Download Handout for Topic 5 (Part 2, The Great Depression and the Initial

The Fourth Political Party
System: 1932 - 2017
The Great Depression and the Initial
Realignment
The Lead up to the Depression: 1) The Road Building Boom
1) As late as 1921 No Highway in the United States had a
Number.
2) Chains on all 4 Wheels and a shovel with a collapsible
handle were necessary equipment for all cars.
3) Between 1921 and the Depression Government expenditure
for Streets and Highways exceeded the capital outlays for
most Private Industries.
4) These expenditures were a "Hidden" Subsidy for the
Automobile Industry and had the effect of Stimulating the
Economy in general.
The Lead up to the Depression: 2) The Housing Industry
1) Housing Construction boomed between the end of World
War I and 1926. After 1926 it slowly dropped off.
2) Rapid Population Growth and Pent-up Demand because of
WWI produced strong demand.
3) The Fact that Real Wages were not Rising as fast as
Productivity Suggests that Demand for Housing was
Exhausted by the late 1920s.
The Great Bubble: Suppose You had $100 to invest
in the Stock Market in July 1926
July 1926
$100
July 1927
112
July 1928
148
January 1929
193
September 1929 216
December 1929 147
December 1930 102
July 1932
34
1) Many People and Corporations had bought stocks on Margin
from Brokers -- usually 10% down and 90% borrowed.
2) Brokers in Turn borrowed Money from non-Bank Sources.
Many Corporations invested their Surplus Profits in
these Endeavors.
3) The Bubble was also Fueled by Investment Trusts. These
sold their own debt instruments and then used the money
to buy stock.
4) The craze became so Intense that it looked like it could
go on forever.
Herbert Hoover (early 1929): "We in America are nearer to
the final triumph over poverty than ever before in the
history of any land ... We have not reached the goal, but
given a chance to go forward with the policies of the last
eight years, we shall soon with the help of God be in
sight of the day when poverty will be banished from this
nation."
John J. Raskob (Chairman of the Democratic Party, Summer
1929): "If a man saves $15 a week, and invests in good
common stocks, and allows the dividends and rights to
accumulate, at the end of twenty years he will have at
least $80,000 and an income from investments of around
$400 a month. He will be rich. And because income can do
that, I am firm in my belief that anyone not only can be
rich, but ought to be rich."
The Empire State Building
Constructed 17 March 1930 – 11
April 1931
ECONOMICS
Unemployment GNP Consumer Prices Manufacturing Investment Stocks
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
a
b
c
d
3.2
8.7
15.9
23.6
24.9
21.7
20.1
16.9
14.3
19.0
17.2
14.6
9.9
104.4a
95.1
89.5
76.4
74.2
80.8
91.4
100.9
109.1
103.2
111.0
121.0
138.7
73.3b
71.4
65.0
58.4
55.3
57.2
58.7
59.3
61.4
60.3
59.4
59.9
62.9
$ Billions in 1929 Prices.
1947-49 = 100 base
Gross Private Domestic Investment ($ Billions)
Average Prices of Stocks (1941-43 = 100)
58b
48
39
30
36
39
46
55
60
46
57
66
88
16.2c
10.3
5.5
.9
1.4
2.9
6.3
8.4
11.9
6.7
9.3
13.2
18.1
260.2d
210.3
136.6
69.3
89.6
98.4
106.0
154.7
154.1
114.9
120.6
110.2
98.2
Four Distinct Periods:
a.1930 - 1933: Steep Decline
b.1933 - 1937: Steep Recovery
c.1937 - 1938: Recession
d.1938 - 1941: Tooling up for World War II
Initial Realignment of Various Groups 1930 - 1937
DEMOCRATS
1) Lower to Lower Middle Class -- In Particular the
Working Class (Especially Urban Areas)
2) Lower Income in General
3) White Ethnic Groups: Catholics, Jews, Poles, Irish,
Slavs, Italians
4) Organized Labor
5) White Southerners
6) New Voters -- Especially Immigrants who entered before
1924
7) Northern Blacks
REPUBLICANS
1)
2)
3)
4)
5)
6)
Upper Middle to Upper Class
Middle to Higher Income in General
White Protestants
Business
Professionals
Southern Blacks
Summary -- Realignment of the 1930s (to late 1930s) -- Neither Party
Replaced
1. Breadth and Depth of the Underlying Grievance – Economic Disaster.
Sudden and Unexpected and the Republicans were blamed for it.
2. Capacity to Provoke Resistance – Haves vs. the Have Nots.
3. Leadership – Lagged Behind the General Public. The Republicans were
unable to adapt.
4. Division of Polar Forces Between the Two Parties – Affected Mainly the
Republicans. They were Reduced to a fraction of their former Support.
5. Strength of Existing Party Attachments – Strong, but overwhelmed by
the sheer Magnitude of the Economic Disaster.
•SUMMARY – Realignment of the 1930s (to late 1930s) -- The Realignment Scenario
Clearly Type 2 -- Realignment in which Neither Party is Replaced.
The System Stays in State A With a Dramatic Shift of the Electorate to the Democratic Party.