The Instigator
Reformist
Pro (for)
The Contender
Stoogesfan1
Con (against)

The Great Depression

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Voting Style: Open Point System: 7 Point
Started: 3/10/2017 Category: Economics
Updated: 1 year ago Status: Debating Period
Viewed: 1,508 times Debate No: 100809
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Reformist

Pro

Only for top debaters, or debaters with a knowledge on the topic

Debate: The Great Depression was caused and prolonged by government involvement in the economy

Rules:
No K's
No switching of topic
First round is acceptance only
You must argue that the Great Depression was NOT caused and NOT prolonged by government involvement in the economy

Good luck!
Stoogesfan1

Con

I accept the rules.
Debate Round No. 1
Reformist

Pro



FDR"s dramatic New Deal legislation provided radical reforms, relief, and recovery efforts during the Great Depression. One of the most controversial actions in US History, the New Deal still remains highly contested. Proponents will attempt to defend it on the basis of the "relief" that it spurred, but many fail to consider the wild amounts of resources that had to be allocated for this legislation. FDR enacted poor legislation to adequately deal with the crisis, clearly evident during analyzation of the actual effects of the New Deal not clouded by the gilded depiction of the period. The New Deal was a haste decision that provided "feel good" regulations, administrations, and government interference in the US economy, all approved under a government controlled by one political faction. FDR would do anything to ensure that his New Deal was passed, including altering the very structure of our sacred Supreme Court to bend to his will. The United States was lucky for the economic stimulation that the second world war caused, as it was the true savior from the wretchedness that chased the country"s citizens through the 1930"s.

FDR"s Relief:
The AAA was basically loaning money to farmers not to farm, in fact perfectly good fields of cotton, tobacco and corn were plowed under and hundreds were slaughtered and put into mass graves. The AAA curtailed supplies and rose prices leading to lower consumption rates and starvations.

On April 8th, 1935, FDR signs the Emergency Relief Appropriation Act. This was a $5 million act, but the government still has not seen this money again.
"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."-Ohanian

Useless jobs were created by the WPA like painting murals and chasing tumbleweeds

Unemployed did not get any job relief until World War II helped make the economy better
FDR"s Recovery:
The NRA (National Recovery Administration) and NIRA (National Industrial Recovery Act) increased the cost of doing business, by an average of 40 percent


New Deal pledged spending 10 billion dollars, while revenue was only 3 million, government spending rose by 83 percent and Federal Debt increased by 73 percent

FDR attempted to add liberal justices to the SCOTUS to support his policies which were heavily opposed by the SCOTUS at the time. Roosevelt tried to manipulate the government in his favor and turn himself into a de facto dictator with no political opposition.

FDR prolonged Great Depression by 7 years

Great Depression was created by government involvement, and prolonged by government involvement such as the New Deal, Fed policies, Smoot Hawley Tariff

New Deal programs were financed by tripling federal taxes from $1.6 billion in 1933 to $5.3 billion, The US debt doubled from 19 to 40 billion. National Industrial Recovery Act (NIRA) of June 1933 [Declared unconstitutional, prices stabilized at first but then rose drastically ]


Federal Securities Act of May 1993/ Securities and Exchange Commission (SEC) [not pleasing for business]


Home Owners Loan Corporation (HOLC) / Agriculture Adjustment Administration (AAA) [declared unconstitutional]

The Tennessee Valley Authority dammed up rivers in Tennessee and flooded rural farmland the size of Rhode Island. TVA agents dispossessed thousands of people. Poor black farmers received no compensation for their lost property.

FDR raised top income rate tax to 96 percent, stagnating growth and development

Taxes on corporate earnings, also known as "undistributed profits tax", plunging stock markets farther and farther down and stagnating wealth

FDR"s useless job creation was one of the pinnacle of his New Deal failures; "Roosevelt"s public relief programs hired actors to give free shows and librarians to catalogue archives. The New Deal even paid researchers to study the history of the safety pin, hired 100 Washington workers to patrol the streets with balloons to frighten starlings away from public buildings, and put men on the public payroll to chase tumbleweeds on windy days." These useless jobs came at the expense of tax dollars which could have been circulated in the economy and created useful jobs

FDR"s Reform-
The resulting success in the 1940s weren't because of FDR"s policies, but rather because of increase of trade due to WW2"s destructive effects and Truman"s relaxing of FDR"s strangling protectionist policies

Labor Unions increased massively under FDR"s rule, labor union participation increased 2.5 percent from 1935 to 1941; this increase in labor unions also resulted in terribly inefficient policies such as lobbying of minimum wage increases, pension demands that later manifested into the Social Security ACT, and other anti productivity laws.


