Teaching American History Erie College July 10, 2007The Depression July 10, 2007Get Some Questions Out of the WayTwo Key Economic Events in American HistorySlide 5The DepressionGrowth of Government: Spending as % of GNPGrowth of Government: “Employees”Slide 9Robert Higgs: Explanations of the Growth of GovernmentChanges in the 1920sSlide 12Slide 13Slide 14Slide 15CausesSlide 17Slide 18Slide 19Slide 20Crash = Depression?Contagion: Failure to ActContagion: DeflationContagion: 3rd Wave of Bank FailuresWhy? From “Then”Slide 26Slide 27Slide 28Explanations from “Now,” with hindsightWhy? From “Now”Slide 31Slide 32Slide 33Slide 34Slide 35Slide 36Slide 37Slide 38Slide 39Slide 40Two Additional PerspectivesNew Deal Political Coalition: Labor Costs as Proportion of Total CostsFerguson’s View: PoliticsBusiness Party Political CoalitionCentrist (Unworkable) Political CoalitionActual New Deal Political CoalitionThe Other Dimension: InternationalismBoth Dimensions (Businesses Only)Actual New Deal Political CoalitionHiggs’ View of the DepressionSlide 51Slide 52Slide 53Slide 54Slide 55Slide 56Slide 57Higgs’ View of the LegacyDid “IT” Work? UnemploymentDid “IT” Work? Real GNP/capSome ReferencesSlide 62Slide 63Slide 64Teaching American HistoryTeaching American HistoryErie CollegeErie CollegeJuly 10, 2007July 10, 2007The DepressionThe DepressionJuly 10, 2007July 10, 2007Get Some QuestionsGet Some QuestionsOut of the WayOut of the WayI have no idea why I have no idea why flammable and flammable and inflammable are inflammable are synonymssynonymsNo, it is NOT a perm.No, it is NOT a perm.Yes, I have proof.Yes, I have proof.Two Key Economic Events in Two Key Economic Events in American HistoryAmerican HistoryThe first was the Civil War. The war ruptured the agreement The first was the Civil War. The war ruptured the agreement among states. National power was now paramount. among states. National power was now paramount. Currency, banking reform created transmission Currency, banking reform created transmission mechanisms: contagion. Real estate, financial, trade mechanisms: contagion. Real estate, financial, trade markets were far more unified. And the system of markets were far more unified. And the system of transportation developed to move troops and material, in the transportation developed to move troops and material, in the north and west, now served to move goods and people.north and west, now served to move goods and people.Power was concentrated in the Federal government, at the Power was concentrated in the Federal government, at the expense of the states, and the citizens. The cause may expense of the states, and the citizens. The cause may have been just, but there was substantial collateral damage have been just, but there was substantial collateral damage to the Constitution, and to the federal system.to the Constitution, and to the federal system.Two Key Economic Events in Two Key Economic Events in American HistoryAmerican HistoryThe second was the Great Depression. It changed the The second was the Great Depression. It changed the way that many citizens saw the government, in terms of way that many citizens saw the government, in terms of their expectations for action and responsibility. And it also their expectations for action and responsibility. And it also concentrated power in the hands of the federal concentrated power in the hands of the federal government, through a series of political and judicial government, through a series of political and judicial choices.choices.Interestingly, just as Lincoln is for many an ambiguous Interestingly, just as Lincoln is for many an ambiguous figure in the Civil War, Roosevelt emerges as an figure in the Civil War, Roosevelt emerges as an ambiguous figure in the Depression. Both were endowed ambiguous figure in the Depression. Both were endowed with a rare political genius. But did their accomplishments with a rare political genius. But did their accomplishments save the Union, or just change it so fundamentally that save the Union, or just change it so fundamentally that their legacy is still hard to guage accurately?their legacy is still hard to guage accurately?The DepressionThe DepressionThe “Great Depression” began in August, The “Great Depression” began in August, 1929, and extended (in its first phase, at 1929, and extended (in its first phase, at least) through 1936.least) through 1936.But there was another sharp downturn But there was another sharp downturn after 1936, and many people would date after 1936, and many people would date the “end” of the Great Depression as the the “end” of the Great Depression as the onset of WWII onset of WWIIGrowth of Government: Growth of Government: Spending as % of GNPSpending as % of GNPGrowth of Government: Growth of Government: “Employees”“Employees”Growth of Government: Growth of Government: “Employees”“Employees”Civilian Conservation CorpsWorks Progress AdministrationFederal Emergency Relief AdministrationNational Youth AdministrationCiVIL WORKS AdministrationRobert Higgs: Explanations of the Robert Higgs: Explanations of the Growth of GovernmentGrowth of GovernmentModernization Modernization Public GoodsPublic GoodsWelfare StateWelfare StatePolitical RedistributionPolitical RedistributionIdeologyIdeologyCrisisCrisisChanges in the 1920sChanges in the 1920sIncreased incomeIncreased incomeIncreased urbanizationIncreased urbanizationSharp rise in existence, and popularity, of Sharp rise in existence, and popularity, of consumer durables (washing machines, consumer durables (washing machines, refrigerators, radios)refrigerators, radios)Automobiles and trucksAutomobiles and trucksPurchasing on credit, investing on creditPurchasing on credit, investing on creditSharp rise in real estate prices in several Sharp rise in real estate prices in several areas (Florida: Pirates became….)areas (Florida: Pirates became….)Changes in the 1920sChanges in the 1920sThe disruptions and shocking nature of World War I had been The disruptions and shocking nature of World War I had been survived and it was felt the United States was entering a “new survived and it was felt the United States was entering a “new era.” era.” In January 1920, the Federal Reserve seasonally adjusted In January 1920, the Federal Reserve seasonally adjusted index of