Arguably, this must be the biggest bungle in recent history
Great depression of 1929-30 could have been averted but the problem became really acute due to follies of government, including that of FDR. One of the biggest blunders was that government spending channeled away from the poorest people. Most of the spendings went to political “swing” states in the West and East where previous elections had been relatively close– average incomes in the swing states were at least 60% higher than in America’s poorest region– the South. FDR, pursuing his self-interest as an incumbent, spent money where it was most likely to gain new votes. The New Deal made it more expensive for employers to hire people which discouraged hiring. The National Industrial Recovery Act (1933), National Labor Relations Act (1935) and Fair Labor Standards Act (1938) were among the New Deal laws forcing wages above the market levels. As a result, in 1937– a depression year– average labor costs jumped 11%, and they went upon other 5% the following year. Consequently, there was a surge of unemployment.
Policy blunders forced up the cost of living in the worst of times which discouraged consumer spending. During the Depression, Americans desperately needed bargain prices, but FDR promoted higher prices.
Great depression of 1929-30 could have been averted but the problem became really acute due to follies of government, including that of FDR. One of the biggest blunders was that government spending channeled away from the poorest people. Most of the spendings went to political “swing” states in the West and East where previous elections had been relatively close– average incomes in the swing states were at least 60% higher than in America’s poorest region– the South. FDR, pursuing his self-interest as an incumbent, spent money where it was most likely to gain new votes. The New Deal made it more expensive for employers to hire people which discouraged hiring. The National Industrial Recovery Act (1933), National Labor Relations Act (1935) and Fair Labor Standards Act (1938) were among the New Deal laws forcing wages above the market levels. As a result, in 1937– a depression year– average labor costs jumped 11%, and they went upon other 5% the following year. Consequently, there was a surge of unemployment.
Policy blunders forced up the cost of living in the worst of times which discouraged consumer spending. During the Depression, Americans desperately needed bargain prices, but FDR promoted higher prices.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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