7
Unit 5
Unit 5– Depression and New Deal
The Great Depression Begins
I. The Nation’s Sick Economy
Economic Troubles on the Horizon
§ As the 1920’s advanced, serious problems threatened economic prosperity
1) Industries in Trouble
q Railroads (Why?), textiles, and steel had barely made a profit in the 20’s.
q Mining and lumbering were no longer in high demand
q What was a key economic indicator that declined? Why is this key?
New housing construction – Why? Related to many businesses
2) Farmers Need a Lift
q Huge demand for their crops in WW I, so they planted more and took out loans for land and equipment
q After WW I, demand dropped, and this led to lower prices and farmers could not pay back their loans.
q What did the government attempt to do?
Price supports – support price levels at or above market values by the government
3) Consumers Have Less Money to Spend
q Americans were buying less, mainly because of rising prices, stagnant wages, unbalanced distribution of income and overbuying on credit
4) Living on Credit
q Many Americans were living beyond their means during the prosperous 20’s
q What was the eventual problem with buying on credit?
People had trouble paying off their debt which led to a cut back in spending
5) Uneven Distribution of Income
q During the 1920s the rich got richer, and the poor got poorer (income of the top 1% off wealthy rose 75% = 9% increase for Americans as a whole.
Hoover Takes the Nation
1) The Election of 1928 - (R) Herbert Hoover (easy victory) vs. (D) Alfred E. Smith
q What was the major advantage Hoover had over Smith? Republican Prosperity of the 1920s
2) Dreams of Riches in the Stock Market
q The stock market became the most visible symbol of prosperity – rising steadily – Americans rushed to buy stocks and bonds
q DEFINE Dow Jones Industrial Average = 30 largest companies on New York Stock Exchange (NYSE)
q Speculation – buying stocks and bonds on the chance of a quick profit
q Buying on Margin – paying a small percentage of a stock’s price as a down
payment and borrowing the rest. PROBLEM HERE?
If prices went down there was no way to pay off the loan.
The Stock Market Crashes – ‘Black Tuesday’
q October 29, 1929 the bottom fell out of the market and the nation’s confidence.
q Shareholders frantically tried to sell before prices plunged even lower.
q By mid-November, investors had lost about $30 billion
Financial Collapse
q The stock market signaled the beginning of the Great Depression (the period from 1929-1940 in which the economy dropped and unemployment skyrocketed)
1) Bank and Business Failures
q After the crash people panicked and withdrew their money from banks.
Ø Why couldn’t people get their money at some banks?
The banks had invested and lost money in the stock market also.
q 90,000 business also went bankrupt and closed and this led to unbelievable unemployment in the US (25% or 13 million by 1933)
2) Worldwide Shock Waves
q Europe had been suffering throughout the 20’s because of WW I
q International trade was hurt because European goods were not being sold in the US and vice-versa.
q IDENTIFY Hawley-Smoot Tariff highest protective tariff in US history – this led to a huge decrease in world trade which hurt the US
3) Causes of the Great Depression
q Tariffs and war debt policies that cut down the foreign market for American goods
q A crisis in the farm sector
q The availability of easy credit
q An unequal distribution of income
II. Hardship and Suffering During the Depression
The Depression Devastates People’s Lives
Ø Great Depression had an impact on people’s lives; it brought hardship, homelessness, and hunger to millions
1) The Depression in the Cities
q In cities across the country, people lost their jobs, were evicted from their homes and ended up on the streets
Ø DEFINE shantytowns, soups kitchens, bread lines
Little towns of rickety shacks – free food for the needy – lines to receive free food
q Conditions for African-Americans and Latinos were worse; their unemployment rates were higher and they were paid lower
ü Both were also subjected to violence; Latinos were even deported
2) The Depression in Rural Areas
q What was the advantage the rural areas had over cities? Grow their own food
q Many farmers lost their properties through foreclosures (EXPLAIN)
Farmers borrowed money but could not pay back – banks took their farms
3) The Dust Bowl
q A drought that began in the early 1930s wreaked havoc on the Great Plains.
q What was a major cause of this? The over-farming of the land
q The Dust Bowl was the name given to the region that was hit the hardest – parts of Kansas, Oklahoma, Texas, New Mexico, and Colorado.
