American Economy

Americans most take Adam Smith’s view (laissez–faire)

After WWI – Americans wanted things to return to pre–WWI

which was  disregarding business controls

Warren G. Harding (1921 – 1923[died]) came in after Woodrow Wilson

– reduced government spending by 20%
– reduced federal tax particularly for wealthy
– reversed government trend from the wartime involvement
– went back to the traditional view of individual needs revived
– biggest barrier  labour unions

Calvin Coolidge (1923 – 1929)

– non-intervention government
– laissez-faire vision
– decrease income tax  wealthy receive tax breaks: 40 – 42% –– 1926
– reduced corporate taxes
– organized labour unions
– government big business worked hand in hand

American Economy
– Ford mass production
– cash money  luxuries
– increase in stock market
– increase in bank loans

1929 –– Stock Market Crash

The Great Depression (see hand-out “Causes of the Great Depression”)

Herbert Hoover (1929 – 1933)

– did not intervene a lot (everything will be okay)
– looked for cooperation between business and labour
– encouraged government to hire people  public works

F.D.R. – Franklin Delano Roosevelt (defeated Hoover 1932)

– New Deal (Economic Reforms)

 Stage 1
– promote recovery
– government get business and labour working together

NRA – National Recovery Association (government organization)

1. established boards in industries to set production, price quotes and standards
however 1935 declared unconstitutional
2. lower unemployment  public works
3. Security exchange Commission
– regulate stock bond markets to prevent another crash
4. Banking Act –– Federal Deposit and Insurance Commission guaranteed money in banks
5. Tax Acts –– inheritance tax

Stage 2
Social Security Act (Social Safety Net)
• established – Unemployment Insurance – Old age pension
 was supported by employers and employees
 welfare Capitalistic State

National Labour Relations Act

•outlawed unfair labour practices
•increase number of union members

Tennessee Valley Authority Act –– is an example of public works project (building large dams)

Failure of the New Deal

1. unemployment remained high
2. failed to reach the poor (money)
3. did not end depression –– WWII did

Successes of the New Deal

1. Roosevelt – laid foundation for present day system
2. American mixed system
 some welfare – unemployment
 social security
 government stimulating economy
3. Beliefs remain capitalistic
– profit motive  driving force
– private property