会计 0501 班 孙 茹 :2005140104

9 石丽红 :20050503069 刘小伟 :20050503045 宋婷婷 :20050503035

• The Great Depression of the 1930s was the economic event of the 20th century. The history of the depression is fascinating because it is a reference point for economic misery and fear. When people make financial planning decisions and politicians set policy the depression experience is, or maybe should be, in the back of everyone's mind as a worst case scenario.

• The Great Depression began in 1929 when the entire world suffered an enormous drop in output and an unprecedented rise in unemployment. World economic output continued to decline until 1932 when it clinked bottom at 50% of its 1929 level. Unemployment soared, in the United States it peaked at 24.9% in 1933. It remained above 20% for two more years, reluctantly declining to 14.3% by 1937. It then leapt back to 19% before its long-term decline. Since most households had only one income earner the equivalent modern unemployment rates would likely be much higher. Real economic output (real GDP) fell by 29% from 1929 to 1933 and the US stock market lost 89.5% of its value.

Another unusual aspect of the Great Depression was deflation. Prices fell 25% from 1929 to 1933. These were the four largest economies in t

he world at that time. To put the severity of the depression in modern perspective, consider the following. Real US GDP went down 4.4% in the five years that it declined since 1959 。 Unemployment has never exceeded 9.7% and we

have not had one year of deflation. Deflation can be a devastating economic event. Imagine wages falling by 30% and the value of debts simult

aneously increasing by that much.

• In the great depression it would have been nice if the suffering had been so evenly distributed. Instead the deflation caused bankruptcies, which in turn led to, more bankruptcies! Millions of people and companies were wiped out completely. The lack of adequate social programs left people of all social strata depending on relatives and friends for charity. Spending became paralyzed with fear as the downturn was so unexpected, so severe, and the bad news just kept coming for years.

• 1 The US in the 1920's: Buying into the Boom

• 2 A Sharp Reduction in the Money Supply

• 3 Political decision making

• (1) The Demise of Trade

• (2) Taxing Timing

• The U.S. economy hit bottom in mid-1932. With the approach of elections in 1932, Hoover vetoed what he saw as wild, emotionally inspired pork barrel legislation that Congress had sent to him. He claimed that he favored carefully planned measures aimed at long-term development rather than "quick fixes."

• Hoover lost the presidency to the Governor of New York, Franklin Roosevelt, Hoover winning 15.8 million votes to Roosevelt's 22.8 million. The Democratic Party became the majority party in the House of Representatives and the Senate by huge margins. Despite the Depression, the Communist Party candidate, William Z. Foster, won only 0.26 percent of the vote - 102,785 votes - indicating where the Communist movement in the United States was going:nowhere. The Socialist Party candidate, Norman Thomas, won nines times that amount - close to 2 percent of the vote.

• Hoover left office saying, "there is nothing more we can do." And when Roosevelt took office he was not sure what he would do but he was determined to do something. Roosevelt had little understanding of economics, but he grabbed some slogans that appealed to him - such as "the greatest good of the greatest number." He began by pursuing a balanced budget, as in his days as governor of New York. He cut federal salaries and veterans' aid. On the other hand, the U.S. Chamber of Commerce was demanding government action in regulating competition, and the Roosevelt administration pondered the benefits of more regulations on business and a greater partnership with business.

• In his first one hundred days in office, Roosevelt was responding to crises more than he was laying plans for economic construction. First he ended the run on the banks, bringing a return of confidence in banking. In a "fireside chat" he told citizens that it was safer to put money in the bank than to keep it under one's mattress. He invoked the Trading with the Enemy Act of 1917 in order to suspend the export of gold and silver. By law, banks and individuals were now required to deliver their gold to  Federal Reserve banks in return for currency. Then his advisors talked him into attempting to stimulate the economy by increasing the money supply. This included putting three billion more dollars into circulation and taking the dollar off the gold standard.

