Classical liberals gradually came to see the merits

of some of their opponents views and modified the

expression of some of their values and beliefs
Rather grudgingly, classical liberals began to
recognize that some modifications were necessary.
The basic premise for these modifications was an
acceptance of the fact that those who believed in
the pursuit of industrial efficiencylaissez-faire
capitalists--needed to develop a social conscience
and more concern for the equality rights of workers
Welfare Capitalism: a classical liberal economic
system combined with a government that used
legislation to give workers protection.
Examples: limited working hours, minimum wage,
pensions and medical insurance.

 Britain, for example, passed a series of

Factory Acts, beginning in 1810
Each Act gradually improved the working
conditions in factories, decreased
working hours, regulated the ages at
which children could be employed, and
regulated the number of hours women
and children could be required to work
Germany passed similar acts starting in
1883
Still, capitalists did not gladly or easily
give way to new ways of thinking about
societys responsibilities

26th President 19011909

Look at the National
Progressive Partys
platform
(pgs 143-144)

What three principles

did the party hope to
implement that
challenged classical
liberalism?

He was a reformer who recognized

some of the problems associated
with classical liberalism
When the United Mine Workers of
Pennsylvania walked off the job,
instead of calling in the army
against the workers as owners had
hoped, Roosevelt threatened to use
the army against the owners should
they refuse to negotiate.
He called this a square deal and
eventually forced the arbitration.
In 1912, T. Roosevelt went on to
form the National Progressive
Party because he felt the
Democrats and Republicans were
too resistant to change. This was
a new kind of liberalism, sometimes
referred to as progressivism.

 The move from welfare capitalism to

the welfare state was motivated by the
Great Depression.
The problems that arose during this
period made it obvious that the
existing political, economic and social
order had failed.
What began to emerge was
as we know it today.

G
N
I
R
A
S
O
E
R TI
E
N
H
E
T W
T

United States was the

richest country in the
world.(resources &
population)
After the war the U.S.A.
became wealthy by mass
producing consumer goods
like radios and cars
The USA also became the
breadbasket for Europe
during WWI.
Factory workers were paid
well which meant they
spent money on consumer
goods.

The beginning of the

end...
As the 20s progressed
, more and more people were

buying shares of companies on margin or on time

(credit) and these shares rose in price.

Factories produced more goods than people could buy;

therefore, the supply of goods was much more than
the demand.
After the war ended, America continued to produce
large amounts of grain. When France began producing
grain again, the market became flooded and the price
of grain plummeted. People began selling their stocks

THE WALL STREET CRASH

In 1929 share prices
were rising but profits for
companies began to
decline.
By September and
October, the market was
fluctuating wildly
On October 24th of 1929,
panic selling of shares
forced the value of
shares to drop drastically.
By October 29th, the
market crashed.
The stock market crash
brought an end to
prosperity in the U.S.A.

Other Causes of The Great

Depression

Demand for goods could not keep up with

supply
Droughts
Wages did not increase
to match inflation
Farmers went bankrupt
Banks failed
Factories closed
Increase in unemployment
High rate of corporate fraud

 By 1931, unemployed people

were lining up in breadlines
since there was no
unemployment insurance.
Countries used protective
tariffs in an attempt to
protect domestic industry, so
global trade declined.
By 1932, 12 million people
were unemployed.
President Herbert Hoover
32nd President (19331945)
feared that assistance from
the government would make
citizens reliant and unable to
Conditions were much the same in
stand on their own two feet.
Canada.
In 1932, the American people
voted for Franklin D.
Roosevelt as president on a
Angry farmers duped horse drawn
platform of government
automobiles the Bennett Buggy
intervention to get the USA
after Prime Minister Richard
out of the Depression.
(R.B) Bennett.

Classical liberals believed that there

would be full employment when supply
and demand were in balance.
They also believed that the natural law
of economics was that good times were
followed by bad times. Therefore, it was
the individuals responsibility to save for
bad times during periods of prosperity.
Keynes argued that the economy was
unstable and people reacted in times of
uncertainty by hoarding money, thereby
harming the economy.
Because few people could predict the
variances in the market, most suffered
during times of recession and depression.
He proposed a solution to this problem
through the regulation of government
spending, taxation, the regulation of the
interest rate and production of money.
In doing so, governments could regulate
consumer demand, thus regulating the
economy.

John Maynard
Keynes:
A British economist who
developed the theory
known as Demand Side
Economics or Keynesian

Demand Side Economics

(Keynesian)
Capitalism tends to move through
cycles

Prosperity
Recession
Depression
Recovery

During inflationary times, the

government should raise interest rates,
raise taxes, reduce spending and slow
the production of money. This takes
money out of the economy, thus
slowing it down.
During a time of growth, the
government must save money to
prepare for a recession.
During recessionary times, it is
necessary for government to lower
interest rates, decrease taxes, and
increase government spending. This
puts money into the economy, thus
speeding it up and avoiding a
depression.
This may cause debt, or a deficit, but
any money lost will be recovered during
the next expansion phase.

Interest rates
Production of
money

Government
spending
Taxation
Franklin D. Roosevelt of
the USA used these ideas
in the New Deal to get
America out of the Great
Depression. We will study
his policies more in depth

prosperit
y

FISCAL POLICY

FISCAL POLICY

depressio
n

Increase
government $

Decrease
government $

Decrease taxes

Increase taxes

MONETARY
POLICY

MONETARY POLICY

Increase $ supply

Deficit financing

Decrease $ supply
Increase interest
Pg. 146-