Download Chapter 24 The Great Depression

Chapter 24
The Great Depression
Mr. Robson, Hicksville High School
Election of 1928
• Herbert Hoover (R)
• Al Smith (D)
• Hoover rides the wave of prosperity
to White House
• Continues Laissez-Faire policies of
Harding, Coolidge
Mr. Robson, Hicksville High School
I.A. The Coming Depression
•
•
•
•
Causes?
By 1927 – Economic Slowdown
(Recession began)
Stock Market speculation continues to
push stocks higher (1928-29 40% growth)
Margin Buying helped fuel growth
Unbridled speculation began to worry
some – including Hoover
Mr. Robson, Hicksville High School
I.A. The Coming Depression
Causes?
• Hoover “warns” banks, raises interest
rates 1% at a time of economic
contraction – “had no desire to stretch the
powers of the federal government”
• Summer 1929 – Dire economic numbers.
• All leading indicators point to crisis as
higher interest rates take affect
Mr. Robson, Hicksville High School
I.A. The Coming Depression
•
•
•
•
Causes?
Black Thursday (Oct. 24)
Hoover “Fundamental business of the
country…is on a sound and prosperous
basis”
Black Tuesday – Oct. 29, 1929
Waves of panic selling
Mr. Robson, Hicksville High School
International
Problems
STOCK MARKET
CRASH AND
FINANCIAL PANIC
MONETARY
POLICY
CAUSES OF
THE GREAT
DEPRESSION
UNEQUAL
DISTRIBUTION
OF WEALTH
INDUSTRY
OVER
PRODUCTION
AGRICULTURE
Mr. Robson, Hicksville High School
I.A. The Coming Depression
Causes?
• Investors Lose
• Banks Lose – invested in stocks and lent
$ to others to invest
• Bank Deposits NOT insured – many
middle class lost savings
• Crushed confidence in American system
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
I.A. The Coming Depression
Causes? Theories?
• 1920’s Prosperity – NOT for all
• Agriculture, Textiles, mining
• Unequal Distribution of Wealth
–Tax Policy
• Labor makes little real wage gain in 20’s
• When market collapses, average
American does not have enough $ to
Mr. Robson, Hicksville High School
revive economy
80
70
60
50
TOP .01%
BOTTOM 42%
TOP 1%
BOTTOM 99%
40
30
20
10
0
THE CHART ABOVE SHOWS THAT IN 1929 THE TOP 1/10TH OF 1 % OF THE
POPULATION EARNED AS MUCH MONEY AS THE BOTTOM 42% OF THE
POPULATION. THE SECOND TWO BARS SHOW THAT THE TOP 1% OF THE
POPULATION SAW A 75% INCREASE IN THEIR INCOME WHILE THE OTHER
99% SAW ONLY A 9% INCREASE IN THEIR
INCOMEHicksville
IN THE 1920’S.
Mr. Robson,
High School
1929
CHART SHOWING WAGES OF UNSKILLED WORKERS. NOTICE
HOW LITTLE THE WAGES CHANGED DURING THE SUPPOSED
PROSPERITY OF THE 1920’S
700
600
500
400
300
200
100
0
1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941
Mr. Robson, Hicksville High School
I.A. The Coming Depression
Causes?
• 1920’s Prosperity – NOT for all
• Purchasing power is affected by this
unequal distribution of wealth
• This fact is hidden for much of 20’s due to
installment buying
Mr. Robson, Hicksville High School
I.B. The Coming Depression
Deepening Crisis
• Self-Perpetuating
• More contraction = less confidence = less
spending and investment = More
Contraction = ….
• Bank Failures cause others to withdraw $,
makes things worse
Mr. Robson, Hicksville High School
I.B. The Coming Depression
•
•
•
•
Deepening Crisis
Federal Reserve – supposed to be a
“lender of last resort” – fail!
