Here are some theories
It may be necessary at this point to say a few words about important schools of thought, which hold to the idea from different points of view that the chronic tendency of contemporary societies towards underemployment should be traced in the direction of under-consumption; this is to say to social practices and a distribution of wealth which results in a tendency to consume, improperly reduced.
A school of economic thought finds the solution to the business cycle not in increasing both consumption and investment, but in reducing the supply of the worker seeking employment; which means by redistributing the existing volume of work, without increasing output.
Let’s take approximate figures for illustration purposes. The average output level for today is 15% below what it should have been with a full continuous employment level and, if 10% of this output represents net investment and 0% of its consumption, if further the net investment should increase to 50%, to ensure full employment in the existing tendency to consume, so that with complete work the output would increase from 100-115, consumption from 0 to 100 and net investments from 10-15; then, perhaps we can aim at modifying the propensity to consume so that full employment can increase from 0 to 103 and net investment from 10 to 12%.
Another theory came from studies conducted by Jevons, where an explanation was found for agricultural fluctuations due to the seasons rather than industry phenomena. Influenced by the above approach, this is presented as a unique view of the problem. Today’s fluctuation in agricultural stocks, between one year and the next, is one of the largest individual elements among the causes of changes in the current investment rate. At the time Jevons wrote this factor must have been significant to all other aspects. Jevons’s theory that the business cycle was mainly an attribute of fluctuations in the harvest domain can be re-emphasized.
When a vast crop is harvested, it is usually a significant addition to the quantity carried over into later years. The income of this increase in amount is added to the actual payment of the farmers and is treated by them in the pure sense of income; In contrast, the rise in income years does not include any flow in the income expenses of other parts of the community but is financed by savings. This means that the addition to the carrying amount over the years is an addition to the actual investment. This conclusion is not devalued, even if prices fall drastically.
Similarly, a low level of harvest carrying is carried over to current consumption, so a corresponding portion of consumer income-expenditure generates no actual income to farmers. This means that what is taken from the amount carried includes a corresponding reduction in the current investment. Thus, if investment in other directions is considered constant, the difference in aggregate investment, in which there is a substantial discount or withdrawal from it, can be enormous.
Il An illustrative example of recession (The Great Depression)
The Great Depression in the United States began on a Black Tuesday with the collapse of Wall Street in October 1929 and quickly spread worldwide. Market changes marked the beginning of high unemployment, low benefits, poverty, def reduction of income in agriculture, and the loss of opportunity for economic growth and personal advancement. However, the factors of this crisis are still unclear the net effect of this crisis was the loss of confidence in future economic growth, More superficial explanations include a large number of factors including consumer debt, irregular markets that allowed ³treatment’ by banks and investors, cuts in foreign markets, lack of growth in new industries, and uneven wealth growth, all interacted to an economic downturn thus reducing costs, lowering confidence and output.
According to the Smoot-Hawley Tariff Act, the government’s initial response aggravated the situation, the protectionist line of action, in 1930, tightened the global shut market. Construction and automobiles the purchase of which was pushed by consumers. The economy began to recover from the winter of 1932-33, with progress until 1937, when the 1937 recession brought unemployment levels back to 1934. The Political Consequences of the Crisis The Great Depression caused significant changes in the United States. Herbert Hoover’s failure to prevent the crisis forced him to lose the 1932 presidential election to Franklin Delano Roosevelt. The American state was entering a new era of economic and political change.
In 1933, the new president brought a unique atmosphere of confidence and optimism and soon made the population regain what was on his program’s banner. The economic plan to improve the situation, the new agreement, established unprecedented assistance programs to assist agriculture and labour unions. What the new deal’ should be commended for is that she quickly realized the goals of her plan points that had taken years. This agreement revived interest in government and politics in general. When Roosevelt was sworn in as president, the banking and credit system was paralyzed.
With dizzying speed, the state banks were closed and then opened only if they were able to overpay. The administration pursued a relaxed inflation policy to start a movement in item prices and provide relief to borrowers. New government agencies quickly bring loans to industry and agriculture.
Since 1933, millions of Americans have remained unemployed. Bread queues were a common sign in most cities. Hundreds of thousands of people roamed the cities in search of food, work and shelter. A quick step for the unemployed was taken by the consumer protection association, a program approved by Congress to come to the aid of young men aged 18-25.
They participated in many activities such as: planting trees to fight erosion from the sun and maintaining the state forests, to clean the air and fishing. They built bird nests and wildlife sanctuaries, collecting coal, oil, shale, gas and helium deposits. This program was established in 1933 and abandoned in the spring of 1934. However, Roosevelt and his top officials continued to support programs such as on-the-job assistance rather than social assistance.
Agriculture, The years of the new agreement, were characterized by a belief that better regulation would resolve many outstanding issues. In 1933, for example, Congress passed the Agricultural Regulation Act (AAA) to provide economic assistance to farmers.