ü What was an Okie? People leaving the dust bowl region for California
Effects on the American Family
Ø The economic conditions of the Great Depression put severe pressure on family life, but for most Americans the family stood as a source of strength
1) Men in the Streets
q Many men had difficulty coping with unemployment because they were accustomed to working and supporting their families.
q Some men abandoned their families and became “hoboes”
q DEFINE direct relief
Cash payments or food provided by the government for the poor
2) Women Struggle to Survive
q Women worked hard to help their families survive adversity during the Great Depression
q Many women began to work outside of their homes.
ü How was this often received?
Women had no right to work when so many men were unemployed
3) Children Suffer Hardships
q Poor diets and lack of money led to serious health problems for children.
q Schools often were closed because tax revenues were falling in communities
q What were “Hoover tourists”?
Teenagers abandoned their families, got on freight trains, and toured
the nation to escape poverty
4) Social and Psychological Effects
q The hardships of the Great Depression had a tremendous social and psychological impact
Ø Suicide rate rose more than 30% between 1928-1932
q Many Americans had to accept compromises and sacrifices that affected them for the rest of their lives
Ø Stopped going to doctor or dentist
Ø Put off having children or decided not to have kids at all
Ø Gave up dreams of going to college
q What habits were developed and stuck with people?
People began to become more thrifty and save more money
III. Hoover Struggles with the Great Depression
Hoover Tries to Reassure the Nation
Ø After the stock market crash of 1929, President Hoover tried to reassure Americans that the nation’s economy was on sound footing
1) Hoover’s Philosophy
q Rugged Individualism – the idea that people should succeed through their own efforts; they should take care of themselves and their families.
ü What was the government’s role?
The federal government should direct and guide relief measures
2) Hoover Takes Cautious Steps
q He asked employers not to cut wages or lay off workers
q He asked labor leaders not to demand higher wages or go on strike
q He created a special organization to help private charities generate contributions to the poor.
Ø None of these steps worked and the Depression continued to deepen.
3) Boulder Dam
q A project that Hoover approved that did make a difference; the building of the Boulder Dam
Ø What was the importance of this massive project?
Provided jobs for unemployed workers
4) Democrats Win in 1930 Congressional Elections
q The Democrats took advantage of anti-Hoover sentiments and took control of the House of Representatives and almost won the Senate
q Americans expressed their anger in other ways:
Ø Farmers destroyed crops rather than selling them at a loss; refused to work their fields; blocked roads so crops could not get to market (raise prices); used force to prevent authorities from foreclosing on farms
Ø IDENTIFY Hoovervilles, Hoover blankets, Hoover flags
Shantytowns were named after Hoover to mock him
Hoover Takes Action
Ø Hoover began to soften his position on government intervention in the economy and took a more activist approach to the nation’s economic troubles
1) Hoover Backs Cooperatives
q What was the Federal Farm Board?
Designed to raise the prices of farm goods to help farmers
q National Credit Corporation loaned money to small banks to help them stave off bankruptcy
2) Direct Intervention
q With a presidential election looming, Hoover appealed to Congress to pass a series of measures to reform banking, provide mortgage relief, and funnel more money into private investment.
- Federal Home Loan Bank Act
Lowered mortgage rates to help stop foreclosures
- Reconstruction Finance Corporation
Provided emergency funding to banks, insurance companies and other
large businesses so they would not close down
Gassing the Bonus Army
Ø In 1932 an incident further damaged Hoover’s image and public moral.
1) The Patman Bill Denied
q The Bonus Army (WW I vets and their families) marched to DC to demand a bonus that they were in due in 1945 be paid immediately.
q The Senate refused to approve of the Patman Bill and Hoover told the Bonus Army to go home; most did but 2,000 stayed around.