• During these first one hundred days, Roosevelt decided to help the distressed farmers. Hoover had tried to help farmers by buying their surpluses, which had encouraged over-production and resulted in ruinous low prices for farmers. Instead of this and letting bankruptcies run their course, Roosevelt chose to limit the production of certain crops and to give relief to farmers who were in immediate danger of losing their homes.

• Eager to fight what they perceived to be economic crisis, Democrats in Congress proposed a "share the work" bill designed to create a thirty-hour work-week and to inspire employers to hire more workers. Manufacturers opposed the bill, and Roosevelt joined in the opposition. Then, consulting with big business, Roosevelt created the National Industrial Recovery Act (the NRA) - a move intended to get more money into the hands of average working people. Industrialists supported the idea of high wages, believing that high wages encouraged people to stay on the job longer and to improve their job skills. The National Industrial Recovery Act enacted into law fixed minimum wages and maximum hours and the abolition of child labor in many industries. It gave labor unions the right of representatives of their choice in bargaining with employers, and it obliged businesses to open their books to government inspectors.

• In May 1933, a government agency called the Tennessee Valley Authority (TVA) was created to oversee development in a depressed 640,000 square-mile area in the Tennessee Valley. There, sharecroppers and tenant farmers were malnourished; and soils were exhausted, eroded and polluted with chemical wastes. Trees had been cut and vegetation destroyed. Many in the area could not afford electrical power. The TVA planned to provide the area with electrical power that was publicly owned. Republicans in Congress took up the fight of two power companies in the area, describing their position as a fight for free enterprise against socialism. The Republicans were out-voted, and the TVA project proceeded as planned, its electrical power to uplift the area, to improve flood control and to reduce soil erosion. The TVA provided phosphate fertilizers that were to revive soil in the Tennessee Valley.

• The appearance that something more was being done produced more confidence, and in the three months of Roosevelt's administration - between the first of April and the end of June - the price of stocks almost doubled. Wages also rose. Big business and the Democrats favored lower tariffs, and this helped move the world towards higher levels of trade.

• In December 1933, the Roosevelt Administration repealed Prohibition. But now came the dust storms across the Dakotas, Oklahoma, Kansas and nearby states, blowing away topsoil. From decades before, these lands had been broken up by plowing. In the place of prairie grasses, wheat had been grown. With the economic depression, the demand for wheat had dropped, and the price that farmers were getting for their wheat had fallen  to about one-fourth what it had been. At that price farmers could not afford to grow wheat. Their fields dried up and were left unused, and winds began blowing away topsoil. Whole houses were buried in dust, and ruined small farmers began migrating to California, lured by growers there who were in search of cheap labor for harvesting their crops.

• The U.S. economy was recovering, but slowly. Roosevelt's strategy of increasing wages had created a disincentive to hire more workers, especially by smaller businesses. People in small businesses were complaining that the National Industrial Recovery Act favored big business. Growers in California, meanwhile, remained ungoverned by minimum wage laws, and, with an abundant supply of labor bidding down wages, they were paying their migrant work force as little as fifty cents a day.

• Meanwhile, some conservatives were complaining that Roosevelt was taking the U.S. down the road to Communism, while American Communists were opposing reform in favor of revolution and charging that Roosevelt was taking the nation toward fascism.

• By 1935, unemployment in the United States had fallen from its high around 25 percent down to around 17 percent, more than three times Sweden's and still a long way from its 1929 level of 3.2 percent. While Sweden's industrial production had risen fifty percent above its 1929 level, industrial production in the United States was 25 percent lower than its 1929 level.

• Roosevelt was still pursing fiscal conservatism. There was nothing in the U.S. like the big emergency spending in Sweden and the quick recovery that brought revenues to pay back the deficit. Eventually economic recovery would come to the United States with government purchases for war production, and the end to high unemployment would come with another form of government spending - payment for the widespread induction of men into military service