The Great Depression (1929-1941)

Causes of the Great Depression:

•Overproduction/Underconsumption

•Corporate Debt – Companies overextended themselves and lied about their assets to get loans, which got the banking system all screwed up. •Speculation – “buying on margin”

•Lack of Recovery in Farming

•International Problems – Following the war the US upped tariffs, which caused Europeans to stop buying our goods.

•Gov’t Policies – The gov’t followed very lassiez-faire policies w/easy credit and low discount rates, which stimulated the speculation mania.

Beginning of the Great Depression:

October 24, 1929 (“Black Thursday”)

October 29 (“Black Tuesday”).

Effects of the Great Depression:

•Unemployment

•Bank closures

•Foreclosure of homes and farms

•Bankruptcy of many businesses

•Poverty

Hoover and the Great Depression:

• Rugged Individualism

• Voluntarism – especially by industry

• POUR (President’s Organization on Unemployment Relief)

• Hoover/Grand Coulee Dams – Public Works

• Federal Farm Board (created in 1929 under the Agricultural Marketing Act)

• Reconstruction Finance Corporation (RFC) – lent money to business (trickle down economics)

• Hawley-Smoot Tariff (1930)

• Revenue Act of 1932 - decrease of expenditures, increase of taxes!!!)

Problems with Hoover:

•vetoed direct relief bills

•Laisezz faire follower

•Blamed for the Great Depression (hoovervilles, hoover flags etc.)

•Used force to remove the Bonus Army from Washington DC

Another Problem: Dust Bowl

Okies

John Steinbeck

The Grapes of Wrath

Easy victory for FDR and his New Deal Program

•New Deal program (3 Rs): Relief, Recovery Reform

•Will it work?

•Use of “Brain Trust”

•Pump Priming

“…we have nothing to fear but fear itself…”

The First Hundred Days and the New Deal

1. Bank Holiday - FDR declared a four day bank holiday and called Congress for an emergency session (which would start the New Deal)

2. Emergency Banking Relief Act of 1933 – gave president the power to regulate banking and foreign transactions, reopen solvent banks and prohibited the hoarding of gold

3. Fireside Chats - These began in March 1933, and began with a message urging Americans to return their savings to banks, which they promptly did.

4. Glass-Steagall Banking Reform Act – creates Federal Deposit Insurance Corporation (FDIC)

5. Beer-Wine Revenue Act –Taxation of alcohol (prohibition repealed by 21st Amendment)

6. Agricultural Adjustment Act of 1933 - Meant to restore farmers’ purchasing power, the AAA had the gov’t pay farmers to reduce the amount of crops sold (this would increase prices). The support payments would be funded by taxes on processors of farm goods.

7. Farm Credit Act & Home Owners Refinancing Act – The FCA provided short/medium loans to farmers so that they could keep their land, and the HORA helped home mortgages

8. Public Works – Creation of the Civilian Conservation Corps (CCC), Public Works Administration (PWA) and Tennessee Valley Authority (TVA) – all provided jobs for people

CCC at work

9. National Industrial Recovery Act (NIRA) - This was the AAA for industry, and it established the National Recovery Administration (NRA), which regulated business through establishing fair production codes, limiting production and pricing, and guaranteeing the right of workers to unionize and bargain collectively.

•Believe it or not, all those bills were passed in the Hundred Days, and they saved the nation from hysteria and panic. Other bills passed after in FDR’s first term include: the Commodity Credit Corporation (lent farmers money for keeping underpriced crops off the market), the Securities and Exchange Commission (SEC)

But did it work?

Opposition to New Deal Programs:

1. Huey Long

• Extreme populism

• 100% taxation for incomes over a million

• Share Our Wealth Society (1934)

“Every Man a King, but No One Wears a Crown”

•Assassinated in 1935

2. Father Charles Coughlin: A Roman Catholic priest who specialized in anti-communism, anti-capitalism, and anti-Semitism – “conspiracy of Jewish bankers.”

3. Francis Townsend: Old Age Revolving Pensions Plan, where the gov’t would give old people $ on the condition they spend it fast (to pump $ into the economy).

4. The American Liberty League - (conservative Democrats and corporation leaders) led this with calls that the New Deal was destroying the American individualistic tradition.

5. Communists – felt the New Deal programs were too conservative

6. The Supreme Court of the United States – ruled Schechter v. US (1935) they got rid of the NIRA (federal gov’t has no right to regulate intrastate business), and in US v. Butler the AAA was invalidated for the same reason.

New Deal Coalition - consisted of urban (immigrant) workers, organized labor, the “Solid South,” and northern blacks

Roosevelt strikes back at the court: Court Packing Scheme -FDR asked Congress to allow him to appoint an additional justice for any judge who was over 70 (the number would amount to 15) -- the Judiciary Reorganization Bill (1937)

•Despite failure reorganize the SC, SC was more careful about declaring New Deal programs unconstitutional

•FDR would get rid of most of them anyhow…how?

Second New Deal1. Works Progress/Projects Administration (WPA) –major public works organization and also sponsored cultural programs that brought art to the people by employing artists, ex. Federal Writers Program, which was accused by some as being left-wing propaganda (since most involved were decidedly to the left).

National Labor Relations (Wagner) Act – This act established the National Labor Relations Board, which was empowered to guarantee democratic union elections and stop unfair labor practices, like the firing of union members. (remnant of NIRA)

*Social Security Act – This act established old-age insurance in which workers paid taxes out of their wages, which were then matched by their employers and stored for use as benefits starting at age 65. The act also included other federal/state welfare programs.

*Public Utility Holding Company (Wheeler-Rayburn) Act & Wealth Tax Act – Setting rates for public utility companies and tax act raised income taxes on rich people.

The last important ND acts were: National Housing Act (1937), a new Agricultural Adjustment Act-Soil and Allotment Act (1938), and the Fair Labor Standards Act (1938).

New Deal Balance Sheet

+•Relieved worst crisis in 1933

•Collapse of economic system was averted

•Fairer distribution of income was created

•Saved capitalism without socialism

•Middle road approach (conservative)

•Made gov’t responsible for the welfare of the people

•Provided jobs in times of need

•Allowed Indians to be Indians again (Indian Reorganization Act-1934)

•Gave people hope for a better future and self-respect

-•Deficit Spending (Keynesian Economics) – national debt at $40,440,000,000 in 1939

•Extreme bureaucracy and waste (boondoggle)

•Unemployment remained high

•Huge farm surpluses and product surpluses

•Gov’t became a welfare gov’t

•Blacks were largely omitted from the work programs

•Mexicans were worse off since the ND programs did not cover migrant farm workers

•AND FINALLY….THE NEW DEAL DID NOT SOLVE THE GREAT DEPRESSION!

- March on Washington Movement (1941) – In response to discrimination in the new jobs in the war industries, Philip Randolph (leader of the porters’ union) came up with a huge march. Afraid it would lead to riots, FDR then promised to outlaw discrimination in war industries in exchange for a cancellation of the march. - Executive Order No. 8802 – In exchange for the cancellation of the march, FDR established the Fair Employment Practices Committee (FEPC).

1930s