The Great Depression

            There are many things that are misunderstood about the Great Depression. Many believe that it was caused by failures of the free market system. Some also believe that government intervention was the best solution. There are a lot of things to consider when deciding how exactly the depression was caused. The Great Depression was not caused by a failure of the free market and resolved by government intervention.

            The government during the depression era was not careful in the way they managed the budget. The political mismanagement of the money and credit supply was a huge factor that led to the depression. They compounded their initial errors with a series of additional and harmful interventions. The article “The Great Myths of the Great Depression” mentions four downturns that led to the depression and they are as follows, “Monetary policy and the business cycle, the disintegration of the world economy, the New Deal, and the Wagner Act. The Monetary policy and business cycle was meant to manage the economy, but this was actually when we begin to see mismanagement of the of the money and credit supply. The disintegration of the world economy put a new stress on everyone. Everyone was worried about their money so they would line up at the banks to get their money out. This eventually led to bank runs. Another aspect of the disintegration of the world economy was the fact that the government was allowing people to borrow money to buy stocks. They allowed “margin lending.” This was a catalyst to the stock market crash. The New Deal was not the best idea because these programs were such that they intervened in a way that the government shouldn’t. The Wagner Act organized labor’s Magna Carta and revolutionized American labor relations.

            The Smoot-Hawley Tariff was one government plan, made my President Hoover, which ignited a vicious international trade war. It raised rates on many products. These tariffs were based on the percentage of the price rather than a specific amount of money. These tariffs made it nearly impossible for foreign businessmen to sell their goods in American markets because their debts became such a burden. The market was constantly rising and falling due to different policies that were put into place at different times. “The market rose and fell in almost direct synchronization with what the Fed and Congress were doing.” (“The Great Myths of the Great Depression.”)

            After the stock market crash Hoover urged business leaders to keep wages artificially high. He created the High Wage policy. He also dramatically increased government spending for subsidy and relief schemes. Some believe that President Roosevelt patterned his New Deal ideas after President Hoover’s policies.

            Roosevelt’s New Deal was put forth to manage the economy and create jobs for the unemployed. It ended up putting the economy in more disarray and confusion. The most radical aspect of the New Deal was the National Industrial Recovery Act which created the National Recovery Administration. This new policy created codes that regulated prices and terms of sale on items. This was a fascist –style arrangement. Benjamin M. Anderson claimed that the NRA was an “Anti revival measure.” (The Great Myths of the Great Depression.)

            The Great Depression was caused by a great many things. There were a lot of small circumstances that led to such a great measure of poverty and unemployment. It was not caused by failure of the free market system. It was not resolved by government intervention. Having the government intervene escalated the depression in some ways. The government was mismanaging the budget and credit supply. They were reckless with their money supply and irresponsible with the credit growth. These are some of the factors that led to the Great Depression.

Charter Essay Lesson 6

            The first thing I would do if I created my own city would be to set up a republic society. In a republic people are free to do things their own way so long as it is moral. I would set up rules and regulations to help prevent monopolies, fraud, and abuse. I would also make a constitution that is similar to the United States Constitution. This would be beneficial to the economic growth and prosperity of my city because it would be run by the people. There would be a government put into place, but the government would exist as a support system. They would not be the ones in charge of all the businesses. The businesses would be run by the people.

            Another thing I would implement in my city would be the free market system. The free market system is based on supply and demand. Supply means how much the market can offer and demand means how much (quantity) of a product or service is desired by buyers. The definition of supply and demand says: “The relation between these two factors determines the price of a commodity. This relationship is thought to be the driving force in a free market. As demand for an item increases, prices rise. When manufacturers respond to the price increase by producing a larger supply of that item, this increases competition and drives the price down.” (Dictionary.com) Supply and demand is the foundation of a market economy. Price is a reflection of supply and demand. This system would also be run by the people with little to no government intervention. People working in this system would work together out of self interest. The “invisible hand” would help guide people to act in the interest of others. This idea of self interest is not greedy because people are willing to help make things better for others. Those who are greedy work for themselves. They only care about themselves and gratifying their own needs. In a free market system people would be free to work to help benefit others and in turn would help themselves as well. The benefit of a free market system would be that there is more freedom and opportunity for everyone. The “invisible hand” helps others to work together for mutual benefits.

            In order for the market economy to have a high success rate there has to be competition between businesses. Competition makes a market economy successful. Businesses are constantly trying to outshine one another so that they can get the most costumers. When one company provides a product or service for a cheaper price their competitors will soon be on the hunt to improve their business. They will look for ways to improve upon what they have already to make it more satisfying for their customers. They will make their options more appealing to the public. Competition would be beneficial to economic prosperity because it keeps businesses on their toes. Competition helps businesses improve themselves and it helps them to do better as a company.

            Another important factor to include in my city would be the use of technology. Technology makes the world go round. Technology greatly helps with supply and demand. It helps to make the supply availability faster. Technology also helps make life a lot easier. Technology exists because of a free market system and so it makes sense that it would be a part of that system. In my city we would have the freedom to have entrepreneurs who will innovate and continue to help the economy grow. The benefits of technology in my city are numerous. Learning how to use technology would make people more valuable as a worker. It would help many people get jobs.

            One of the most important factors in creating my city would be the implementation of the rights to life, liberty, and property. These rights are what make people free. People need political and economic freedom. The right to life means people have the right to live. They don’t have to live in fear of someone killing them for no reason. The right to Liberty means people have the right to freedom and justice. With that right also come consequences to protect everyone. The right to property means that everyone has the right to pursue property and has the right to do whatever they need to in order for them to obtain property. Once they do that no one can take that property away from them as long as they make their payments. Having these rights will make people free and that is how it will benefit the city.

            These elements are essential for economic growth and prosperity. Without these standards people would not be as free and independent. The government would be taking over and infringing on their rights as individuals. Businesses would not grow to their full potential and the economy would not run as smoothly. Life would be harder without the use of technology and production rates would be much lower. These elements will make it possible for economic prosperity to prevail.