USA 1919 – 1941
Why did unemployment persist despite the New Deal?
Although one of the many aims of the New Deal was to get people working again, unemployment still persisted. Why? •
Pouring Money into the Economy:
The president at that time, Franklin D. Roosevelt, tried to end unemployment by pouring money into the economy, hoping people’s “purchasing power” would increase – which would get the economy going. Although, in times of depression, people tend to go safe and not spend much just in case.
A lot of American business depended on world trade. After the First World War, when the majority of the world was depressed, Americans didn’t have anyone to trade with and thus, the economy couldn’t keep going. (Due to this, after the Second World War, people pumped money into western European countries as most of their trade was with America and that got American economy going.)
President Roosevelt had imposed heavy restrictions on banks, and thus banks cut down on their loans to businessmen – which restricted industrial growth.
Just like most of the public, the American government had been hit too. Roosevelt, thus, increased the amount of taxes to pay for government spendings. Taxes were not only raised on rich people, but on ordinary people too. Money was being taken away from people as fast as it was being given to them = no effect.
Being conservative, Roosevelt believed that in order to prevent inflation, they needed to keep the amount of money in the economy under strict control. (We learned after the Great Depression that this also restricts economic growth.)
Limited production, droughts, no rain leading to deserts and the words “Laissez-faire” by Roosevelt.
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