From an Abyss of Crisis to a New Deal

Муниципальное общеобразовательное учреждение «Гимназия»

“From an abyss of economic crisis to a New Deal”

Done by:

Vasilkevitch Roman ,11th form student;

Reshetnikova Marina. 10th  form student

Supervisor:

Aman Natalya Ivanovna, a teacher of English.

Morshansk

2010

                                     Content

1. Introduction……………………………………………………………………....3
2. Main economic reforms of F. D. Roosevelt:

1. The Great Depression and The New Deal………………….…4
2. Federal Emergency Relief Administration…………….……..5
3. The National Industrial Recovery Act…………………………. 5
4. The Work Progress Administration………………………….…..6

3. Economic situation in Tambov Region:

1. Industrial production……………………………………………………8
2. Unemployment problems……………………………………….….12

4.  Conclusions………………………………………………………………...……16
5. Appendix 1………………………………………………………………………..17
6. Appendix 2………………………………………………………………………..18
7. Appendix 3………………………………………………………………..………19

8.  Appendix4…………………………………………………………………….…...20

         9.  Literature list………………………………………………………..……………21     

INTRODUCTION

         World economic crisis is one of the most serious problems which troubles all mankind. The results of the economic crisis of 2007 are decreasing of income, losses of jobs and as a result growth of unemployment, delays of wages, scholarships and pensions. Unfortunately, any crisis is an integral part of economic cycle and the mankind has witnessed already a lot of recessions that caused great difficulties. But after all economic problems had their solutions.

       As a part of the global world economic system our country didn’t manage to avoid the influence of the world crisis. And consequently, neither did Tambov region. Among the most important problems our regional economy suffers today are such problems as bankruptcy of some industrial enterprises which played a rather important role in the economy of the region some years ago and as a result growing unemployment, especially among youth and people under 50, who are able and eager to work and be useful to their country.

      It happened so that just a few weeks ago at our English lessons we studied the biography of one of the most prominent presidents in the history of the United States – Franklin Delano Roosevelt, whose policy and economic measures helped the country to overcome successfully a very heavy economic crisis. A risky idea to analyze his methods and to investigate main economic problems, connected with the crisis in Tambov region and then to see whether they could be of any help in our region came to our heads. We thought that very often people try to invent a bicycle instead of taking into account an invaluable experience of the past generations.

     While preparing this report we read newspaper materials, worked with some Tambov economic sites in the Internet and consulted with the economists of our town.

Main economic reforms of F. D. Roosevelt

The Great Depression and the New Deal

         To understand modern economic situation we dipped into the world history and remembered one of the most interesting and effective, to our mind, ways out of economic crisis.

       At the beginning of the 20th century new tendencies appeared in the US government’s economic policy. One of them was regulation of national economy and social relations. The necessity of it was fully realized in the 30th, when an extremely severe economic crisis stroke     not only in the USA, but in many other leading countries of the world. This event is known as “The Great Depression”. As everybody knows, the impetus to it was the crash of Wall Street in 1929. Up to now there is no agreement among economy scientists on the reasons of that depression, but undoubtedly the main of them were:    

0. short of cash and overproduction of goods which both caused deflation and the last led to slump in prices and then to bankruptcy  of a great number of enterprises;
1. Stock market bubble, when investments exceeded real need of economy in money.

      To the beginning of the Great Depression the industrial   production reduced up to 56%, the   national income was half less than before, 40%   of banks became bankrupt and as a result millions of ordinary Americans   lost their savings.  Nearly 17 million people lost their jobs.  Herbert Hoover, the president of the USA at that time, did almost nothing essential to improve the situation. [5,C.223]

       Meanwhile, the socio-political situation was becoming worse: hunger marches, demonstrations and other forms of protest followed one after another. So, Democratic victory in elections of 1932 was not surprising. Theodor Delano Roosevelt became the new president of the USA. He immediately suggested a detailed program of way out of the crisis which was named a “New Deal”. He said that under the “New Deal” government would be responsible for helping people during the hard times. Roosevelt brought new people into the government: college professors, economists, business people and labor experts – the best minds which he could find. Many new laws were passed. The New Deal was created by F .D. Roosevelt to provide relief for the unemployed, recovery of the economy and reform of the economic and banking system. To achieve these goals he took some measures. Let’s consider them and their effect on the US economy.

Federal Emergency Relief Administration

      Having come to power, F. D. Roosevelt ordered to found “Federal Emergency Relief Administration”. Its main goal was to alleviate adult unemployment. In order to achieve this goal FERA provided state assistance for unemployed and their families. It gave states and localities $3,1 billion to operate local work projects. FERA provided work for over 20 million people and developed facilities on public lands across the country. It gave $ 500. 000. 000 into state-run relief money, for example, money was spent on soup kitchens, blankets, employment schemes and nurseries. But every state had to add its 3 dollars to each federal dollar. Thus, the federal government forced states to be more active in helping needed. [4,C.178]

The National Industrial Recovery Act

      Another important measure was adoption of The National Industrial Recovery Act (NIRA).  As a capitalist state the USA had to have powerful industry. But a lot of industrial enterprises became bankrupt in the time of Great Depression, so the economic situation in the country was very poor.

