New Deal F. D. Roosevelt - History of Economics

9.1.2. New Deal F. D. Roosevelt

The global economic crisis has had a significant impact not only on the economies of developed capitalist countries, but also on the notions of the possibility, degree and socio-economic results of self-regulation of the market economy. To overcome the consequences of the Great Depression, governments of various countries are beginning to actively regulate the market economy, use government regulation tools to stabilize economic development and stimulate economic growth. Ideas and theoretical concepts of the need for state regulation of the market economy find their realization in virtually all developed countries.

The socio-economic consequences of the global economic crisis took place to varying degrees in all developed countries. The decline in the production of the national product, the massive bankruptcies of enterprises and banks, rising unemployment, a decline in the standard of living of the population, etc. were a common "disease" developed countries in this period. But the governments of different countries formed their own specific programs for stabilizing the economy, used methods of state regulation of the economy that were different from other countries.

The predecessor of FD Roosevelt as president was G. Hoover, who was building an economic policy of overcoming the crisis on the basis of three provisions:

- the balance of the state budget without increasing government spending;

- contain inflation by any means;

- preserving the gold content of the dollar.

In 1932, FDR Roosevelt became president of the United States, which begins to pursue an economic policy to overcome the crisis and further develop the national economy. This program was called the "new course" F. D. Roosevelt. New Deal FD Roosevelt is one of the most famous, successful and successful economic reforms that have embraced all spheres of the economy and the system of social relations.

The theoretical basis of F. D. Roosevelt's economic policy was the concept of JM Keith (1883-1946) on the need for state regulation of the economy and specific instruments of state regulation. The whole economic policy of FD Roosevelt was based on the thesis that the most important stimulus for the economic stabilization of the economy is the growth of aggregate demand, including government spending. In accordance with this, the concept of budgetary policy was changed. The government deliberately went to deficit financing - to exceed the state budget over revenues.

To implement this economic policy and coordinate its activities, a special organization was created - "National Administration for the Restoration of Industry" (NIRA, National Industrial Recoverg), led by a council of major economists and industrialists.

Directions of economic policy New Deal included in the system of state regulation almost all the main spheres of economic life.

Strengthening of financial and banking systems. It was necessary to stop the collapse of the banking system - the "circulatory system of the economy" - without which no branch of the economy could function properly. An Extraordinary Law on Banks was adopted, which gave the president broad powers. In order to analyze the existing banking system on March 6, 1933, all banks were closed in the country, which were further divided into 3 groups (Figure 19).

Three groups of banks

Figure 19

After analyzing the financial possibilities of banks, on March 15, 1933, financial institutions that were recognized as "healthy" were opened. As a result, with a reduction in the number of banks, the concentration in the banking system and the credit resources of banks increased significantly. The number of banks decreased by 15% (2 thousand banks did not receive permission to open), but their assets increased by 37%. This led to an increase in the scale of lending to industrial enterprises, which was very important in the context of the economic crisis. All banks of the country were divided into two groups - deposit and investment. The system of state deposit insurance has been introduced. Full insurance was guaranteed deposits in the amount of up to 10,000 dollars, which was most suited to the general population. The introduction of state deposit insurance has strengthened public confidence in banks, stopped the outflow of money and led to an increase in the flow of free money to banks.

In the same period, the norm of mandatory reserve was introduced into the practice of monetary regulation - an instrument for regulating the money supply, actively used by central banks of different countries and in modern conditions.

Devaluation of the dollar. To increase financial resources of the state and expand the possibilities of state regulation, gold was withdrawn from free circulation, the gold standard was abolished, gold export abroad was prohibited, and gold was devalued. In January 1934, its gold content decreased by 41%. If in 1932 an ounce of gold was worth $ 20.67, then in January 1934 the official price was set at $ 35 per ounce. Devaluation of the dollar was preceded by a large-scale purchase of gold worth $ 187.8 billion at prices that exceeded the rate of gold against the dollar.

The devaluation of the dollar, the withdrawal of monetary gold from circulation, affordable lending promoted price increases and created an inflationary mechanism for the development of the economy. The devaluation of the dollar ensured the redistribution of incomes in favor of industrial, rather than financial capital, which stimulated industrial growth. The debt of monopolies has decreased, the export opportunities of the USA have increased.

The stimulation of industrial growth on the basis of the Law on the Restoration of National Industry adopted in June 1933. To implement this direction of economic policy, the National Reconstruction Administration was created, which included representatives of major concerns, figures from the American Federation of Labor and economists.

Among the measures that contributed to the revival of the economy and its emergence from the crisis, the focus was on codes of fair competition. The President of the country urged entrepreneurs working in the same industry, during difficult times of bankruptcies and mass closure of enterprises for a time to abandon competition. Entrepreneurs were invited to sit down at the negotiating table, voluntarily determine a joint coordinated policy in all important areas of production and sign the "peace treaties" - codes of fair competition. The coordinated policy of entrepreneurs gave the necessary respite in the competition.

The Association of Entrepreneurs divided the entire industry into 17 groups, each of which was to develop a code for this group. Codes of fair competition provided for the agreement of entrepreneurs within the same group on the main areas of activity of enterprises: production volumes, price levels, the use of the same type of technological processes, distribution of sales markets, the size of the working day, terms of employment, wages, etc. In addition, these Codes, regulating the volume of production, ensure that its scale corresponds to the capacity of the domestic market - solvent consumer demand.

