Keynesian Theory and the New Deal
Keynesian Theory and the New DealThe crash of the stock market brought many hard times.
Franklin D. Roosevelt's New Deal was a way to fix these times. John
Stuart Mill and John Maynard Keynes were two economists whose economic
theories greatly influenced and helped Franklin D. Roosevelt devise a
plan to rescue the United States from the Great Depression it had
fallen into. John Stuart Mill was a strong believer of expanded
government, which the New Deal provided. John Maynard Keynes believed
in supply and demand, which the New Deal used to stabilize the
economy. Franklin D. Roosevelt's New Deal is the plan that brought the
U.S. out of the Great Depression. It was sometimes thought to be an
improvised plan, but was actually very thought out. Roosevelt was not
afraid to involve the central government in addressing the economic
problem. The basic plan was to stimulate the economy by creating jobs.
First Roosevelt tried to help the economy with the National Recovery
Administration. The NRA spread work and reduced unfair competitive
practices by cooperation in industry. Eventually the NRA was declared
unconstitutional. Franklin D. Roosevelt then needed a new plan.
Keeping the same idea of creating jobs he made many other
organizations devoted to forming jobs and in turn helping the economy.
One of those organizations was the Civilian Conservation Corps. This
corps took men off the streets and paid them to plant forests and
drain swamps. Another of these organizations was the Public Works
Administration. This organization employed men to build highways and
public buildings. These were only some of the organizations dedicated
to creating jobs. Creating jobs was important because it put money in
the hands of the consumer. This directly affected the supply and
demand. The more money they had the more they could spend. This would
slowly start a chain reaction and bring the economy back to the way it
was before the depression. By the end of the 1930's this plan had
lowered unemployment to 17.2%. To make these organizations it was
going to take money. Roosevelt had to deficit spend, which is when the
government spends more than their budget in one year, in order to
obtain this money. Of course these ideas of supply and demand and
active government didn't just come to him. He was influenced by John
Maynard Keynes and John Stuart Mill. There philosophies were the basis
of the New Deal. John Stuart Mill, who began studying economics at age
13, was one of the most influential political thinkers of the
mid-Victorian period. He believed in empiricism and utilitarianism.
Empiricism is the belief that legitimate knowledge comes only from
experience. Utilitarianism is the belief by which things are judged
right or wrong. It is judged according to their consequences. In a way
he was a hypocrite. When the economy was good he believed in
Laisezz-Faire, which means "hands off." If the economy was bad,
though, he believed in an...
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