Capitalist Crisis, New Deal, and Keynesian Economics
Causes of the 1929 Crisis
- Cyclical financial speculation.
- Capitalist system credit crisis.
- Treaty of Versailles implications.
The New Deal (New Covenant)
A package of economic measures undertaken by President Franklin D. Roosevelt between 1933 and 1937. It was firmly based on state interventionism and the firm belief in the theories of subconsumption. Its two objectives were:
- Reactivation: Via consumption and investment, increasing the state's fiscal effort and spending to revive production.
- Control: Setting stricter banking controls to prevent another stock market crash in the future.
Purpose and Measurements
Purpose: To promote exports, increase prices, and remedy structural deficiencies beforehand.
Measurements:
- Devaluation of the dollar.
- Minting of silver coins.
- Insurance on bank deposits.
- Wage increases.
Keynesianism
John Maynard Keynes (British economist) suggested that the state should intervene in the economy to overcome the crisis. He did not criticize liberalism but thought intervention was the best solution for the situation. The state should:
- Provide capital.
- Regulate the economy.
- Subsidize agriculture.
- Subsidize industry (avoiding totalitarianism).
Keynes concluded that if the Allies promoted trade and German industry for five years, the nation would be able to boost its economy and meet its continental obligations.
Consequences of the Crisis
- Economic and social inequality.
- Unemployment.
- Bankruptcy of banks.
- Social conflicts.
- Coin devaluation.
Coup of 1930 in Argentina
The implications of the global crisis were so great that Argentina began the process of import substitution industrialization (ISI) and experienced its first coup. The military coup was led by General José F. Uriburu, who overthrew President Hipólito Yrigoyen of the Radical Civic Union in 1928.
Uriburu's Government
Uriburu was elected as de facto president, with recognition from the Supreme Court. The military government established a fascist-inspired administration, implementing methods of torture against opponents. This marked the beginning of a series of fraudulent and corrupt conservative governments known as the Infamous Decade.
Transition of Power
In 1932, Uriburu handed over power to General Agustín P. Justo, considered the true intellectual architect of the coup.