Download The Great Depression Descends Upon America - Parkway C-2

The Great Depression
Descends Upon America
1929-1939
The Post-War
Economic Boom
• Twenties Prosperity –
–
–
–
–
“Our American experiment
in human welfare has yielded a degree of wellbeing unparalleled in the world. It has come
nearer to the abolition of poverty…than has
ever been realized before.”
-- Hoover 1928
Americans were earning more money than ever – between 1922 and
1929, national income rose from $61 billion to $87 billion, a leap of
43%!
Americans had more money to spend (luxury goods and cars)
U.S. factories increased the number of goods they produced - what a
factory worker could produce in an hour rose by 72% during the 1920s
and business profits rose by 80%
The stock market was at an all time high – 1927 NYSE traded over 550
million shares and by the end of 1929 it doubled to 1.1 billion shares
Postwar Economic
Boom (cont.)
• The Depression Foreshadowed
– Unemployment was on the rise
– Farmers were losing their land
– Stock prices were dropping
• One author stated “[the stock market crash]
lowered the [U.S.] economy’s resistance to the
point where already existing defects could
multiply rapidly and bring down the whole
organism.”
6 Key Factors Most
Historians Can Agree
Caused the Great
Depression
1. Republican domestic and international economic
policies.
2. Unchecked Stock & Speculation
3. Weak and Unregulated Banking Institutions
4. Overproduction of Goods
5. The Decline of the Farming Industry
6. Unequal Distribution of Wealth
1. Republican Economic Policies
Three Leaders of the Republican Party
– President Calvin Coolidge (left),
Secretary of the Treasury Andrew
Melton (middle), and Herbert Hoover
(right)
• Domestic Economic
Policies included many
pro-business policies
– Based on doctrine of
“trickle-down”
economics
– Tax cuts for the
wealthy; cut gov.
expenditures and raised
taxes for middle and
lower classes
• Wealth did not trickle down b/c excess
money for the rich was not used as expected
• International Economic Policies – after
WWI, most indebted nations could not
repay the U.S.
– We lent them more money to help repay, yet
raised the tariff on imported goods
– Europe had no market to sell their goods, fell
deeper into debt, and began defaulting on loans
2. Unchecked Stock and
Real Estate Speculation
In 1929 it was strictly a gambling
casino with loaded dice. I saw
shoeshine boys buying 50 000 dollars
worth of stock with 500 dollars down
payment. A cigar stock at the time
was selling for 114 dollars a
share. The market collapsed. The
114 dollar stock dropped to two
dollars, and the company president
jumped out of the window of his Wall
Street office.
-Studs Terkel, Hard Times
Studs was talking to an interviewer in
1970
Speculation – a person or
organization makes a risky
investment in the hope of
making a quick, large profit
– Real Estate Speculation
was popular in the early
20s
– Stock Market Speculation
as the decade progressed
(Buying on Margin
especially 10-20% down)
Rapid Rise of the Stock Market
• Many had the belief that prices
would continue to rise or that
there would always be a bull
market
• Investment Pools and other
crooked investment schemes
artificially inflated the value of
stocks, thus the perceived value
of the companies they
represented
• Some economic analysts and
investors predicted that the
market was headed for a fall
Analyzing the Uncertainty of the Stock Market
Timeline of the Crash
of 1929
• Rising Prices - Sept. 3rd, prices hit an all time
high!
• Sell Now - Oct. 24th, people wanted to sell to
make a maximum profit; some bankers led by J.P.
Morgan tried to stabilize the market, but the
descent could not be stopped
• Oh no, Prices are Falling - Panic on Wall St.
• Oct. 28th – loss of over $4 billion
• Black Tuesday - Oct. 29th, people in mass hoped
to sell stocks before all shares lost value; loss of
over $16 billion
The Stock Market Crash of 1929
Triggered…
• A collapse of the stock
exchange system; All
Sellers and No Buyers
= No Stock market
exchange!
• Prices and wages fell
• Production decreased
• Unemployment
increased
• Many banks and
businesses failed
3. Weak and Unregulated
Banking Institutions
Run on Union Bank in NYC 1933
• The 1920s saw
banks over-extend
credit to stock
investors and
brokers
• Laissez Faire
attitudes left
banking virtually
unregulated by
government
• Federal Reserve Board did little to prevent banks
from speculating depositors’ money on high-risk
ventures, nor did it demand that banks keep a
certain percentage of their money on reserve and
available.
• Depositors money was uninsured
• Stock was accepted as collateral in buying on
margin loans (believed it was as safe as a house or
car)
• Many banks had no assets, no cash reserved, and
no new money coming in
• By 1932, 1/4th were forced to close their doors –
almost 6,000 banks
4. Overproduction of Goods
1935 photo depicting striking workers
dumping milk from the back of a
delivery truck in the middle of a road as
two men try to resist their protest. (Photo
by American Stock/Getty Images)
Henry Ford with his son Edsel
standing next to the 20
Millionth automobile to leave Ford’s
production line on April 15, 1931.