Monetary Policy – Federal Reserve
increases discount rate = contraction in $
supply
Just when banks need $ to avoid failure,
Fed refuses to act
Americans save $ instead of spending
Mr. Robson, Hicksville High School
I.C. The Coming Depression
•
•
•
•
Worldwide Depression
World Trade dysfunctional since WWI
By late 20’s, European nations struggle
under heavy debt and trade imbalances
with U.S.
Collapse in U.S. = less investment in
Europe, fewer European goods bought
***Interdependent world economy***
Mr. Robson, Hicksville High School
I.C.
Worldwide Depression
Hawley-Smoot Tariff
• Under pressure from his party and
despite opposition from almost every
economist at the time, Hoover raises
tariff rated to an all time high
• Europe responds in kind…severely
limiting world trade.
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
Causes
• Economists (and politicians) argue
over the true cause
• Keynesian View – pro-business
laissez-faire government did
nothing to stop the reckless
business practices of the 20’s.
Modern Industrial economies
require government intervention in
order to “balance” unbridled
Mr. Robson, Hicksville High School
capitalism
FDR’S PHILOSOPHY
KEYNESIAN OR "PUMP PRIMING" ECONOMICS
BASED ON THE WORK OF ECONOMIST JOHN MAYNARD
KEYNES. MONEY SHOULD BE INVESTED IN THE PEOPLE, THE
WORKING CLASS. SPENDING WOULD THEN INCREASE WITH
NEW MONEY IN CIRCULATION. AS SPENDING INCREASED IT
WAS EXPECTED THAT BUSINESS WOULD EXPAND TO MEET
THE NEW DEMAND AND HIRE NEW WORKERS. THIS WOULD
BRING ON MORE SPENDING AND MORE GROWTH.
THIS PLAN WAS THE OPPOSITE OF THE REPUBLICAN PLAN
ASCRIBED TO BY HOOVER. SUPPLY SIDE OR "TRICKLE
DOWN" ECONOMICS. MONEY WAS TO BE INVESTED AT THE
TOP, IN BUSINESS. THEN BUSINESSES WOULD EXPAND, HIRE
NEW WORKERS AND THIS IN TURN WOULD SPUR ON
SPENDING AND FURTHER ECONOMIC GROWTH.
Mr. Robson, Hicksville High School
Causes
• Conservative View (Milton
Friedman) – Government was
the culprit. While the stock
market may have been over
inflated, the crash was a normal
correction in the business cycle
were in not for the government
interfering – particularly with the
Hawley-Smoot tariff and the
Fed’s monetary policyMr. Robson, Hicksville High School
The Coming Depression
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•
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Stats – 1929-1932
GDP – $103.1 billion to $58 billion
Construction down 78%
9000 bank failures
***consumer price index down by
25% - deflation, bank failures
Corporate profits - $10 billion to 1
billion
Robson,
Hicksville
High School
Unemployment 3.2 %Mr.to
24.9
percent
II.A
•
•
•
•
•
Hard Times
Invisible Scar
Most Americans kept jobs, but wages
hours etc. affected
Uncertainty
Experiences varied by class, race,
age, geography
Elderly hit hard
Middle class downward
social mobility
Mr. Robson, Hicksville High School
II.A
Hard Times
Invisible Scar
• Many begin to question Horatio
Alger ethic of hard work – begin to
alter Americans view of “rugged
individualism”
• Many turned to volunteer relief
organizations – churches, relatives
etc.
Mr. Robson, Hicksville High School
II.A
Hard Times
Invisible Scar
• With charities overwhelmed, some
have to turn to state/local
governments for relief –
humiliating at the time
Mr. Robson, Hicksville High School
II.B
.
Hard Times
Families face the Depression
• Women’s role as homemaker
changed little
• Middle class families still
consumed goods – deflation,
credit
• Movies, cigarettes, gas (cars) held
stable
Mr. Robson, Hicksville High School
II.B
.
