Transcript The Great Depression Chapter 22 p. 640

The Great
Depression
Chapter 22
p. 640
• By the late 1920s, several
industries were “sick.”
• Among these were the textile,
steel, railroad, lumber, coal,
and construction industries.
• Perhaps the worst hit part of
the economy during the 1920s
was the farm sector.
• Farmers had increased production and
expanded their farms to meet the demand
of WWI.
• As demand for farm products declined in
the 1920s, farmers overproduced hoping
to make up for lower prices.
• This worsened the situation.
• Congress tried to offer help but President
Hoover vetoed several farm relief bills.
• By the late 1920s, Americans were
buying less – even as American
farms and factories were
producing more.
• Overproduction became a major
problem.
• Americans were not as rich as they
seemed.
• They often bought on credit.
• By making credit easily available,
businesses encouraged Americans to
pile up a large consumer debt.
• Faced with this mounting debt,
consumers started spending less.
• There was also an uneven distribution
of income
• Most Americans could not afford
many of the household products that
were being manufactured.
• In contrast, rich Americans
continued to make more money.
• In 1927, the wealthiest 5% of
American families took in nearly
1/3 of the nation’s income, while
the poorest 40% of the population
earned just over a tenth of the
national income.
1928 Presidential
Election
• This election matched Republican
Herbert Hoover against Democrat
Al Smith.
• Hoover, the Secretary of
Commerce (business) under
Harding and Coolidge, was a
former mining engineer from Iowa
who had never run for public
office.
• Smith was a career politician who had
served four terms as governor of New
York.
• Hoover had the advantage of
Republicans presiding over the
prosperity of the 1920s.
• Smith tried to overcome his heavy
Brooklyn accent, his opposition to
Prohibition, and his religion (Roman
Catholic), but lost the election.
The Market
Crashes
• Through most of the 1920s, prices on
the stock market rose steadily.
• Eager to take advantage of this “bull
market” (rising stock market prices)
many Americans rushed to buy stocks
and bonds.
• More and more investors engaged in
speculation, the engagement in risky
business transactions on the chance of
quick or considerable profit.
• As prices rose, wealth was
generated on paper, but it bore
little relation to the real worth of
companies or the goods that they
produced.
• The price of stocks had little
relationship to the profits that the
company was making.
• Many investors began buying on
margin – paying a small
percentage of a stock’s price as a
down payment and borrowing the
rest.
• With stockbrokers willing to lend
buyers up to 75% of a stock’s
purchase price, buying on margin
became much too common.
• Buying on margin worked as long as
prices continued to rise, since
investors could sell their inflated
stocks to make a profit and pay off
their debt.
• If stocks declined, however, there was
no way to pay off the loan.
• Beginning in September 1929 and
continuing into October, stock prices
began to decline.
What happened in the first 3 hours of
trading on the New York Stock Exchange
(NYSE) on Thursday, October 24, 1929?
-- unprecedented # of sell orders; stock
prices fell by $11 billion
What did a group of bankers agree to do in
an effort to stop plummeting prices?
-- they bought up stocks well above the
market price
• On October 29, 1929 – known
as Black Tuesday – the bottom
fell out of the stock market.
• Everybody tried to sell.
• By mid-November, investors
had lost $30 billion, an amount
equal to American spending in
WWI.
• The Stock Market Crash (the
name for this steep decline in
stock prices) signaled the
beginning of the Great
Depression – the period from
1929 to 1941, in which the
economy was in severe decline
and millions were out of work.
1929
1933
Unemployment
rate
3.2%
25%
Investment in
US economy
$16
billion
$340
million
Why it
Happened?
1) Overproduction:
overproduction by farmers
and a loss of the markets
after WWI.
Overproduction by
manufacturers; not enough
consumers (buyers) for all
the products.
Why had farm prices dropped following
WWI?
1. European agriculture revived
2. grain from Argentina and Australia
entered the world market
What effects did the decline in farm income
have on the overall economy?
1. rural consumer spending dropped
2. millions of farmers defaulted on debts
3. banks began to fail
2) Easy credit: too
many people
buying on the
installment plan
What did consumers have to do to pay back
these loans?
-- cut back on discretionary spending
What did this inevitably lead to?
-- reductions in production and worker
layoffs
3) over speculation:
too many people
taking too many
chances in the stock
market
4) Unequal
distribution of
income: too little
money in the hands
of working people
5) High tariffs: U.S. tariffs did
not allow other countries to
sell their goods here. Those
countries responded with high
tariffs against the U.S., which
prevented the U.S. from
selling its surplus products in
their countries.