After part 2 of the New Deal was launched, the percentage of unemployed workers jumped back up from the low 20s to almost 30%.


Even with the FERA, Unemployment remained in double digits

FDR"s New Deal programs were financed by tripling federal taxes. Items purchased by middle class individuals were subject to the major taxation, such as cigarettes, candy, electricity, etc. In order to pay for the New Deal, the American middle class was heavily taxed which strained their ability to put money into the economy, and contributed to a wider gap between the middle class and the rich.

13 recessions in U.S. since New Deal
-"Reforms were hastily drawn and weakly enforced, often contradicting each other"
-Roosevelt"s reforms were highly contested, he almost abused the Democratic control of government.
-Reforms directed towards blacks were unsuccessful in that they did little to assist with the segregation that hindered prosperity among blacks, so he could keep Southern votes.
- Currency reforms would cause prices to rise, massive inflation following the removal of the US Gold Standard and falling confidence in the US Dollar.
- Most government spending did not actually go to the poorest areas, it went out west.
- The cost of employing people rose 25% since FDR laws enforced Union principles.
- 14.5% vs 9.5% unemployment, difference is due to work relief jobs. Unemployment rate without temporary work relief jobs were closer to actual rates of unemployment before relief projects were added.
- Roosevelt"s SC expansion in 1937 immediately neutralized the court which was hostile to his New Deal, and unemployment saw a spike upwards immediately afterwards that his legislation was being passed.
- A second recession was actually experienced 1937-1938, 1929 levels of production and unemployment were the same (aka bad)
- Stock prices were continually falling around 40% despite SEC
- 2008 recession and SEC
- Bank runs were still a problem despite the efforts of the FDIC to protect banks


Conclusion:

While the New Deal legislation may have been in good faith, the poor institution of it led to the unstable and overinflated 1930s. The second recession that occurred despite the New Deal, Continual falling prices and rising unemployment, and prolongment of the Great Depression all point to the conclusion that the New Deal failed in its goal of resolving the economic turmoil and only aided citizens in their hope for better times.



Citations:
https://web.stanford.edu...
https://chnm.gmu.edu...
http://www.johndclare.net...
Powell, Jim. "How FDR's New Deal Harmed Millions of Poor People." CATO Institute. N.p., 29 Dec. 2003. Web. 9 Mar. 2017.
"New Deal - Facts & Summary." History. N.p., n.d. Web. 9 Mar. 2017.
https://www.cato.org...
Jim Powell December 29, 2003. "How FDR's New Deal Harmed Millions of Poor People." Cato Institute. N.p., 29 Dec. 2003. Web. 09 Mar. 2017.
http://www.wikiwand.com...
http://newsroom.ucla.edu...
https://www.fdic.gov...
https://fee.org...
Stoogesfan1

Con

The Great Depression is often seen, in its simplest form, as the resulting recession in the wake of the Stock Market Crash of 1929 until the entry of the US into World War Two more than a decade later, with the accompanying mobilization of the populace, industry, and policy towards victory. To attribute the total reversal of fortune in the US to the outbreak of war itself is disingenuous, as many government policies during the Great Depression not only alleviated the sufferings of the general public, but also stimulated the economy and hastened its recovery either directly or indirectly. Perhaps the most impactful legislation during the period is FDR's New Deal, which encompasses many economic policies specifically designed to mitigate the effects of the depression. The claim that the Great Depression was caused specifically by government intervention in the economy can be proven demonstrably false, as several presidencies directly prior to FDR's had advocated for a Laissez Faire economic policy as well as promoted a generally deregulatory atmosphere dealing with business and wealth accumulation.

