Great Depression

The Beginning

Great Depression

• The United States economy seemed very strong by 1922, only four years after World War I, but by the beginning of the 1930s, the United States was in a deep economic depression.

• Why do you think this happened?• As the worry of war decreased, people began

buying many products.

Great Depression

• For example, demand for home appliances increased, and many Americans bought such products on credit.

• In addition, overseas orders for American products increased as war-ravaged countries purchased goods from the United States because their own factory systems were destroyed.

Great Depression

• Factories in the United States went into full production to meet this increased postwar demand, both domestic and foreign.

• As war-torn countries rebuilt their factories, they began cutting their orders to American factories, which in turn contributed to American factories’ laying off workers or shutting down when their inventories stopped selling.

Great Depression

• A long period of rising stock prices is known as a bull market

• Many investors bought stocks on margin, making small cash down payments (borrowed money)

• Margin call, a demand by the broker for the investor to repay the loan immediately

• Speculation, bet on the market climbing and selling whatever stock they could to make money

Buying on MarginStock Investor’s

initial cost Amount Broker Must

Borrow

Investor 1 10 Shares $7.50

Investor 2 50 Shares $212.50

Investor 3 100 Shares $75.00

Shares are being sold at $5.00 each. Initially, the investor owes 15%.

Roots of the Great Depression

• Efficient machinery led to overproduction• Uneven distribution of wealth added to the

country’s problems. (5% of households earned 30% of the county’s income)

• Low consumption added to economic problems

• As sales decreased, workers were laid off, resulting in a chain reaction

Roots of the Great Depression

• Installment plan, paying a little at a time, left little money to purchase other goods

• Hawley-Smoot Tariff intensified the Depression by raising the tax on imports

• Americans purchased less from abroad, in return foreign corporations did not buy American exports.

• Federal reserve lowered interest rates instead of raising them, encouraging banks to make risky loans and business thinking economy was growing

Causes of the Great Depression

• Over speculation in the stock market• Over borrowing (investments made with

borrowed money)• Over production in factories and farms• Uneven distribution of wealth• Failure by the Federal Reserve to monitor

banks• High protective tariffs

Causes of the Depression

• Overproduction and low demand leads to employee layoffs

• Low wages reduce consumer buying power• High tariffs restrict foreign demand for

American goods (Hawley-Smoot Tariff)• Unemployment reduces buying power further

Causes of Depression

• Hawley-Smoot Tariff: A high import tariff that is considered the most destructive tariff in American history.

Depression

• Black Tuesday, October 29, 1929, stock prices fell drastically (stocks lost $10-$15 billion in value)

• This stock market crash did not cause the depression, but it weakened the nation’s banks

• Because the government did not insure bank deposits, customers lost their money.

• $30 billion was lost, (roughly equal to the total wages earned by Americans in 1929), as stock prices had dropped by over 1/3.

THE 1929 CRASH

• October 29, Black Tuesday, the bottom fell out

• 16 million shares were sold.

• Prices plummeted

• $30 billion was lost

• Affect on Banks:• People can’t repay

loans, therefore banks lose money. Banks close and people lose life savings.

The Stock Market Crash

Bank Closings • Banks had

invested in the Stock Market and lost money

• By 1933 – 11,000 of the 25,000 banks nationwide had collapsed Bank run 1929, Los Angeles

Causes of Depression

• Overproduction: Machines (automation) and new technology led to creating more products than could be consumed.

Causes of Depression

• Uneven Distribution of Wealth: Most Americans were poor and could not afford to buy new products.

Causes of the Depression

• Credit: Americans who could buy things were making installment payments and could not afford to buy additional goods.

Causes of Depression

• Under-consumption: Low sales led to factory lay-offs. Creating a chain reaction: Lay-offs led to lower sales, led to more lay-offs………..

Effects of the Great Depression

• Unemployment: By 1933, 1 out of every 3 American workers were unemployed. Bread lines / Soup Kitchens created to feed the poor

The Impact of The Great Depression

• Unemployment increased• Homelessness increased• Workers became more militant • Farmers lost their farms• Workers migrated in search of jobs

The Depression Worsens

• Bread lines – people waited for free food• Soup kitchens – private charities gave a free

meal to the poor• Many homeless built shacks in shantytowns,

which they referred to as “Hoovervilles” because they blamed the president who had been inaugurated in March 1929.

