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A New Deal version 2020 ?

If you want to become wealthy, this article is for you! Here you will understand the workings of a stimulus policy, ...

Some time ago, the Grunge News team published an article on a potential economic crisis that would hit the world due to the coronavirus outbreak (COVID-19, the cause of a major economic crisis). At that time, it was only a guess, but today, the economic crisis is very real and affects even the biggest economic powers in the world like the United States. Since the COVID-19 pandemic hit the United States, the economic situation of the world's leading power has been in free fall. Should a New Deal be needed to revive the economy? But besides that, what is the New Deal ?



The 1920s were nicknamed the Roaring Twenties. The reason was because the United States lived a decade of major economic prosperity and with a certain carelessness. The country entered a major period of overconsumption where the Americans were constantly investing in financial markets.

Unfortunately, it only lasted a while. October 24, 1929 Wall Street witnessed an unprecedented stock market crash. It instantly plunged the New York Stock Exchange prices before affecting all sectors and all industrialized countries. It was in fact the starting point of the Great Depression, considered to be one of the greatest economic crises of the 20th century.

The United States, the country where the crisis was born, were the most affected in the years following the crash. Unemployment and poverty quickly set in, and famines appeared with them. The unemployment rate rose to 25% in 1932. This crisis had its repercussions on the whole world, especially in Europe. Indeed, American banks have interests in many European banks and stock exchanges. During the crash, they urgently repatriated their assets to the United States, gradually plunging Europe into crisis. Since international economic relations were less important at the time than today, these repercussions only took a few months to manifest themselves in the world. Thus France was affected from the second half of 1930, when the crisis was aggravated by the fall in prices and wages. In Germany, the unemployment rate reached more than 25% of the population in 1932, causing anger within the people. It was partly with his promises to overcome the crisis that Adolf Hitler came to power on January 30, 1933. Chaos was gradually spreading throughout the world.


The American economy suffers from imbalances in the distribution of wealth and resources.

To get out of this situation, the governor of New York, Franklin Delano Roosevelt ran for the presidential elections and had only one message in his mouth during his meetings: "We need a New Deal".


Franklin ROOSEVELT

Elected in 1932 at 57.4% of the vote, facing Hoover, he instantly launched a bold interventionist policy after taking power. It was set up between 1933 and 1938, it was his famous "New Deal". This stimulus policy was created to limit the effects of the Great Depression within the country. The objective was to support the lower classes of the population, but also to succeed in an innovative reform of the financial markets to be able to revive the American economy, asleep since the crash of 1929.


This policy is divided into two parts; the first New Deal / the second New Deal. The first New Deal aimed to improve the situation in the short term (over the first 100 days of Roosevelt's term). It was necessary to regulate the banking sector and finance. Thus the president implements bank reform laws, emergency social assistance programs, and agricultural programs. As soon as one of the first laws was passed, hundreds of thousands of positions of activity (re) arose. Young people were the first to have access to these trades, the aim being to get them back into activity. The government made significant investments and allowed access to financial resources. Despite the fact that economic results were not as good as expected, the situation was clearly improving.


The "Second New Deal" spanned between 1935 and 1938 and was based on two major laws: the Wagner Act and the Social Security Act.





The Wagner Act aimed to improve the situation of workers and employees while the Social Security Act was an income tax reform which aimed to reduce inequalities between the richest and the poorest. The objective of this second New Deal was to promote a redistribution of resources and power on a larger scale. The government therefore put in place union protection laws, the Social Security Act, the Wagner Act, as well as assistance programs for farmers and itinerant workers. The second part of the New Deal was much more expensive than the first, and widened the public deficit. In addition, despite the numerous programs implemented and an improvement in the situation, unemployment still affected 11 million Americans in 1938 (15% unemployed).


It was not until 1941, with the entry into the war of the United States, that the country was really able to recover economically by relaunching all sectors of activity and by drastically lowering the unemployment rate . Even today, some New Deal programs are still active, such as the Federal Deposit Insurance Corporation (FDIC), or the Social Security System.


During this period, with COVID-19, the United States was hit hard by the economic crisis. 20.5 million jobs that were lost in April 2020 alone. A world record! The country has never been forced to cut so many jobs in such a short time. The current unemployment rate is similar to that of the 1930s! Today there have been more than 41 million new unemployed since mid-March, whereas before the pandemic, there were only 1.7 million. To best alleviate the situation, $ 669 billion has been released to help SMEs overcome the crisis. Unemployment rights have also been extended to certain people who could not claim it before.


Cases, per million inhabitants, of people with COVID-19 in the United States and by States


The lecturer at Paris 2 University expresses his opinion on the situation: “The United States is still in action, with between 700 and 1,000 deaths a day. Politics is not yet what worries people, they want to get out of the health crisis first. ”



When passing the 100,000 mark for coronavirus in the United States, the death of African-American George Floyd provoked a series of anti-racism riots in the country's largest cities with considerable damage. The number of COVID-19 deaths only increases every day, the violent riots spread throughout the territory and with the unemployment rate which is only increasing day by day, nothing favors an economic recovery . How will the United States revive its economy ? Will a New Deal be created ?



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