The Great Depression

The Great DepressionCrash!February 1928- Fall of 1929 generally a steady rise October 21 and 23 major declines in stock market followed by temporary recoveries2nd recovery engineered by JP Morgan and Company and other big name bankersConspicuously (noticeably) bought up stocks to gain peoples confidence

Black TuesdayTuesday October 29, the market collapsed4 years the market stayed depressedTook more than a decade to recover

Walter Thornton PhotographFact or Fiction?Many people believe the Great Depression began with, or was caused by the stock market crashIs this true?

The stock market crash of 1929 did not so much cause the Depression, then, as help trigger a chain of events that exposed longstanding weaknesses in the American economy. (page 662)

Causes of the DepressionFirst Cause:Lack of diversification in American economy (1920s)Construction fell from 11billion-9billion from early 20s to late 20s Automobiles fell more than 33% in 9 months (1929)Other industries emerging not big or strong enough yet Causes of The DepressionSecond Cause:2nd major cause was maldistribution of wealthWhat does this mean? 1920s decade of economic growth but more than 50 % of American families below minimum subsistence levelIndustrial and agricultural production increased workers and farmers not getting enough Not enough people could afford the numerous goods being produced

Causes of the DepressionSecond Cause continued:As a result construction, auto, coal, and other industries found a decreased demandPeople Laid off even less purchasing powerIn many expanding industries technology replaced need for workers In 1929 difficult for these workers to find more jobs as economy was slowed

Causes of the DepressionThird Cause:Credit structure of the economyFarmers in debtCrop prices too low to allow them to pay off mortgagesSmall banks esp. those involved in this industry were struggling

Big banks Some of or countrys biggest banks were investing recklessly:Stock marketUnwise loansWhen the market crashed in 1929 many banks had greater loss than they could afford

Causes of the DepressionFourth Cause:Declining exports Some European nations industries and agriculture were becoming more productiveOther European nations (ex: Germany) were struggling financially and could not afford overseas goods

Fifth and Final Cause International debt structure resulting from World War I When WWI ended (1918), U.S. allies in Europe owed American banks These countries economies were shatteredDespite Woodrow Wilsons pleas, European allies demanded reparations from Germany and AustriaGermany and Austria could not pay reparationsFifth Cause ContinuedHigh U.S. tariffs made it difficult for Europe to export goods and repay loans owed to AmericaThis international credit structure collapsed as a result causing the Depression to spread to Europe while worsening the Depression in the U.S.Five Causes of the Depression(Review)Lack of diversificationMaldistribution of wealthCredit structure of the U.S. economyDeclining exports The collapse of the international credit structure

The Banks After stock market crashed, the banking system collapsed as wellMore than 9,000 banks went bankrupt or closed Depositors lost $ 2.5 billionAmerican gross national product shrunk from 104 billion to 76.4 billion in three years Market value of all products and services produced in one year by labor and property supplied by the residents of a country

UnemploymentCities of the Northeast and Midwest crippled by unemployment Ex: Ohio unemployment rateCleveland -50% Akron-60%Toledo 80%

Americans from this time grew up thinking everyone was responsible for their fateUnemploymentMost Americans had been taught to believe that every individual was responsible for his or her own fate, that unemployment and poverty were signs of personal failure. Many men in particular felt deeply ashamed of their joblessness; the helplessness of unemployment was a challenge to traditional notion of masculinity (664).

The jobless walked the streets looking for nonexistent jobsPublic Relief SystemsMore families were in need of state and local public relief systems (for food alone)1920s much smaller number relied on relief Now in a large number of areas relief collapsedWith the help of private charities, relief still could not reach a large number in need

State GovernmentsState tax revenues declined so state government leaders hesitated to alter the already constricted budgets Other public officials thought a widespread welfare system would undermine the moral fiber of its clients

Widespread Desperation Breadlines stretched blocks1000s sifted through garbage or waited for restaurant scrapsNearly 2,000,0000 (mostly young men) lived as nomads travelling from city to city by car or riding freight trains

The Dust Bowl

The Dust Bowl

1929 to 1932- 1/3 of farmers lost their land Great Plains of the South and WestCatastrophic natural disaster (began 1930)Large portion of the country became known as the Dust Bowl Fertile land became desertBlack BlizzardsInvasions of Grasshoppers-devoured the few remaining crops, fenceposts, clothes (hanging to dry)Major dust storms- known as black blizzards moved across plains Hid the sunKilled livestock & occasionally unlucky/unwise humans (suffocation)Cows cut open sand in bellies

"Black Blizzard"

StarvationDespite dust storms farmers still produced more food than Americans could affordHospitals noticed alarming increases in deaths from starvationPeople slept in shacks, subways, and unused sewers, parks, and freight cars

OkiesThousands of families migrated to Californiaand other states (usually conditions not much better)-Called Okies because many came from Oklahoma

Herbert Hoover31st president in 1928Republican Inaugural address: We in America are nearer to the final triumph over poverty than ever before.