• As crop prices fell, many farmers left their fields uncultivated

Hoovervilles

Hoovervilles

Hoover Flags Hoover Blankets

Hoovervilles

Hoovervilles

Hoovervilles

Unemployment Lines

Unemployment Lines

Bread Lines

Bread Lines

Bread Lines

Soup Kitchens

Soup Kitchens

Soup Kitchens

THE DUST BOWL

• A severe drought gripped the Great Plains in the early 1930s

• Wind scattered the topsoil, exposing sand and grit

• The resulting dust traveled hundreds of miles

Kansas Farmer, 1933

The Depression Worsens

• A drought in the Great Plains, beginning in 1932, caused the region to become a “Dust Bowl”

• Farmers lost their farms and many families moved to California hoping to find a better life

• To escape these hardships Americans turned to movies and radio programs

• These shows contained stories of triumph over adversity and visions of a better life

Dust storm approaching Stratford, Texas - 1934

Dust buried cars and wagons in South Dakota in 1936

Coping with the Depression

• Movies and Radio: allowed people to temporarily forget the problems that they faced.

• Stories tended to focus on people overcoming hardships to achieve success.

• Snow White, Wizard of Oz

The Depression Worsens

• Movies like The Wizard of Oz, Gone with the Wind, and Snow White became popular

• Books were written about the depression, the most famous was The Grapes of Wrath by John Steinbeck.

• It was about an Oklahoma family fleeing the Dust Bowl to find a new life in California.

Headlines of 1932

• U.S STEEL LAYS OFF ANOTHER 10,000• GENERAL MOTORS STOCK DOWN FROM $500 A

SHARE TO $10 A SHARE• CHICAGO TEACHERS FEED 11,000 HUNGRY CHILDREN• IOWA CORN WAY DOWN IN PRICE• KENTUCKY COAL MINERS FOUND LIVING ON

DANDELIONS• 110 CHILDREN IN N.Y.C. DIE FROM MALNUTRITION

Some Interesting statistics

• National Income: • 1929--$81 billion• 1932--$41 billion• Business Failures: 1929-32--85,000• Banks: 1929-32 - 9,000 failures and 9,000,000 accounts

wiped out• Per capita income: • 1929 -- $681• 1932 -- $495• Weekly income of a stenographer: • 1929 -- $45• 1932 -- $16

Hoover’s Response:

• Initial Response:• Laissez-Faire: Left the

economy alone “the ship would right itself.”

• Rugged Individualism: Americans should pick themselves up by their boot straps.

•Hoovervilles = shanty-towns built by migrant populations that had lost their farms, homes, jobs, etc.

Later Response:• Reconstruction Finance

Corporation (RFC): • Loaned money to

companies to keep businesses running.

• The government also bought surplus grain from farmers.

• Both measures were too little, too late!!

Promoting Recovery

• Public Works – government-financed building projects

• Hoover increased public works and asked the nation’s mayors and governors to do the same

• Hoover tried to persuade the Federal Reserve to put more currency into circulation, but they refused

• He set up the NCC (National Credit Corporation) creating a pool of money to rescue the banks, it was not enough to help

Promoting Recovery

• He set up the Reconstruction Finance Corporation to make loans to banks, railroads, and agricultural institutions, but the economy continued to decline

• He opposed the federal government’s participation in relief – money that went directly to very poor families

• He felt that was the responsibility of state and local governments

TOO LITTLE TOO LATE• public works projects

• Reconstruction Finance Corporation – created to strengthen banks and businesses through government loans

• prosperity would “trickle down” to the average citizen

Hoover’s flurry of activity came too late to save the

economy or his job

ROOSEVELT WINS OVERWHELMING VICTORY

• Democrat Roosevelt, known popularly as FDR, was a 2-term governor of New York

• FDR was a distant cousin of Teddy Roosevelt

• The Democrats also won huge victories in the house and senate

• Greatest Democratic victory in 80 years

FDR easily won the 1932 election

The New Deal• Franklin D. Roosevelt • elected in 1932• “the only thing we have to fear

is……”• Eleanor Roosevelt: Supporter of

the little person• Radio talks with America:

