The Impact Of Classical Economics On The United States

Reed’s book, Great Myths of the Great Depression, attempts to argue that the stock market crash of 1929 was merely a normal economic occurrence. Instead, it was government policies enacted in response that exacerbated and prolonged the economic effects of the crash. In effect, Reed’s thesis flips the conventional view on its head: instead of being the cause, free-market capitalism would have naturally solved the issues that led to the Great Depression. Conversely, government intervention was a cause of, rather than a solution to, the economic hardships that resulted.

In the United States, we encounter quite a bit of obstacles that we can’t seem to get rid of completely. We as a nation deal with inflation, unemployment, stagflation, recessions, depressions, and so much more. Reading these three articles opened my eyes to the world of economics, and even made me question the society we live in. I’ve learned that sometimes questions can’t be answered, and I learned that once we solve one issue, there is always another issue on its way. These articles made me analyze, and think about the future of economics, and what I can do to try and help the economy. These authors of these three articles make it very clear that there are issues in the United States, and they do an amazing job

The Market Revolution was the most fundamental change in American history all because of three very important developments. These developments consisted of transportation, commercialization and industrialization. Transportation developed many more ways to get around by roads, canals, steamboats and even railroads. Commercialization began to replace household self-sufficiency with goods that were starting to be produced for a cash market. Industrialization was life changing for all of goods that were produced by hand and switched to machines to do the same job but faster and more efficient.

James Tobin had once stated, “The miserable failures of capitalist economies in the Great Depression were root causes of worldwide social and political disasters” (James Tobin Quotes). America has yet to face the dark ages of failing economy when the stock market crashed in the days of October 1929. From a child to a dying old man, everyone’s lifestyles were changed dramatically by the events of this period, the Great Depression. The Great Depression resulted from a combination of both domestic and worldwide conditions. The depression had afflicted every inch it passed by. Every nation, especially the United States, now have to find a way out.

When we look back through history we can find many opportunities to learn the lessons of economic theory but The Great Depression is a particularly relevant historical event when discussing economics. It is a defining event in the history of America as politics and economics intertwined, transforming the role of the federal government in the economy. Due to the length, severity and global effects an entire decade is known as the Great Depression. Theories continue to be debated on how or why the Depression took place and the reasons for its eventual end however, what most will agree on is that “The Great Depression (1929-39) was the deepest and longest-lasting economic downturn in the history of the Western industrialized world” (History.com Staff, 2009).

Following an era of economical prosperity, the Great Depression, otherwise known as the ugliest sister of the 1900’s family, which lasted an entire decade from 1929 to 1939, began on a fateful day with the New York Stock Exchange abruptly crashed and was unable to recover quickly. This occurrence, of course, had an unforgivable effect on the economy, leading to one of the most memorable and significant eras in American history. Not only affecting the economy domestically, internationally trading was burdened by the limp leg that was the United States. Socially, people were struggling to regain their balance after a main income source –agriculture- was swept away by the Dust Bowl, only worsening the drawn out effects of the initial Wall Street crash. Politically, the US faced severe turmoil with presidency of Herbert Hoover due to a lack of action to prevent economic decay and promote domestic and foreign recovery. Needless to say, after one presidential term, Franklin D. Roosevelt was elected into office and soon passed the New Deal, a highlight in his presidential career. However, due to the previous president, there were several critics about the nature and efficacy of such a policy. The Great Depression was a time of discussion and criticism of political policy and the nature and efficacy of said policy in dominating the backfire of grand economical proportions within the United States alone.

In the late 1920s and early 1930s, the Great Depression changed the lives of everyone on a global scale, but the economic and social change in America was incomparable. In 1929, the unemployment rate was at a mere 3.2%, but by 1933 however, a massive 25% of citizens were without jobs. To truly understand the enormity of this decline in the working population, one must first understand the causes of the depression itself. On October 29th, 1929 a crash in the stock market, known today as Black Tuesday, contributed to a drastic decline in the value of stocks and assets of banks. The massive hit that many of these banks took to their assets forced many of them into failure, and they took the savings and fall-back plans of millions of Americans with them. Without the banks, ordinary people had no access to their own savings and many people’s homes were foreclosed upon. Following the loss of the banks, unemployment also skyrocketed since people weren’t able to buy goods without access to what they had thought was their money. If there is no demand for products in a market like the United States’, then there is no demand for the production of those goods, and that very production of consumer goods was the trade that many of those hurt the worst by the Great Depression relied upon.2 This vicious cycle was one that would continue to plague the country until a new problem, the

