The 1930s

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. … It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

"When the panic of 1929 suddenly wiped out the whole value of many stocks and sharply reduced the values of others, a great number of people who had though themselves rich, or at least well-off, found themselves with much less than they had thought they had, or with nothing at all. By [the] millions they quit buying anything except what they had to save to stay alive. This drop in spending threw the stores into trouble, and they quit ordering [new products] and discharged clerks. When orders stopped the factories shut down, and factory workers had no jobs"

Units

Abstract

In Brad DeLong's History of the Twentieth Century, he indicates that "the twentieth century is unique in that its wars, purges, massacres, and executions have been largely the result of economic ideologies."  In the 1930s a fierce ideological war raged between two ideological groups - the Classical and Keynesian economists.   It was not a military war fought to expand or protect one's homeland, but a war of ideas concerning the proper role of the government in the economy.  This did not, however, mean there was no hardship and suffering associated with the war.  It was a war fought during the Great Depression and there were many victims immortalized in the stories and songs of the era.  In this unit we will examine the structure of the competing theories - the conservative Classical economists who believed that economic downturns were a valuable feature of the economy, purging them of their excesses, and the liberal Keynesian economists who believed that the human toll of the depression was too high, that government needed to act.  When we are done you will see how the first quote at the top of the page, taken from the Memoirs of Herbert Hoover reflects the sentiments of the Classical economists, while the second quote from historian Gerald Johnson captures the essence of the Keynesian view. We will also examine the policies  rooted in these theories, examining how within the decade the guidelines for fiscal policy changed, how we moved away from the balanced budget rule and the tax increases of Herbert Hoover were replaced by the spending increases of Roosevelt's New deal.