At its core, the AAA had a plan to raise production prices by paying farmers a subsidy to compensate for voluntary production cuts. Funds for payments will be produced from a tax levied on industries where crops are processed. By the time the act was a law made, it was also the growing season, and the AAA encouraged farmers to plough with their produce. Abundant. Secretary of Agriculture Henry A. Wallace called the activity a “shocking commentary on our civilization.” However, through AAA and the Commodity Credit Corporation, a program that expanded credit to products held in storage and off-market, output has declined. Between 1932 and 1935, farm incomes had increased by more than 50 per cent, but only in part because of federal programs.
During the same years, which encouraged farmers to take land from production – tenants – a severe drought hit the big states and led to a significant reduction in farm production. Violent winds and dust storms destroyed the southern part of the crop when it became known as the “Dust Bowl” during the 1930s, but especially 1935-1938. The Crops were destroyed, cars and making were destroyed, people and animals were damaged. Some 800,000 people, often referred to as “Okies,” fled Arkansas, Texas, Missouri, and Oklahoma during the 1930s and 1940s. Most run farther west than the land of myth and promise, California.
Immigrants were not only farmers but also professionals, retailers, and others associated with the health of farm communities. California was not the place of their dreams, at least initially. Most migrants ended up competing for seasonal crop harvest work at meagre wages. Industry and Labor Administration National Recovery (NRA), established in 1933 with the National Industrial Recovery Act (NIRA), sought to end competitions cut to the throat putting into practice the codes of fair, competitive ethics to generate more jobs and thus buy more.
Although the NRA was initially welcomed, businesses complained about the severity of the over-regulation of this administration. The NRA was declared unconstitutional in 1935. At this time, other policies were those promoting recovery.
The government soon viewed that prices administered in certain business lines were severe exhaustion for the national economy and a hindrance to recovery. During the new agreement, organized labour brought greater profits than at any previous time in American history. NIRA had guaranteed the right to work and collective bargaining (bargaining a unit representing individual workers with industry). In 1935 Congress passed the National Labor Relations Act, which defined unfair labour practices, gave workers the right through unions to make favourable choices for them, and forbade employers from interfering in union activities. He also set up the National Labor Board to oversee collective bargaining, election administration, and give workers the right to choose the organization they should represent in their employers’ dealings.
Significant progress was made in the organization of work. Work brought the people a growing sense of common interest, and the labour force grew not only in industry but also in politics.
This power was exercised mainly within the framework of the two major parties. However, the Democratic Party has generally received union support more than the Republicans. SECOND AGREEMENT In the early years, the new agreement sponsored a tremendous series of legislative initiatives and achieved significant increases in output and prices – but this did not bring an end to the depression. And as a sign of the rapid relief of the crisis, new demands emerged.
Businessmen saw the end of the “laissez-faire” and started working under NIRA rules. The protests raised by the dreamers of the right and the political left, attract a broad audience and dissatisfied with the pace of recovery. This included the inflationary suggestions of Father Coughlin, the radio priest. He blamed international bankers for his rhetorical speeches “Everybody is King” plan by Huey P. Long, senator and former governor of Louisiana, spokesman for powerful and ruthless that ruled the state as personal property. (If he had not been assassinated, he would probably have launched a presidential challenge against Franklin Roosevelt in 1936.)
In the face of these pressures from the left and the right, President Roosevelt supported new economic and social measures. These were measures to fight poverty, fight unemployment through work, and provide a social security network. The Workers’ Progress Administration (WPA) was an effort to provide jobs instead of welfare. According to the WPA, buildings, roads, airports and schools were built. Actors, painters, musicians and writers were employed through the Federal Theater Project, Federal Art. The National Youth Administration also gave part-time work to students, established training programs, and provided assistance to unemployed youth. The WPA recruited only about three million unemployed, by the time it was abandoned in 1943 it had helped a total of 9 million people. According to Roosevelt, the foundation of the new agreement was the Social Security Act of 1935.
Social Security created an insurance system for the elderly, the unemployed and the disabled based on the employer’s contributions and the employee. Many other industrialized countries have already adopted such programs, but such an initiative in the 1900s in the US had gone unnoticed. Although conservatives complained that the Social Security system went against American traditions, it was relatively conservative. Social security was funded in large part by taxes në income of current employees, at a single rate set for all, regardless of income. For Roosevelt, these restrictions on programs were compromises to ensure the passage of the crisis.
Although its origins were initially relatively modest, the Social Security Act is today one of the most extensive local programs administered by the US government. CONCLUSIONS: The Great Depression was the worst global economic depression in the preceding decade of World War II. The Great Depression varied across nations, but in most countries, it began in 1929 and lasted until the late 1930s or 1940s. It was the longest, most widespread, and the most profound depression of the 20th century was used in the 21st century as an example of how much the world economy could suffer. The depression originated in the United States, beginning with the stock market crash of October 29, 1929 (known as Black Tuesday), but spread rapidly to almost every country globally.