Professor Aleksander Lust
Final Exam Paper
Question No. 1: During the great depression, American workers protested, rioted, and struck. During the current recession, they have quietly accepted layoffs and pay cuts. Why is American labor less militant today than in the 1930s? What impact does this have on public policy?
Great depression was a worldwide economic crisis, and during Great Depression the unemployment rate rose to record high in the United States. In 1930s unemployment rate was soared by 20 percents. Stock price was declined by 89 percents, and industrial production and construction were almost halt. Unemployment was rising and wages fell for those who were working, business failed, millions of people were homeless, banks were out of business. Farmers were caught in a depression because of the collapse of food prices with the loss of exports markets after World War I. Farmers also lost their lands. In 1933 than senate passed an unexpected bill to established a 30 hours week at the same weekly pay rate; at the same time corporate leader decided to create a government regulatory agency, they wanted create that kind of agency because they believed that it would help to bring business leader together to set minimum wages, minimum prices, and maximum level of production output. For the hope of elimination wages and overproduction they created the National Recovery Administration. The main reason was corporate leader wanted to gain unprecedented power to change the nature of market failure. At that time moderate conservative leaders also decided to accept the amendments, they thought section 7a wouldn’t cause any problem because there was no enforcement power behind it. But the National Recovery agency was completely failed and section 7a had an overwhelming effect on workers and union organizers. Workers thought that the President of United States wanted them to join in Union. This was one of the reason worker struck and protests in hundreds of locations across the country, and their demand was to join in the union with their own choose. Other reasons American labor struck and protests during the Great Depression official denials helped to confuse the unemployed and to make them ashamed of their plight. People were lined up on the street to get a job, families were exhausted their savings, borrowing from the relatives. All those dilemma burst into protests, struck, riots etc. during the Great Depression.
Turmoil in housing, credit and financial market plagued the U.S Economy in 2008. According to the National Bureau of Economic Research identified December 2007 as the beginning of a recession. Labor market started to slide during the second half of 2007 and continued to slide thorough out 2008. In the US unemployed rate rose record high since 1982. House market collapsed record; a lot house went into foreclosure. If we see the mainstream media, the current recession was caused by laissez-faire economics. But the direct cause of recession was big government. The big government causes the current financial crisis. Congress powered Fannie Mae and Freddie Mac to exercise their ill power. By using the Congressional Democrat power hundreds of billions of dollars turned into Fannie Mae assets to purchase mortgage for unqualified homeowners in the name of affordable housing, which affected the whole financial market in the US. After the financial system meltdown, the crisis spread to the entire economy.
If we compare both of the causes of economic crisis, current recession and Great depression was caused by deflationary forces. According the greatest free market economist Milton Friedman, the fundamental problem of Great Depression was that the Federal Reserve foolishly allowed the money supply to shrink by a third between 1929 and 1933. This is same problem causes the current recession as like as Friedman descried for Great depression.
During Great Depression...