Unequal Distribution of Wealth : From 1923-1929 the average output per worker increased 32% in manufacturing. During that same period of time average wages for manufacturing jobs increased only 8%. Thus wages increased at a rate one fourth as fast as productivity increased. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits. The rich were not willing to share their wealth and the government because of a laissez-faire philosophy was not willing to force the rich to do so Overproduction: For an economy to function properly, total demand must equal total supply. In an economy with such disparate distribution of income it is not assured that demand will always equal supply. Essentially what happened in the 1920's was that there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income. The economy based on a relatively few people (the rich) purchasing luxury goods to sustain itself. Layoffs were inevitable as supplies increased Installment Credit: Three quarters of the U.S. population would spend essentially all of their yearly incomes to purchase consumer goods such as food, clothes, radios, and cars. These were the poor and middle class: families with incomes around, or usually less than, $2,500 a year. The bottom three quarters of the population had an aggregate income of less than 45% of the combined national income; the top 25% of the population took in more than 55% of the national income. While the wealthy too purchased consumer goods, a family earning $100,000 could not be expected to eat 40 times more than a family that only earned $2,500 a year, or buy 40 cars, 40 radios, or 40 houses. One obvious solution to the problem of the vast majority of the population not having enough money to satisfy all their needs was to let those who wanted goods buy products on credit. The concept of buying now and paying later caught on quickly. By the end of the 1920's 60% of cars and 80% of radios were bought on installment credit. Between 1925 and 1929 the total amount of outstanding installment credit more than doubled from $1.38 billion to around $3 billion. Installment credit allowed one to &quot;telescope the future into the present.” This strategy created artificial demand for products which people could not ordinarily afford. It put off the day of reckoning, but it made the downfall worse when it came. By telescoping the future into the present, when &quot;the future&quot; arrived, there was little to buy that hadn't already been bought. In addition, people could not longer use their regular wages to purchase whatever items they didn't have yet, because so much of the wages went to paying back past purchases. Loans were defaulted as people lost their jobs which exacerbated the problems. The government refused to step in because Social Darwinism was the philosophical basis by the leaders in power.
Task 5.2 New Deal And Cornell Notes
Overproduction Unequal Distribution Of Wealth Installment Credit Overspeculation Causes of the Great Depression
Downward Spiral Towards Economic Depression Unequal Distribution of Wealth Overproduction Installment Buying Layoffs No Government Intervention Pullback in Consumer Spending
The “Old Deal” What? <ul><li>President Hoover’s reaction to the Great Depression </li></ul>President Herbert Hoover
The “Old Deal” What did he want to do? <ul><li>Refused to create government programs until it was too late </li></ul><ul><li>Let the business cycle take care of things </li></ul>Children in one of the Bonus Army Camps
The Bonus Army 1932 <ul><li>25,000 WWI veterans </li></ul>Who? <ul><li>Marched to Washington D.C. to get a $ bonus they were supposed to get in 1945 </li></ul>What?
The Bonus Army 1932 <ul><li>Called out the troops and dispersed the army </li></ul>What did Hoover do?
The Election of 1932 <ul><li>Roosevelt offers a “New Deal” for America </li></ul><ul><li>Roosevelt wins with 60% of the vote </li></ul>What?
Roosevelt’s New Deal <ul><li>What? </li></ul><ul><li>Programs meant to help the country by getting the government involved in the economy </li></ul>1. Relief - help people out in the short term 2. Recovery - get the economy back on its feet 3. Reform - keep this from everyhappening again <ul><li>Meant to do 3 things </li></ul>
Bank Holiday - First Step <ul><li>Why? </li></ul><ul><li>Many banks had failed, wiping out families’ savings </li></ul><ul><li>People lost confidence in the banks </li></ul>Depositors Congregate Outside Closed Bank
Bank Holiday - First Step <ul><li>How? </li></ul><ul><li>Closed banks for four days to reorganize </li></ul><ul><li>President explains in a “fireside chat” </li></ul><ul><li>Confidence restored </li></ul>
Next Step - “Alphabet Soup” <ul><li>In the first 100 days of his administration Roosevelt passes tons of legislation </li></ul>Hundred Days <ul><li>The agencies he creates (like AAA) </li></ul>Alphabet Soup
Next Step - “Alphabet Soup” <ul><li>18-25 year old guys get jobs and send money home to their families </li></ul>CCC - Civilian Conservation Corps CCC workers in Lassen National Forest, California
Next Step - “Alphabet Soup” <ul><li>Government pays farmers not to farm </li></ul>AAA - Agricultural Adjustment Administration <ul><li>Meant to cause prices to rise and halt overproduction </li></ul>
Next Step - “Alphabet Soup” <ul><li>Government runs a hydroelectric power plant </li></ul>TVA - Tennessee Valley Authority <ul><li>Provides cheap power & fertilizer to the poor region </li></ul>Construction at Norris Dam, which was being built by the TVA on the Clinch River in Northeastern Tennessee
Next Step - “Alphabet Soup” <ul><li>Insurance for the $ you put in banks </li></ul>FDIC - Federal Department Insurance Corp. <ul><li>Protected people’s savings </li></ul>Bank Employee Checks Depositor's Account
Next Step - “Alphabet Soup” <ul><li>Watchdog agency for the stock market </li></ul>SEC - Securities and Exchange Commission New York Stock Exchange
Next Step - “Alphabet Soup” <ul><li>Gave direct relief ($) to those who needed it </li></ul>FERA - Federal Emergency Relief Admin. <ul><li>Beginnings of a welfare program </li></ul>
Next Step - “Alphabet Soup” <ul><li>Taxed people working now to give payments to the elderly </li></ul>Social Security Social Security Information Poster
His Greatest Mistake Packing the Supreme Court What? Why? <ul><li>Increase the # of Supreme Court justices from 9 to 15 </li></ul><ul><li>Kept declaring his programs unconstitutional (including NRA, AAA, SEC, etc.) </li></ul>
His Greatest Mistake Packing the Supreme Court February, 1937, Richmond (Virginia) Times Dispatch, "Fall In!" What did this cartoonist think about the Supreme Court?
His Greatest Mistake Packing the Supreme Court Results? <ul><li>Public grew angry (FDR taking too much power) </li></ul><ul><li>FDR passed much less legislation after this </li></ul>Supreme Court Exterior
The New Deal - Pros and Cons Pros <ul><li>Restored optimism and hope to Americans </li></ul>Cons <ul><li>Did not really fix the depression </li></ul><ul><li>Left the nation with much debt </li></ul><ul><li>Provided necessary relief to many </li></ul><ul><li>Left people too dependent on government (?) </li></ul>
A particular slide catching your eye?
Clipping is a handy way to collect important slides you want to go back to later.