1. The Great Depression

2. The Great Depression
AP Themes
• Economic transition: Rapid shift from boom of
the 20s to “bust” of the 30s was a challenge to
America.
• Politics: Role of government in economic
crisis? What responsibility does a citizen have
as an individual in time of economic crisis?
• Globalization: Crash showed American
economic connection to the world. Hoover’s
policies which limited foreign trade may have
contributed to the Depression.

3. Hard Times for Farmers
• Farm crisis of 1920s deepens as
farm prices drop by 60% (1929–
33)
• Farmers suffer overproduction,
low prices, drought, insects, and
debt / foreclosures
• Many are forced to leave land and
migrate
• Effect on families: people delay
marriage and parenthood; more
husbands desert their wives and
children

4. Farmers’ Holiday Assoc.; Bonus
Expeditionary Force
• Most Americans are bewildered by crisis,
but some scattered urban/rural protests
emerge
• Association calls for strike by farmers to
raise food prices; some block foreclosures
• BEF marches on DC (1932) to lobby for
immediate payment of promised bonus
• Hoover refuses and uses army to evict
veterans and their families by violence

5. Communists/Socialists
• Communists organize protests by jobless,
but party membership remains small
• Socialists win a few elections, but overall
Americans do not turn to radicalism
• Many call for more active government

6. Causes of Great Depression
• Economists and historians disagree as to
causes.
– Economic downturns are a natural part of a
capitalist economy.
– What was remarkable was not that it
happened, but that it was so severe and long
lasting.
• Key question then: Why such a severe
depression?
– Some general agreement as to certain causal
factors.

7. Causes of Great Depression
• Lack of diversification in economy- 20s
prosperity had depended upon a few key
industries (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 than
50% of American families lived on the edge or
below minimum subsistence level.

8. Causes of Great Depression
• Credit problems
– Farmers in debt- mortgaged property and falling crop prices
led to bank defaults.
– Small banks suffered from defaults in loans
– Larger banks often engaged in unwise investments in stock
market and other loans
– Ordinary Americans began making substantial purchases on
credit/installment plans.
• Declining exports: European demand for US goods
declined
– European industry/agriculture more productive
– European nations having financial difficulties- in part driven
by WWI debts.

9. Magnitude of the
Depression
• 100,000 businesses failed
GNP fell 50%

10. 0
5
10
15
20
25
30
35
1928 1929 1930 1931 1932 1933
Business failures (In thousands)

11. Magnitude of the Depression
9,000-10,000 banks failed
• 1929: 659 banks failed
• 1930: 1,350 failed.
• 1931: 2,293 closed.
• 1932: 1,453 closed.
• Americans who had seen saving
as a virtue saw them disappear.
• 30% loss in the money supply.

12. 0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1928 1929 1930 1931 1932 1933
Bank Failures

13. Magnitude of the Depression
Stock market crash
• 6.4 million share sold on Black
Tuesday (normally 3 million)
• Down 13% of value in 1 day.
• Down 87% of value in 4 years.
• Margin buying contributes to
crash.
• By day after the crash, 11 well-
known Wall Street men had
committed suicide.

14. Magnitude of the Depression
Joblessness
• Beginning of 1930: 4 million
• Nov. 1930: 6 million
• March 1933: 13 million; 25% of labor
force.
– Midwest hit hard: Cleveland 50%
unemployment; Akron, 60%; Toledo, 80%
• At worst time of depression, about 40
million people without any income at all-
about 28% of the population.
• Income falls by 50% in 4 years.

15. Magnitude of the Depression
Joblessness (cont’d)
• 50% of textile mill workers lost jobs in
New England by end of 1930.
• Millions more only partially employed
(underemployed)
– Even before the Depression, wages were
down: 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.

16. 0
2
4
6
8
10
12
14
1928 1929 1930 1931 1932 1933
Unemployment (in millions)

17. Magnitude of the Depression
• Malnutrition
–Cases of up 4 times
• Breadlines and soup
kitchens become common
site in cities.
– Read story of Aunt Molly Jackson (p. 393 in
Zinn)

18. Magnitude of the Depression
• Homelessness
– Thousands of people lose their homes
to banks as they cannot make
payments. Forced on to the streets.
• Hoovervilles
– Name given to shanty-towns that
people constructed. Show contempt
for Pres. Hoover.

20. Dust Bowl

26. A ‘Hooverville’

27. Bonus Army
• Vets of WWI promised a bonus-
totaling $2.4 billion. Not to be paid
until 1945.
• Congress considered early payment.
Vets marched to DC to lobby.
• Hoover opposed early payment. Helped
kill the bill.
• Many Bonus Army members stayed on
to try and get it passed.
• Army marched on them. Burned their
shacks. Killed two Vets, and one child.

