The Great Depression
The Great Depression is viewed as the worst economic downturn in United States history. The period started in 1929 and ended in the 1930s. Essentially, the economic downturn was not limited to the U.S since countries in Europe and other parts of the world also experienced depression. Throughout the 1930s, international tensions escalated as the world economy also declined. In response to the crisis, the social-democratic response started which involved the voluntarist principles (Hingstaman and Goodnight ). The principle held that direct public relief to individuals was likely to diminish individual character while turning citizens away from work ethics. The situation would lead them to depend on government handouts. Nevertheless, these social democratic responses were considered too little to deal with the financial crisis. Particularly, the responses were unable to explain the cause of the severe global economic downturn or offer a sustainable public policy solution.
The inadequacy of the existing economic policies led to short-term anti-cyclical policies. A British economist, John Maynard Keynes, started a revolutionary theory that overturned the existing that free market would
to provide full employment. Keynes rejected the idea of a country returning to a natural state of equilibrium. Rather, he stated that once a depression sets in, the fear that it engenders among investors and businesses is likely to become self-fulfilling hence leading to a sustained period of unemployment as well as depressed economic activity (Hingstaman and Goodnight ). Keynesian theory of economics argued that everyone who wanted a job would have one only if the workers were flexible enough in their wage demands. According to Keynes, inadequate aggregate demand could lead to lengthened periods of high unemployment. He also believed that a country’s economic output comprises of government purchases, consumption, net exports, and investment. The short-term anti-cyclical interventionist held that increased demand has to come from the four major components.
Works cited
Hingstaman, David, and Thomas Goodnight. “from the great depression to the great recession: the 1932 Hayek-Keynes debate: a study in economic uncertainty, contingency, and criticism.” An Interdisciplinary Journal of Rhetorical Analysis and Invention (2011). Https://doi.org/10.13008/2151-2957.1088.