The crash of the stock market brought many hard times. Franklin D. Roosevelt's New Deal
was a way to fix these times. John Stuart Mill and John Maynard Keynes were two economists
whose economic theories greatly influenced and helped Franklin D. Roosevelt devise a plan
to rescue the United States from the Great Depression it had fallen into. John Stuart Mill
was a strong believer of expanded government, which the New Deal provided. John Maynard
Keynes believed in supply and demand, which the New Deal used to stabilize the economy.
Franklin D. Roosevelt's New Deal is the plan that brought the U.S. out of the Great
Depression. It was sometimes thought to be an improvised plan, but was actually very
thought out. Roosevelt was not afraid to involve the central government in addressing the
economic problem. The basic plan was to stimulate the economy by creating jobs. First
Roosevelt tried to help the economy with the National Recovery Administration. The NRA
spread work and reduced unfair competitive practices by cooperation in industry.
Eventually the NRA was declared unconstitutional. Franklin D. Roosevelt then needed a new
plan. Keeping the same idea of creating jobs he made many other organizations devoted to
forming jobs and in turn helping the economy. One of those organizations was the Civilian
Conservation Corps. This corps took men off the streets and paid them to plant forests and
drain swamps. Another of these organizations was the Public Works Administration. This
organization employed men to build highways and public buildings. These were only some of
the organizations dedicated to creating jobs. Creating jobs was important because it put
money in the hands of the consumer. This directly affected the supply and demand. The more
money they had the more they could spend. This would slowly start a chain reaction and
bring the economy back to the way it was before the depression. By the end of the 1930's
this plan had lowered unemployment to 17.2%. To make these organizations it was going to
take money.
Roosevelt had to deficit spend, which is when the government spends more than their
budget in one year, in order to obtain this money. Of course these ideas of supply and
demand and active government didn't just come to him. He was influenced by John Maynard
Keynes and John Stuart Mill. There philosophies were the basis of the New Deal. John
Stuart Mill, who began studying economics at age 13, was one of the most influential
political thinkers of the mid-Victorian period. He believed in empiricism and
utilitarianism. Empiricism is the belief that legitimate knowledge comes only from
experience. Utilitarianism is the belief by which things are judged right or wrong. It is
judged according to their consequences. In a way he was a hypocrite. When the economy was
good he believed in Laisezz-Faire, which means "hands off." If the economy was
bad, though, he believed in an extended role of government. This simply meant that the
government should take part in the economy and try to make it better. The New Deal was a
very active government plan because it had the government working directly to make jobs
and fix the economy. Mill died in 1873 and would never had a chance to talk to Franklin D.
Roosevelt.
In a press conference Franklin D. Roosevelt once said, "I brought down several
books by English economists and leading American economists, I suppose I must have read
different articles by fifteen different experts."(Schlesinger, Pg.650) This writing
indirectly steered Roosevelt towards a plan which expanded the role of government. Mill
gave Franklin D. Roosevelt the basis of the plan, but it needed to be elaborated on. John
Maynard Keynes was the man to do this. John Maynard Keynes, one of the most influential
economists of the 20th century. For many years he was an active voice in economics. In
1929 he wrote We Can Conquer Unemployment and in 1930 he wrote his Treatise on Money. Ten
years before he died he wrote his General Theory of Employment, Interest and Money. Above
all he believed in supply and demand. This was an indirect way to let the economy balance
itself. In order for this system to work people needed money. This could only be done by
creating jobs. Keynes also believed that to reduce unemployment the government needed to
increase the aggregate demand. The aggregate demand is the total amount of goods being
demanded. The government could do this by creating jobs. These jobs would provide people
with money to spend on products. The ability to pay and the increase desire to spend would
increase the demand for goods. The demand for goods would rise and the demand for workers
would rise. This would slowly reduce the unemployment rate and put the economy back where
it was before the crash of the stock market.
In Arthur M. Schlesinger Jr.'s book The Politics of Upheaval it's stated that Franklin
D. Roosevelt and Keynes communicated on several occasions such as, letters, English tea
meetings, and messages delivered via mutual friends. Although Franklin D. Roosevelt never
publicly embraced Keynes' theories, and at times voiced disagreement with parts of his
theories, there were many similarities between the works of the two men. Franklin D.
Roosevelt took these philosophies and created the New Deal, which eventually brought the
United States out of the Great Depression. John Stuart Mill gave Franklin D. Roosevelt the
idea of an active government and John Maynard Keynes showed him how to do it. Although
Franklin D. Roosevelt never really liked economists it appears that the work of many
economists showed up in his New Deal. Although Mill did not directly influence FDR his
philosophies were present in Franklin D. Roosevelt's plan. Also, Keynes theories were
disagreed on time and time again by FDR, but in the end the New Deal was almost a perfect
example of Keynes' theories.
