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Depression
The document provides an overview of the Great Depression and the New Deal. It discusses the economic crisis of the 1920s that led to the Depression, including falling farm prices, overproduction, and rising debt. The magnitude of the Depression is examined through statistics on business/bank failures, unemployment, homelessness, and malnutrition. The document also summarizes Hoover's unsuccessful policies and FDR's New Deal programs in the "100 Days" to provide relief through jobs, agriculture supports, and public works projects. The immediate impact and legacy of expanding the role of government are discussed.
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Depression
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- 2. The Great Depression APThemes • 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 forFarmers • 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 organizeprotests 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 GreatDepression • 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 GreatDepression • 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 GreatDepression • 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 19301931 1932 1933 Business failures (In thousands)
- 11. Magnitude of theDepression 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 19301931 1932 1933 Bank Failures
- 13. Magnitude of theDepression 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 theDepression 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 theDepression 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 19301931 1932 1933 Unemployment (in millions)
- 17. Magnitude of theDepression • 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 theDepression • 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.
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- 27. Bonus Army • Vetsof 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.
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- 29. Fire destroys BonusArmy camp
- 30. President Hoover • Didmore than any previous president • But opposed direct aid. – Made him seen heartless
- 31. Positive Actions takenby 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 byHoover • 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 pursuitof 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
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- 39. Franklin D. Roosevelt Hismindset: • “Action and Action Now” and “Bold Persistent Experimentation” • “Relief, Recovery, Reform” • Pledged “A new deal for the American people.”
- 40. Launching the NewDeal • Restoring Confidence – Roosevelt’s Personality plays a key role.
- 43. The New Deal FDRcalled 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
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- 47. Immediate impact ofthe 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 ofthe New Deal
- 49. Interest-Group Democracy • NewDeal 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 theNew 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 theNew 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 Lesscooperation 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.
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- 54. New Deal coalitionformed • New political coalition with city dwellers (immigrants esp.), organized labor, “old” south, northern blacks.
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- 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.
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- 58. Legacy of theNew 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 theNew 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 theNew 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.