Progressivism: Conclusion

Response to early 20th century

problems from many angles

Populism

Socialism

Progressivism Muckrakers

Upton Sinclair (The Jungle)

Jacob Riis (How the Other Half Lives)

Lincoln Steffens (The Shame of the Cities)

Ida M. Tarbell (The History of the Standard Oil Company)

Muckrakers crusading journalists

exposed scandal, corruption, and injustice

wrote in cheap and popular magazines

light destroys corruption

Ida Tarbell & John Rockefeller

tradition continues today

Triangle Shirtwaist

Ida Tarbell on John D. Rockefeller

Mr. Rockefeller was "good." There was no more

faithful Baptist in Cleveland than he. Every

enterprise of that church he had supported

liberally from his youth. He gave to its poor. He

visited its sick. He wept for its suffering... Yet he

was willing to strain every nerve to obtain for

himself special and illegal privileges from the

railroads which were bound to ruin every man in

the oil business not sharing them with him.

It may be that Mr. Rockefeller is one of those

double natures that puzzle the psychologist. A

man whose soul is built like a ship in air-tight

compartments to use the familiar figure -- one

devoted to business, one to religion and charity,

one to simple living and one to nobody knows

what. But between these compartments there are

no doors.

Progressive Reform 1880-1920

Dehumanization

labor unions/regulation of working conditions

Imperfect Information

FDA

Monopolies

Break them up: Sherman Anti-trust Act

Regulate them: FTC

Continued

Externalities Subsidize positive

National parks—environmental concerns

Reduce negative Prohibition (18th amendment)

Public goods Public sanitation services

Economic Injustice Minimum safety standards in housing

16th Amendment—graduated income tax

Massive expansion of private charity

Underlying philosophy

Human nature basically good

Trust and empower the people

“Scientific” knowledge will provide “progress”

Trust and empower experts

Blows to Progressivism

WWI—1914-18

Science

produced machine gun/mustard gas, but not knowledge to avoid war

People

Proved human—as in the human predicament

Jazz Age: “Roaring 20’s”

Post war prosperity—Henry Ford

Harding, Coolidge, Hoover

“a chicken in every pot and a car in every garage”

“We in America today are nearer to the final triumph over poverty

than every before in the history of any land.”

-- Herbert Hoover, 1928

Outline: The Great Depression

Economic Fluctuations and Recession

Crash, Recession, and Depression

Government Attempts To End the

Depression

The Constitution and the Growth of

Government

The Legacy of the Great Depression

Macro-economic Instability

Normally output and employment rise and fall

cyclically.

Recession: The Breakdown

Economies generally grow.

At times, though, they shrink: recessions.

Employment drops; output drops significantly below

what economy could produce with full employment.

Recession vs. Depression

A depression is a very severe recession.

One definition of a depression: A drop of GDP

of at least 10%.

Great Depression begins as

Economic Crisis

Recession begins summer of 1929

Oct. 24, 1929: Stock market crashes

By election of 1932

25% unemployment in America

50% Cleveland, 60% in Akron, 80% in Toledo

185,000 bankruptcies (large and small)

over 4000 banks went bankrupt

one-third of American farmers lost farms

Recession: The Breakdown

Why?

“Shock” hits the economy: stock market drop, bank

panic, crop failure, housing bubble burst.

Wages, prices should adjust downward quickly to

preserve full employment.

But wages, prices do not move down quickly:

contracts, inertia.

Excess supply of goods and labor.

Firms cut production and lay off workers: recession.

Crash, Recession, and Depression

Series of unfortunate events.

Boom economy in 20s.

1929: Problems begin to emerge.

Drought.

Decline in industrial production.

Stock market crash: October 24,28,29.

1930: Problem shifts from stock market to banks.

Stock market losses raise concerns about banks.

Runs. Bank failures. Devastating.

Recap: Causes of the Great Depression

The stock market bubble bursts.

Then trouble spreads to the banks.

The Federal Reserve does nothing to

stabilize banks or to keep money supply

from shrinking.

Crash, Recession, and Depression

Series of unfortunate events.

1930-1933: 1/3 decline in money supply.

Consumers stop buying; businesses stop investing.

The Federal Reserve did not maintain the money

supply and did not rescue banks.

Terrible mistakes: These two failures are the main reasons

why the recession morphed into a Great Depression.

Large tariff increases in 1930 (infamous Smoot-

Hawley tariffs).

Crash, Recession, and Depression

Hard times.

The Great Depression shows how bad things can get

in a market economy

1930-1933: 30% drop in GDP.

Industrial production plummets.

Farm prices plummet. One third of American

farmers lose land.

Over 9000 banks shut down.

