Download File - US Studies

+
Unit 5: Great Depression &
New Deal
+
Stock Market Crash

October 29th, 1929

Great Depression: 1930s

President Franklin D. Roosevelt’s “New Deal”

Dominates all phases of life in US in the 1930s

Changes America forever

Includes economic, social, political, psychological issues

Forces re-evaluation of American values

Challenges whole concept of the “American Dream”
+
Before the crash…

Things “appeared” to be good


“Boom Times”
However:


Major problems beneath surface
Vicious economic cycle
 Low interest rates
 Encourages borrowing money
 People borrow to buy stocks
 People sell stocks to make money
 Higher interest rates to entice saving
 Banks, businesses demand payments on loans = less money
 Less money = less stock buying = stock prices drop
 Stock prices drop = value of companies, businesses, dollar drops
 Business fail = can’t pay off loans
 Workers fired = can’t pay off loans
 Banks fail = no loans for businesses
 Businesses fail = fire workers
+
PLEASE NOTE…

The Stock Market Crash did NOT cause the Great
Depression, it only signaled the beginning of it. The causes
of the Depression were already in place
+
Prosperity Shattered

Economic troubles on the horizon, but nobody noticed

Confidence credit purchases 6x higher

Low interest rates  more borrowing/buying

Playing the stock market (Bull market)

Problems

Not stable

No long term growth

Stock prices inflated (supply and demand)

Margin buying Buying stocks on credit
+
Stock Market Crash

Many investors sold stocks because of concerns about rising
interest rates

This caused investor confidence to drop which led to less
demand for stocks which led to a drop in prices which led to
sell-offs = PANIC!!!

October 24, 1929 “Black Thursday”

October 29th, 1929 “Black Tuesday”

16 million stock shares sold

US stockholders lost $30 billion
+
Banking Crisis
 Banks
call in loans but borrowers defaulted (can’t
pay off loans) = banks close
 Depositors rush banks to get money out
 1930-1932 = 5,000 banks fail and shut down
 No banks = no businesses = fire workers = no
buying/borrowing = businesses fail
 1930-1931: 56,000
businesses fail
 1929
GNP = $103/1933 = $56 billion
 1929
= 3.2% unemployment/1932 =23.6%
+
Three Major Causes…

Overall global depression
 WWI war debts = no buying US goods
 Smoot-Hawley Tariff 1930

Income gap and domestic consumer debt
 Disposable income of top 1% up 63%
 Disposable income of lowest 93% down 4%

Normal business cycles based on supply and demand:
 Overproductionsurplusdemand dropsprices
droploss of profitstoo much borrowing, etc.
+
Hard Times
 Big
issue was unemployment
 1929: 1.5 million Americans out of work
 1933: 15 million Americans out of work
 Drop in wages/work hours for employed
 African Americans suffer even more
 Some women benefit:
Cheaper to hire
+
Life in the City

Hunger

Homeless

No jobs

Shantytowns
 Bread
lines
 Loitering

/ Crime
20% of kids in NYC were malnourished
NO GOVERNMENT ASSISTANCE = LAISSEZ FAIRE
+ Life on the Farm
 Major
drop in sales of products
 Produce and livestock destroyed because of a
major loss in profits
 No profits = farmers can’t pay back loans
 Banks foreclose on mortgages
 Farm equipment repossessed
 Land becomes useless =
 Dust Bowl
 Many farmers hit the road =
 migrants
+
Family Life
 1930s=Huge
strain on traditions
 Role of father/husband/provider questioned
 Delayed marriages = lower US birthrate
 Psychological pressures = suicides up 28%
 Popular culture/entertainment = escapism or
realism
+
Media

Literature during the
Depression = Realism
 John Steinbeck: Grapes of
Wrath
 Zora Neale Hurston: Their
Eyes Were Watching God
 Richard Wright: Native Son
 Margaret Mitchell: Gone With
the Wind
 Films: Escapism = Marx
Brothers, the Three Stooges
+
Do Something!
 People
 He
looked to Hoover for guidance
believed in American values and ingenuity
 He
saw the Great Depression as just part of the
business cycle and refused to make a move to
better the economy
 Called
the most hated man in America
+
Hoover: “Gov. should not support
the people!”

