1930’s Great Depression

Caused by fundamental weaknesses in the economy, like buying on margin (credit), the Stock market crash resulted in widespread

panic, unemployment and discontent.

Stock market CRASHAfter years of buying on margin, paying only a little and using profit to pay off the rest, the Stock Market crashed. Companies called in the debts owed, and few could pay them. This led to panic selling and on October 29 (Black Tuesday), stocks fell $14 billion. The plunge continued until July 1932 when they bottomed out, 89% lower than 1929.

Causes1) Overproduction and under consumption- Too much supply, not enough

demand2) Installment buying and credit- Americans were unable to pay back debts3) Weak Banks- banks were not regulated and made risky investments

Economic issuesEven before the crash, the unequal distribution of wealth in America caused concerns. 87% of Americans owned only 10% of the wealth, nearly all the wealth was in the hands of a select few. Additionally, slowing consumer demand meant unemployment at railroad lines, steel plants, etc.

Losing confidence in BanksMany Americans lost confidence in the American Banking system. They rushed the banks, attempting to get their cash out to safe guard at home. The banks did not have enough cash because they had made investments in the stock market. Banks went out of business and took people’s money with them. Small town banks were particularly susceptible.

Unemployment and bread linesAs Americans defaulted on their loans, businesses closed, creating a cycle of Americans not paying and businesses closing. Jobs became scare, and 25% of Americans were without a job. Unable to support themselves, millions of Americans stood in Bread Lines looking for food.

HoovervillesUnable to pay for shelter, many families lived in unheated shacks built from cardboard, tin or crates. These communities were called Hoovervilles, in honor of the president who did nothing to help, Herbert Hoover.

The Dust BowlFarmers, already affected by low food prices after WWI, were hurt as Americans could no longer buy food. To make matters worse, the Midwest experienced extreme drought. The drought and poor farming methods resulted in giant dust storms. Texas, Oklahoma, Kansas, Colorado, and New Mexico were widely affected. Due to the drought many “okies” moved to California in search of work.

What occurred during WWI that contributed to the Dust Bowl?

Farmers cleared huge plots of land to grow more food. Plants are

needed to hold water in the soil

Culture of the Great Depression Instead of the glitz and glam of the ‘20s, the ‘30s brought inexpensive and escapist leisure activities. Mini golf, pinball, softball and Monopoly all became popular. Dick Tracy, a comic strip, become one of the most popular of the era. Millions of people went to the movies to see King Kong, Gone with the Wind and the Wizard of OZ; of course, Mickey Mouse was also popular.

Radio and picturesTo escape many Americans listened to the comedic offerings on their radios of George Burns and Gracie Allen. Photographers worked to show the suffering of the people, especially Walker Evans and Margaret Bourke-White, who snapped photos for Life magazine.

Government ResponseThe Great Depression presidents are Herbert Hoover and Franklin Delano Roosevelt. These presidents had very different ways of dealing with the Great Depression and attempting to get America back on sound financial footing.

Herbert HooverHoover took office in 1929, and had a reputation for helping Europe financially recover after WWI. To help America, Hoover:

-”Prosperity is just around the corner”-trickle down effect-Reconstruction Finance Corporation

lent money to RxR companies and banks

-halted war payments from European nations

-raised taxes to boost government funds

Hoover’s Bonus ArmyDuring WWI soldiers had been promised a Bonus for their service. However, the bonus wasn’t due for a few more years. In the summer of 1932, thousands of former soldiers and their families gathered in Washington D.C. to push congress to release the funds early. Congress denied the request, and the soldiers refused to leave.

Army vs. Bonus ArmyWhen the Bonus Army refused to leave, Hoover insisted they must be influenced by Communists. He called ordered the Army to break up the camps and disperse the veterans. Tanks, tear gas and other violent means were taken against the Bonus Army.

HoovervillesDespite his efforts, Hoover never approved of direct assistance. As more and more Americans became homeless, they gathered together in makeshift camps. These camps came to symbolize Herbert Hoovers ineffective response to economic crisis. Hoover’s belief in the American economic system and self-help prevented him from becoming involved in the recovery.

Franklin Delano Roosevelt“I pledge you, I pledge myself, to a new deal for the American People”

In 1932 FDR was elected as president, and would remain in office until his death in 1945. FDR instantly inspired confidence and support in the American people. Using his “fireside Chats” on the radio, Roosevelt reached out to the people in their own homes to tell them his plans. However, despite achieving success in handling the economic Crisis, Roosevelt is accused of gaining dictator like powers.

Brain Trust and WifeFranklin Roosevelt surrounded himself with intellectuals and lawyers. Together, Roosevelt and the brain trust created a “New Deal” for the American people. Additionally, Roosevelt listened to the advice of his wife, Eleanor Roosevelt. Eleanor was a humanitarian, and focused on helping women and minorities. Eleanor travelled the country, bringing news back to Franklin and guiding him with Progressive views.

New DealTo combat the problems of the Great Depression Roosevelt promised a New Deal for the American people. His goals were simple:

-relief for suffering Americans-recovery for the economy-reform to avoid future depressions

In order to get his New Deal programs started, Congress had to approve each one:

-Emergency Banking Act-Federal Emergency Relief Act-Public Works Administration-Civilian Conservation Corps-Works Progress Administration

Bank ReformsThe Emergency Banking Act called for a bank holiday to stop the collapse of the banking system. Banks were closed until their practices were examined for good business practices.

