utilized a similar system of subsidies to protect farmers from foreclosure. Agriculture was to be further reformed through the institution of Reichsnahrstand, or Food Estate. Much like the AAA, the Food Estate controlled prices and levels of production (Kindleberger, 236).

Additionally, both nations shared the same idealized vision of rural life. They romanticized peasants, their self-sufficient lifestyle, and attempted to discern ways to effectively make use of their country’s resources. Under the New Deal, programs such as the TVA, attempted to both undertake the unified development of the country’s resources and also manage a “vast regional experiment in social planning that would affect directly the lives of the people of the valley” (Leuchtenburg, 54). In Nazi Germany, similar organizations attempted to promote a return to rural life and the more efficient exploitation of the country’s resources. In 1933, 70% of the population was urban, thus any industrial workers with agricultural training were sent immediately back to the farms. The goal by 1938 had been to resettle 20,000 families in the countryside. However, the program lacked funding and ultimately failed.

As a response to the crisis of Depression, FDR’s New Deal proved to be the closest approach to a truly democratic course of action. As a period of unimaginable economic catastrophe, the Great Depression lacked any past examples to follow. Such a heady atmosphere promoted a course of experimentation in search of a solution to the crisis. Many New Deal critics, such as Friedrich A. Hayek, saw an incompatibility between a managerial state and personal liberty. Invoking the example of the rise of totalitarianism in Germany, Hayek feared the New Deal and what he saw as a promotion of statism (Brinkley, 158). However, such critics of the New Deal failed to recognize that few New Dealers had ever endorsed these criticized “socialist” policies. Furthermore, such programs as the NRA, which had greatly expanded the government’s role in economics, were with time dealt with by the Supreme Court. Indeed, the strength of the American system of checks and balances ensured that the policies of the New Deal, though they may have occasionally gone too far, remained within the boundaries of the American constitution and never truly impeded upon the rights of American citizens. This was further guaranteed by the voice of the public which, when FDR attempted to expand executive powers in 1937, actively voiced their disapproval through the various media outlets and their legislative representatives.

The Great Depression presented the world with an unimaginable economic disaster. The response it elicited from the world varied with each nation’s political and historical background. In the case of Germany and the United States, one finds both numerous differences and similarities in the policies and measures undertaken by both countries. Regardless, the overall means by which each nation’s economic policies were implemented remains strikingly different. Germany utilized a completely authoritarian approach and held its ultimate goal to be the rearmament of the German nation and eventual war. The US and its New Deal policies were, in contrast, a truly democratic approach to the Depression. While certain initiatives may have stretched the limits of the American democratic system, the New Deal proved to be the best democratic response to a crisis that demanded an extraordinarily strong leader and an administration willing to experiment and take risks.

Amit Mehta

Final Essay Question # 2

The New Deal and its impact upon the outlook of “ordinary Americans” has been a topic of constant debate. The academia of the 1960’s and 70’s viewed the state as “an agent of social and political forces external to it” (Brinkley, 11). Public policy during the New Deal era was seen as a response to popular movements, interest groups, political coalitions, party structures, and corporate elites. However, there are some who challenge this ‘society- centered’ view of the period, declaring instead a more ‘state-centered’ theory of New Deal policies. This viewpoint declares the state and its institutions to be the major factors in determining public action and portrays the 1930’s political state as one dominated by small elite intellectual groups (Brinkley, 13). Nevertheless, such a view fails to adequately explain the New Deal and the gradual transformation of liberal ideology associated with it. In truth, the New Deal was a combination of the two opposing theories. The early New Deal followed the society-centered theory and generally focused upon directly affecting the lives and outlook of the general public. However, the later, post-1937 New Deal adhered to the state-centered view of economic policy and subsequently underwent a transformation in ideological focus that would impact the future of American liberalism.

The New Deal policies of the pre-1937 period were characterized by an advancement of both direct and work related relief. Programs such the CCC of 1933 combated unemployment with various work relief programs. The CCC employed young men in such tasks as the conservation of forests and the control of plant disease and pests (Sternsher, 32). Through the CCC, communities such as Mobile County experienced positive contributions to the conservation of natural resources. Moreover, the program provided enrollees with discipline and training that would prove beneficial, both during World War II and, when searching for jobs in the private sector afterwards (Sternsher, 38). The program directly affected the lives and outlook of those who enrolled and volunteers “found the organization left a lasting effect on their lives” (Sternsher, 33).

Similar examples of direct action were implemented by the New Deal throughout American cities such as Flint, Michigan. The Depression had uncovered the local and regional government’s inability to cope with an economic crisis on such a grand scale. Thus, it was the New Deal which effectively forged a new structural system to deal with the Depression and in the process cultivated the development of substantial changes in both the local administration and the public’s outlook concerning relief (Sternsher, 77). Instead of catering to the elites and politicians, the federal government required that each local committee be directed by a trained social worker. Such policies alienated many local officials, as in the case of Flint, whose welfare administrator, Louis J. Ludington, after regaining power in 1938 attempted to undue all that was accomplished under the New Deal. Nevertheless, Ludington’s reaction did not represent a community-wide rejection of relief and instead was more of a political response (Sternsher, 81). In truth, the New Deal greatly benefited Flint and similar communities throughout the country. Furthermore, its policies helped change the popular view concerning welfare. As more residents received public assistance, relief no longer was associated with only the pariahs of the community (Sternsher, 80). Instead, people throughout the country increasingly came to view relief as “a right of citizenship, not a symbol of shame” (Sternsher, 81).

