Government
Steps In
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By the middle of the decade of the
1930s, many governments started to lose faith that 'the market would correct
itself.' A number of factors lay behind this major transition away from the
traditional economic policy of "laissez faire".
Half a decade into the Great
Depression, the economy simply was not righting itself as still close to one
out of three workers was unable to find employment. The markets needed to be
stimulated. British economist John Maynard Keynes introduced the new concept of
'deficit financing' in which governments could postpone debts in the future and
thus spend their way out of depression. In 1933 American President Franklin
Roosevelt introduced his revolutionary New Deal which addressed head-on some of
the systemic causes that underlay the Great Depression.
R. B. Bennett and Mackenzie King,
1934
The
Bennett New Deal
Something had to be done, and done
quickly about the worsening national economic state. After initially acting
quickly upon taking office by raising tariffs and providing relief money to the
provinces for unemployment, Prime Minister Bennett did little else. He sat back
and waited, trusting in the economy to right itself. He could not leave behind
the old high-tariff protectionist attitudes that were strangling recovery. The
economy had been in trouble before but it had always righted itself. It would
do so again. That was the popular belief shared by Bennett and many others,
including Mackenzie King. However, things were not getting better; they were
simply getting worse, with no end in sight. Bennett realized that he had do
something drastic to salvage his political fortunes in the upcoming 1935
election. Adopting a page from United States President Franklin Roosevelt,
Bennett tried to institute his own version of 'the New Deal.' In doing so, he
appeared to be contradicting everything that he as a conservative capitalist
had stood for.
Roosevelt had come to office in 1932
and announced in his famous Inaugural Address, "the only thing we have to
fear is fear itself." In order to combat that fear, he launched an
ambitious and innovative One Hundred Days, which called for "action, and
action now." He targeted three areas - relief, recovery, and reform. His
plan came to be known as the New Deal. Roosevelt got the United States working
by funding massive public works projects. Farmers were paid to accept
government quotas to limit production. Interest-free loans were made available.
Bank deposits were ensured up to $5000 per person. Tariffs were reduced. The
stock market was reformed through the creation of the Securities and Exchange
Commission. In short, FDR's New Deal helped to save, reform, and renew
America's economy.
Bennett was slowly converted to some
of the leftist leaning policies of the New Deal, probably less out of
conviction than out of pragmatism. Faced with a very low popularity rating as
well as the gaining momentum of several new political parties, Bennett needed
something that the electorate would respond to favourable. He surprised the
country and even his own cabinet by introducing his version of the New Deal. On
January 2, 1935, he began to copy another FDR innovation - 'the fireside chats'
(informal radio speeches) that outlined his ideas for getting Canada out of
Depression.
Questions:
1. 1. What evidence was there that half a decade
into the Great Depression the economy was still in bad shape?
2. 2. What
was John Maynard Keynes idea to help the
economy during the Great Depression?
3. 3. Which American President unveiled his ‘new
deal’ to deal with the Great Depression?
4. 4. What was Prime Minister Bennett’s strategy to
fix the economy?
5. 5. What idea did Prime Minister Bennett take from
the US president at the time?
6. 6. What were the ‘three r’s’ of Roosevelt’s New
Deal?
7. 7. What were the ‘fireside chats’ and how were
they used to help Canada’s economy?
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