Which two tariff laws did Congress pass
that raised tariffs to unprecedented
levels?
-- Fordney-McCumber (1922) and HawleySmoot (1930)
How did foreign countries react to high US
tariffs?
-- they imposed trade barriers of their own
6) Low interest rates: This
allowed too much
borrowing, often for
speculation. People could
borrow money at a low
cost, invest it, and have a
chance of making a large
profit.
Who did the burden of providing relief to
the homeless and unemployed fall on in
the early days of the Depression?
-- state and city governments working with
private charities
How effective were they in providing relief?
Why?
-- not very; they lacked resources
The Great
Depression in
Global
Perspective
Depression leads to new political
systems
Military dictatorship
Argentina and many countries in
Central America
Fascism/militarism
Germany, Italy, Japan
Totalitarian communism
Soviet Union (Stalin)
Welfare capitalism
Canada, Great Britain, France
Definition: government assumes ultimate responsibility
for promoting reasonably fair wealth distribution and
provides security against bankruptcy, unemployment,
and poverty
List the ways in which the Great Depression
transformed the American political landscape.
1. Produced a major political realignment, creating
a coalition of big city ethnics, African Americans,
and Southern Democrats committed to
interventionist government (New Deal Coalition)
2. The Depression strengthened the federal
presence in American life
Innovations: national old-age pensions,
unemployment compensation, public housing,
insured bank deposits, etc.
3. Fundamentally altered labor relations,
producing a revived labor union movement
and a national labor policy protective of
collective bargaining.
4. transformed the farms economy by
introducing federal price supports and rural
electrification
5. led Americans to view the government as
the ultimate protector of well-being
The Human
Toll
What images of the Great Depression
remain firmly etched into the American
psyche?
-- breadlines, soup kitchens, shantytowns,
men and women selling apples on street
corners
The Rise in Unemployment
What effect did the Depression have on …
Families – marriage delayed, birthrate fell,
desertion increased, medical and dental
care neglected
Men -- Large numbers lost self-respect,
became immobilized and stopped looking
for work, while others turned to alcohol or
became self-destructive or abusive to their
families.
Women – many women saw their status rise
during the Depression; became decisionmakers
Children – More than 200,000 vagrant
children wandered the country as a result of
the break-up of their families
President Hoover
Unemployment rate
when Hoover took
office
4.4%
Unemployment rate
when Hoover left
office
23.6%
What, in a campaign speech during the
1928 presidential election campaign, did
Hoover, a self-made millionaire, suggest
was the basis of the American system?
-- rugged individualism and self-reliance
In the same speech, what role did Hoover
believe the government should have in
the economy?
-- it should avoid intervening with business
Who did Hoover believe should deal with
problems of poverty and unemployment?
-- “voluntary organization and community
service”
Why did Hoover fear direct federal relief
programs?
-- they would undermine individual
character by making recipients dependent
on the government
Hoover’s early
attempts to provide
relief
Did it work? Why or
why not?
1. Appealed to industry to keep wages
high to maintain consumer purchasing
power
NO: while businesses did maintain wages
for skilled workers, it cut hours and wages
for unskilled workers and installed
restrictive hiring practices that made it
more difficult for under qualified younger
and older workers to get a job
2. Signed the Smoot-Hawley tariff in 1930 NO: provoked retaliation from Britain,
to keep out foreign goods and help
Canada, France, Germany, and other
American businesses
traditional trading partners; the US found it
much more difficult to export its products
overseas.
3. Persuaded local and state governments
to sharply increase public works
spending
NO: the practical effect was to exhaust state
and local financial reserves, which led
government, by 1933, to slash
unemployment relief programs and to
impose sales taxes to cover their deficits.
Reconstruction Finance
Corporation (RFC)
How long did it last? 21 years
What was the RFC authorized to do?
1. Finance public works projects
2. Provide loans to farmers and victims of
natural disasters
3. Assist school districts
How much money did the RFC loan out
during its existence? $40.6 billion
Franklin D.
Roosevelt
What was FDR’s background?
-- privileged youth, New York State Assembly,
Asst. Sec. of the Navy, VP candidate in 1920
What happened to FDR in 1921?
-- he was struck with polio, leaving him
paralyzed from the waist down
What office did FDR win in 1928?
-- Gov. of New York
What, during his acceptance speech at the
Democratic convention, did FDR promise the
American people?
-- a “new deal”
“I pledge myself to a new
deal for the American
people.”