While the period before 1937 was more concerned with the direct confrontation of social problems resulting from the Depression, the post- 1937 era saw a change in the New Deal and general liberal focus. Furthermore, there was shift from the early New Deal’s “social-response.” Policy issues were now discussed and modeled by a smaller, more exclusive political sphere. Though issues were confined to the state, they were also not confronted by those outside the smaller group of elites; predominantly liberal policymakers, journalists, and intellectuals. This network of elites was by no means confined to a “cultural or social vacuum.” Nevertheless, their actions and policies no longer impacted the minds and views of the general population as the early New Deal had (Brinkley, 13).

As the US once more suffered a severe recession in 1937, this period’s New Deal program had come to be far less dynamic than its predecessor of the early 30’s. Yet, if the New Deal had stagnated in development as a program, it by no means had stopped developing as an idea. In fact, it was the maturing ideals of the late 30’s and World War II, which formed the liberal principles referred to as “New Deal Liberalism” (Brinkley, 3). This redefinition of the New Deal philosophy was in fact a gradual movement, emerging from a number of small adaptations, which steadily accumulated into a decisive change in outlook.

The post-recession period saw the New Deal itself battling through an intense ideological struggle, the goal of which was to “define the soul of the New Deal” (Brinkley, 30). The year 1938 was initially dominated by an anti-monopoly crusade deeply rooted in the republicanism and populist traditions similar to those of the early New Deal programs (Brinkley, 60). Nonetheless, the small collection of New Dealers who were to define the future course of the administration saw these anti-trust campaigns from a different perspective. To them, the problem concerning monopolies was not necessarily social or cultural, but instead purely economic (Brinkley, 62). This view of the problem involved a departure from the traditional anti-monopoly stance of defending the rights of small producers and in its place developed a newfound belief in increased public control over corporations.

However, it was not this vigorous regulatory impulse which would transform the liberal view of the role that government was to play in economics. Instead, it was the movement from a producer-oriented society to a consumer-oriented society. This shift reflected the liberal policymaker’s embracement of Keynesian economics and viewed federal spending as a positive tool, “to be used lavishly at times to stimulate economic growth and social progress” (Brinkley, 104). By the end of the decade, even the anti-monopoly crusade under Thurman Arnold had become a means towards increasing mass consumption.

However, this alliance between anti-monopoly and spending strategies proved short-lived (Brinkley, 117). Thus, there developed a fundamental change in liberal economic thought. Concern about traditional issues, such as monopoly regulation and public works, gradually disappeared from the liberal agenda and the future decades saw the movement of fiscal policy to the center of liberal hopes (Brinkley, 136). However, this abandonment of traditional New Deal policies resulted in the subsequent lack of impact new policies had upon the “minds and hearts” of the people. The complicated fiscal policies of the post-1937 New Deal, increasingly limited the general public’s understanding of government policies. Moreover, the seemingly threatening expansionary actions, like FDR’s court packing plan in 1937, fostered public mistrust of the government

In order to understand the New Deal and its impact upon the general public, one must look upon the era as two distinct periods. Initially, the government policies were steeped in the populist tradition and were generally concerned with directly affecting the lives of the American people. Programs such as the CCC and monopoly-regulation were policies whose effects were noticeable to the public and could generally be understood by the majority. However, the recession of 1937 resulted in a gradual yet decisive shift in New Deal focus. No longer were outside influences so directly involved in the policy making process. Instead, an elite group of intellectuals debated amongst themselves over the future of the liberalism and gradually retreated from the commitments that had defined early New Deal policies. The center of liberalism had redefined itself and ushered in a new consumer oriented approach to political economy. Sadly, the cost of such a transformation had been the “minds and hearts” of the public the New Deal had initially set out to change.

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It was this characteristic which allowed liberals to transform their own ideas with the changes in American society and culture.

The past economic tradition of both nations played a significant role in their response to the depression. As the geographic center of Europe, Germany’s history can be characterized as both turbulent and abrupt. Existing only as a loosely bound series of modest sized territories before Napoleons conquest in 1806; Germany did not achieve unification until 1871 with the rise of Prussia under Otto von Bismarck. Economically, the German state stressed wirthschaftsoroneemg, or economic order. This policy was supported by a strong crafts tradition and a superb education system, which called for the general education of all. Further economic infrastructure was made up of custom unions, which acted as a free trade arena. By the turn of the century, Germany had grown substantially. It had built a massive railroad system including a national line. The nation had also utilized a system of universal banking, which combined aspects of both commercial and investment banking. Its main purpose involved providing funds for numerous large scale ventures.