Hard Times
Demographics
• Marriage and divorce rate falls
• Birth rate decreases (as expected)
• Increased access to contraception
• Birth control begins to fall into
realm of health (and economic)
issue
Mr. Robson, Hicksville High School
II.B
Hard Times
Demographics
• Married women expand in
workforce despite resistance
• Most still believed in separate
roles
• More finish H.S.- College still
privilege Mr. Robson, Hicksville High School
II.C
Hard Times
Popular Culture
• Movies – 60% attend once a
week!
• Mea West, Fred Astaire, Ginger
Rogers, Marx Brothers
• More than just entertainment,
social commentary – Mr. Smith
Goes to Washington
Mr. Robson, Hicksville High School
II.C
Hard Times
Popular Culture
• Movies – 60% attend once a
week!
• Mea West, Fred Astaire, Ginger
Rogers, Marx Brothers
• More than just entertainment,
social commentary – Mr. Smith
Goes to Washington
Mr. Robson, Hicksville High School
II.C
.
Hard Times
Popular Culture
• Radio – Music (Benny Goodman,
Duke Ellington), Variety Shows (Jack
Benny), and Serials (Lone Ranger,
Superman)
• Amos ‘n’Andy
• Church attendance increases, Family
time – reading, board games
(Monopoly)
Mr. Robson, Hicksville High School
III.A.
•
•
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Harder Times
African Americans
Made hard times harder –
Scottsboro Case- brings attention to
legal system in South
Lynching increase – incentive to
migrate
Harlem – 50% unemployment – 1935
Race riot.
Shift to Democratic Party
begins
Mr. Robson,
Hicksville High School
III.B.
Harder Times
Dust Bowl Migrants
• Wheat demand in WWI encourage
farmers to over farm land
• 1930’s – terrible drought, wind and
loss of natural vegetation = dust
bowl.
• Prompts mass exodus from plains
to California on Route 66
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
Mr. Robson, Hicksville High School
III.C.
Harder Times
• Mexicans - Many returned to Mexico
(political and economic reasons)
• Most, not all, migrant farm workers
• Asians – Many also returned
• Japanese fare best
• Filipinos – 1934, Tydings-McDuffie
Act – grants independence, no longer
citizens
Mr. Robson, Hicksville High School
III.D.
Herbert Hoover
• Believed depression was
temporary downturn
• Contrary to myth – he does act
• Agricultural Marketing Act (1929)
• Lowers Taxes, then raises them!
• Public Works spending increases
Mr. Robson, Hicksville High School
IV.A.
Herbert Hoover
• Supported Glass-Steagall Banking Act
(1932)– props up failing banks
• Reconstruction Finance Corporation
(RFC) – 1st Federal Institution to
intervene in economy during peacetime
• Provided loans to big businesses to
stimulate production. Benefits would
then “trickle down” to Americans
• No significant impactMr.–Robson,
too Hicksville
cautious
High School
IV.A.
Herbert Hoover
• RFC easy to politicize – He
refused to provide DIRECT relief
to unemployed – felt it would
undermine “American
Individualism”
Mr. Robson, Hicksville High School
.IV.B.
•
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•
Herbert Hoover
Discontent
Hoover comes to symbolize the GD
Hoovervilles, Hoover Blankets, Hoover
Flags
Protest – Farm Holiday Association, Labor
Strikes, Communist Party
Bonus Army (Marchers)
Mr. Robson, Hicksville High School
SOME BONUS MARCHERS BROUGHT THEIR FAMILIES
Mr. Robson, Hicksville High School
THE ELECTION OF 1932
500
ROOSEVELT
HOOVER
OTHER
400
300
ROOSEVELT
HOOVER
200
POPULAR VOTE
100
0
ROOSEVELT
HOOVER
ELECTORAL VOTES FOR
EACH CANDIDATE
ALMOST 57% OF THE
ELECTORATE VOTED