the death of capitalism and the rebirth of progressivism

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  • The Death of Capitalism and the Rebirth of Progressivism

  • I. The Death of CapitalismA. Causes1) 20s economy overheating (tech + productivity justified?) Fed Reserve puts on brakes + econ begins slowdown (housing, durable goods, farm)Common view until 2007: Fed overshoots correction, too little too late, other mistake (1937) length + depthBut now?Monetary vs. fiscal policy (Friedman vs. Keynes: does the Pres matter?; liquidity trap); public rather than private sector failure?Stock crash spreads tight money, not v. important cause (mostly psych)

  • 2) Global economy: 1) failure Versailles + 2) gold standard (Am not Britain, limits fiscal response; off first less hurt) + 3) tariffs + 4) leftist-govts (jobs over gold further disrupts) + 5) ag. glut= worldwide crisis

  • B. Blame HooverBeliefs:Not straight laissez-faire: the Great Engineer1) Opp. socialism2) Self-made man3) American system sound (1920s utopian): only need confidence to revive4) Jeffersonian economic individualism + property rights no compel voluntary action (saw success Secy Commerce)5) Foreign causes thinks globally, cant act locally

  • 1st 60 DaysAgricultural Marketing Act (1929): ag. co-ops sustain markets, Federal Farm Board buy glut sustain pricesMix voluntary + direct intervention Prob.: a) missed WWI systemic; b) growing FFB surplus hangs over market lower prices1932: Cotton Corporation begs plow under (voluntary vs. AAA)

  • All of Its Powers" Post-Crash advocated heavy intervention 1) Fed Reserve eases credit, 2) "the first shock must fall on profits and not on wages" (pre-Keynesian: prop up consumption); 3) construction programsProb: 1) fed govt v. small: HH nearly 2x federal public works expenditures but still much less state + private; 2) wages high greater unemployment (maybe)

  • Reconstruction Finance CorporationBanking crisis (run)1931: National Credit Corporation: association of banks (not enough)1932: RFC: loans to banksLimited: 1) public list fear runs; 2) high cost to banks (collateral)Broke ideological barrier to fed relief greater demands20% unemployment (10 million); Midwest 50-80% (esp. big cities)

  • Blunders1) Hawley-Smoot Tariff (1930) highest ever (protectionist/ beggar-thy-neighbor) retaliatory tariff war globalization of Depression2) 1932: greatest tax hike US history (to point): balance budget (deficit $2.7B, 60% of expenditures; proportionally larger deficit any ND budget) + hoped revitalize credit markets (confidence + pay back debt) poor hit hardest

  • Death to the Great Humanitarian3) Refused direct Fed aid to poor: a) loss local control, b) undermine confidence, c) dole long-term econ prob (Europe), d) undermine character1930 drought: $45M save AR livestock, resisted $25M feed farmers (loan; Red Cross pick up slack)

  • 4) Bonus Army/March/Expeditionary ForceJune 1932: vets demand $1000 bonus (1945) Congress denies, but pays way home for mostMore militant stay vagrants, squatters, Hoovervilles police riot federal cavalry (MacArthur, Eisenhower, Patton): tanks, tear gas

  • Claim made that Bonus Army full of communists (untrue)Response fueled by rise of Hitler and militarism: US revolution?V. unpopular killed chances election 1932

  • New York Times (March 2, 1930): "No one in his place could have done moreFDR adviser: "Practically the whole New Deal was extrapolated from programs that Hoover started his policies were substantially correct." C. Hoover Evaluated

  • Political ineptitude stymied success

  • Hoover unable to substantially break with old order and thinking must save system w/o violating basic ideas of capitalism and democracy

  • II. Rebirth of ProgressivismFDR far more successful in passing legislation (at least until 1938)Willing to experiment with anything to save capitalism and democracyBegan conservative (32 election: balance budget, Prohibition), pushed to radicalism (Wagner Act, Social Security)