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Schulmeister, Stephan
Year of Publication: 
Series/Report no.: 
WIFO Working Papers 483
Abstract (Translated): 
Roosevelt's New Deal stays in sharp contrast to the course followed by European policy since 2009. At first, Roosevelt focussed on fighting the generally pessimistic mood of the public, on strictly regulating the financial sector and on setting up investment and employment programmes. After that, structural reforms were carried out in order to strengthen confidence and social coherence. The most important measures were the introduction of unemployment insurance and of a public pension scheme as well as regulations to ensure "fair" labour conditions. The New Deal policy was successful: GDP expanded in the USA between 1933 and 1937 by 43 percent, mainly due to a boom in investments (+140 percent). By fighting the social-psychological depression and "speculation with other people's money", Roosevelt anticipated those two main messages of Keynes' "General Theory" (1936) which were later forgotten: first, the importance of the "state of confidence" and, second, the necessity to radically restrict financial speculation. The most influential thesis of Friedman - Schwartz (1963) according to which the Great Depression was primarily caused by a too restrictive monetary policy, i.e., by the state, turns out to be more based on ideology than on empirical facts. This holds even more true for the thesis of Cole - Ohanian (1999) and of Prescott (1999) according to which the depression was prolongued by New Deal policies. At present, a re-orientation of economic policy in Europe along Roosevelt's guidelines and, hence, a "New Deal for Europe" might help to lead the economy out of the persistent crisis.
Makroökonomische Politik
New Deal
Document Type: 
Working Paper

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