WWI
Conservation
= $ to burn
+
WWI
Mechanizati
on Improves
in Industry
and Farming
After WWI – Consumer demands for goods and a higher
standard of living is high; so is the belief in unrestricted
capitalism and production. Farmers were use to producing
food for the war and they kept up the pace after, expecting
the demand to be the same
5. The Decline
of the Farming Industry
• Farmers failed to sell
surplus crops
• They became unable
to repay loans (from
WWI machinery)
• The dust bowl disaster
only worsened the
plight of the farmer
6. Unequal Distribution of Wealth
The Rich got Richer…
“In the USA too much wealth had
fallen into too few hands, with the
result that consumers were unable to
buy all the goods produced. The
trouble came to a head mainly
because of the easy credit policies of
the Federal Reserve Board, which
favored the rich. Its effects were so
profound and so prolonged because
the government did not fully
understand what was happening or
what to do about it.”
-John A. Garraty, The American
Nation (1979)
…& the Poor got Poorer.
Hoovervilles constructed by the
Homeless; Named for Hoover’s lack of
action to help the poor.
• Homelessness Hoovervilles (aka shanty
towns); people become
migrants or squatters
• Health Conditions
Worsened - poor diet and
inadequate medical care
• Family Problems - Men
feel a sense of failure;
domestic disputes;
abandonment
• Increased
Discrimination conditions of
unemployment are worse
for minorities and women.
The Human
Impact of the
Great Depression
The Impact of the Depression on
American Social Groups
• Children – Confused;
sickness
• Businessmen –
Embarrassment; suicide is
only way out
• Women – Trying to hold
the family together
• Migrant Workers –
constant travel; negative
image
• African Americans –
last to be hired, first to
be fired
• Mexican Americans
– deportation;
discrimination
• Farmers – lost farms;
dust bowls
• Families – life in
Hoovervilles was hard
Conservative, Liberal, and Radical
Solutions to the Great Depression
Say that civilization is a tree which, as it
grows, continually produced rot and dead
wood….”
-FDR, 1932
• Conservative – Hoover / Republicans
– “Don’t touch it!”
• Liberal – FDR / Democrats
– “Let’s prune, so that we lose neither
the old trunk nor the new branches.”
• Radical – Socialism / Communism
– “Cut it down!”
Hoover Reacts with Little Action
• Herbert Hoover (Rep) OPPOSED federal
programs of assistance and believed private
charity would end the depression
• He believed in the idea of laissez faire (federal
government should not regulate business)
• To stimulate the economy, he cut taxes and started
public works programs to create jobs (Ex. The
Hoover Dam)
• Still, the people were not satisfied and looked to a
new leader by 1932…FDR!
Roosevelt and the New Deal
The Public Reacts at the Polls in 1932
• As the Great
Depression worsened,
the public lost faith in
Hoover and the
Republican Party.
• In 1932, they elected
Democrat Franklin D.
Roosevelt who
promised a NEW
DEAL to help the
American people.
President Franklin D. Roosevelt
FDR’s First 100 Days
During the first 100 days in office, FDR (aided
by his “brain trust” of college professors,
lawyers, labor leaders, and social workers) and
Congress passed laws focusing on:
1. Bank Reform
2. Loan Assistance and Relief Programs
3. Government Jobs for the unemployed
FDR’s New Deal(s)
FDR’s First Term (19321936) programs were
known as the New Deal.
 Civilian Conservation
Corps (CCC)
 Federal Deposit Insurance
Corporation (FDIC)
 Federal Emergency Relief
Administration (FERA)
 Public Works
Administration (PWA)
His Second Term (19361940) programs were
known as the Second
New Deal.
 Social Security Act
 Rural Electrification
Administration (REA)
 Works Progress
Administration (WPA)
 Fair Labor Standards Act
City of Milwaukee work project for the Depression-era WERA (Wisconsin Emergency Relief Administration)
Copyright 1997 State Historical Society of Wisconsin
Maxine Albro , WPA Federal Art Project marble mosaic over entrance to hall of the
Natural Science Building, San Francisco State College University
Photograph, ca. 1934, from the Federal Art Project Photographic Division records, Archives of American Art.
Key Ideas Behind FDR’s New
Deal Plan
• An opposition to laissez-faire principles (little
gov. involvement in business)
• More extensive government intervention and
regulation of the economy through “alphabet soup
agencies.”
• More government involvement in the lives of
people.
• The government spent money to create
employment and relief.
Opposition to the New Deal
• Business leaders claimed it discouraged free
enterprise and was the beginning of socialism in
America.
• Others claimed that the New Deal had created a
WELFARE STATE. This system of government
institutions provides for the basic needs of citizens
(like health care and unemployment benefits)
• Still others claimed that the New Deal encouraged
DEFICIT SPENDING.
Effectiveness of the New Deal
• New Deal programs helped many people.
• Home loans, farm subsidies, bank deposit
insurance, relief payments and jobs, pension
programs, and unemployment insurance helped
Americans get through the Depression.
• New laws regulating working standard and
workers rights were established.
• It wasn’t until WWII, however, that America was
truly out of the economic depression of the 1930’s