One Depression Cured, Another Prevented: Planning for War and. Postwar

The depression burst upon the nation in the summer of 1929 and did not subside for a decade. Unemployment was computed officially at 8.7 percent in 1930, 15.9 percent in 1931, and 23.6 percent in 1932. It did not dip below 20 percent until 1936, and it would not go below 5 percent until 1942. As the figures demonstrate, the appearance of FDR in the White House, whatever it did for the nation’s “spirit,” did not solve the problem of unemployment. FDR’s first attempt at a cure for the country’s economic ills was the same as Hoover’s—balancing the budget—and similarly unsuccessful. Balancing the budget by reducing spending was the exact opposite of what J. M. Keynes, the English economist, had prescribed for the depressed economy. Keynes argued that in a depression public spending had to be increased, not decreased, to put people back to work. The nature of their jobs was not as important as the salaries they earned. It was their paychecks that would start the economy going again as they used them to buy goods and services, pumping money into the depressed economy. As Keynes himself put it: . . . If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again . . . there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. . . . What Keynesian logic could not accomplish, the German and Japanese threat to the “free world” and its “free economy” could. “In the Second World War the equivalent of the . . . buried bottles full of money were the tanks, the bombers, and the aircraft carriers.” They did the job, as Keynes had predicted. In the course of the war, the nation spent itself out of the depression.