What was the done to minimize the impact of the Great Depression on the countries affected?

David Chavdia
5 may 2012
History

What was the done to minimize the impact of the Great Depression on the countries affected?

The Great Depression started as a consequence of several factors. These, in return were the direct effect of a series of events that caused the stressed economy to fall apart. In fact, the world market was barely functioning after World War One, because of continuous loans from the Unites States to all over Europe, and especially in Germany. Therefore, the stock market crash of Black Tuesday October 29, 19291 broke the system. Two months after the Black Tuesday the investors lost 40 billion dollars. The stock crush caused over 9000 banks to fail, and, since there wasn’t insurance for costumer of these banks, when a bank failed all the savings of people got lost. The surviving banks stopped borrowing money, making matter worse2. The reduction in purchasing across the board led to a reduction of production and a reduction in working forces this led to a rise of unemployment of 25 %. When the business started to decrease, the government decided to apply the Smooth-Hawley Tariff to protect the American companies. High tax for tariffs, consequently, led to a decline in foreign trade.3 Furthermore, the Mississippi Valley experienced one of the most terrible droughts in its history. The farmers in that valley were forced to sell their farms to pay the taxes and the number of unemployed and homeless people increased exponentially4. The American decline was transmitted to the rest of the world largely through the gold standard. However, other events influenced the beginning of the depression in other counties.5
The united Sates of America were in crisis, and to solve these problems Franklin D. Roosevelt introduced the New Deal. He ushered in the 'New Deal ' program (1933 - 1938) to help the unemployed giving to then jobs, and to reform the strengthen of American economy6. The following are the policies adopted:
The Agricultural Adjustment Act (AAA) was created to reduce the surpluses, and to increase prices. This act consisted in make a balance of supply and demand for farm commodities so that prices would support a decent purchasing power for farmers. This concept was known as "parity."8
The Civil Works Administration (CWA) was made to create useful construction such as repairing schools, laying sewer pipes, building roads. Yet, it was mainly aimed to employ millions of people paying them more than 15 $ per week using the state’s money. Plus, The Public Work Administration (PWA) was created to build public building, highways, bridges, and dams for waterpower.
The Farm Security Administration (FSA) was created to help sharecroppers. The FSA made a temporary housing for “Okies and Arkies” refuges from Oklahoma and Arkansas that moved to California to find work. 8 The Federal Deposit Insurance Corporation (FDIC) was created to encourage the people to save their money in banks. It consisted in insurances for banks, which amounted to more than 5000$.
The Federal Emergency Relief Administration (FERA) was created in 1933, to support millions of households each month, and to give thousands of work projects to the unemployed. It also provided vaccinations and education programs for millions of poor people.8
The Federal Housing Administration (FHA) was created to stimulate the building industry by giving small loaning to build houses.8
The Indian Reorganization Act (IRA) was created to stop the loss of Indian land, and to encourage them to make their own government to preserve their traditions and crafts.8
The National Labor Relations Act (NLRA) was created to protect the rights of the labor, to organize them, and collectively bargain with employers.8
The National Recovery Administration (NRA) was created to stop the deflation, restore wages, and prices and competition.8
The National Youth Administration (NYA) was created to give jobs to young people.8
The Rural Electrification Administration (REA) was created to give low-cost loans to farm cooperatives to bring electricity in their communities.8
The Security and Exchange Commission (SEC) was created to protect public and private investments from stock market frauds.8
The Social Security Administrations (SSA) was created to help retired people, an unemployment insurance system, and public assistance programs for dependent mothers, children, and the physically disabled.8
The Tennessee Valley Authority (TVA) it’s purpose was to control the economic developments in the valley by building dams to control flooding, generate hydro electrical power, increase the agricultural production, and revitalize the Tennessee Valley region.8
The Works Progress Administration (WPA)
was established under the $4.8 billion Emergency Relief Appropriation Act of 1935, the WPA lasted until 1943 and employed at least 8.5 million people at an average of $2 a day.7 When the Great Depression started on Tuesday, October 29, 1929 Germany was especially vulnerable because it was dependent on foreign economic policies. There were the International Financial System Under the Dawes Plan and Young Plan (abandoned in 1929). Germany was dependent upon the US loans, in order to pay the Allied powers for reparations, and they in their turn had to pay back the loans to the US. When the Great Depression started the US stopped loans to Germany because of its falling international trade revenues.9 The crisis of the Great Depression brought disunity to the political parties in the Reichstag. Instead of making alliances and help each other the parties started a long period of isolation. In March of 1930, Heinrich Bruening, a member of the Catholic Center Party, became Chancellor. Bruening, in order to stabilize the situation, went to the president Hindenburg and incited him to appeal to the Article 48, witch states the possiobility to give extreme power to the president to by decree. This even created long protests, during which Bruening asked Hindenburg (in July 1930) to dissolve, the Reichstag parliamentary rules and started a new series of elections.10 Adolf Hitler, which already at power, was saw this moment as an opportunity to create a new Germany, in which only the Nazi party was to exist and so he did. Hitler became chancellor in 1933 and he promised to diminish the unemployment rate that intrested around 8.5 million people. In addiction to the spread of the unemployment and the hyperinflation hit the country with a peak of 1$ = 4200000000000 marks11. One of the most wanted goals of Hitler was to make Germany self-sufficient, and in the 1993 Hitler in charged Rhichard Darè to solve this problem11. Nazis solution policies started on May 2, 1933, Adolf Hitler ordered Saturn Abteilung (SA) to dissolve German trade unions to create The Labor Front (DAF) the only union allowed in the Third Reich. The DAF introduced the pay freeze, and now the wages and the taxes were controlled by the DAF, it also issued the work-books that recorded the worker’s employment record and no one could be employed without one11. To reduce even more the unemployment the government banned all the saving-labor machines in factories. Employers had to get a permission to reduce the labors. Members of Nazis party were given work contracts in companies that used manual labors a large amount of people were assumed in factories that produce weapons11. Hitler also started the mass production of the radios for two reasons. First, to reduce the unemployment and second for Nazi propaganda10. To reduce the “young” unemployment was created the Voluntary Labor Service (VLC) and Voluntary Youth Service (VYS) they planted forests, repaired riverbanks and helped to reclaim Westland11. Women were dismissed from professions such as doctors and civil servants, but married woman were paid a 1000 marks to satay at home.11 In the summer of 1935 Hitler wanted that all the man aged between 19 and 25 to work for the government for six month, later women were also introduced.11 Hitler, to make people work as hard as they could for the Nazi, created the Strength through Joy an organization that encouraged people by offering cheap holydays and a car, these were good ways to gain more support from people. Plus the money earned from the Strength through Joy was used rapidly to expand the weapon factories, this process accelerated at the arriva of WWII.12
Unemployment in Germany
Total
January 1933
6 million
January 1934
3.3 million
January 1935
2.9 million
January 1936
2.5 million
January 1937
1.8 million
January 1938
1.0 million
January 1939
302,000

