Keynesian Theory and the New Deal

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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.