Hoovers Response to the DepressionHoover met with the Business, agriculture, and labor leaders and urged them to adopt the policy of Voluntary CooperationBusiness- urged not to cut labor/productionLabor- not to ask for higher wages, better hours (conditions) By mid-1931 economic conditions worsenedVoluntarism collapsedHoovers ResponseTried using government spending ($ 423 million)In federal works programs Pressed state and local governments to fund public constructionEconomic conditions worsened he reversed the trend of spendingWanted now balanced budget1932 (depth of the Depression) proposed a tax hike to avoid a deficit Agricultural Impact (or lack there of)April 1929 Agricultural Marketing ActEst. first major government program to help farmers maintain pricesEst. corporations to buy surpluses of crops this would raise prices

Why would buying surplus crops raise crop prices?Hint: surplus is when there is a greater supply than demand

Agricultural Impact (continued)Hawley-Smoot Tariff1930Increased protection of 75 farm products Neither act helped American farmers significantly

Hoovervilles1931 Hoovers popularity deterioratedDemocrats won control of the House Democrats gained some ground in the SenatePromised increased government assistance in the economyAmericans blamed Hoover for crisis Hoovervilles-name given to shantytowns established by unemployed Americans on city outskirtsHooverville

Troubles WorsenSpring 1931- international financial panic1920s European nations relied on U.S. banks for loansAfter 1929 they could not receive these loansfinancial fabric of several European nations began to unravel (667)One of the Largest banks in Austria collapsedU.S. economy quickly plummeted to new lowsCongress met December 1931Conditions were desperately bad, causing Hoover to support a series of measures that would keep endangered banks afloat and protect homeowners from being foreclosure

Reconstruction Finance CorporationBill passed January 1932Formed the RFC-a government agency provided federal loans to troubled banks, railroads, etc. Made $ available to local governments allowing them to support public works projects and relief efforts

RFC and HooverEarly Hoover programs small scaleRFC-Large scale1932 budget-$1.5 billion dollars

Shortcomings of the RFCOnly lent to businesses with sufficient collateralA lot of money went to Big corporations and banksOnly funded public works projects that would ultimately pay for themselves (ex: toll bridges)

What is collateral?a borrower's pledge of specific property to a lender, to secure repayment of a loanRFC Did not have enough money to make a significant impact on the DepressionDid not spend all the money it had either$300 million available for local relief efforts RFC only lent out $30 million of that $1.5 billion budget only lent out 20%Protest (notes)At first, Americans too stunned, confused, etc. to really protest1932-people began to organizeFamers formed: the Farmers Holiday Association-kept farm products from market (A farmers strike)Ended in failure did block some marketsBonus Army1924, congress approved a $1,000 bonus for all who served in WWI These veterans would be paid starting in 19451932 (bad economy) many veterans began demanding their bonuses immediatelyHoover refused (wanted to balance the budget)June (1932) 20,000 veterans marched into Washington D.C.Built camps around the city and refused to leave until congress passed legislation to pay the veterans bonuses immediatelyBonus ArmyThese men called themselves the Bonus Expeditionary Force (Bonus Army)Hoover embarrassed by the Bonus ArmyOrdered policeTroops threw rocks and one police officer fired killing twoHoover then ordered the military to assist in clearing out these men and camps

End for the Bonus ArmyGeneral Douglass MacArthur led the mission himself (with the aid of Dwight D. Eisenhower) MacArthurs action would exceed the presidents ordersMacArthur led the third Calvary under George S. Pattons command

General Douglas MacArthur (left)George S. Patton (Right)Veterans fled in fear100 + marchers injuredthe incident served as perhaps the final blow to Hoovers already battered political standingThe Election of 1932Republicans dutifully renominated HooverDemocrats nominated New York Governor Franklin Delano RooseveltBroke tradition- addressed the convention in Chicago in person I pledge you, I pledge myself, to a new deal for the American peopleHis future plan as president would be called the New Deal

Results of the Election of 1932Roosevelt won easilyDemocrats won the majority in both houses of congress

FDR Distant cousin Teddy RooseveltSecretary of the Navy in WWIStricken with polio (1920)*Never could truly walk again Appeared to be able to through crutches and braces