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The crash of the stock market brought many hard times. Franklin D. Roosevelt's
New Deal was a way to fix these times. John Stuart Mill and John Maynard
Keynes were two economists whose economic theories greatly influenced and
helped Franklin D. Roosevelt devise a plan to rescue the United States from the
Great Depression it had fallen into. John Stuart Mill was a strong believer of
expanded government, which the New Deal provided. John Maynard Keynes
believed in supply and demand, which the New Deal used to stabilize the
economy.
Franklin D. Roosevelt's New Deal is the plan that brought the U.S. out of
the Great Depression. It was sometimes thought to be an improvised plan, but
was actually very thought out. Roosevelt was not afraid to involve the central
government in addressing the economic problem. The basic plan was to
stimulate the economy by creating jobs. First Roosevelt tried to help the
economy with the National Recovery Administration. The NRA spread work and
reduced unfair competitive practices by cooperation in industry. Eventually the
NRA was declared unconstitutional. Franklin D. Roosevelt then needed a new
plan. Keeping the same idea of creating jobs he made many other organizations
devoted to forming jobs and in turn helping the economy. One of those
organizations was the Civilian Conservation Corps. This corps took men off the
streets and paid them to plant forests and drain swamps. Another of these
organizations was the Public Works Administration. This organization employed
men to build highways and public buildings. These were only some of the
organizations dedicated to creating jobs. Creating jobs was important because it
put money in the hands of the consumer. This directly affected the supply and
demand. The more money they had the more they could spend. This would slowly
start a chain reaction and bring the economy back to the way it was before the
depression. By the end of the 1930's this plan had lowered unemployment to
17.2%. To make these organizations it was going to take money. Roosevelt had
to deficit spend, which is when the government spends more than their budget in
one year, in order to obtain this money. Of course these ideas of supply and
demand and active government didn't just come to him. He was influenced by
John Maynard Keynes and John Stuart Mill. There philosophies were the basis of
the New Deal.
John Stuart Mill, who began studying economics at age 13, was one of the
most influential political thinkers of the mid-Victorian period. He believed in
empiricism and utilitarianism. Empiricism is the belief that legitimate knowledge
comes only from experience. Utilitarianism is the belief by which things are judged
right or wrong. It is judged according to their consequences. In a way he was a
hypocrite. When the economy was good he believed in Laisezz-Faire, which
means "hands off." If the economy was bad, though, he believed in an extended
role of government. This simply meant that the government should take part in
the economy and try to make it better. The New Deal was a very active
government plan because it had the government working directly to make jobs
and fix the economy. Mill died in 1873 and would never had a chance to talk to
Franklin D. Roosevelt. In a press conference Franklin D. Roosevelt once said, "I
brought down several books by English economists and leading American
economists, I suppose I must have read different articles by fifteen different
experts."(Schlesinger, Pg.650) This writing indirectly steered Roosevelt towards a
plan which expanded the role of government. Mill gave Franklin D. Roosevelt the
basis of the plan, but it needed to be elaborated on. John Maynard Keynes was
the man to do this.
John Maynard Keynes, one of the most influential economists of the 20th
century. For many years he was an active voice in economics. In 1929 he wrote
We Can Conquer Unemployment and in 1930 he wrote his Treatise on Money.
Ten years before he died he wrote his General Theory of Employment, Interest
and Money. Above all he believed in supply and demand. This was an indirect
way to let the economy balance itself. In order for this system to work people
needed money. This could only be done by creating jobs. Keynes also believed
that to reduce unemployment the government needed to increase the aggregate
demand. The aggregate demand is the total amount of goods being demanded.
The government could do this by creating jobs. These jobs would provide people
with money to spend on products. The ability to pay and the increase desire to
spend would increase the demand for goods. The demand for goods would rise
and the demand for workers would rise. This would slowly reduce the
unemployment rate and put the economy back where it was before the crash of
the stock market. In Arthur M. Schlesinger Jr.'s book The Politics of Upheaval it's
stated that Franklin D. Roosevelt and Keynes communicated on several
occasions such as, letters, English tea meetings, and messages delivered via
mutual friends. Although Franklin D. Roosevelt never publicly embraced Keynes'
theories, and at times voiced disagreement with parts of his theories, there were
many similarities between the works of the two men.
Franklin D. Roosevelt took these philosophies and created the New Deal,
which eventually brought the United States out of the Great Depression. John
Stuart Mill gave Franklin D. Roosevelt the idea of an active government and John
Maynard Keynes showed him how to do it. Although Franklin D. Roosevelt never
really liked economists it appears that the work of many economists showed up in
his New Deal. Although Mill did not directly influence FDR his philosophies were
present in Franklin D. Roosevelt's plan. Also, Keynes theories were disagreed on
time and time again by FDR, but in the end the New Deal was almost a perfect
example of Keynes' theories.