-- Presidential candidate Franklin
Delano Roosevelt as he accepted the
Democratic nomination in 1932.
The Bonus
Army
What did the Bonus Army want?
-- Congress had voted to give WWI vets a
bonus that would be paid in 1945.
Desperate vets wanted their money now.
How did the Democratic-controlled House
vote? YES, give them their bonus now
How did the Republican-controlled Senate
vote? NO, the law says they get it in 1945
Who did Hoover call on to “put an end to
rioting and defiance of authority?” The
Army
What was done to the Bonus Army’s
camps?
-- The camps were burned
What was the electoral result of the 1932
election?
-- FDR – 472 electoral votes; Hoover 59
electoral votes
First Hundred
Days
The US Economy in 1933
% of workforce
unemployed
# of homeless Americans
Average # of farm
foreclosures/month
25%
1.2 million
20,000
In his inaugural address, FDR expressed confidence that his
administration could end the Depression. What FDR quote
signified this confidence?
-- “… the only thing we have to fear is fear itself.”
New Deal reform
Purpose?
Federal Banking Relief Act
Closed all banks for 4 days and
reopened solvent banks under gov’t
supervision
Federal Emergency Relief Act
pumped $500 million into state-run
welfare programs
Homeowners Loan Act
provided more than 1 million loans
totaling $3 billion
Glass-Steagall Act
provided a federal guarantee of all bank
deposits under $5,000, separated
commercial and investment banking,
and strengthened the Federal Reserve's
ability to stabilize the economy
Agricultural Adjustment Act (AAA)
the nation's first system of agricultural
price and production supports
National Industrial Recovery Act
(NIRA)
first major attempt to plan and regulate
the economy
Tennessee Valley Authority Act (TVA) first direct government involvement in
energy production
What did FDR do to generate support for
his programs?
-- appealed directly to the American people
through radio addresses (“fireside chats”)
What monetary measures did FDR take in
order to ease suffering?
1. took the nation off the gold standard
2. devalued the dollar
3. urged the Federal Reserve to ease credit
The New
Dealers
What nickname was given to the collection of Ivy
League intellectuals and New York state social
workers who served as economic advisors to
FDR?
-- the “brain trust”
How were New Dealers similar to the
Progressives of the early 20th Century? How
were they different?
-- similar: both believed that gov’t had a duty to
intervene to improve the lives of Americans
-- different: Progressives ideas dealt with
morality, whereas New Dealers were more
pragmatic in their approach to problems
What FDR quote
summed up his
pragmatic attitude
toward ending the
Depression?
-- "Take a method
and try it, if it fails,
admit it frankly and
try another. But above
all try something."
The Farmer’s
Plight
What, ironically was the farmers’ problem?
-- they grew too much
Why had worldwide crop production soared?
1. more efficient farm machinery
2. improved fertilizers
3. improved plant varieties
Why had demand fallen so much?
1. people ate less bread
2. Europe imposed trade barriers
3. consumers replaced cotton with rayon
How did nature affect southern agriculture?
-- the boll weevil ate the cotton crop
How did nature affect the Great Plains?
-- dry conditions and high winds led to the topsoil
blowing away in windstorms
What nickname was given to the area of the Great
Plains affected by this?
-- the Dust Bowl
What did more than one million tenant farmers,
evicted from their now unproductive lands, do by
1939?
-- moved to California to work as migrant produce
pickers
Federal program/act
How each was used to help struggling
farmers
Tennessee Valley Authority
generate electricity for tens of
thousands of farm families
Rural Electrification Act
brought electricity to 35% of farm
families by 1942
Soil Conservation Service
helped farmers battle erosion
Farm Credit Association
provided some relief from farm
foreclosures
Commodity Credit Corporation
permitted farmers to use stored
products as collateral for loans
Agricultural Adjustment Act
raise prices by reducing the supply of
farm goods
The National
Recovery
Administration
What was the basic idea behind the NRA?
-- representatives of business, labor, and
government would establish codes of fair
practices that would set prices, production
levels, minimum wages, and maximum
hours within each industry
What workers’ right did the NRA support?
-- right to join labor unions
What, through rational planning, was the
NRA seeking to end?
1. ruinous competition 3. labor conflicts
2. overproduction
4. deflating prices
Jobs
Programs
What type of work did those
employed in this program do?