Unlike the United States, the German state practiced a form of cooperative capitalism. Such a system called for the use of cartels. Legalized in 1897, cartels created a forum in which business and labor cooperated with one another in order to avoid excess competition. It was an effort to help manage supply and demand and thereby stabilize the business cycle. In an attempt to limit excess competition, firms gave up their entrepreneurial authority and much of their independence. Organizations, such as the Coal Cartel, employed techniques such as production quotas and price regulation to regulate competition amongst each other. However, the success of the cartels proved to be relative. Though they were effective in slowing down competition, they by no means eliminated it. In effect, the cartels served to simply soften the blow of the depression in the 1930’s.

First and foremost, labor groups saw an increase in their influence upon microeconomics and government decision making. Furthermore, the government had developed into a powerful economic force. By 1916, the war had shown self-government, or selbwerwaltung, to be an insufficient form of regulation. Thus, towards the end of the war, Germany underwent both an economic and state metamorphosis.

Such economic conditions only served to worsen an already tense political situation, resulting in the assassinations of numerous key government officials; including the prime minister in 1921.

The mid 1920’s were a time of short-lived stabilization. By 1928, exports and business investments had once more slowed down.

The next step in Hitler economic process involved a 4 year plan meant to intensify war preparation and further lower unemployment. Through deficit spending, Hitler was able to fund his rearmament policies and by 1939, the military had gained further control over the German economy.

Their economic solution involved multiple steps, the firs of which was a “General Economic Recovery.”

Immediately after obtaining power in 1933, Hitler worked towards restoring order to the chaotic German state. He suspended civil liberties, other political parties, and proceeded to repress all those he viewed as problematic; particularly the communists and Jews. Yet the cost for success had been high. Civil liberties had been lost, productivity and standards of living had both decreased, and there had been a general increase in price controls and wage limits.

Hitler’s policies also included the gradual alienation and increased repression of the Jewish community. Jewish owned business and private property were expropriated by the Nazi government. Though the economic impact of this policy proved insignificant, it nevertheless hinted towards the Nazi’s future anti-Semitic plans.

The history of the New Deal shows numerous incidences of the public’s influence upon government policy and action. The agrarian dissent and powerful farm organizations proved important to the development of such New Deal policies as the AAA and NA. The “rank-and-file labor activism” of the mid to late 1930’s proved essential to the passage of the Wagner Act in 1935 and to subsequent government policies affecting labor relations. Popular movements, headed by such figures as Long, Coughlin, and Townsend, were influential in the proposal and passage of such social policies as the Social Security and progressive taxation of 1935. Furthermore, social workers and reform activists helped shape the character of the New Deal welfare state.

WWI proved to be transformative experience for the German economic system. The nation adopted a “softer” more democratic form of socialism. Moreover, a planned economy, formerly only championed by the left, had now become the adopted economic policy of the political right as well. The war had permanently changed the relation of the state to the economy, viewing the state as the new driving force of economic order. Reforms were undertaken to create economic order. Public spending was increased as %GDP and an unemployment insurance act was passed by 1927.

Nevertheless, the early 1920’s remained a time of financial crisis. The war had been financed by bonds and the increased printing of money, resulting in severe post- war inflation. By 1923, the French reparation payments had caused the hyper inflation to accelerate. Within a year of the French acquiring the Rhineland, the German currency value had imploded; with 1 dollar being the equivalent of 4 trillion marks. The fallout from the economic crisis proved severe.

The general public, who had been left out of the political process found themselves suffering the most from the rampant inflation. Subsequently, they increasingly held little trust in the government and began drifting more towards the political right. In addition, the financial crisis contributed to a general belief in fiscal conservatism. Unfortunately, such an economic standpoint only served to hinder dealing future dealings with the Depression. The 1929 Wall Street crash landed the final blow on the German economic system, taking away the “life preserver of US currency.” Due to Germany’s reliance upon exports and its low domestic consumer spending, the Depression proved exceptionally debilitating to the German economic system. By 1932, the unemployment rate had reached a high of 33%, already surpassing the US 1933 unemployment rate of 25%. Furthermore, the ad hoc emergency response by the presidential regime proved ineffective. The result of such unproductive leadership was a rising lack of support for the Weimar republic and the rise of Adolph Hitler to the position of Chancellor in 1933.

Mnay of the policies, such as the NRA, were perceived to be socialist actions which were undrming the foundation of Amereican capitalism. Thugh these actions may have been criticzed for their socilast inclination, they were evtually handeled by the Suprme e curt andd eclarede uncontituional. This is what made the New Deal a truly democratic response. The country need a leader willing to take risks and stretch govenremnt power, yet the American politcl system’s checks and balances kept FDR within certain limits. Through the legislative bodies and Supreme Cout, FDR was kept in line. Furthermore, unlike Germnay which brutally repressed dissent, the New Deal never trely rpressed any patucvlar group or ethiicty. The media and public were allowed to voice their concerns and diaagremements. It was this steght of the public which further chcarterizes the New Deal as truly democratic response. The President and Cngress were publciky elected officlas, thus the descions they made together were the will of the majority and thus in essence democratic.

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