      NIRA was the act which authorized the President of the USA to regulate industry and permit cartels and monopolies in an attempt to stimulate economic recovery, and which established a national public works program.

      This act included two main sections (or “titles”). Title one was devoted to industrial recovery, and authorized the promulgation of industrial codes of fair competition, guaranteed trade unions rights, permitted the regulation of working standards, and regulated the prices. For example, every industrial enterprise had to adopt a code, according to which discrimination of trade union members was not allowed, a minimum and maximum level of wages was fixed. After the president’s confirmation it became a law. All in all Roosevelt’s administration approved 746 codes (99% of all enterprises).[5,C.321]

     The second title established the Public Works Administration and funding opportunities it could engage in.

     These measures favorably influenced the country’s economy. Table 1 shows it.(see ap.1)

       It is clearly seen that The New Deal provided a stable economic growth in all taken indexes and to 1940 reached the pre-crisis level. [4,C.342]

       To calculate the GNP growth from1933 to 1940 (7 years) and a per year growth we drew up a proportion:

56  -  100%

100,4 – x %

56 x = 1040x = 179

7 years growth – 179,2%

Average per year growth: 179,2 : 7 = 25,6

      Using the same proportion we found the rate of growth of the industrial development in the USA:

64,1 – 100%

114,3 – x%

64,1x = 11430

X = 178%

So, the growth of industry for 7 years is 178,8%

Per year growth – 25,5%

                     The Work Progress Administration

When a great number of big factories and plants were closed unemployment reached a dangerously high level. To provide people with jobs F. D. Roosevelt founded The Work Progress Administration (WPA). It was instituted by presidential executive order in 1935 to generate public jobs for the unemployed.

By 1936 over 3,4 million people were employed on various programs. Administrated by Harry Hopkins and furnished with an original congressional allocation of $ 4,8 billion, WPA made work accessible to the unemployed on an unparalleled scale by disbursing funds for an extensive array of programs. Hopkins argued that although the work relief program was more costly than direct relief payments, it was worth it. He averred “Give a man a dole, and you save his body and destroy his spirit. Give him a job and you save both body and spirit.”

While responsibility for such unemployable people as children, the elderly, and the handicapped was remanded to the states, the WPA provided literally millions of jobs to employable people, enrolling on average about two million a year during its eight-year stint. Far fewer women were enrolled than men. Just 13.5 percent of WPA employees were women in 1938, its top enrollment year. [3,C.634]

            The WPA was charged with selecting projects that would make a real and lasting contribution — but would not vie with private firms. As it turned out, the "pump-priming" effect of federal projects actually stimulated private business during the Depression years. The WPA focused on tangible improvements: During its tenure, workers constructed 651,087 miles of roads, streets and highways; and built, repaired or refurbished 124,031 bridges, 125,110 public buildings, 8,192 parks, and 853 landing fields. In addition, workers cleaned slums, revived forests, and extended electrical power to rural locations. [1,C.217]

Work was provided for nearly a million students through the WPA National Youth Administration (NYA). The Federal One projects employed 40,000 artists and other cultural workers to produce music and theater, sculptures, murals and paintings, state and regional travel guides, and surveys of national archives. The Civilian Conservation Corps (CCC) was a program designed to address the problem of jobless young men aged between 18 and 25 years old. CCC camps were set up all around the country.

The WPA's positive results for the public good and its popularity helped Franklin D. Roosevelt to garner a thumping electoral victory in 1936

With wartime prosperity rising in the 1940s, the WPA became more difficult to justify, and on June 30, 1943 the agency was terminated by presidential proclamation. All told, the WPA had employed more than 8,500,000 individuals on 1,410,000 projects with an average salary of $41.57 a month, and had spent about $11 billion. [1,C.231]

Economic situation in Tambov Region

              In the previous chapter we considered FDR's measures of struggle against the financial crisis and calculated the percent of economical growth in the USA. Now we will try to figure out (calculate) possible percent of economic growth in Tambov region.

