President Franklin Delano Roosevelt was elected to the Democratic Party in 1932. When he took over the government of the United States, he was faced with an unexciting scenario, the great economic crisis of 1929 had devastated the country.
Failed banks and millions of unemployed were some of the problems he would face. To contain the economic crisis, he proposed the creation of a plan called New Deal, which promised to lift the United States out of chaos and once again elevate it to the rank of world superpower.
Index
- Introduction: Historical Context
- Causes and consequences
- How the 1929 crisis affected Brazil
- The crisis and the New Deal
Introduction: Historical Context
when the First World War(1914-1918) came to an end, the countries that participated in the conflict were social devastated and economically. Europe had a balance of thirteen million deaths, the economy had stagnated, the low birth rates added to the number of deaths led to a decrease In addition, large debts were incurred by those nations who had to dispose of their gold reserves and foreign business in order to remedy them.
Only one country benefited from the war: the U.S.
While the great European nations were concerned with military strategies to defeat the enemy during the conflict, the North Americans enjoyed their position of neutrality.
In the early years of the Great War, the United States participated in the conflict by selling arms and food to the belligerent countries, this undertaking contributed to their economic strengthening and development industrial. There was also an expansion of the American consumer market, if Europe was at war, it was time to establish other commercial ties, thus expanding its production to the Asian continent and to America Latin.
Germany's rapid rise during World War I worried the countries that formed the Triple Entente and pressured the United States to declare its entry into the conflict in April 1917.
It is known that the reasons for this sudden decision are much more economic and political than social. Americans used as a pretext to enter the war the sinking of two ships carrying supplies for the England. The military superiority and the strong army under the leadership of General John J. Pershing were decisive factors in Germany's defeat.
The United States emerges from the conflict as the biggest world power responsible for about 42% of the world industrial production, the scenario was of euphoria and confidence in increasingly prosperous days.
The North Americans became the main creditors in the world, the increase in the consumer market generated the need for a much faster production. To handle all this production, it was also necessary to increase the purchasing power of workers, so the government started a wage increase policy and creation of new credits, as a small sign of recession emerged the president intervened creating more credits.
Causes and consequences
In 1929, the increase in speculation on the New York Stock Exchange caused a destabilization of stock values, the rise in price was soon accompanied by a sharp fall. The introduction of new bonds generated this crisis, there were too many shares for few interested buyers. This episode would become known as the New York Stock Exchange Crash.
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The collapse of the New York Stock Exchange generated great concern in other sectors of the economy, banks froze loans, industries slowed production and to make this scenario worse, the European countries were taking large steps towards economic reconstruction, now they depended less on imports of North American products, which accelerated the economic crisis in the United States.
The decrease in production in factories encouraged businessmen to lay off thousands of employees across the US, many of them decided to close their doors.
People have lost their homes, the number of homeless people on the streets of the United States has increased considerably, and suicide and crime rates have also risen. In an attempt to protect the economy, countries increased taxes on North American products, which further contributes to reducing international trade.
How the 1929 crisis affected Brazil
This episode would be portrayed in historiography as the Great Depression. This crisis reflected in several countries, even the Brazil has been affected. Dependent on coffee exports, the country was included in the crisis, as the United States, which was the main buyer of the product decreased the number of coffee bags purchased, as a guarantee other countries also decreased the purchase.
To try to contain the crisis, the Brazilian government ordered the purchase and burning of around eighty million bags of coffee. The crisis ruined the coffee economy and opened space for the industrialization of the country from 1930 under the government of President Getúlio Vargas.
election of president Franklin Delano Roosevelt (1933-1945) rekindles Americans' hopes of getting out of the crisis, he promises to act immediately to restore the country's economy and the path found seems to be the increase of State intervention in economy.
The crisis and the New Deal
A set of economic and social measures that received the name of New Deal begins to be put into practice between the years 1933-1937 with the objective of reverting to the crisis situation.
The policy adopted by the program goes against economic liberalism, strong state intervention will be the path for the reconstruction of the United States. This measure was based on the economic theory of John Maynard Keynes, according to the economist, only the State would be able to generate social welfare.
At main measures contained in the New Deal they are:
- massive investment in the construction of public works: roads, bridges, highways, hydroelectric plants, power plants, airports, ports, dams, schools, hospitals, etc. This measure was intended to generate employment for the thousands of people unemployed since the height of the crisis in 1929. The increase in workers would increase consumption and consequently production;
- the government started to control product prices to avoid a new crisis of overproduction, since one of the reasons for the Great Depression was the accumulation of products in factories;
- creation of laws to control and supervise the financial market in order to avoid speculation;
- incentive through loans to large and small farmers. In addition to increasing agricultural production, the measure was intended to curb the great rural exodus;
- increase in social measures such as the creation of Social Security, unemployment insurance and insurance for the elderly over 65;
- reduction in working hours, this measure aimed to create two work shifts in the factories and generate a greater number of jobs.
The measures implemented by the New Deal were a success, since in the beginning of the 40's the Americans managed to realize the stabilization of the financial system, the increase in jobs, the increase in production and exports. The economic and social program generated a high cost for the public coffers, which according to specialists has more positive than negative characteristics, as it enabled the end of the crisis.
Lorena Castro Alves
Graduated in History and Pedagogy
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