Differences in policies for ending the Great Depression

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Grossman and Meissner (318) argue that despite the economic stagnation that most countries witnessed during the subprime crisis, the Great Depression is undoubtedly the longest and broadest economic decline in the developed world. This period saw a decline in employment rates, commodities prices, and gross domestic product of countries across the world among other adverse implications. Two presidents during this period, including President Roosevelt and President Hoover, made various strategies to end the Great Depression and reduce its effects on American citizens. These policies impacted the economy differently with some producing positive consequences while others brought adverse implications. President Roosevelt, through the New Deal, focused on recovery and reform programs that largely contributed to the end of the Great Depression while President Hoover largely applied a non-intervention policy.

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President Hoover’s policies to end the Great Depression

One of the policies that President Hoover initiated was the rejection of proposals to take bold government actions and the subsequent agreement to cooperate with businesses (Divine et al. 619). The President convened a series of meetings and White House conferences with major businesses and some of the leading financiers. Murphy asserts that the president managed to successfully convince them to maintain employees’ wages, their jobs, and the overall investment spending of their businesses (31). If this proved impossible, the employers would cut the wages slowly than the prices of their goods to ensure that the profits took the hit before the employees. It would also ensure that the reduction in hours could easily be spread among employees rather than conducting layoffs (Murphy 32). However, this plan failed as these business people had to make wage cuts and layoffs to survive.

The President also proposed voluntary efforts as the way to deal with some of the negative repercussions of the Great Depression. According to Divine et al. the President called on private charities and local governments in the US to offer food and clothing to those afflicted by the depression (619). It is imperative to note that the president rejected the plea for federal relief by arguing that it would undermine the character of hardworking American citizens (Divine et al. 619). The failure of this strategy prompted the President to take bold measures to help alleviate the effects of the Depression on the American people. He instituted the Reconstruction Finance Corporation in a bid to help banks and insurance firms from becoming solvent. However, despite the involvement in business, the President still frowned upon other direct means such as federal relief and public works to reduce unemployment.

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The Smoot-Hawley Tariff Act enacted in 1930 also fostered the Great Depression. This act imposed some massive tax hikes for American citizens who were importing foreign goods. After the rapid falling of prices during the recession, the President felt that the government needed to intervene to help the American farmers and other struggling industries. Murphy argues that while a hike in tariffs assists American producers, it still makes it costly for the American consumers to purchase the products (33).

President Roosevelt’s Policies to End the Great Depression

After the failure of President Hoover to end the Great Depression, Americans were ready to have a regime change that would help address these concerns. After being elected, President Roosevelt developed the New Deal reforms to help address the economic and social implications of the Great Depression in America. He launched various initiatives which were meant to improve the economic and social conditions of the people. The Tennessee Valley Authority, for example, was an ambitious measure that saw the building of various dams in seven states. The project was designed to control the flooding in these regions, help in the production of electricity and to ease navigation (Divine et al. 622). This project not only changed an underdeveloped part of the country but also offered employment opportunities for idle persons.

Wallis posits that no programs in the New Deal were more important than those involving relief in sheer fiscal terms and on the direct impact it had on those afflicted by the implications of the depression (448). These relief policies were not aimed at encouraging economic recovery but to provide assistance to families and individuals who were victims of the depression. The Civilian Conservation Corps, for example, offered work to millions of youth while the Works Progress Administration offered welfare services to the unemployed. Divine et al. claim that these relief programs were meant to help regain self-respect and boost the economy through the purchasing of goods (623).

To stimulate the economy, Roosevelt sought to raise wages of those working and to raise product prices. He proposed industrial and labor policies that would limit competition and raise the bargaining power of employees. This included the creation of NIRA which would reduce competition and create incentives for businesses that raised wages and accepted collective bargaining (Cole and Lee 673). Sectors which were affected by these industrial and labor policies showed significant increases in wages and prices after the adoption of these policies and remained high throughout the 1930s (Cole and Lee 792). Other monetary policies that improved the economy of the US during this time include the elimination of the gold standard and the policy of inflating the price level to pre-depression levels (Eggertsson 1476).

Concisely, the two Presidents made relatively different initiatives to end the great depression. While President Hoover believed in free labor markets and less government interference, the lack of intervention made the recession advance as time progressed. The policies by President Roosevelt, however, stimulated the economy through an increase in public spending while also providing employment and welfare services to victims of the depression.

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  1. Cole, Harold L., and Lee E. Ohanian. “New Deal policies and the persistence of the Great Depression: A General Equilibrium Analysis.” Journal of Political Economy, vol. 112, no. 4, 2004, pp. 779-816.
  2. Divine, Robert A, T. H. Breen, Hal Williams, Ariela J. Gross, H. W. Brands, and Brands. America, past and present. 10th ed., Pearson Longman, 2012.
  3. Eggertsson, Gauti B. “Great Expectations and the End of the Depression.” The American Economic Review, vol. 98, no. 4, 2008, pp. 1476-1516.
  4. Grossman, Richard S., and Christopher M. Meissner. “International aspects of the Great Depression and the crisis of 2007: similarities, differences, and lessons.” Oxford Review of Economic Policy, vol 26, no. 3, 2010, pp. 318-338.
  5. Murphy, Robert. The politically incorrect guide to the great depression and the new deal. Regnery Publishing, 2009.
  6. Wallis, John Joseph. “Lessons from the political economy of the New Deal.” Oxford Review of Economic Policy, vol. 26, no. 3, 2010, pp. 442-462.
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