“Fireside Chats”

FDR LAUNCHES NEW DEAL

• FDR promised a “new deal” for the American people

• He took office with a flurry of activity known as “The Hundred Days”

• The 100 Days lasted from March to June 1933

CONGRESS GETS BUSY

• FDR’s philosophy was to get people help and work through “deficit” spending

• During the 100 Days, Congress passed more than 15 major pieces of legislation that significantly expanded government’s role in the nation’s economy and welfare

FDR

• created a program of relief and reform called the New Deal

• Federal $ was granted to states to provide the needy w/clothes, food, shelter

• Public works programs hired people to construct public buildings, roads, and other projects

Franklin Delano Roosevelt

• “The only thing we have to fear is fear itself.”• What did Roosevelt mean by this statement?

Roosevelt’s Approach to Solving the Problems of the Great Depression

• Relief: Programs such as the Works Progress Administration (WPA) provided direct payment to workers.

• Recovery: Programs such as the Agricultural Adjustment Administration (AAA) were developed to bring the nation out of the Depression over time. The Tennessee Valley Authority (TVA) was also established.

Roosevelt’s Approach to Solving the Problem of the Great Depression

• Reform: Programs such as the Federal Deposit Insurance Corporation (FDIC) were developed to prevent similar problems in the future.

• The Social Security Act provided retirement protection.

• http://www.history.com/videos/the-new-deal#the-new-deal

TO DO LIST: #1- HELP BANKS

• First order of business was to get the banking system in order

• On March 5, one day after taking office, FDR declared a bank holiday

• He persuaded Congress to pass the Emergency Relief Act, which authorized the Treasury Department to inspect the nation’s banks

Roosevelt’s Hundred Days

• President FDR sent many bills to Congress• Congress passed 15 major acts to help the economy,

these programs made up the First New Deal• The Securities and Exchange Commission (SEC) was

created to regulate the stock market and prevent fraud

• The Glass-Steagall Act prohibited commercial banks from speculating on the stock market. It created the Federal Deposit Insurance Corporation (FDIC)

MORE 100 DAYS ACTIVITY

• Federal Securities Act: Required stock info to be accurate and truthful

• Agricultural Adjustment Act: (AAA) Raised crop prices by lowering production

• Tennessee Valley Authority: (TVA) Focused on direct relief to hard hit area– created ambitious dam projects

Managing Farms and Industry

• The FDIC provided government insurance for bank deposits up to $5,000. It covered peoples savings in the banks from loss

• Agricultural Adjustment Administration (AAA) helped some farmers but mostly just the large commercial farmers who raised one crop

• The National Industrial Recovery Act suspended antitrust laws

• PWA – broke down long standing racial barriers in the construction trades. (Public Works Administration)

Spending and Relief Programs

• The Civilian Conservation Corps (CCC) gave unemployed men aged 18 to 25 the opportunity to work with the national forestry service

• They planted trees, fought fires, and built reservoirs.

• The most important aspect of Roosevelt’s New Deal was the change in the spirit of the American people. Their faith in America was restored.

ALPHABET AGENCIES

• CCC – Civilian Conservation Corps put young men to work

• Men ages 18 to 25 worked building roads, parks, planting trees (200 million trees in Dust Bowl areas)

• By 1942 three million men worked for the CCC

ALPHABET AGENCIES

• PWA – Public Works Administration was part of the NIRA (National Industrial Recovery Act)

• The PWA provided money to states to construct schools and community buildings

PWA workers construct a public building in Hartford, Connecticut

ALPHABET AGENCIES

• CWA – Civil Works Administration built 40,000 schools and provided salaries for 50,000 teachers in rural America

• Also built 500,000 miles of roads CWA School in Woodville, CA

ALPHABET AGENCIES

• FHA – Federal Housing Administration provided home loans, home mortgages and repairs

Repaired business in Childersburg, Alabama

Long-Term impact of New Deal

• The long term impact of Roosevelt's New Deal was an increased role of the federal government.

