Depression
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Depression Depression Presentation Transcript

  • The Great Depression
  • The Great DepressionAP Themes• Economic transition: Rapid shift from boom ofthe 20s to “bust” of the 30s was a challenge toAmerica.• Politics: Role of government in economiccrisis? What responsibility does a citizen haveas an individual in time of economic crisis?• Globalization: Crash showed Americaneconomic connection to the world. Hoover’spolicies which limited foreign trade may havecontributed to the Depression.
  • Hard Times for Farmers• Farm crisis of 1920s deepens asfarm prices drop by 60% (1929–33)• Farmers suffer overproduction,low prices, drought, insects, anddebt / foreclosures• Many are forced to leave land andmigrate• Effect on families: people delaymarriage and parenthood; morehusbands desert their wives andchildren
  • Farmers’ Holiday Assoc.; BonusExpeditionary Force• Most Americans are bewildered by crisis,but some scattered urban/rural protestsemerge• Association calls for strike by farmers toraise food prices; some block foreclosures• BEF marches on DC (1932) to lobby forimmediate payment of promised bonus• Hoover refuses and uses army to evictveterans and their families by violence
  • Communists/Socialists• Communists organize protests by jobless,but party membership remains small• Socialists win a few elections, but overallAmericans do not turn to radicalism• Many call for more active government
  • Causes of Great Depression• Economists and historians disagree as tocauses.– Economic downturns are a natural part of acapitalist economy.– What was remarkable was not that ithappened, but that it was so severe and longlasting.• Key question then: Why such a severedepression?– Some general agreement as to certain causalfactors.
  • Causes of Great Depression• Lack of diversification in economy- 20sprosperity had depended upon a few keyindustries (esp. construction and auto).– In late 20s these industries began decline.– New industries could not take up the slack.• Maldistribution of income– Weakened consumer demand– Even at height of 20s boom years, more than50% of American families lived on the edge orbelow minimum subsistence level.
  • Causes of Great Depression• Credit problems– Farmers in debt- mortgaged property and falling crop pricesled to bank defaults.– Small banks suffered from defaults in loans– Larger banks often engaged in unwise investments in stockmarket and other loans– Ordinary Americans began making substantial purchases oncredit/installment plans.• Declining exports: European demand for US goodsdeclined– European industry/agriculture more productive– European nations having financial difficulties- in part drivenby WWI debts.
  • Magnitude of theDepression• 100,000 businesses failedGNP fell 50%
  • 051015202530351928 1929 1930 1931 1932 1933Business failures (In thousands)
  • Magnitude of the Depression9,000-10,000 banks failed• 1929: 659 banks failed• 1930: 1,350 failed.• 1931: 2,293 closed.• 1932: 1,453 closed.• Americans who had seen savingas a virtue saw them disappear.• 30% loss in the money supply.
  • 00.511.522.533.544.51928 1929 1930 1931 1932 1933Bank Failures
  • Magnitude of the DepressionStock market crash• 6.4 million share sold on BlackTuesday (normally 3 million)• Down 13% of value in 1 day.• Down 87% of value in 4 years.• Margin buying contributes tocrash.• By day after the crash, 11 well-known Wall Street men hadcommitted suicide.
  • Magnitude of the DepressionJoblessness• Beginning of 1930: 4 million• Nov. 1930: 6 million• March 1933: 13 million; 25% of laborforce.– Midwest hit hard: Cleveland 50%unemployment; Akron, 60%; Toledo, 80%• At worst time of depression, about 40million people without any income at all-about 28% of the population.• Income falls by 50% in 4 years.
  • Magnitude of the DepressionJoblessness (cont’d)• 50% of textile mill workers lost jobs inNew England by end of 1930.• Millions more only partially employed(underemployed)– Even before the Depression, wages weredown: Avg income about $1,200/year.Cost of raising a family, about $2,000/year• Minorities hit hardest.• Ford Co. employed 128.000 in 1929;37,000 by 1931.
  • 024681012141928 1929 1930 1931 1932 1933Unemployment (in millions)
  • Magnitude of the Depression• Malnutrition–Cases of up 4 times• Breadlines and soupkitchens become commonsite in cities.– Read story of Aunt Molly Jackson (p. 393 inZinn)
  • Magnitude of the Depression• Homelessness– Thousands of people lose their homesto banks as they cannot makepayments. Forced on to the streets.• Hoovervilles– Name given to shanty-towns thatpeople constructed. Show contemptfor Pres. Hoover.
  • Dust Bowl
  • A ‘Hooverville’
  • Bonus Army• Vets of WWI promised a bonus-totaling $2.4 billion. Not to be paiduntil 1945.• Congress considered early payment.Vets marched to DC to lobby.• Hoover opposed early payment. Helpedkill the bill.• Many Bonus Army members stayed onto try and get it passed.• Army marched on them. Burned theirshacks. Killed two Vets, and one child.