Wealthy disparity in America is greater than it has ever been, yet nothing seems to be done by the government to fix it. Bridging the wealth gap in America would require government regulation from government, but the American government is controlled by the wealthy. Rich business owners give large sums of money towards political campaigns, thus gaining them political favor. Along with a corrupted government, large corporations have taken up almost all market share in their respective industries, not allowing for small business to thrive. And, low-level workers at said corporations are treated unfairly and not allowed to unionize. With the wealthy controlling the government, big businesses dominating the economy, and workings being denied their rights, the American capitalist economic system makes it very difficult, if not impossible, for the impoverished to escape poverty.

Writer and philosopher, George Santayana, explained the importance of history best, “Those who cannot remember the past are condemned to repeat it.” This seems to ring true in recent years in our economic and political sectors in America, when we experienced the financial meltdown of the Great Recession. The Great Recession and the Great Depression haunted people with their similarities. Many recognized that both events occurred due to imbalances in the global world economy and an unfettering belief that the financial markets were strong and stable. (Temin, 2010)

The American System transpired after the War of 1812. The need to protect the United States economy against outside influence and control became evident. A group of politicians, led by Henry Clay and John Calhoun developed an economic plan that believed that the federal government should encourage economic enterprise. The center of this new plan wanted to keep American products in the United States. The American System fell under the Market Revolution, where economic and social changes took place between the years 1812 - 1868 (Schultz, n.d.). They felt the federal government should encourage internal enterprise by creating internal improvements, establish secure economic institutions, and high tariffs. Internal improvements consisted of creating new ways to move goods

The US economy, as anybody would expect, has gone through its ups and downs. Some believe that our new president has a brilliant plan to create a phenomenal economy for our country. Others believe that his economic policy will take our country to the worst state it has ever been. Throughout our history, various styles of economic policy have been commonly believed. In the early 1900’s most economists believed in “classical” economics, this is the idea that the economy will work better when the government is more hands off. This can be thought of as the purest form of capitalism that has been attempted. In the late 1940’s, most US economists began to follow “Keynesian” economics. This form of

For example, when a good is scarce, the prices goes up, so consumers try to avoid buying and therefore conserving the resource. Then, the suppliers want to find more of the source as to get a better profit. The reasons behind their actions are selfish, yet they benefit all of society. Smith identified that the pursuit of profit and the power of self-interest would increase motivation and result in more advances in technology. His model of capitalism was on the basis of freedom and selfishness as a motivator for society. It was also on the basis that the economy would go through recessions and expansions but fix itself. Recessions are periods in the economy in which unemployment goes up, while profits and spending goes down; a slowdown of the economy. An expansion is essentially the exact opposite. The classical model of economics states that the economy will continue to go through these fluctuations over time and will fix itself with no help, thus not needing a government to give influence.

In The Return of Depression Economics and the Crisis of 2008, Paul Krugman warns us that America’s gloomy future might parallel those of other countries. Like diseases that are making a stronger, more resistant comeback, the causes of the Great Depression are looming ahead and much more probable now after the great housing bubble in 2002. In his new and revised book, he emphasizes even more on the busts of Japan and the crises in Latin America (i.e: Argentina), and explains how and why several specific events--recessions, inflationary spiraling, currency devaluations--happened in many countries. Although he still does not give us any solid options or specific steps to take to save America other than those proposed by other economists, he

In America there have been great economic struggles and triumphs. The many great leaders of this country have foraged, failed, and overcome some very difficult times. Comparing the Great Depression of 1929 and the Great Recession of 2008 has revealed similarities that by learning from our mistakes in 1929 could have prevented the latest recession. I will discuss the causes of the Great Depression and the Great Recession, and what policies were implemented to reverse the economic downfalls.

Economic system in the world is mostly productive in America this is due to the constant unlimited wants of its people and the fact that most people have high standards of living (Rosefielde, 2008). An individual has different wants and at any particular time an individual can satisfy his or her wants through purchasing these goods therefore there is an unlimited wants for goods and services. In recent times people consume goods that they don’t produce they sell or provide services then the income they gain from the services they purchase the goods that they want to consume. In this paper I will discuss the developed theories of the classical political economy developed theories and discuss on their different characteristics. These theories were mainly concerned with the changing aspects of economic growth in different centuries.