AMERICA COMPARED (part6)

America Compared#6

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The 1920s "boom" enriched only a fraction of the American people. Earnings for farmers and industrial workers stagnated or fell. While this represented lower production costs for companies, it also precluded growth in consumer demand. Thus, by the mid 1920s the ability of most Americans to purchase new automobiles, new houses and other durable goods was beginning to weaken.

This weakening demand was masked, however, by the "great bull market" in stocks on the New York Stock Exchange. The ever-growing price for stocks was, in part, the result of greater wealth concentration within the investor class. Eventually the Wall Street stock exchange began to take on a dangerous aura of invincibility, leading investors to ignore less optimistic indicators in the economy. Over-investment and speculating (gambling) in stocks further inflated their prices, contributing to the illusion of a robust economy.

Once in office, FDR said yes to almost every plan put forward by advisors and the Congress said yes to almost every program proposed by the president. In the frantically-paced first few months of his administration, Congress passed scores of new legislation at the president's request. Historians tend to categorize these efforts as either measures for "relief" (short-term programs designed to alleviate immediate suffering), "recovery" (long-term programs to strengthen the economy back to its pre-crash level), or, "reform" (permanent structures meant to prevent future depressions). Another way of understanding FDR's Depression-fighting efforts is to analyze the politics of the New Deal. Generally speaking, the overall aim of the New Deal was essentially conservative. The New Deal sought to save capitalism and the fundamental institutions of American society from the disaster of the Great Depression. Within that framework, however, significant differences between New Deal programs existed. The "first" New Deal (1933-35) tended toward a continuation of "trickle down" policies, albeit better-funded and executed more creatively. Even in the early first New Deal, exceptional programs pointed toward the "second" New Deal's tendency toward "Keynesian" economic policies of revitalizing a mass-consumption based economy by revitalizing the masses ability to consume.