In order to make Germany self-sufficient Darré set up the Reich Food Estate, he called it “The Battle for Food”.The Reich Food Estate was a huge organization, which controlled every part of agriculture. This enabled the government to control farmers’ incomes, as it determined both the cost of what they used and the price of what they sold. They used this to allow farmers’ incomes to increase the amount of annual goods.13 The New Deal and the Nazis’ policies were similar in the administration. For example Roosevelt crated the WPA responsible for the reconstruction or construction of schools, hospitals, roads, etc. The Nazi, Hitler, also started a program of build and reconstruct building as school, hospitals, etc, as Roosevelt. Then, NIRA allowed trade associations in many industries to write codes regulating wages, working conditions, production, and prices. It also set a minimum wage, like the DFA of Nazis it was responsible for the organization of wages and taxes. The TVA helped farmers and created jobs in one of Americans least modernized areas. Reactivating a hydroelectric power plant provided cheap electric power, flood control, and recreational opportunities to the entire Tennessee River valley. Moreover, the TVA program is very similar to the Richard Darré’s program of the improvement of self-supplies. In addition NYA provided 4.5 jobs for young people in the US, and also in this Nazis policies were similar. It was called VYS, it gave jobs to millions of young people in Germany exactly as the NYA did in US.
There were different policies because there were different situations. For example, Hitler was preparing for war, so he employed a massive amount of people in the production in weapons, while Roosevelt didn’t because the US because there was not a call for war, so he carried only about politics and the common well being of the US population Second, the economic problems were different Germany was experiencing a strong hyperinflation while the US had the deflation. The US after the WWI remained untouched so their fabrics weren’t destroyed. While in Germany the problem was the hyperinflation. In order to decrease the inflation Hjalmar Schacht the director of the Reich bank advised Hitler to change the Piepermark to a new volute. The new mark was valued at one Trillion of piepermarks, and inflation ceased to be a problem, the German people accepted the value of the new currency and businesses accepted it as being of worth, resolving the pressing hyperinflation.814
In conclusion, if we base the answer to the question on the effects provoked by single policies, Germany had more success in responding to the Great Depression. All the policies were useful and helped somehow Germany, while the USA had less successes in the defeating the crisis. Indeed some policies of the New Deal were so ineffective that they didn’t last a year. For example Roosevelt disbanded the CWA because the society described as useless. The IRA in my opinion it was completely useless it didn’t ha positive repercussions. Why? This policy didn’t help the country to fight the crisis, and if the Indians wanted to restore their traditions they were absolutely free to do that, they didn’t needed the permission of the President. So, the US should have been more effective in uprising the aggregate demand. In addition, Kenyans believed that the short term or decisions for a short period of time would have had more positive effects rather than long run decisions, because it’s not possible to predict what would happen in the future15. Finally, when the USA were dealing with short term policies, Germany already had a long run plan, but during this plan, Germany committed the worse mistake of history, starting the WWII

David Chavdia

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