To preface any further elaboration, I must define 'government intervention.' 'Government' will be defined as, ' the organization, machinery, or agency through which a political unit exercises authority and performs functions and which is usually classified according to the distribution of power within it,' [1] while 'to intervene' will be defined as, 'to come in or between by way of hindrance or modification.' [2] The term 'government intervention' in the economic context which I describe it in will therefore signify the imposition of the will of a ruling political body (i.e. The United States) onto the market in a way designed to curb economic autonomy of the market.

I will first address the causes of the Great Depression. The Great Depression was caused by a myriad of factors, but most directly by the repeated failure of the US government to intervene in the economy and further legislate certain areas of the market, allowing corporations to expand in a swift and unsustainable manner in addition to facilitating banks' irresponsible lending habits and monetary policy.

The US Federal Reserve was organized largely in response to the Panic of 1907, wherein a failure to corner the stock of United Copper nearly resulted in economic disaster on Wall Street. The disaster was only averted when financial giant J. P. Morgan stepped in and took control of the situation, though damage had been done. The tide of public opinion, having already been negative towards the elite members of society, seemed to have reached a peak as a result of the adverse effects of the crisis; commodity prices fell by 21%, industrial production dropped by 11%, imports fell by 26% and unemployment rose from 2.8% to 8%. [3] Various efforts originating from the panic would culminate in the 1913 Federal Reserve Act, formally establishing the Federal Reserve, which still exists to this day. During the Great Depression, the Federal Reserve would fail in its duty to act as a lender of last resort and would also stifle the economy leading up to the Depression through mismanagement, poor monetary policy, and inspiring a confidence to invest among smaller banks with less capital on hand, as they believed that they would be bailed out.

Thus, the Federal Reserve assumes a unique role in history; It was an evidently necessary agency, so as to avoid a devastating situation similar to the Panic of 1907, but also was one of the main causes of the Depression. The main issue here lies not in the fact that the Federal Reserve was the literal apparatus for government intervention in the economy, as a Federal Reserve system is generally considered necessary to ensure the health and vigor of the economy, but the fact that the government failed to strengthen it at all prior to the onset of the Depression. The distinction here is key; The government's lax policy not only in managing the Federal Reserve but also in finance, compounded with a failure to decisively act, was the root cause of the Great Depression. The government was responsible for the depression precisely because they failed to act when they could.

A lack of oversight or any sort of cohesiveness in the Federal Reserve system, which was highly decentralized at the time, was a major issue. Each district was run by a governor who set the policy for his individual district, sometimes answering to the overseeing Federal Reserve Board that was based in Washington D.C., whose members were appointed by the president for terms of 10 years initially, 14 year terms later in the system's life. Monetary policy became chaotic without reliable current information, with many different individuals in the Federal Reserve having a variety of opinions on the best course to take with fiscal policy. [4] Enforcement of government policy can therefore be described as erratic through the Federal Reserve System, and many glaring issues weren't rectified within the Reserve system and the banks until the Banking Acts of 1933 and of 1935, when it was too late to prevent the depression itself. Inability to deal with a variety of economic realities persisted in even the relatively robust Federal Reserve system and persisted abroad in other countries who had readopted the gold standard after the First World War, mostly due to the inherent nature of the gold standard itself and it's deflationary trends.

The depression was as much a product of the international situation post-World War One as it was of the poor domestic situation. America had been launched into financial relevance on the international stage by its entrance into World War One and emerged a creditor, insisting on the repayment of large war debts, especially from France and the United Kingdom. Stubborn insistence by the US government of full repayment soured European relations immensely and sparked a new wave of isolationism, influencing future trade agreements and interactions, most evident in the form of retaliatory tariffs. Adherence to the gold standard can be generally correlated to deflation and poor economic performance when compared to countries that weren't on the gold standard. While the countries which were to abandon the gold standard in
1931 did slightly worse in 1930 and 1931 than the nations of the Gold Bloc, subsequent to leaving gold these countries performed much better. Between 1932 and 1935, growth of industrial production in countries not on gold averaged about seven percentage points a year better than countries remaining on gold, a not insignificant amount in any meaning of the word. [5] Deflation would exert itself negatively in three major ways; through the increase of real wages, the increase of the real interest rate, and by causing financial crises, all of which were significant causes of the Great Depression. The US was inextricably tied with foreign countries on the gold standard and was affected by their financial struggles to a large degree, meaning that its prosperity would be subject in a certain measure to the whims of the foreign market.