Additionally, the Glass-Steagall Banking Act created the Federal Deposit Insurance Corporation (FDIC). The FDIC originally guaranteed deposits of up to $5,000 (today $250,000)

Jobs for AmericansRoosevelt supported federal projects to create jobs. He created several groups dedicated to this cause:

Public Works Administration (PWA)- provides jobs through construction projects like bridges, buildings, houses and schools.

Civilian Conservation Corps- Hired 2.5 million young men(18-25) to conserve natural resources.

Works Progress Administration- replaced direct aid with works projects but limited employment to one person per family. Created jobs in construction, services and culture.

Relief, recovery and reformCongress also passed a wide range of recovery programs:

-National Industrial Recovery Act (NRA)- government set prices, wages and hours. (unconstitutional)

-Home owners Loan Corporation (HOLC)- helped owners keep homes out of foreclosure-First Agricultural Adjustment Act (AAA)- raise farmers income by cutting surplus

through paying farmers to not plant or to kill animals-Federal Housing Administration (FHA)- provided mortgages

at low interest rates and down payment of 10%

Social SecurityThe Social Security act combined insurance and public assistance. The law had three main parts:

-employees and employers pay in-unemployment insurance for workers-assistance to children, elderly, ill and handicapped

Still used today though the system is in trouble from extended life expectancy with fewer workers.

Wagner ActRoosevelt wanted workers to form unions to protect themselves. To accomplish this the Wagner Act was passed, allowing workers themselves to balance the power of big business. Unions grew to 7 million within 3 years of the Wagner Act’s passage. Soon both the American Federation of Labor (AFL) and Congress of Industrial Organizations (CIO) were helping workers fight big business. Sit down strikes became a major force (stay in plant but refuse to work)

New Deal and Minorities-Native Americans were granted citizenship in 1924-African Americans were not a priority of Roosevelt who couldn’t risk

democratic anger in congress. Still some 40% of African Americans received help.-Latinos worked in agriculture in California, competing with incoming Okies

looking for labor. The Government stopped immigration from Mexico and deported unemployed noncitizens.

-Women experienced less unemployment but made only 50 cents for every dollar a man was paid

New Deal BlocRoosevelt built the New Deal Coalition, a voting bloc created from the solid Democratic South, new immigrant workers, the big cities, African Americans, organized labor, the elderly and farmers. In the 1936 election Roosevelt won reelection, winning nearly all the electorate votes.

New Deal ControversiesDespite the benefits of the New Deal “Alphabet Soup” many criticized the president for over reaching his power and influences. However, Roosevelt was a man of action who followed the Populist and Progressive philosophies that the government should solve economic and social problems.

Supreme CourtThe nine members of the Supreme court practiced judicial restraint, striking down many of FDR’s New Deal programs. The justices decided that FDR’s program violated the interstate Commerce clause.

A series of court decisions weakened the New Deal reforms

Schechter Poultry V United States

Supreme Court and the AAA

The NRA was declared unconstitutional because it gave too many powers to the government

Struck down the AAA (agriculture) ruling that agriculture was a state not government issues

Dams and TVAThe Tennessee Valley Authority provided jobs, cheap electricity and flood control to poor rural areas. The TVA built dams on the Tennessee River and was widely praised as a benefit. However, others saw it as “creeping Socialism”, where the government directly assists American citizens.

Socialism-economic and political system

based on public ownership of the means of production (factories,

resources, transportation)

Court PackingWith the Supreme Court vetoing many of his New Deal programs, FDR asked Congress to approve a law that would allow the president to increase the number of judges from 9 to 15. This would have allowed the president to add judges that would pass his New Deal programs. Ultimately it was never passed because it threatened the separation of powers and Checks and Balances.

Third Term??As Roosevelt’s second term came to a close, he decided to run for reelection. This raised questions on the constitutionality of a president serving more than 2 terms, which was the precedent set by George Washington. Roosevelt died in his 4th term, and shortly after Congress passed the 22nd Amendment, limiting presidents to 2 terms.

What are the benefits and disadvantages of having a 2 term limit?

Deficit SpendingAnother criticism of the New Deal was that it used public funds to fund the New Deal programs. The federal debt soared, and a policy of using federal funds to finance public assistance programs was established.

Radical LongAs the depression continued, numerous ideas surfaced. For example, Huey Long, a powerful senator proposed that the wealthy be taxed more heavily, and those taxes would be used to give each American a $2,500 income, a car and a college Education. Huey Long was assassinated in 1935.

Other Criticisms

Women and African Americans

Progressives and Socialists

Republicans and political

opponents

The New Deal offered more for white men than women and minorities.

The New Deal is not enough. Must redistribute the wealth among all Americans

Government is becoming too powerful and is threatening the Constitution. FDR is like a socialist dictator

The greatest criticism was that the President was spending too much money and gaining too much power.

The Depression endsWhile the New Deal did help Americans, the depression did not end until World War II increased production. Roosevelt restored American confidence in the government, and increased government power. Additionally, the Federal deficit grew under Roosevelt. Finally, the New Deal also established the right of Unions to exist and guaranteed collective bargaining.