International Political Economy Term Paper

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Great Depression and the end of World War II marked a major shift in economic ideas that transformed not only the international economic order, but domestic policies within most countries of the world as well. The shift of ideas occurred primarily in the United States, arguably one of the hardest hit nations by the depression. The shift was representative of a movement away from the very liberal economic policies of the nineteenth and early twentieth century towards collective economic cooperation between public and private sectors. The result was a "cushion" that served to prevent economic and social breakdown in society.

It has been argued that the catalyst behind the depression was the lack of governmental regulation of the stock market, and other important economic activities. In the early twentieth century, the markets of the world, especially those of the United States, were relatively free of regulation. Unlike today, there were no monetary and fiscal checks and balances to stabilize the economy (i.e. preventing mass inflation, deflation, ect.) The United States government saw a booming stock market, assumed it was infallible, and did not want to regulate it with the potential of staggering its growth.

This decision ultimately turned out to be detrimental, as a fairly instant change in investors' confidence in the market led to its "bust," and government had no regulatory powers to prevent, or even cushion the fall. Known as "Black Thursday," the market went into a downward spiral, which instantly led to deflation of the dollar and massive unemployment. An excerpt from the website history.searchbeat points out that, "Although the initial trigger event may not have been the result of government action, many have argued that incorrect economic policies turned the stock market crash from a momentary crisis into a decade long depression.

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" The excerpt continues by pointing out that, along with the lack of monetary regulation, the government was practicing "protectionism," which is the act of highly taxing foreign goods in an effort to boost the sale of domestic ones.

After the fall of the American stock market, it was clear that the entire world was in economic trouble. Many leaders, most American, looked for solutions, especially those mandated by the government that served to stabilize economies.

When Roosevelt was elected President in 1933, the United States had a twenty-five percent unemployment rate and very little domestic production (history.searchbeat). With the advice from his top aides, he sought to integrate the federal and state governments into the private sector, in a way never done before. Roosevelt's New Deal expanded the federal government, creating thousands of new jobs. He also implemented new policies to regulate the stock market, and other economic sectors in the United States. Finally, Roosevelt worked with other developed nations (those of whom were also experiencing economic hardships) to develop plans for eliminating their protectionist policies.

Domestically, the economic cooperation between the private and public sectors was the most important transformation of ideas during the time between the Great Depression and World War II. In his book, World War II and the West, Gerald Nash describes the cooperation between public and private sectors, "In the United States such restructuring has been accomplished through complex processes of co-optation.….....

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