Abstract

The economic troubles of the Great Depression have been a case study for economics for decades. Its cause and longevity have been analyzed in several ways. Much of the debate is related to why the depression was the “Great Depression.” This post examines research that argues that the social issues of the New Deal made a severe recession into the Great Depression. Secondly, it examines how this period gave rise to the Social Gospel.

Blog Post

The Great Depression of 1929-1932 is an interesting case study that many historians and economists have used to argue for their own economic worldview. Knowing the conditions of the long-lasting global depression is important for the discussion. The depression began in an era of America where many philosophies for governance were being discussed. Like today, social justice was a major concern and ideas of fairness were placed in juxtaposition with opportunity. The depression era was one of an unexpected financial crash with “conditions that were among the most difficult and chaotic in its history.”[1] A major cause of the longevity of the depression were these chaotic conditions and an unwillingness by some to recognize the need and benefit to restructure contacts, debt, and wages. Bernanke points out the challenges that some businesses had with workers whose wages were not depressed while the cost of goods plummeted. One of the reasons he points to for the severity of the depression is the “slow adjustment of nominal wages.”[2] In some industries like the railroad, the government had imposed higher wage rates.[3] The regulated wages sought to prevent workers from going on strike in an industry that was essential to the nation’s economy. While some have attributed the eventual recovery of the American Economy to the social programs of the era others see a very different picture. For example, Christina D. Romer argues that recovery was stifled by social programs and the recovery was a result of monetary expansion that drove demand.[4] This has undertones of the modern debate over minimum wages and a desire for some to impose a living wage, which for them is a moral imperative.

For some, the New Deal solved the problem of economic morality. The fair thing to do was to create a society where the government could care for the populace. This progressive idea had existed for some time and had even entered into the world of religion. As the government moved toward socialism so did some in Christian circles which sparked vigorous debates among religious leaders. One of the most vocal proponents of this view of social ethics was Walter Rauschenbusch, one of the developers of the Social Gospel. Rauschenbusch believes that Jesus Himself was a prophet, who sought to accomplish social awareness, and through His faith, “transform the common hope.”[5] On the issue of wages he writes, “Look now, the wages of the workingmen who have reaped your fields, which you have fraudulently retained, cry out against you and the outcries of the reapers have come to the ears of the Lord of Hosts.[6] Rauschenbusch made the case that the Bible affirmed communism.[7] Carl Henry, a premillennial fundamentalist was an alternate voice in the inter-war period. Henry saw the social movements of America as an error in worldview and theology. He argues that the liberals were looking for a utopian kingdom in the present rather than affirming the future hope in the kingdom of Jesus Christ. He writes, “During the past two generations, creative ethical thinking was done by those whose ideology was divorced from New Testament…”[8] He added, “The troubled conscience of the modern liberal, growing out of his superficial optimism, is a deep thing in modern times.[9]

If one accepts the arguments of Bernanke, that the liberal social programs of the New Deal had the opposite effect that was intended, then it can be understood that those social programs did harm to the people of America. Those programs were claimed to offer opportunity while they produced extended poverty, economic depression, and societal decline. The depression opened the door to criticism of capitalism and republicanism by social liberals. The depression also opened the door to another gospel where hope is found in modern application of communistic ideas in the name of a present kingdom without the King of kings. Before this, the Church was most often the place where people sought for hope in troubled times. While the political application of a social Gospel may have sounded good, it turned people to the government for their hope and away from Biblical Christianity.

Bibliography

Bernanke, Ben S. “The Macroeconomics of the Great Depression: A Comparative Approach.” Journal of Money, Credit and Banking 27, no. 1 (1995): 1-28.

Ben S. Bernanke. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” American Economic Review 73, no. 3 (1983): 257-276.

Henry, Carl F.H. The Uneasy Conscience of Modern Fundamentalism. Grand Rapids: Eerdmans, 1947.

Higgs, Robert. “Crisis, Bigger Government, and Ideological Change: Two Hypotheses on the Ratchet Phenomenon.” Explorations in Economic History 22 (1985): 1-28.

Romer, Christina D. “What Ended the Great Depression?” The Journal of Economic History 52, no. 4 (1992): 757-84.

Walter Rauschenbusch, Christianity and the Social Crisis in the 21st Century. San Francisco: HarperOne, 2009.

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[1] Ben S. Bernanke, “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression,” American Economic Review 73, no. 3 (1983): 257.

[2] Ben S. Bernanke, “The Macroeconomics of the Great Depression: A Comparative Approach,” Journal of Money, Credit and Banking 27, no. 1 (1995): 24.

[3] Robert Higgs, “Crisis, Bigger Government, and Ideological Change: Two Hypotheses on the Ratchet Phenomenon,” Explorations in Economic History 22 (1985): 24.

[4] Christina D. Romer, “What Ended the Great Depression?” The Journal of Economic History 52 no. 4 (1992): 757.

[5] Walter Rauschenbusch, Christianity and the Social Crisis in the 21st Century, (San Francisco: HarperOne, 2009), 53.

[6] Ibid, 85.

[7] Ibid, 100.

[8] Carl F.H. Henry, The Uneasy Conscience of Modern Fundamentalism, (Grand Rapids: Eerdmans, 1947), 34.

[9] Ibid.