Today, in the class of Social Sciences many people have arrived late, including me. Paqui has reviewed USA after WW1:
USA had a privileged economic position and they developed consumer society and continuous growth based on easy credit and instalments: real state and Stock Exchange Bubble.
When Europe's recovery started, there was less demand for USA products and economy contracted. This happened in 1927.
The beginning of the crisis was on the 24th October 1929, this day the Stock Exchange crashed.
Paqui has shown us a graphic where the prices in the US Stock Marcket were increasing until 1929, in 1929 prices started to decrease. The lowest prices were in 1932. The extension of the crisis provoked:
- Many banks went bankrupt because they couldn't recover the loans they had given.
- Consumption reduced: farmers were ruined and many industrial workers lost their job.
- Deflation: prices decreased because there weren't buyers for the products.
Paqui has told us that there is a book called The Grapes of Wrath that tells the story of a family of farmers who lost their farm and had to emigrate to the city.
The crisis coincided with a big drought.
Paqui has shown us some photos that shown the line of a group of unemployment people with a sentence behind them: "There is no way like America way".
She has also shown us another photo of two men with a poster offering themselves towork or for work.
Then Paqui has recommended us to see Cinderella Man, a film that shows the shanties in Central Park.
In the unemployment rate, the first years of the crisis were catastrophic. From 1929 to 1932 unemployment increased to 25% . From 1932 to 1937 it decreased again.
The crisis became more serious due to:
-Economic liberalism orthodoxy
-The crisis quickly extended to Europe because the USA was the main Europe's creditor.
In 1932 there were elections and there were different candidates. John Maynard Keynes wasn't a candidate for the elections, he was an economist who had studied the reasons for the crisis and proposed some measures:
-The State had to intervene in economy and increasee public expenses, even if this meant increasing the state deficit:
-Investment in public works to create jobs.
-Stimulation of production, consumption and reduction of stocks.
"Expend money in bad times and not increase taxes in periods of crisis and being austere and increasing taxes in periods of prosperity"
Here you have some links to know more about Keynes:
And here you have a song made by Paqui:
The candidat who won the elections was F.D. Roosevelt, he launched an economic program based on Keynes ideas: NEW DEAL.
The new words that we have learnt today are:
VAT (Value Added Tax): IVA
The Grapes of Wrath: las uvas de la ira
Labour force: población activa
To lower: bajar
Tariffs: aranceles (taxes that have to be pay for introducing foreign products in a country)
Gold standard: patrón oro
Bye bye !! See you tomorrow :)