Cause of the Great Depression and The Recover

The Great Depression has many theories about how the government made the situation worse, how it made it better, and if the free market failing was the cause of the Great Depression, or if it helped the American economy to recover. Many people even believe that the stock market crash alone was the cause of the Great Depression, but other events were the cause of this terrible time in our nation’s history. I believe that the free market failing caused the Great Depression and the government stepped in to recover the economy.

                One of the main reasons why the free market crashed was because of Black Tuesday, which occurred on October 24, 1929. This was the day when the stock market began to crash. The nation was in panic because the stock market prices began to drop. The stock market collapsed completely on October 29, 1929. A reason why the stock market collapsed was because people buying stocks were borrowing too much money and putting them into stocks. “Many history texts blithely assert that a frenzied speculation in shares was fed by excessive “margin lending.”” The stock market crashed and people could not pay back the money that they borrowed from the banks, which is one of the reasons why banks failed, too.

                We do not have a free market economy today because the government stepped in to control principles, like setting wages. Why would the government not want a free market anymore? Without some control of the market by the government, then we could see another depression arise. It’s true that the government did step in to attempt to recover the economy, like Hoover’s Smoot–Hawley Tariff Act and the government’s decision to lower their spending, and these decisions could have been a reason why the depression lasted for so long. President Hoover was blamed so much for causing the depression to worsen that Hoovervilles was what people called the areas where homeless people would put together scraps of metal and cars for shelter. Even though things looked bleak, Franklin D. Roosevelt as the new President, starting in 1933, the government had a chance to recover the hurt economy with their new leader.

                FDR was able to continue the New Deal program, which Hoover started during his time in office. Some of these programs were the National Industrial Recovery Act, National Youth Administration, and Works Progress Administration. These and other programs helped the economy because they created minimum wages, millions of jobs, and more. Some of these jobs were not much, but it still gave many American’s a job to do. This helped the country in many ways because the government’s participation with the economic recovery and the fact that many were working again gave them hope. Putting money back into the people’s pockets helped the economy because businesses were able to receive money from customers. The jobs given to people by the New Deal programs caused businesses to hire more people and then those people were able to spend their money on other businesses. It’s a domino effect. Some people do not believe in this statement that Lawrence W. Reed said is a myth, but I believe this to be true: “government needs to take an active role in the economy to save us from inevitable decline.” In 1939, the unemployment rate went from 25% to 15% because of the FDR’s New Deal Programs. Another cause of the unemployment rate dropping was because the government started to create new jobs with the start of the participation of the U.S. with World War two in 1941.

                With the view of the Great Depression, I agree with John Maynard Keynes’ theory of economics, which says that the government participating with the economy causes it to grow, and without the government, the economy would fail. If we believe that a free market did not cause the Great Depression, then why do we no longer have a free market economy? 

Charter City

                If I had a city that I could create and make the rules, I would make it so that the people would be greedy as little as possible. We would live in an environment where the citizens would feel safe, happy, and confident. The town rules would encourage acts of kindness like charity towards others. A city is a great place to create rules because, like Paul Romer said in his speech, a village is too small for the benefits that people can get if they live in a larger area, a continent is too big because change in rules would be too difficult, but a city is just right because it’s not too big and not too small.  

                One of the first rules that I would make in a new city is to have the rich pay higher taxes than middle and lower class citizens. I believe that this would make a good effect because when the rich are taxed, they still have plenty of money to go out and buy things to satisfy their wants and needs. If middle and lower class citizens are taxed, they usually have to save their money and pay for the necessities, and not have extra money to spend on other businesses, like going out to eat. So, if the rich and lower classes have extra money to spend after taxes are paid, then businesses would benefit much because of the extra service they receive. And if a business doesn’t receive enough money from customers, then they would have to lay off workers, and they would not have money to spend on other businesses. It is a domino effect.

                When a new product is introduced to the citizens of the city, and it benefits the citizens quite well, then it would be necessary to agree to other cities around us for trade. It wouldn’t even have to be a new product, it could be food that is grown or produced in the city, for example.  In order for the city to grow, it will need to have interaction with other cities and their products. If we stayed in our own bubble, then things could eventually slow down and even end up in chaos. In order for a civilization to grow, it needs help from others. The United States of America would not be what it is today if it wasn’t for trading goods between other countries. In Paul Romer’s speech, he mentioned how back in around the eleventh century, China was a dominate country because of their technology, but as the centuries went by and they didn’t trade with other countries, they were left behind while the countries around it blossomed because of trading with one another.

                Finally, I would encourage welfare to those who are out of work, but only for a limited time. Those out of work would only have welfare for a minimum of one year. I chose this because people are naturally greedy. They decide not to work because they think that they can live off of welfare. They live off of the government’s money. They year that they are on welfare will give them more than enough time to find a new job and support themselves enough to get back on their feet. The city’s government is meant to help people help themselves. It may seem cruel to stop welfare after one year, but they will need to learn to live for themselves, financially. Obviously, if an individual is unable to work because of health reasons, or any other serious reasons, then they will be able to stay on welfare as long as they need it.

                Running a new city would be difficult because a great amount of time would be needed and a lot of bright leaders would need to think of a way for an environment filled with people to run smoothly. The ideas I have suggested would be a good, fair way for the city to run because it gives businesses and the people to benefit greatly in the end if we all work together.