• Federal government grew larger and gained more power which we are still dealing with today.

• He used the government to try to solve economic problems which stemmed from the government interference in the free market system in past administrations. (Ex: T.R., Taft, and Wilson)

Review

• What 5 weaknesses appeared in the global economy during the postwar era?1. Europe couldn’t produce much of its own

food/products.2. US farmers struggled w/debt and Dust Bowl3. Economic nationalism, or protectionism4. Speculation, or risky investments5. Buying stocks ‘on margin’ (using credit)

Review

• How did nations initially respond to the Great Depression?1. Protectionism, or economic nationalism =

countries protect domestic businesses2. Surpluses were destroyed

Review

• How did the New Deal mark a shift in the U.S. government’s relationship with its citizens and the economy?– It provided $ for relief and reform programs– It provided jobs for many US citizens to stimulate

the economy

CRITICS EMERGE• Despite the renewed

confidence of many Americans, critics from both political spectrums emerged

• Liberals (left) felt FDR’s program was NOT doing enough

• Conservatives (right) felt that government intervention was TOO much and interfered with our free market economy

WINSTON CHURCHILL “Any man who is under 30, and is not a liberal, has no heart; and any man who is

over 30, and is not a conservative, has no

brains.”

SUPREME COURT REACTS

• By the mid-1930s, the Supreme Court struck down the NIRA as unconstitutional (citing too much government control over industry)

• The Court also struck down the AAA on the grounds that agricultural was a local matter -- not a federal matter

The Supreme Court -- 1935

FDR REGAINS CONTROL OVER SUPREME COURT

• From the mid to late 1930s, FDR was able to appoint 7 new judges to the Supreme Court, thus assuring that his programs would carry on unabated

CONGRESS PROTECTS WORKERS

• In 1938, Congress passed the Fair Labor Standards Act which set maximum hours at 44 per week and minimum wage at 25 cents per hour

SOCIAL SECURITY ACT• One of the most important

achievements of the New Deal era was the creation of the Social Security System

• The Social Security Act, passed in 1935, had 3 parts:

Old-Age Pension Unemployment compensation Aid to families with dependent

children & disabled (welfare)

Social Security Act

• The Social Security Act provided security for the elderly, unemployed workers, and other needy people

• It provided welfare payments to needy people, including those with disabilities and poor families with young dependent children

• It provided a monthly retirement benefit for people when they stopped working at age 65

WORKS PROGRESS ADMINISTRATION

• Helping urban workers was critical to the success of the Second Hundred Days

• The WPA set out to create as many jobs as possible as quickly as possible

• Between 1935-1943, the WPA spent $11 billion to give jobs to 8 million workers

WPA BUILDS AMERICA

• WPA workers built 850 airports, 651,000 miles of roads and streets, and 125,000 public buildings

• The WPA also hired artists, writers and photographers to create art

The Davis Street School Extension in Atlanta under construction as part of the Works Progress Administration Program, November 2, 1936

AFRICAN AMERICANS DURING THE NEW DEAL

• The 1930s witnessed a growth of activism for black Americans

• A. Philip Randolph became head of the nation’s first all-black union – the Brotherhood of Sleeping Car Porters

AFRICAN AMERICANS GAIN POLITICAL POSITIONS

FDR appointed over 100 African Americans to positions within the government

• Mary McLeod Bethune headed the division of Negro Affairs of the NYA

• Despite these gains, FDR was never fully committed to Civil Rights Bethune

NATIVE AMERICANS MAKE GAINS

• Native Americans made advances during the 1920s & 1930s

• Full citizenship granted in 1924• The Reorganization Act of 1934

gave Natives more ownership of reservations

• Policy was moving away from assimilation towards autonomy

ROOSEVELT’S FIRESIDE CHATS

• FDR communicated to Americans via radio

• His frequent “Fireside Chats” kept Americans abreast of the government’s efforts during the Depression

LEGACIES OF THE NEW DEAL• FDIC – banking insurance

critical to sound economy• Deficit spending has became

a normal feature of government

• Social Security is a key legacy of the New Deal in that the Feds have assumed a greater responsibility for the social welfare of citizens since 1935