The world wide situation in which the US became a creditor generally worsened its prospects. Gold increasingly flowed towards US markets and accumulated within the Federal Reserve itself. By August 1929, the Fed Banks" gold holdings were $3.12 billion, double the legal requirement. This did not lend itself to inflation, as one would expect, but instead resulted in deflation as Federal Reserve policymakers had realized that they could sterilize the inflow of gold and keep prices at roughly the same level. The gold standard was thus circumvented, leaving determination of currency largely up to the US/other governments in a similar situation, such as France. The sheer amount of gold entering the US due to the higher price in the US and the European situation during the middle of the depression also caused the commercial banking system to have double the required legal reserves in gold in 1936. Despite this, the Federal Reserve still pursued a deflationary policy, damaging the already fragile economy more. [6]

Domestic factors also contributed significantly to the depression. Following World War One, the European economy recovered much more quickly than expected, especially agriculturally, and US farmers were no longer able to get a favorable government price for their crops. The huge surplus of crops caused the price of them to drop dramatically, resulting in a plummet in average farm incomes. Increasing mechanization would not help the poor situation among farmers during the 1920s. Irresponsible or shortsighted investment, encouraged by the vigor of the economy, was commonplace, and an increasing number of farmers were forced to foreclose on second properties or even their main properties because of the recession. Bank failures climbed during the period before the Great Depression in the US. Inexperienced investors entering the stock market made a crash nigh unavoidable.

The primary forces behind the great depression itself were either out of government control almost entirely, such as the international trend of the gold standard, or should've been brought under more control or scrutiny, such as the Federal Reserve. Most of the issues were exacerbated either by government non-intervention or minimal intervention in the economy. In the next round I'll address FDR's New Deal policies as well as refute some of the claims that my opponent has made about their effectiveness.

Sources:
[1] https://www.merriam-webster.com...
[2] https://www.merriam-webster.com...
[3] http://www.fas.harvard.edu...
[4] http://www.federalreservehistory.org...
[5] http://www.nber.org...
[6] http://www.econlib.org...
Debate Round No. 2
Reformist

Pro

The Great Depression's main beginnings was not in fact out of the governments control. The federal reserve, a government agency, failed by increasing interest rates on government loans (1)

Secondly the depression was worsened by government involvement by Hoover under the creation of the Hawley Smoot tarriff which reversed the slight recovery of 9.6 percent unemployment to 8 percent unemployment and expanded unemployment to double digits (2)

According to Milton Friedman, the bank holdiays of FDR were not a success rather a failure!

"FDR was inaugurated on March 4, 1933, and two days later he declared a “bank holiday,” allowing banks legally to refuse withdrawals by depositors; it lasted ten days. With his famous phrase, “The only thing we have to fear is fear itself,” he intended to dissuade depositors from running on their banks, but by then it was far too late. In 1929 there were a total of 25,000 banks in the United States. As the bank holiday ended, only 12,000 banks were operating (though another 3,000 were to reopen eventually). The effect on the money supply was equally dramatic. From 1929 to 1933 it fell by 27 percent—for every $3 in circulation in 1929 (whether in currency or deposits), only $2 was left in 1933. Such a drastic fall in the money supply inevitably led to a massive decrease in aggregate demand. People’s savings were wiped out so their natural response was to save more to compensate, leading to plummeting consumption spending. Naturally, total economic output also fell dramatically: GDP was 29 percent lower in 1933 than in 1929. And the unemployment rate hit its historic high of 25 percent in 1933." (1)

My opponent seems to say that the if the federal reserve did its job then it would have been okay, but this is still an example of government incompetence! In fact commerical banks did the job of the federal reserve and succedded in mitigating panics! (1)

Again government involvement in terms of creating "public works programs" that made seemingly useless jobs and costs exceeding tax revenue drove us into more debt, less growth and less wealth

Sources:
(1):https://fee.org...;
(2): https://www.britannica.com...
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