Great Depression

4 Pages 1124 Words

The Great Depression and the New Deal.

In 1932 almost 1500 banks failed, 32,00 businesses closed their doors and
one-fourth of the labor force in the United States was unemployed. In that
same year Franklin Delanore Roosevelt was elected president. He took
office in 1933 with the economy and the nation in a severe depression. For
the first three years of the Great Depression the government did very
little to help the economy to recover. This all changed when FDR and his
democratic administration took control. This administration initiated the
"New Deal." This program brought together the federal and the state
governments. The states received federal grants, which provided funding
for such programs as public works projects, housing assistance, aid to
families with dependent children, unemployment compensation and many other
programs. These programs helped to eventually pull the economy and the
nation out of the Great Depression. The main question is why the
democratic administration and FDR felt these programs would work, and why
they felt such a dramatic change in the role of the government was needed.
For the answer we must turn to an economist by the name of John Maynard
Keynes. He developed an economic theory that said that the forces of
supply and demand operated to slowly in a serious recession, and the
federal government should step in and help stimulate the economy. This
theory became known as Keynesian Economics. In terms of the Great
Depression the economy was at a serious imbalance because the public sector
was saving more than usual and the business sector was not investing at a
typical level. Therefore the government needed to step on and stimulate
the economy. This stimulation was seen in the actions of the government in
the "New Deal." Slowly but surely the steps taken by the government pulled
the nation's economy out of the recession it faced for so many years.


Fran...