28. Bonus Army
Camp

29. Fire destroys Bonus Army camp

30. President Hoover
• Did more
than any
previous
president
• But opposed
direct aid.
– Made him
seen
heartless

31. Positive Actions taken by Hoover
• Agreement with business and labor to
maintain wages and avoid strikes.
• Encouraged states to do more public
works.
• Presidents Organization on Unemployment
Relief (POUR)- encourage private donations
for relief.
• Public Works- Hoover Dam, for ex.
• Reconstruction Finance Corp.- make
loans to businesses. Trickle down money
to those in need. $300 million in relief

32. Negative actions by Hoover
• Hawley-Smoot tariff- raised tariffs
on goods coming in. Counter-
productive because it made it more
difficult for nations to sell goods to
us, get $ to buy American goods.
• Vetoed a variety of relief bills-
believed they would undermine
character and work ethic.

33. Hoover
• Hoover’s pursuit of a balanced budget
blocks him from accepting deficit
spending
• Hoover is the bridge to New Deal
(1) starts to mobilize US Government
(2) gives private enterprise a chance to
solve Depression; when it fails, more
people are willing to accept larger
expansion of US Government

38. 1932
Election

39. Franklin D. Roosevelt
His mindset:
• “Action and Action
Now” and “Bold
Persistent
Experimentation”
• “Relief, Recovery,
Reform”
• Pledged “A new
deal for the
American people.”

40. Launching the New Deal
• Restoring Confidence
– Roosevelt’s Personality plays a key role.

43. The New Deal
FDR called a emergency session of
Congress as soon as took office.
In the first “100 Days”…
• Government activity unprecedented in
US history. (See chart pp. 1239-40 in Tindall)
• Declared Bank Holiday- 4 days to stop
the panic.
• Emergency Banking Relief Bill-
provided for reopening of solvent
banks, and reorganization of those
that are not.
• AAA-
– Reduce production
– Price supports

44. New Deal
100 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

46. TVA

47. Immediate impact of the
New Deal
• Unemployment fell from 13 million to
9 in 1936 (16.9%).
• Net farm income increased from $3
billion to $5.85 in 1935.
• Manufacturing salaries and wages
increased from $6.35 billion to
almost $13 billion in 1937.
• But… economy was still in bad
shape.

48. Immediate impact of the
New Deal

49. Interest-Group Democracy
• New Deal provides something to benefit most
interest groups in USA (Table 25.1*)
• FDR brokers interests of different groups
• Fig. 25.1*: New Deal reduces bank failures,
business failures, and unemployment; raises
farm prices and industrial wages/salaries
• Roosevelt and New Deal overwhelmingly
popular
*A People & a Nation, Sixth Edition

50. Critics of the New Deal
Conservatives
• too much taxation and regulation
• deficit spending condemned
• Liberty League- claimed that
subverting individual initiative and
self-reliance.
• Supreme Court-
– Struck down key legislation as giving the
Pres. too much power, and as a violation
of state rights.
• NIRA (Schechter) and AAA (Butler) struck
down.

51. Critics of the New Deal
Liberals
• NRA codes too favorable to business
• Plowing under millions of acres of
fields and killing livestock when
people are hungry. 6 million pigs
slaughtered before market.
• Huey Long-
– Every man a king
– Share our wealth- every family a
homestead allowance of $5,000 and an
annual income of $2,000.
– 100% tax on millionaires.

52. Second New Deal
Less cooperation with Business.
More relief.
• Key programs
– WPA- ultimately employed 8.5
million on many public works
projects.
• Also sponsored art and cultural
projects.
– Wagner (NLRA) Act- grants labor
the right to organize.
– Social Security.

53. Social Security

54. New Deal coalition formed
• New political coalition with
city dwellers (immigrants
esp.), organized labor,
“old” south, northern
blacks.

55. FDR’s
Court
Packing
Plan

56. Court Packing plan
• FDR upset over S. Ct. rulings
• Proposed bill to appoint new justice
for each that was over 70 and
refused to resign. Could add several
justices this way.
– Bill generally opposed. FDR over
reached.
– Bill may have had an impact in defeat-
swing votes on the court began
supporting the New Deal.

57. Legacy of the
New Deal

58. Legacy of the New Deal
• The New Deal represents the beginning of
the WELFARE STATE.
• The New Deal helped to bring about a
change in thinking by ordinary Americans
from a mind-set that they wanted as little
government as possible, to a way of
thinking were they turn to the government
to solve their problems for them. Today
people regularly turn to the government
when things go wrong in their lives.
• The New Deal encouraged the growth of
unions. The Wagner Act legitimized
unions.

59. Legacy of the New Deal
• The New Deal expanded the power of
the President. Made the presidency
more personal.
• The New Deal used deficit spending to
deal with the troubled economy. By
spending more, the government put
money in the hands of people, which
helps to create jobs. Deficit spending
in this case is an example of the use of
Keynesian economics.
• The New Deal expanded the power of
the federal government.

60. Legacy of the New Deal
• The New Deal caused political shifts. African
Americans left the Republican Party and
joined the Democrats because of FDR’s
policies. White southerners became more
uneasy with the Democrats because of this
and FDR’s “big government policies,” causing
the beginnings of a split within the party.
• New Deal changed the government’s role in
the economy, but the economy remained
capitalistic. The nation weathered the storm.