              In 2007 regional industry included over 30 enterprises with more than 500 workers (chemical and oil chemical, machine building,  light industry), which produce goods for the Russian market and 3125 small factories, belonging to non-industrial organizations. They produce goods for needs of the region, which are not competitive in the world markets. In 2009 more than a thousand of them stopped their work for 2 and more months because there was no demand for the goods they produced. As a result in the first quarter of 2009 the industrial production was reduced on 10% to the level of 2008. [7]

             Though, the number of small enterprises is being increased for the last 5 years, their contribution to the industrial development of the region is small and not enough to improve economic situation seriously. In today’s situation we think it is necessary to pay attention to main regional industrial enterprises. To make them more profitable, to increase industrial production we suggest to divide all plants and factories of the region into 6 main groups, each of them will control some sub branches.  

           For this industrial reform “The Association of Regional Restoration” (ARR) should be created. This association should consist of the administrative staffs of the biggest enterprises of the region. In the next table you can see the most profitable factories of Tambov region.

        Representatives  of these groups must  work out «the codes of fair competition» for their groups, where there  will be established equal for all:

 - amount  of production;

 -level of wages;

 - duration of working week;

 - realization markets;

 - common price policy.

            To involve workers to the process of restoration, to make them active, it is necessary to give them the right to a professional union and the right to vote for all future reforms.

             But profitability of any enterprise must be determined not by the quantity of the produced goods, but by the realized ones. A board of directors of the most profitable organization must join the association of restoration.

             Everybody knows that the main showing of the industrial growth is the growth of index of gross regional product (GRP).

Look at the diagram.(see ap2)

 In the table you can see the growth of index GRP for  the last 10 years (1998-2007) with an average percent 11.4%.Let us Calculate the growth per a year:

     As we remember, the average growth of GNP in the USA after  the admission of NIRA was 6.1%. In that way, possible index of GRP in Tambov region might be 6.1% in comparison with 1.14% .

     So, we are convinced that a  measure similar to the NIRA could put our region on a leading position in  Russian industry.

Unemployment problems

            Problems of unemployment in Tambov region, caused with the processes of restructuring in economics and hard situation at the labour markets, are very important now. Your can see it in the table(see ap3)

We will calculate a level of unemployment increase for two years. The quantity of unemployed was 48100 people in 2006 and in 2008 - 51900. [7]

Make a proportion to calculate a per cent of unemployment increase

     As we remember, a quantity of the unemployed after WPA admission was  sharply reduced.

     We will calculate an increase of employment in the first two years after beginning this program.         

     In 1935 the quantity of the unemployed was 20% from a common number of population (14200000 people). In 1937 - 14 % (10 300 500 people)

We will make a proportion to calculate a decrease of unemployment for two years.(see ap.4)

     As we remember, a number of the unemployed has decreases in Tambov region and it accounted -8%.

     Calculate a possible number of the unemployed after admission of the law, similar WPA. The index of our region would increase in:

      We offer for achieve similar results to found an organization of public jobs for building of:

-roads

- common edifices

- parks

And also

- for melioration of forests and rivers.

     We suppose such measures can decrease a level of unemployment in our region and improve roads conditions, clean ecosystem that is very actually nowadays.

Conclusion

With the help of our research and a detailed analysis of the economic problems of our region we come to a conclusion that such measures as government regulations through “The Association of Regional Restoration”, “The Organization of Public Jobs”   are able to overcome problems with recession of industrial production and unemployment in our region. The number of industrial enterprises will grow and new jobs will appear. As a consequence, living standards of the population will become higher. “The Organization of Public Jobs” will not only provide thousands of people with work, but also will make the ecological situation in the region much better.

Of course, we have no economic education. Perhaps, some of our ideas may seem you doubtful. Perhaps, we have missed some important things. But still this project is the result of our hard work and interesting ideas, which we tried to support with historical facts and statistics.

We want to connect our future life with English and economy and we are sure that precious experience we’ve got while making this report will help us greatly.

In conclusion, in our opinion, the best way to help the country to overcome the crisis is to give worthy education to a young generation so that it was ready and willing for large social and political reforms. Wit and wisdom are eternal values that never lose their significance.

Appendixes.

                                                                                                         Appendix 1

 Appendix 2

                                                                                                               Appendix 3

Total number of the unemployed (average a year).

Appendix 4

List of literature:

1. Ambrosius, G. and W. Hibbard, A Social and Economic History of Twentieth-Century Europe (1989)
2.   Beaudreau, Bernard C. 1996 Mass Production, The Stock Market Crash and the Great Depression: The Macroeconomics of Electrification Greenwood Press, Westport, CT. [Republished 2004 iUniverse, New York, NY.
3. Garraty John A. Unemployment in History. (1978)
4. Haberler, Gottfried. The world economy, money, and the great depression 1919—1939 (1976)
5. Rothbard, Murray «America’s Great Depression» (2000)
6. Сайт статистики РФ www.gks.ru
7. Сайт статистики Тамбовской области tmb.gks.r
8. Тенисова А.Л, Зайцев Е.В. Теория и практика экспертной оценки товаров и услуг, издательство ТГТУ.