The "Roaring Twenties" period in the USA, the causes of the 1929 crash, the Great Depression and the economic decisions to face the crisis.

1. U.S.A: FROM THEU.S.A: FROM THE
ROARING 20s TO THEROARING 20s TO THE
GREAT DEPRESSIONGREAT DEPRESSION

2. FIRST WORLD INDUSTRIAL POWER
- During WW1 the USA supplied the
belligerent countries with raw
materials, industrial products and
weapons
- The European countries owed a lot
of money to the USA (war loans)
- Intact productive system after the
war.
- Small human losses with respect to
other countries
- Owners of half of the world gold
reserves.
- The dollar became the predominant
currency in international trade.
COUNTRIES %
USA 45%
USSR 5%
FRANCE 7%
UNITED KINGDOM 9%
GERMANY 12%
OTHER COUNTRIES 23%
WORLD INDUSTRIAL PRODUCTION IN 1929

3. PROSPERITY AND CONSUMER SOCIETY
PERCENTAGE OF HOUSES WITH
ELECTRIC APPLIANCES
Growth of industrial production
Growth of consumption, stimulated by:
- Payment in instalments
- Banking loans
1912 1932
IRONS 0 65
RADIOS 0 65
VACCUUM CLEANERS 0 30
WASHING MACHINES 0 27
TOASTERS 0 27
COFFEE MAKERS 0 19
FRIGIDAIRES 0 12

4. AMERICAN WAY OF LIFE
ARRIVAL OF IMMIGRANTS TO ELLIS
ISLAND, 1920s
The USA became a dream for
thousands of immigrants of all
over the world.

5. THE OTHER FACE OF PROSPERITY

6. The prohibition of producing,
selling and consuming
alcoholic drinks contributed to
the extraordinary development
of the mafia
AL CAPONE
SPEAKEASY, ILLEGAL BAR

7. Although slavery had been abolished after the Civil War (1861-
1865), many black people continued to be discriminated and they
were hounded in several states by the Ku Klux Klan, a racist
organization.

8. INVESTMENT EUPHORIA AND SPECULATION
As getting cheap loans was very
easy, many people got into debts to
buy houses or stocks in the Stock
Market:
- Real estate bubble: a lot of
houses were built and easily sold,
although prices increased due to
the high demand.
- Stock Market bubble: many
people invested money without any
knowledge about economics.
Stocks prices increased constantly
due to the big demand.

9. SYMPTOMS OF CRISIS
- High debts to keep high levels of production and
consumption
-
When the European countries started recovering, the USA
producers (farms and factories) started having difficulties
to sell their products and stocks started accumulating.
CASH-FLOW PROBLEMS
OVERPRODUCTION
- No correspondence between the real economic
situation of the companies and the value of their stocks
in the Stock Exchange Market
STOCK EXCHANGE
BUBBLE

10. NEED FOR MONEY
TO INCREASE
PRODUCTION
AND CONSUMPTION
BANKS GAVE
CHEAP CREDITS
WITHOUT
GUARANTEE
A LOT OF MONEY
AVAILABLE AND FACILITIES
TO ACCESS TO CREDIT
AND PAYMENT IN
INSTALMENTS
REAL ESTATE BUBBLE:
HIGH DEMAND FOR
HOUSES AND APARTMENTS
FINANCIAL BUBBLE:
MANY PEOPLE WITHOUT
ECONOMY KNOWLEDGE
BOUGHT STOCKS
DEMAND FOR
ALL TYPE OF
PRODUCTS:
CONSUMERISM
MANY
PEOPLE
GOT INTO
DEBT
INDUSTRIES AND FARMERS GOT
CREDITS TO ENLARGE THEIR BUSINESSES

11. EUROPE´S
RECOVERY
LESS DEMAND
FOR THE USA
PRODUCTS
OVERPRODUCTION
CRISIS
INDUSTRIES
AND FARMERS
COULDN´T GIVE
THE
CREDITS BACK
WORKERS FIRED
UNEMPLOYMENT
INCREASED
FARM
FORECLOSURES
STOCK INVESTORS
TRIED TO GET CASH
SELLING
THEIR STOCKS
WALL STREET STOCK EXCHANGE
MARKET CRASH
BANKS WENT
BANKRUPT
LESS
CREDIT
LESS
EXPENSE
ECONOMY
CONTRACTED

12. BEGINNING OF THE CRISIS: OCTOBER 1929 CRASH
24th
October 1929: Black Thursday
- Massive sale of stocks in Wall
Street Stock Exchange Market
- The price of the stocks fell down,
prices shrunk and investors got
ruined
STOCKHOLDERS PANIC

13. EVOLUTION OF THE U.S STOCK MARKET BETWEEN 1927-1933
From euphoria to the crash and
later to the Great Depression

14. EXTENSION OF THE CRISIS
- Many banks went bankrupt,
because they couldn´t recover the
loans they had given
-
Consumption reduced. This made
overproduction crisis more serious:
-
Farmers were ruined. Many lost
their farms and migrated to cities
in search of job.
-
Many industrial workers lost
their jobs: unemployment and
poverty increased.
- Deflation: as there were not buyers
for the products, prices decreased
and so did the profits of producers.
AMERICAN UNION BANK BANKRUPTCY

