Download The Great Depression and New Deal

The Great Depression and New
Deal
Ch 24
EQ’s
• What were the causes and consequences of the Great
Depression?
• How did Hoover and Congress respond to the Great
Depression?
• What was the First New Deal, and how did it differ
from the Second New Deal?
• How did the New Deal expand the scope of the federal
government in the South and West?
• How did the Great Depression affect American cultural
life during the 1930s?
• What were the limits of the New Deal’s reforms, and
what legacy did they leave?
Herbert Hoover
 Elected President in 1928
 Self-made millionaire
 Served in Wilson, Harding,
and Coolidge administrations
 Efficiency movement and
associative state
 No electoral experience or
military rank (only other?)
 Born to Quaker parents/IA
 Humanitarian
 “Rugged Individualism”
 Associative State
Hoover’s fortunes will be
tied directly to the US economy
October 29, 1929 – “Black Tuesday”
Output Plummets and Prices Fall
Unemployment and the Great
Depression
Unemployment (cont.)
• More than 13 million Americans lost their jobs.
– Of those, 62% found themselves out of work for
longer than a year;
– 44% longer than two years;
– 24% longer than three years; and
– 11% longer than four years.
– Unemployment peaked at a staggering 24.1% in 1933,
and never dropped below 14.3% until World War II.
(By contrast, the unemployment rate has never
surpassed 9.7% since.)
Bank Failures
Just a normal recession…
• In the late 1920s, the economy started to enter a
mild recession
– House and automobile sales decreased
– Governments had completed most of their
infrastructure projects
– Total spending in the economy was falling
– Business firms began to cut production
– The stock market crash in October signaled to
shareholders that profits would fall
– Wealth decreased and the ability of consumers to
meet credit obligations was diminished
Liquidationist/Austrian
Keynesian
Monetarist
Easy monetary policy by the
FED created “malinvestment.”
The Great Depression was
caused primarily by a fall in
total demand (aggregate).
The Great Depression may
have originated in a fall in
total demand, but its length
and severity resulted primarily
from the unwillingness of the
Federal Reserve System to
prevent bank failure and
maintain a large enough
supply of money
Economy will adjust in long
run.
“In the long run, we are all
dead.”
Animal Spirits
"It will purge the rottenness
out of the system… High costs
of living and high living will
come down. People will work
harder, live a moral life. Values
will be adjusted, and
enterprising people will pick
up the wrecks from less
competent people."
The decline in demand was so
severe that adequate demand
could be restored only by
large increases in government
spending (deficit).
FED should have served more
effectively as lender of last
resort providing liquidity
(cash) to banks to stem bank
failures stop contraction of
money supply.
Ideological
implications?
Ideological
implications?
How do you fix How do you fix How do you fix
economy?
economy?
economy?
Ideological
“Liquidate labor, liquidate
implications?
stocks,
liquidate the farmers,
liquidate real estate.”
What do people do
when they EXPECT
deflation?
Uneven
Distribution
of Wealth
Bank
Failures
Excessive
Stock Market
Speculation
Weak
farm
economy
2
1
5
Easy
Monetary
policy in
1920’s
3
Excessive use of
credit/installment
purchasing
11
6
4
12
High Debt
7
Overproduction
of goods
9
8
High Tariffs
(HawleySmoot)
10
Buying on
Margin
Fischer and Over indebtedness and
Deflation
1. Debt liquidation and distress selling
2. Contraction of the money supply as bank loans are paid
off
3. A fall in the level of asset prices
4. A still greater fall in the net worths of business,
precipitating bankruptcies
5. A fall in profits
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence
8. Hoarding of money
9. A fall in nominal interest rates and a rise in deflation
adjusted interest rates.
Hoover Response - “the Government
should not support the people.”
• What do you think?
• International
– Hawley-Smoot Tariff (1930)
– Debt Moratorium
• Domestic
– Federal Farm Board
– Reconstruction Finance Corp (RFC)
• Emergency loans/prop up key business
Bonus Army
Hoovervilles
Election of 1932
Solve the Great Depression
Using fiscal policy (spending, taxing, and
borrowing), how do you help the economy get
through the following economic problems?
Problem
No confidence in banking
system
High unemployment
Deflation
Poor business and
consumer confidence
Unequal distribution of
wealth
Farming overproduction
Solution
"The money changers have fled from
their high seats in the temple of our
civilization”
Franklin Delano Roosevelt - March 4,
1933 – April 12, 1945
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32nd POTUS
New Deal
Distant cousin to TR
Aristocrat
Democrat – NY
Asst Sec of Navy
Contracted polio in 1921
Unflinching optimism
Charismatic
Kept quiet between
election and inauguration
With Eleanor
FDR at Warm Springs
FDR Polio
A president who cannot walk would
now try and help heal a crippled
nation
The Three R’s
• Relief
• Recovery
• Reform
The Brain Trust
First 100 Days
Bank Holiday Fireside Chat
Financial Recovery
Repeal of Prohibition
Gold Standard
Level 1
Describe
List
Identify
Level 2
Analyze
Compare
Group
Level 3
Evaluate
Imagine
Predict
Industrial Recovery – NRA***
“At this moment in time from the early days of the
New Deal, it is difficult to recapture, even in
imagination, the heady enthusiasm among a goodly
number of intellectuals for a government planned
economy. So far as can now be told, they believed
that a bright new day was dawning, that national
planning would result in an organically integrated
economy in which everyone would joyfully work for
the common good, and that American society
would be freed at last from those antagonisms
arising, as General Hugh Johnson put it, from "the
murderous doctrine of savage and wolfish
individualism, looking to dog-eat-dog and devil take
the hindmost."
“priming the
pump”
Relief for Unemployed
• FERA
CCC
CCC Facts
• 3 Million young men
• “Mr. Roosevelt’s Tree
Army” – 3B trees
• Six month enlistments
• Quota/Segregated
Camps
• $1 per day
• Opposition
TVA
AAA***
The Dustbowl
The Great Plow Up
Black Sunday
Grasshoppers
Dust Pnemonia
FDR Visit
Okies
http://www.youtube.com/watch?v=kyHYHrm_oE
Classify the following New Deal policies as
Relief, Recovery, and/or Reform AND
EXPLAIN WHY
NIRA
AAA
FDIC
FERA
Home Owners Loan Corp
(HOLC)
Farm Credit Admin
Bank Holiday
Removal of Gold Standard
SEC
PWA
FHA
CCC
CWA
Repeal of 18th Amendment
Second New Deal (1935)
“I welcome their hatred”
WPA
SSA
• Good economics?
Wagner Act/NLRB
Taxes
How did Roosevelt read these results?
Opposition
Conservative Opposition
Demagogues
Huey Long – “Share the Weath”
Father Coughlin – National Union for
Social Justice
Schechter
Butler
“Court Packing” - 1937
• AAA and NRA Unconstitutional
CIO
UAW Strike
Fair Labor Standards Act
1. Min Wage
2. Max work
week 40 hrs
plus 1.5x for
OT
3. Child labor
restrictions
Last Phase of New Deal
• Deficit spending = “priming the pump”
Eleanor Roosevelt
Marian Anderson
Mary Mcleod Bethune
• Federal Council on Negro Affairs
Mary McLeod Bethune once noted, the
Roosevelt era represented “the first time in
their history” that African Americans felt that
they could communicate their grievances to
their government with the “expectancy of
sympathetic understanding and
interpretation.”
A. Phillip Randolph
Wheeler-Howard (1934)
• Indian Reorganization Act/Indian New Deal