In each code, the terms of employment were determined, discrimination in hiring trade union members was excluded, the maximum permissible working week and the minimum weekly wage ($ 12-15) were determined. In all industries, more than 400 codes have been formed and signed, which have been distributed by more than 90% of American industry and trade.

Simultaneously for two years the antitrust law was suspended, which stimulated the growth of concentration and centralization of production.

Fighting unemployment. The unemployment rate in the United States was very high, in 1933, 16.9 million people lost their jobs, the wage fund fell by 60%, only 10% of the population were fully employed. The existing employment offices in this period could not give people work.

The lost work and income lost the opportunity to pay loans for homes and apartments. As a result, those who lost their homes were forced to settle in the suburbs, building shelters from "improvised means", and so-called "governor's towns" ("gouvervili") began to be formed around large cities, whose residents switched to local exchange and practically did not use money.

To combat unemployment, the Emergency Relief Administration was created. To fight unemployment in the US in this period was allocated about $ 4 billion from the state budget.

The state employment policy has two directions:

- a passive policy aimed at maintaining the standard of living of the unemployed, - unemployment benefits and in-kind assistance (providing free services, allocating food, clothing, etc.);

- an active policy - creating jobs, providing work (in modern conditions - retraining and retraining), etc.

To reduce unemployment, FD Roosevelt has chosen an active employment policy - the formation of new jobs at the expense of the state budget.

As part of the New Deal F. D. Roosevelt and in accordance with the active employment policy was formed a system of public works, which involved the unemployed. For the period from 1933 to 1939, about 4 million people were employed in public works. A feature of the employment policy in this period was that jobs were created in those industries that "pulled out" other related industries based on the effect of the multiplier effect - in the construction of roads and railways, bridges, canals, dams, infrastructure facilities, etc. Special labor camps were created for unemployed youth aged 18-25 years who were guaranteed work and wages . As a result of such a policy, not only the growth of employment and incomes was provided, but also incentives for economic growth were created.

Overcoming the agricultural crisis. Prices for agricultural products decreased by 58% during the crisis, and this price level did not allow farmers to profit and recover production costs. The prices for grain made it more profitable to use it not as a food product, but as a fuel. During the years of the crisis about 18% of farmers were ruined, whose property was sold because of non-payment of debts and taxes. Farmers were deprived of their own land. In the cities people were starving, and farmers were forced to destroy the crop - they burned wheat, poured milk, poured land with kerosene and smelled, which led to a reduction in the supply of agricultural products.

Urgent measures were taken to help farmers. In 1933, the Law on the Regulation of Agriculture was adopted, the implementation of which was carried out by the Administration of Agricultural Regulation. The law on the regulation of agriculture provided for state regulation of prices. Prices for agricultural products were raised.

The farmers were offered compensation and premiums for reducing the acreage and production volumes. As a result, 10 million acres of cotton fields were smelted and taken out of economic circulation, 1/4 of the crops of other crops were destroyed, about 30 million head of cattle and pigs were slaughtered. In 1934, cotton harvest was cut by 25%, corn by 40%. As a result of the measures taken, it was possible to curb the fall in prices for agricultural products and improve the situation of farmers. The rise in the price level was also important for the elimination of the "price scissors" - the ratio of prices for agricultural and industrial products, primarily for agricultural machinery.

A moratorium on the bank debts of farmers was introduced. The state began to finance the debts of farmers, which by 1933 amounted to $ 12 billion. Refinancing of farmers' debts was carried out, interest on mortgage debt was reduced, and terms for repayment of debts increased. In general, with the help of the state, the debts of farmers were reduced by 37%. The government ensured the growth of farm loans due to the renewed banks. During the period 1933-1935. farmers received loans worth more than $ 2 billion

The anti-crisis agrarian policy of the state was completed by the Law of 1936, which called for the conception of the "always normal granary". On the eve of the Second World War, the US government ensured that prices were maintained not by the destruction of surplus agricultural products, but by its preservation. The state paid farmers often not yet produced or sold products.

Regulation of social relations. Under FD Roosevelt, the foundations of the social security system were laid. In 1935, the Social Security Act was passed, according to which old-age insurance (pensions) and unemployment (unemployment benefits) were introduced. The federal pension fund was formed from two sources: due to the tax on entrepreneurs and the tax on workers and employees at a rate of 1% of wages. The standards of pension provision were unified throughout the country. At the same time, if pension provision was guaranteed to all workers, only workers of large industrial companies could receive unemployment benefits. Workers and employees of trade, services were not part of the unemployment insurance system. This law also gave workers the right to hold strikes.

Wagner's law, adopted in 1935, introduced the regulation of working conditions and relations between entrepreneurs and trade unions. In accordance with it, workers were given the right to organize trade unions and conclude collective agreements with the administration. Entrepreneurs were forbidden to interfere in the creation of workers' organizations, discriminate against members of trade unions, refuse to participate in collective bargaining, etc., and the courts had to consider trade union complaints.

The regulation of wages and working time was carried out (Law on Fair Labor Regulation). The minimum wage is set at 25 cents per hour - with an increase of 40 cents in the next seven years. The maximum workweek was set at 44 hours, followed by a reduction in 3 years to 40 hours.

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