1. Keynesian Economics and the Preservation of Democracy
FDR & The New Deal
Picture: FDR campaign button
Keynesian Economics and the Preservation of Democracy

2. OVERVIEW “Laissez-faire” vs. Keynesian economics FDR’s “New Deal”
Opposition to the New Deal
Effects of the New Deal
Picture: FDR signs another New Deal act into law

3. “The invisible hand”
18th century Scottish philosopher, Adam Smith, argued in his Wealth of Nations that a true, free market economy needed no control
He believed that the natural forces of an “invisible hand” would correct the market’s up’s and down’s

4. The Wealth of Nations, Book IV Chapter II
Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
The Wealth of Nations, Book IV Chapter II
Picture: Cover of an original print of The Wealth of Nations

5. Keynesian Economics
In the 20th century, John Maynard Keynes, an English economist, argued that it was necessary for the state to intervene in the economy
According to Keynes, governments needed to save money during strong economic times so that they could spend it during poor economic times

6. Keynesian ideas in effect
HIGH ACTIVITY
Government saves money
UNCHECKED ECONOMY
Government spends money
LOW ACTIVITY
KEYNESIAN THEORY IN EFFECT

7. FDR takes office
Franklin Delano Roosevelt’s wanted to rebuild public trust in the American financial system through the Emergency Banking Act and the Federal Deposit Insurance Commission
Roosevelt used his “fireside chats” on the radio to explain and convince Americans to deposit their money into banks
Picture: FDR gives his first speech upon taking office

8. The First New Deal
The purpose of the First New Deal was to create government jobs and improve work conditions in order to raise morale and generate purchasing power:
AAA
(Agricultural Adjustment Administration)
Farmer subsidy program to reduce overproduction
CCC
(Civilian Conservation Corps)
projects related to forestry
Picture: Members of the CCC working on a forest
NRA
(National Recovery Administration) support program to encourage employers to give more benefits to workers
WPA
(Works Progress Administration) projects related to roads and public works

9. The Second New Deal
The Second New Deal attempted to improve the living standards and work conditions for the working class:
Social Security Act
Pension plan for the old and disabled; basic unemployment insurance
National Housing Act
Program that limited rents and provided financial assistance for building homes
Wagner Act
Trade unions had legal right to negotiate wages
Picture: Building Project from the New Deal

10. Opposition
FDR was accused of being a socialist and of changing America into a communist state
Businesses and corporations were against FDR’s support for unions
The US Supreme Court argued that President Roosevelt’s programs were unconstitutional
Picture: US Supreme Court

11. Effects of the New Deal
Unemployment did not significantly decrease throughout FDR’s presidency
“People who are hungry and are out of a job are the stuff of which dictatorships are made.”
FDR was re-elected to office 3 times
Picture: Supporters of the NRA raising the flag

12. Summary Questions
What is the major difference between “laissez-faire” and Keynesian economics?
What was the focus of FDR’s first policies upon coming to office?
What effect did the first and second New Deals have on the American economy and society?
On what bases did FDR face opposition to his policies?
Picture: FDR’s last inauguration