  • Bonus ArmyCamp
  • Fire destroys Bonus Army camp
  • President Hoover• Did morethan anypreviouspresident• But opposeddirect aid.– Made himseenheartless
  • Positive Actions taken by Hoover• Agreement with business and labor tomaintain wages and avoid strikes.• Encouraged states to do more publicworks.• Presidents Organization on UnemploymentRelief (POUR)- encourage private donationsfor relief.• Public Works- Hoover Dam, for ex.• Reconstruction Finance Corp.- makeloans to businesses. Trickle down moneyto those in need. $300 million in relief
  • Negative actions by Hoover• Hawley-Smoot tariff- raised tariffson goods coming in. Counter-productive because it made it moredifficult for nations to sell goods tous, get $ to buy American goods.• Vetoed a variety of relief bills-believed they would underminecharacter and work ethic.
  • Hoover• Hoover’s pursuit of a balanced budgetblocks him from accepting deficitspending• Hoover is the bridge to New Deal(1) starts to mobilize US Government(2) gives private enterprise a chance tosolve Depression; when it fails, morepeople are willing to accept largerexpansion of US Government
  • 1932Election
  • Franklin D. RooseveltHis mindset:• “Action and ActionNow” and “BoldPersistentExperimentation”• “Relief, Recovery,Reform”• Pledged “A newdeal for theAmerican people.”
  • Launching the New Deal• Restoring Confidence– Roosevelt’s Personality plays a key role.
  • The New DealFDR called a emergency session ofCongress as soon as took office.In the first “100 Days”…• Government activity unprecedented inUS history. (See chart pp. 1239-40 in Tindall)• Declared Bank Holiday- 4 days to stopthe panic.• Emergency Banking Relief Bill-provided for reopening of solventbanks, and reorganization of thosethat are not.• AAA-– Reduce production– Price supports
  • New Deal100 Days (continued)…• CCC– Jobs for 2.5 million young men.• Federal Emergency Relief Act– $500 million in aid for state and local govts.• Public Works Admin.– $3.3 billion to hire unemployed for public works• NRA- economic planning• Federal Securities Act– Set up FDIC- insures bank deposits.• TVA– Electric to the Tenn. Valley
  • TVA
  • Immediate impact of theNew Deal• Unemployment fell from 13 million to9 in 1936 (16.9%).• Net farm income increased from $3billion to $5.85 in 1935.• Manufacturing salaries and wagesincreased from $6.35 billion toalmost $13 billion in 1937.• But… economy was still in badshape.
  • Immediate impact of theNew Deal
  • Interest-Group Democracy• New Deal provides something to benefit mostinterest groups in USA (Table 25.1*)• FDR brokers interests of different groups• Fig. 25.1*: New Deal reduces bank failures,business failures, and unemployment; raisesfarm prices and industrial wages/salaries• Roosevelt and New Deal overwhelminglypopular*A People & a Nation, Sixth Edition
  • Critics of the New DealConservatives• too much taxation and regulation• deficit spending condemned• Liberty League- claimed thatsubverting individual initiative andself-reliance.• Supreme Court-– Struck down key legislation as giving thePres. too much power, and as a violationof state rights.• NIRA (Schechter) and AAA (Butler) struckdown.
  • Critics of the New DealLiberals• NRA codes too favorable to business• Plowing under millions of acres offields and killing livestock whenpeople are hungry. 6 million pigsslaughtered before market.• Huey Long-– Every man a king– Share our wealth- every family ahomestead allowance of $5,000 and anannual income of $2,000.– 100% tax on millionaires.
  • Second New DealLess cooperation with Business.More relief.• Key programs– WPA- ultimately employed 8.5million on many public worksprojects.• Also sponsored art and culturalprojects.– Wagner (NLRA) Act- grants laborthe right to organize.– Social Security.
  • Social Security
  • New Deal coalition formed• New political coalition withcity dwellers (immigrantsesp.), organized labor,“old” south, northernblacks.
  • FDR’sCourtPackingPlan
  • Court Packing plan• FDR upset over S. Ct. rulings• Proposed bill to appoint new justicefor each that was over 70 andrefused to resign. Could add severaljustices this way.– Bill generally opposed. FDR overreached.– Bill may have had an impact in defeat-swing votes on the court begansupporting the New Deal.
  • Legacy of theNew Deal
  • Legacy of the New Deal• The New Deal represents the beginning ofthe WELFARE STATE.• The New Deal helped to bring about achange in thinking by ordinary Americansfrom a mind-set that they wanted as littlegovernment as possible, to a way ofthinking were they turn to the governmentto solve their problems for them. Todaypeople regularly turn to the governmentwhen things go wrong in their lives.• The New Deal encouraged the growth ofunions. The Wagner Act legitimizedunions.
  • Legacy of the New Deal• The New Deal expanded the power ofthe President. Made the presidencymore personal.• The New Deal used deficit spending todeal with the troubled economy. Byspending more, the government putmoney in the hands of people, whichhelps to create jobs. Deficit spendingin this case is an example of the use ofKeynesian economics.• The New Deal expanded the power ofthe federal government.
  • Legacy of the New Deal• The New Deal caused political shifts. AfricanAmericans left the Republican Party andjoined the Democrats because of FDR’spolicies. White southerners became moreuneasy with the Democrats because of thisand FDR’s “big government policies,” causingthe beginnings of a split within the party.• New Deal changed the government’s role inthe economy, but the economy remainedcapitalistic. The nation weathered the storm.