FISCAL POLICY IN THE RECOVERY
RECOVERY from the deep depression of 1932-33 proceeded by fits and starts, but on the whole at a fairly satisfactory rate, until 1937. The speed of the recovery, up to this point, was clearly one of the most rapid in our history, and probably about as rapid as the economic organism could digest. The recovery was, moreover, one of the longest in American experience.
In 1937, however, the recovery was checked at a point barely exceeding the 1929 total output level, but about 7 per cent below 1929 in terms of per capita output, and far below 1929 in terms of the degree of full employment reached. Thus, before a full recovery was reached, a major depression was allowed to develop until well into 1938. In the second quarter of that year the tide was turned by a positive program of federal expenditures, and by late 1939, stimulated by the war, the 1937 level was recovered, but no new ground conquered. In broad outlines, the recovery made satisfactory progress until August, 1937, and since then has been operating at about 70 to 80 per cent of reasonably full employment.
A combination of circumstances produced the depression of 1937. A part of these could have been avoided, but in part it was a normal reaction from a prolonged upswing. With respect to the mistakes made, careful account should be taken of them for future guidance,1 and every effort made to avoid them. Some (for example, the labor difficulties) were related____________________