2) Hoover Disbands the Bonus Army
q Hoover decided that the Bonus Army should be disbanded and ordered Gen. Mac Arthur to roust the veterans
q What did Mac Arthur do and how did it effect Hoover?
MacArthur ordered the camp to be burned down and this made Hoover even
more unpopular in America
The New Deal
I. A New Deal Fights the Depression
Americans Get a New Deal
Ø The 1932 presidential election showed that the Americans were clearly ready for a change
1) Electing Franklin Delano Roosevelt (FDR) – Democrat – governor of New York
q Wins an easy victory over Hoover and the Democrats also win control of both houses of Congress
q Why was this victory easy for FDR and the Democrats?
Many Americans blamed the Republicans for the economic situation
2) Waiting for FDR to take over
q FDR began to formulate a set of policies (the NEW DEAL) that would deal with problems caused by the Great Depression (Relief, Recovery, Reform)
3) The Hundred Days
q On taking office, FDR launched a period of intense activity known as the Hundred Days – 15 major pieces of legislation
q What was the Emergency Banking Relief Act? Shut down banks until government inspected them
4) An Important Fireside Chat
q DEFINE fireside chats = FDR’s radio talks designed to calm down Americans
q What was their significance? People again began to deposit money in banks
5) Regulating Banking and Finance
q Glass-Steagall Act = established the Federal Deposit Insurance Corporation (FDIC) – it provided federal insurance for individual bank accounts
q Federal Securities Act = required corporations to provide complete information on all stock offerings
ü What is the SEC? the Security and Exchange Commission whose job was to regulate the Stock Market
Helping the American People
Ø The Roosevelt administration also implemented programs to provide relief to farmers and other workers; also attempted to stimulate the economy
1) Rural Assistance
q Agricultural Adjustment Act (AAA) = sought to raise crop prices by lowering production by paying farmers not to grow as much of their crop.
q What did the government also do that upset many Americans? Paid hog farmers to slaughter 6 million pigs
q Tennessee Valley Authority (TVA) = created 1000s of jobs and provided electricity to the badly depressed Tennessee River Valley
2) Providing Work Projects
q Civilian Conservation Corps (CCC) = young men to work building roads, planting trees, etc
q National Industrial Recovery Act (NIRA) = set prices to ensure fair competition
3) Promoting Fair Practices
q NIRA also sought to promote industrial growth by establishing codes of fair practices for individual industries.
q Workers were allowed to organize unions and bargain collectively.
4) Food, Clothing, and Shelter – New Deal programs that dealt with homes
q Home Owners Loan Corporation (HOLC) = provided government loans to homeowners who could not make loan payments.
q Federal Emergency Relief Administration (FERA) = $500 million to provide relief for the needy
The New Deal Comes Under Attack
Ø DEFINE deficit spending = spending more money than you are making
1) The Supreme Court Reacts
q Supreme Court ruled some New Deal programs unconstitutional.
q What was FDR’s “court-packing” scheme?
FDR wanted to appoint 6 new justices who would be more sympathetic to his New Deal
2) Three Fiery Critics
- Charles Coughlin = The ‘Radio Priest” wanted a guaranteed national income and nationalization of banks. Anti-semitic views eventually cost him support.
- Dr. Francis Townshend = believed FDR was not doing enough for the poor and elderly. He devised a monthly pension plan for the aged.
- Huey Long = the “King Fish” proposed a nation wide social program called “Share-Our-Wealth”. Everyone would have a home and income.
II. The Second New Deal Takes Hold
The Second Hundred Days
Ø By 1935 the Roosevelt Administration was seeking ways to build on the programs established during the Hundred Days. (The Second New Deal)
ü Who pushed the President in this direction?
His wife Eleanor – a social reformer with great political skills
Ø The election of 1936
q Republicans ran Alfred Landon (governor of Kansas)
q Democrats ran FDR and he won easily.
ü What (2) groups voted Democrat for the 1st time?
African-Americans and Labor unions
Roosevelt Extends Relief
Ø As part of the Second New Deal, the Roosevelt administration and Congress set up a series of programs to help youths, professionals, and other workers.