Terrible dust storms make things worse.

Great Depression Stats

Year Real GDP

$ billions

Price level

1958=100

Unemploy-

ment

Suicide

Rate

Fore-

closures

1929 203.6 50.6 3.2% 13.9 134,900

1930 183.5 49.3 8.7 15.6 150,000

1931 169.3 44.8 15.9 16.8 193,800

1932 144.2 40.2 23.6 17.4 248,700

1933 141.5 39.3 24.9 15.9 252,400

Crash, Recession, and Depression

Hard times.

Many men on streets.

Many hide in houses until they get foreclosed.

Many men leave families.

Blacks hit especially hard.

Great Depression damaged an entire

generation, some beyond repair.

Great Depression as Economic

Crisis Recession begins summer of 1929

Oct. 24, 1929: Stock market crashes

By election of 1932

25% unemployment in America

50% Cleveland, 60% in Akron, 80% in Toledo

185,000 bankruptcies (large and small)

over 4000 banks went bankrupt

one-third of American farmers lost farms

Great Depression as Moral Crisis

Individual demoralization

Social deception

Alcoholism

Abandonment

Suicide

National demoralization

Great Depression as Political

Crisis

Violent conflict

Loss of faith in the system

Rise of demagogues:

Manipulates emotions, fears, and prejudices to

obtain vast power

America: Huey Long

confiscate incomes over $1 mil.

$2000 guaranteed income/free college

“SOW” clubs boast 7 million members

Europe: Hitler, Mussolini, Stalin

FDR to the Rescue

optimistic &

energetic

president as

legislative leader

unprecedented

federal

involvement

The Great Depression 31

Election of 1932

FDR’s Approach

Charismatic Leadership

A “New Deal”

“Bold, persistent experimentation”

Anticipated and then influenced by Keynsian

economics

“prime the pump”

Stimulate demand by increasing spending or cutting taxes

FDR (continued)

Revolutionized government

Four Freedoms Speech, Jan. 6, 1941

of Speech

of Worship

from Want

from Fear

Year House of Representatives Senate

Democrats Republicans Democrats Republicans

1928 167 267 39 56

1930 220 214 47 48

1932 310 117 60 35

1934 319 103 69 25

1936 331 89 76 16

Government Efforts To End the

Depression

Election of 1932

The New Deal

The National Recovery Administration

Agricultural Adjustment Act

Short-term relief: CCC, WPA, others

Regulation: SEC, FDIC, NLRB, FCC,

minimum wage, Social Security

Keynesian economics.

Two New Deal Programs

The Agricultural Adjustment Act (AAA) is

designed to help farmers.

It does not work very well.

The Works Progress Administration

(WPA) does provide jobs for many.

Long-term Structural Changes

Caused by the New Deal Agricultural Price Supports

Government regulation of business

SEC to regulate the stock market

FDIC to regulate bank deposits

NLRB to regulate labor relations

Social Security to provide retirement income for the elderly

Acceptance of deficit spending

Government Efforts To End the

Depression

The Real Solution: Restore money supply.

This plus passage of time, rather than just

World War II, end the Great Depression.

The Constitution and the Growth of

Government

Proponents of government growth argued

against the Constitution.

In practice, the Constitution did not prevent

government growth.

Commerce clause interpreted broadly.

Takings clause interpreted narrowly.

Free speech, freedom of religion, and due process:

not economic freedom.

The Legacy of the Great Depression

Before the Great Depression, the

government did not take responsibility for

the economy.

Default switched from no intervention to

intervention.

WWII solidified this mindset.

Since then, almost any glitch has been

subject to government action.

The Legacy of the Great Depression

Most important legacy of Great

Depression is philosophical: We expect the

government to solve economic problems.

The days of limited government are over.

A spiritual-political dilemma

God would have us be both free and equal

America’s response

Why Focus on Income?

lifespan education

leisure income consumption

Equal 1800 Unequal

lifespan leisure education consumption income

Equal 2010 Unequal

The Gospel and Economic

Inequality

The Savior, through scriptures and church leaders, has

repeatedly told us to help the poor.

“And now, for the sake of…retaining a remission of your sins

from day to day, that ye may walk guiltless before God—I

would that ye should impart of your substance to the poor,

every man according to that which he hath, such as feeding the

hungry, clothing the naked, visiting the sick and administering

to their relief, both spiritually and temporally, according to

their wants.” Mosiah 4:26.

Helping the poor is part of the public virtue we need to

sustain society.

The Gospel and Economic

Inequality

Does the admonition of Christ to help the

poor extend to the way we use

government?

In other words, is using government to

compel spending on aid to the poor a way

to fulfill the command in Mosiah 4:26?