Public Works Administration (PWA)
In six years the PWA spent $6 billion,
building such projects as the port in
Brownsville, Texas, the Grand Coulee
Dam, and a sewer system in Chicago
Civilian Conservation Corps (CCC)
For $30 a month, CCC young men
planted saplings, built fire towers,
restocked depleted streams, and
restored historic battlefields
Civil Works Administration (CWA)
it employed 4 million men building
250,000 miles of road, 40,000 schools,
150,000 privies, and 3,700 playgrounds
Works Progress Administration (WPA)
first five years alone, the WPA
constructed or improved 2,500
hospitals, 5,900 schools, 1,000 airport
fields ; also hired artists, writers, etc.
Roosevelt’s
Critics
Huey Long – governor and senator from
Louisiana; very powerful and ambitious;
attacked the New Deal as too conservative
Describe his Share Our Wealth proposal.
-- 100 percent tax on annual incomes over $1
million. The funds would be distributed to
the people, guaranteeing every American
family an annual income of no less than
$2,000.
Father Charles Coughlin – a religious
leader who had a radio show
What types of things did Coughlin preach
about on his radio program?
-- He believed that Jews and Communists,
in league with bankers and capitalists, were
out to get the little man
Francis Townshend – 67 year old health
worker who found himself unemployed with
only $100 in savings
Explain his elderly pension program.
-- $200 monthly pension for every citizen
over the age of 60; recipients had to retire
and spend their entire pension every month
within the United States
The Wagner
Act
Under the Wagner Act, what did the federal
government promise labor?
-- to form unions and to bargain collectively
What was the name of the committee set up
by the Wagner Act?
-- National Labor Relations Board
What did it have the power to do?
-- prohibit unfair labor practices by
employers
Major Labor
Union
American Federation of
Labor (AFL)
Congress of Industrial
Organization (CIO)
Type of Labor
Organized
consisted of craft unions
organized by occupation
unskilled workers in
America's mass production
industries
Social
Security
What 3 groups of people did the Social
Security Act of 1935 provide relief for?
1. elderly
2. dependent children
3. disabled persons
How old did one have to be to receive
retirement benefits?
--65
What were these monthly payments based
on?
-- previous earnings
How were both the retirement program
and system of unemployment insurance
financed?
-- federal government and the states
How did the Social Security Act influence
Americans’ attitudes?
-- expanded the public's sense of
entitlement and the support people expected
government to give to all citizens
African Americans
and the New Deal
Prior to the New Deal, what political party did
most blacks remain loyal to?
-- Republican
What percentage of black voters supported the
Democratic Party in 1936?
-- 75%
Many New Deal programs were discriminatory
towards blacks. Why did FDR fail to support
many civil rights efforts?
-- He needed Southern support to get New Deal
legislation passed.
The New Deal
in Decline
Explain the outcome of the 1936 Presidential
election.
-- FDR defeated Kansas Governor Alf Landon,
winning every state but Maine and Vermont.
What 2 New Deal programs were struck down
by the Supreme Court as unconstitutional?
-- NRA and AAA
What did FDR propose in his “court-packing
scheme?”
-- to appoint 6 new members to the Supreme
Court
How did the public respond to this plan?
-- it was rejected by Democrats and
Republicans
What changes resulted from the new, more
liberal, “Roosevelt Court?”
-- It significantly expanded the
government's role in the economy and in
civil liberties.
Legacy of the New Deal
1.
2.
3.
4.
5.
6.
unemployment insurance
old age insurance
insured bank deposits
reduced violence in labor relations
Securities and Exchange Commission (SEC)
Shift in government philosophy
The New Deal
focused on three
general goals, known
as the Three R’s:
1) Relief for persons in
need by providing them
with money, loans to
make mortgage
payments, or jobs
2) Recovery to the nation
as a whole by passing
legislation to assist
business, labor, and
agriculture to reestablish
their strength
3) Reform of institutions,
such as banking to make
for economic and social
stability, hoping to avoid
depressions in the future
End of the
Depression
• The United States began to
come out of the Depression in
1939 when World War II broke
out in Europe.
• War production put millions of
Americans back to work and
revived the American
economy.
Lasting Effects
of the New Deal
1) The New Deal created a
welfare state. The people
of the US came to depend
on the federal government
to advance and protect the
general welfare.
2) The federal government
took more control over
individuals and private
organizations. The state
and local governments
would have less power in
the years ahead.
3) The crisis of the Depression
allowed a shift of power from
the Congress to the
Presidency. Presidential
appointed agencies carried out
many of the new federal
programs.
4) Many Americans were convinced
that deficit spending – spending
more than you are collecting – could
be a good thing for the economy. It
placed money in the pockets of
citizens, who spent it. Business
expanded and hire more workers.
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