15. FARMERS RUINED

16. UNEMPLOYMENT
HOOVERVILLES, SHANTY TOWNS AT CENTRAL PARK, NEW YORK

17. UNEMPLOYMENT RATE,1922-1939
(% of the labour force)
1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939
0
5
10
15
20
25
8
4
6
4.2
2
4.1 4.1
3
9
17
23
25
22
19.5
17
14
19
17

18. THE GREAT DEPRESSION
The crisis became more serious due to:
- Economic liberalism orthodoxy,
opposed to the intervention of the State in
economy.
- Deflationist policy: the attempt of
keeping low prices in order to recover
consumption made things even worse.
- Protectionism: the US increased tariffs
to protect their industry and international
trade contracted
- As the USA was the main Europe´s
creditor, when they started repatriating
capital the crisis quickly extended to
Europe.
HERBERT HOOVER
PRESIDENT OF THE USA
FROM 1929 TO 1933

19. PROPOSALS TO SOLVE THE CRISIS
John Maynard Keynes, a British
economist, proposed different
solutions:
-
The State had to intervene in
economy and increase public
expenses, even if this meant
increasing the State deficit:
- Investment in public works to
create jobs and reduce
unemployment
- stimulation of production and
consumption and reduction of
stocks.

20. F.D. ROOSEVELT AND THE NEW DEAL
In November 1932 the Democrat
Franklin D. Roosevelt won the
elections and launched an
economic program based on
Keynes´ ideas: NEW DEAL
F.D.Roosevelt to Hoover:
“Just leave them, Herb. I´ll do it after
March 4th
, Washington Evening Standard,
1932)

21. Roosevelt´s government launched
some emergency laws to reactivate
economy:
- relief decisions
- economic legislation
- social legislation
These decisions were known as the
Three R Program: REFORM,
RELIEF, RECOVERY

22. DECISIONS TO REACTIVATE ECONOMY
- Subsidies for farmers to destroy
their stocks and recover prices.
-
Minimum prices, in order to fight
deflation.
- Creation of the Public Works
Administration, to build big
infrastructures with public money
and create jobs.
DESTRUCTION OF STOCKS
FARM RELIEF PLAN

23. PUBLIC JOBS CREATED TO REDUCE UNEMPLOYMENT
NEEDY FAMILY PROGRAM
(distributed surplus farm products to
poor families)

24. -Social Security Act: pensions for
retired workers and assistance for
orphans and the disabled. It also
created unemployment benefits.
-
National Labour Relations Act,
which gave the unions the right to
organize and represent workers in
collective bargaining.
- National minimum salary
- Child labour was abolished
SOCIAL LEGISLATION

25. FINANCIAL LEGISLATION
-
Banking reform: strict control of
banks in order to avoid another
bankrupt and government help in
exchange for cheap credits to recover
investment.
-Creation of the SEC (Securities and
Exchange Commission), to supervise
the Stock Exchange Market and protect
investors
THE FIRST SEC

26. New Deal Program What It Did Category
Federal Emergency
Relief Administration
Sent millions of dollars to states to use in direct relief payments and food for
the unemployed.
Relief
Civilian Conservation
Corps (CCC)
Created jobs for over two million young unmarried men in conservation work
and parks.
Relief
Agriculture Adjustment
Act (AAA)
Paid farmers to reduce the amount of crops they planted, in order to cut excess
production.
Recovery
Federal Deposit
Insurance Corporation
(FDIC)
Protected people’s bank deposits, thus eliminating the problem of “bank runs”
that were a serious problem in the early 1930s.
Reform
National Recovery
Administration (NRA)
Set up voluntary agreements among businesses to cut excess production. The
agreements covered production, prices, wages, and hours of work.
Recovery;
Reform
Tennessee Valley
Authority (TVA)
Built hydroelectric power plants and flood control dams in seven states in the
Tennessee River region.
Recover; Relief
Securities and Exchange
Commission (SEC)
Created to supervise the stock market and protect investors from dishonest
practices.
Reform
Public Works
Administration (PWA)
and the
Works Progress
Administration (WPA)
Created jobs for millions of unemployed people constructing roads, hospitals,
post offices, parks, and many other projects.
The WPA also included a program that hired out-of-work artists,
photographers, actors, and writers for a wide range of artistic and educational
projects.
Relief; Recovery
National Labor
Relations Act
Gave labor unions the right to organize and represent workers in collective
bargaining.
Reform
Social Security
Act
Created a federal system of old-age pensions and assistance for orphans and
the disabled. It also created an unemployment insurance system.
Reform; Relief
Fair Labor
Standards Act
Set up the first national minimum wage law and abolished child labor. Reform
THE THREE R PROGRAM: REFORM, RELIEF, RECOVERY

27. Some of the New Deal decisions
were declared unconstitutional
by the Supreme Court of Justice.
The Court argued that the Federal
Government had imposed these
decisions over the states.

28. All these decisions reduced
unemployment and production
recovered:
MORE WORKERS
However, the crisis didn´t finish
until the outbreak of WW2 .
MORE DEMAND
MORE CONSUMPTION
MORE PRODUCTION