An Attempt to Understand President Obama’s Recovery Plan - in relation to the Great Depression

There unmistakeable similarities between the Great Depression of the 1930s and the sharp downturn in the economy that we are experiencing today. I would like to compare the two events, and the remedies that were used back then by President Franklin D. Roosevelt with President Obama's policies for curing our current economic problems. 

When the Great Depression happened I was seven years old, and I was 10 when FDR took office in 1932. So I have some memory of the times, but I'm not sure how much comes from memory, and how much I have learned about it through the years.

One thing I do know is that FDR's many programs after 1932 brought hope to the people when they felt only dismal despair under Herbert Hoover's administration. Franklin D. Roosevelt's unrelenting efforts to find ways to relieve failing businesses and overburdened families were greatly appreciated whether the programs were entirely successful or not. The people knew Roosevelt was trying his best to turn the economy around, and that surely beat Hoover's hands-off policies that allowed the depression to continue getting worse, and left a huge part of the population hungry and even starving. The worst part of the depression before FDR was the inaction of the government that caused a complete lack of hope in the people.

The reasons for the crash of '29 were very similar to the present down turn - not enough regulation and oversight on unbridled ambition to get rich quick in the stock market. During the '20s it seemed that everyone was buying stock. If they didn't have the cash they bought on margin, another name for credit.

My father and mother didn't lose money first of all because my father didn't believe in borrowing money except on a home to live in, and also because they had recently used their cash to buy a new car and also used cash for a substantial down payment on a farm that they bought in 1928. But most of their friends who were not farmers had invested heavily in the stock market and lost so much that their lifestyles changed forever.

Roosevelt's programs put subsistence money back in the pockets of people who needed it most, whether it was by made-up jobs under WPA or the CCC programs, or an influx of money to help businessmen. Hungry people could feed themselves again and regain their self-respect at the same time. And those 'made-up jobs' have value to us even now as art, recorded history, improvements to our roads and parks and other projects that were promoted by the Works Progress Administration (WPA) and the Civilian Conservation Corp (CCC).

The negative forces that opposed FDR's programs back in the '30s refused to believe, or ever acknowledged, that the economy was on the way to recovery before the outbreak of WWII. They loudly proclaimed, "Roosevelt didn't stop the depression! The war did!". That idea has been repeated so long and so often that is widely believed to be true even now. The people who say that disregard that the unemployment rate between 1932 and 1941 went from 25% and over in some areas to single digit numbers. It is true that the war accelerated economic recovery enormously, and that it led to a return to prosperity much faster than it would have had there been no war. And that is the point of this article. Exactly how did World War II stop the depression of the 1930s?

Manufacturers all over the country retooled at great expense from peacetime to wartime products. Carmakers turned to making tanks, shipyards switched over to building battleships, aircraft carriers, and destroyers, and airplane manufacturers turned to making bombers and fighter planes. It was a very costly process. Huge amounts of borrowed funds went into the economy very quickly, and the whole country was behind the process 100%. Well - there were probably a few isolationists who thought we could ignore 'foreign wars', put our heads in the sand and the war would go away.

So how did the war stop the depression? The answer is easy - by inserting an enormous amount of money very rapidly into the economy for the war effort. Huge sums of borrowed money went into the economy in a very short period of time. And that is what Obama is trying to do now. He is trying to make all-out war on the recession before it becomes any worse. He wants to put as much money as necessary into the hands of workers, manufacturers, and other businesses that are most closely involved in the lives of average Americans.

But to do that the failing financial part of the economy has to be propped up to be able to loan out money to the people again. Which financial companies should be helped, and how much money to loan them is the problem. And how do we make sure they spend their windfall of public money wisely. The money is all borrowed by our government from foreign investors and must be paid back as soon as possible. The interest on that debt is one of the highest expenses in our federal budget. The debt that is incurred will be paid back by cuts in spending where possible without cutting many jobs, and more importantly by increased revenues that will come into the treasury in increasing amounts as soon as the recession gets turned around. That is what happened after WWII, in spite of continued federal expense on the Marshall Plan to help reconstruction of Europe's war zones, and honoring the promises to our war veterans to take care of their health and pay for their college educations.  

As I see it what has happened lately is that the financial part of our economy has reinvested in other financial companies instead of returning money to people who would grow our Gross National Product. Money has to be available to the people and companies who actually make things to sell. Because financial institutions have been trying to make money by other means, they have failed to provide money where it will do the most good, and our country has gone from being a creditor country to being a debtor country. At least that is part of the problem as I see it.

But let's return to just how WWII stopped the depression of the 1930s. In the case of WWII, all able-bodied men were drafted into the military services where they were paid enough to supplement their needs that didn't come with their jobs as soldiers, sailors, and marines, and there were modest allotments available for their dependents.

On the civilian front, many women, maybe half the women in the country, took over jobs the men had done formerly. My sister went to work as a teller in a bank. My mother, in addition to doing the office work for my father's dairy and overseeing the running of the household, worked for a Norden Bombsight factory in Danbury, Conn.  The thing was that all the money earned from war work put families back in a good financial status. I worked for factories making war materials before I enlisted in the Navy Waves.

The war effort was universal in America. Everyone gave his or her best effort. We knew we had to do everything humanly possible to help our allies in Britain and France, who had already given everything they had to beat Hitler's Germany. At the same time we had to defeat the demoniacal forces of Japan before they invaded our homeland. There was no hesitation in where our duty lay. We knew we could and would win against both enemies. And we did.

We need to apply the same tactics and determination to the problems with our economy now. It is every bit a war as important as WWII. We are fighting adverse forces that can bring down America to the status of a third world power. If we don't rally strongly and universally behind President Obama and the many world-renowned economists whose advice he is taking, this country may go down permanently. If we don't dare to give this capable and uniquely qualified man a chance to save the economy, maybe we will deserve the meager pickings left to us in this life. As I see it the key to success is to go after the problem with fast, strong, and solid blows, or we will find ourselves dying the death of a thousand cuts.