MMW 15 Lecture Notes - Lecture 4: Totalitarianism, Franklin D. Roosevelt, Irrational Exuberance
2 Mar 2019
School
Department
Course
Professor
MMW MIDTERM--> Next Wednesday
Key Questions:
How did capitalist democracies try to survive in the wake of crises like W.W. I
and the Great Depression?
1)
How did they respond to the appeal of opposing ideologies economically,
socially, and politically? How did they adapt?
2)
The Economic Challenge for Capitalist Democracies
The Global Economic Depression
Late-1920s glut of raw materials world-wide
Oversupply of materials
(1)
Had to do with the resumption of agricultural materials in
Europe
(2)
New technology enabled people to recycle rubber so the
demand for rubber declined
(3)
New synthetic materials for clothing appeared so the demand
for cotton decreased
(4)
New reliance on fossil fuels which resulted in a sharp decline
for the demand of coal
(5)
i)
Volatility of commodities pricing contributing to global recession
ii)
Stock market crash of 1929—“Black Thursday”
Price of a bushel of wheat was the cheapest it had been in
400 years
(a)
This means that farmers were going bankrupt and in debt
(b)
Almost total lack of regulation in the stock market
Especially in the American stock market
(a)
Many of them were engaged in binge speculative buying
Average was buying stocks using CREDIT-->
taking loans to play the stock market
(i)
40% of all bank loans were sold to average folks
buying stocks
(ii)
People lost entire fortunes
(iii)
(b)
(1)
iii)
a)
I)
Lecture 4: Disorders of a Decade: 1929-1939
Wednesday, August 15, 2018
11:02 AM
buying stocks
People lost entire fortunes
(iii)
Panic selling--> so many people who were taking huge
risks and not understanding the risks basically pushed the
market to the sharp drop
(c)
“Irrational exuberance” of the “Roaring 20s”
Great Gatsby
(a)
Average imitating rich
(b)
(2)
Economic aftermath
Gross national income came down by 30%
(a)
US economy shrunk by 50%
(b)
Domestic and around the world, especially in Germany
Unemployment rate-->35%
(a)
(1)
Collapse of the Weimar Republic to fascism
Constitutional democracy that would very quickly
succumb to fascism
(a)
Question was "will this happen to us?"
(b)
(2)
iv)
Balancing Social Stability with Economic Equality in the West
Keynes’s vision of a New Liberalism (1925)
Distinctions between the 19th century “era of abundance” and
the 20th century “era of stabilization”
New changes for survival
(a)
Era of abundance that characterized the 19th century vs.
the Era of stability that the 20th century needs
(b)
Abundance 1800--> height of imperialism, influx of
wealth
Push for max liberty--> no need for coercive
measures by government
(i)
(c)
Maintaining stability!!!
Banks and individuals have to be regulated
(i)
Warned the world and statesmen about this in 1925
but no one was really listening to him
(ii)
(d)
(1)
Impact of increasing globalization and economic disparity on
free market assumptions
Increase government intervention--> has to play a bigger
role to stimulate economy
(a)
(2)
i)
Stability necessitated increased government intervention and
oversight
ii)
b)
Franklin Roosevelt’s Keynesian New Deal in 1930s
Social welfare programs to protect American democracy from
i)
c)
Social welfare programs to protect American democracy from
alternative models
Governments must offer more intervention
(1)
Having a direct hand in setting an interest rate
(2)
When you control interest rate, you shape how much people
save/spend
(3)
Establishment of a minimum wage
Doesn’t depend on supply and demand
(a)
(4)
Anytime you allow the government to play a role in the
economy--> Keynes approach
(5)
i)
Eleanor Roosevelt’s justification of The New Deal
A kinder and gentler capitalism prioritizing economic fairness
and social stability
(1)
Its time to develop and pursue a kinder and gentler form of
capitalism
(2)
On fairness and social stability
(3)
Altruism and philanthropy
(4)
Reintegrate themselves back into
(5)
ii)
Safeguards against revolution
Revolutions are usually born through economic crisis
(a)
The New Deal as a morale booster
"We will go backward unless we go forward"
(a)
(1)
Withhold the bad news from the public to prevent panic
Release piece meal
(a)
(2)
iii)
Lippmann’s more cynical or sober view
Walter Lipman wrote this in 1922
(a)
As long as a democratic government makes the people
believe that something is getting done, then you don’t
have to fear of a revolution
(b)
“It takes stupendous and persistent blundering, plus infinite
tactlessness, to start a revolution from below”
(1)
Flip-side of “maintaining social morale” is “manufacturing
consent”
(2)
iv)
Mass Conformity through the Manufacturing of Consent
Walter Lippman’s Public Opinion
“Public opinion” is never independently generated, but is always
subject to manipulation and suggestion
Public affairs--> realities of the world
(1)
Public opinion (lowercase)-->our reasoning
(2)
i)
a)
I)
Document Summary
How did capitalist democracies try to survive in the wake of crises like w. w. Late-1920s glut of raw materials world-wide (1) (2) Had to do with the resumption of agricultural materials in. New technology enabled people to recycle rubber so the demand for rubber declined. New synthetic materials for clothing appeared so the demand for cotton decreased. New reliance on fossil fuels which resulted in a sharp decline for the demand of coal (3) (4) (5) ii) iii) Volatility of commodities pricing contributing to global recession. Stock market crash of 1929 black thursday (1) (a) Price of a bushel of wheat was the cheapest it had been in. This means that farmers were going bankrupt and in debt (b) Almost total lack of regulation in the stock market (a) (b) Many of them were engaged in binge speculative buying (i) Average was buying stocks using credit--> taking loans to play the stock market.