1) Conservative, Social Darwinist, Capitalism

2) Relief would create a large gov. bureaucracy

3) Did not want to inflate the federal budget

4) Fearful of reducing Americans’ self-respect

5) Rugged individualism and volunteerism

Example: Hoover refused to support the Federal Emergency
Relief Board proposed by Robert LaFollette to give $375
million for unemployment relief
+
SOME Gov’t Intervention
 Hoover
encouraged businesses to maintain level of
production, employment and wages
 Funding
for public works projects: Hoover Dam
used $800 million of gov’t funds
+
Farm Crisis
 Agricultural
 Home
 BUT
Marketing ActFederal Farm Board
Loan Bank Act 1932
Hoover still rejects direct gov’t aid
 Help
yourself! No buying up of surplus
+
Other Minor Gov’t Action

Reconstruction Finance Corporation
 Lend $2 billion of tax payer money to stabilize banks,
insurance companies, RR
 Still based on “trickle down” theories

Rumblings of Discontent
 Increasing condemnations of capitalism
 Bonus Army MarchMay 1932
 1932 election of FDR
+
1932: Time for Change
 Born
to a wealthy family, Governor of New York,
created relief programs to help with Depression
for New Yorkers
+
FDR For President!
 The
campaign revolved around the Depression
 Roosevelt
promised a “New Deal” for Americans
+
have no expectation of making a hit every time I
come to bat. What I seek is the highest possible
batting average…”
 “I
+
Restoring Hope
 New
Deal: Three levels of plans and policies
 Relief: Short term: “stop the bleeding”
 Recovery: Medium term: “get back to even”
 Reform: Long term: “Never happens again”
 VERY
different than Hoover’s approach
 1) Strong advisory approach = “Brain Trust”
 2) Very activist approach-use of gov’t powers
 3) Took immediate steps
 4) Called Congress into special session
+
FDR’s First Steps
 1)
Bank Holiday to stop massive withdrawals
 2)
Emergency Banking Act—Fireside Chats
 3)
Federal Deposit Insurance Corporation
 4)
Homeowners Loan Corporation
+
Relief Measures (Frances Perkins:
Secretary of Labor)
 1)
Federal Emergency Relief Administration—
H.Hopkins
 2)
Civil Works Administration
 3)
Civilian Conservation Corp
+
Recovery Measures

1) Federal Security ActSecurities and Exchange
Commission

2) National Industrial Recovery Act
 Public Works Administration
 National Recovery Act

3) Agricultural Adjustment Act

4) Tennessee Valley Authority

5) Concept of deficit spending: John Maynard Keynes
+
New Challenges
Major criticisms of the New Deal
 Conservatives: New Deal did too much
 A. Went against capitalism
 B. FDR had too much power
 C. Too much against tradition
 Liberals: New Deal didn’t do enough
 A. Did not redistribute the wealth
 B. Still focused on private property
 C. Did not do enough to eliminate poverty



Francis Townsend: $200 pension per person
Charles Coughlin: Gov’t should run all banks
Huey Long: Minimum income for all Americans
+
Second New Deal

Critics do not deter FDR

More public works programs, social security, wage and hour
improvements for workers
 A. Works Projects Administration $5Billion budget
 B. National Youth AdministrationMary M. Bethune
 C. Social Security Act 1935
 D. Rural Electrification Program
 E. FDR easily wins 1936 election
 F. National Labor Relations Act (Wagner Act)
 G. AFL merges with CIO in 1935

FDR and the Supreme Court—major mistake by FDR
+
Life in the New Deal Era and the
New Deal and the Arts

Hard life all aroundmade worse by natural
disaster=droughtDust Bowl

Ruined land, forced migrations, job comp.

Hardship captured by photographers

Dorothea Lange
+
Overall Criticisms of the New Deal

Creation of welfare state

Too much spending=debt

Gov’t, especially President, too much power

Free-market capitalism threatened

Yet, relief was successful

Reforms still with us today

Recovery, though, not until WWII
+
Arts During the New Deal Era

Mix between realism and escapism

Encourage pride in American culture by providing work and
opportunities to artists

WPA $300million to create Federal Project #1