What lessons can be learned from the 1930s New Deal for post pandemic recovery?

economy recession recovery Jun 26, 2020

The New Deal was a series of measures introduced by President Franklin D Roosevelt to help the US economy recover from the Wall Street Crash and subsequent Great Depression.

It introduced a string of measures to better protect workers from ill-treatment and the consequences of unemployment and to better regulate banks and financial institutions.

As noted in the Encyclopaedia Britannica “Opposed to the traditional American political philosophy of laissez-faire, the New Deal generally embraced the concept of a government-regulated economy aimed at achieving a balance between conflicting economic interests”.

Perhaps one of the best-known Acts was the Glass–Steagall Act of 1933, which separated commercial from investment banking.

But the New Deal measures were also designed to stimulate and revive economic activity in agriculture and business, founded on the economic theory, as propounded by the UK economist John Maynard Keynes, that massive Government spending should...

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What is the difference between a Depression and a Recession?

Both a recession and a depression are characterised by an economic decline but the difference between them is down to the length of their duration with depressions lasting years.

An economy is defined as being in recession when there have been two consecutive quarters in which growth as measured by GDP (Growth Domestic Product) has contracted.

This is usually caused by a reduction in business activity and consumer confidence, such that businesses may start laying off employees and cutting back on production and on investment as their focus shifts almost entirely to their cash flow and balance sheet.

In the most recent recession, in 2008, the precipitating factor was a liquidity crisis that began in the USA where banks had lent what was perceived to be too much money on what came to be seen as risky mortgages on which borrowers then defaulted. This resulted in a loss of confidence in banks, which declined to lend to each other which in turn led to a liquidity crisis.

Recessions are...

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