GREAT DEPRESSION

REVIEW

IB Syllabus Summarized

(Section 7) 7.1 Causes of the Great Depression

7.2 Nature and Efficiency of Solutions; critiques.

7.3. Canada: King and Bennett

7.4 Brazil: Vargas (Or Argentina)

7.5 Impact on Women, Minorities (Hispanics), and African-Americans

7.6. Effect on Arts, Movies, Literature

Historiography

This is one of the biggest questions in

economic history (What caused the Great

Depression?).

Typically, Progressive historians blame

inequality and lack of consumption (AD).

Conservative historians blame the Federal

Reserve and Roosevelt’s overreaction.

Historiography

Orthodox View

Carl Degler

New Deal was revolutionary change for America

Revisionist View

Bart Bernstein

New Deal maintained the status quo by providing

the least amount of reform possible to maintain

the system.

III. Canada

Economic Differences

Canada relied much more on commodity (raw materials) export than the US Lumber

Oil

Metals

Canada was going through a wheat and lumber (newspapers) boom in the 1910s-1920s.

Canada’s depression was as severe as the United States’, even though it began in the United States.

Canada had its own currency, but did not have a Central Bank (Federal Reserve)

Political Differences--Parliament

Parties

Liberal and Conservative Parties

Many smaller parties

Cooperative Commonwealth Federation (New

Democratic Party)---Labor Party

Progressive Party---Middle Class Reformers

United Farmers of Alberta---Farmer Party

Bloc Populaire---Quebecois Party

Other Differences

Party Leadership lasts much longer because

there are no term limits.

Quebec: Ethno-linguistic differences are bigger

division than any other political division.

Canada did not have a Constitution. Instead,

they had a British law that set up a legal

system similar to a Constitution.

William Lyon MACKENZIE

KING

Mackenzie King

(Liberal party)

Some similarities to FDR.

Built a liberal coalition with progressives during the Depression

Was leader during Great Depression and World War II.

Considered by many to be Canada’s most successful politician (served as Prime Minister for 22 Years)

Some Differences

Never pursued the radical reforms of FDR

Was President when the Depression hit (some similarities to Hoover)

Never fully brought labor support into the Party

Mackenzie King’s Response to the

Depression

Like Hoover, King and the Liberals were

blamed for the Depression.

Claimed that British North America Act limited

how he could react (left public relief to the

provinces and then didn’t fund the provinces

claiming too much debt).

Overall Ideology

As a “liberal,” King favored small government

to support economic and social freedom.

He wanted to keep the Canadian

government’s response to the Depression

limited.

Richard Bedford (R.B.) BENNETT

(1930-1935)

1930 Election

King called elections in 1930, but lost to Bennett and the Conservative Party.

Like Roosevelt, Bennett promised a series of unspecified reforms to fix Canada.

Like Roosevelt, Bennett called his reform program the “New Deal,” after 1933.

Unlike Roosevelt, Bennett stuck to his Conservative beliefs and did not implement a lot of reforms.

Bennett’s Response

Increased Tariffs (made things worse---see Hawley-Smoot Tariff in the U.S.)

Provided funds for public welfare system to the unemployed and the destitute.

Created a “work camp” program very similar to Roosevelt’s CCC. Participants were called the “Royal Twenty Centers.” (This was partially done to prevent unemployed from calling for more radical change).

Other Reforms

Canadian Wheat Board: Somewhat similar to

AAA, but more helpful to poor farmers.

Bank of Canada: Created a Central Bank

Farmer’s Creditors Arrangement Act: Allowed

farmers to restructure their debt.

Bennett’s Ideology

As a conservative, Bennett wanted to try to

maintain the status quo. His reforms were an

attempt to provide as little change as possible

to a problem that might require significant

change.

King Comes Back!

In 1935, King and the Liberal Party won with

the slogan “King or Chaos.”

Leading up to the election, Bennett had promised

more sweeping changes (including minimum

wages, unemployment benefits, and other

progressive reforms.)

King attacked the New Deal as being too

expensive.

King’s 2nd “Fix”

Instead of promoting more reforms, King passed on Bennett’s laws to the courts.

The Supreme Court of Canada ruled most of the New Deal unconstitutional.

Canada’s economy overall did recover faster than the U.S.

It also entered World War II earlier (1939 under the UK).

Relief, Recovery, Reform

Programs Summarized

Similar to Hoover—

Save the banks, let

the states take care

of their own.

Remove Tariffs

Tariffs

Work camps (“Royal Twenty Centers)

Canadian Wheat Board

Central Bank

Farmer’s Creditors Arrangement

King Bennett

Other Social Changes

Hockey!

Hockey became the national pastime during the 1930s (on radio broadcasts).

MapleLeafs vs. Canadians became symbolic rivalry between English-Speaking and French-Speaking Canada

Historiography

Traditionalist: King and Bennett embraced far-reaching political and

economic change in order to move the nation out of the Depression and did so effectively.

Revisionist King and Bennett’s reforms were remarkably limited and

relied on political repression.

Conservative King and Bennett’s economic success in getting Canada

out of the Depression shows the market-oriented conservative action is the best remedy to a Depression.

Practice Questions

How serious was the impact of the Depression on the Canadian economy and society?

Why did the Canadian federal governments of the 1930s introduce so little social and economic legislation to deal with the problems of the Depression?

Assess the view that the response of the Canadian governments in the 1930s to the problems of the Depression was limited.

Assess the view that neither Mackenzie King or Bennett offered the Canadian people a coherent policy to tackle the problems they faced in the 1930s.

‘Provincial Governments did more to tackle the problems caused by the Depression than federal governments in the 1930s.’ How far do you agree with this view?

IV. Brazil and Vargas

Economic Differences

Brazil, like most Latin America, is and was a much less developed country.

During the 16th-18th centuries, Sugar was the focus of the economy.

Brazil was the last country in the Western Hemisphere to abolish slavery (1880s)

In the mid-19th century, the focus moved to coffee (industry exports out of Sao Paulo).

Political Differences

Like most Latin American countries, Brazil

historically was run by rich landowning

oligarchs.

Brazil’s central government was weak even by

Latin American standards up until the Great

Depression.

Had once had a relatively strong central

government under a Brazilian monarchy (Pedro I

and Pedro II).

Political Parties

Today, Brazil has tons of political parties.

Leading up to the 1930s, the biggest divide wasn’t political, it was geographical:

Paulistanos (people from Sao Paulo)--Coffee

Mineiros (people from Minais Gerais—Minerals, and cattle

In both areas, oligarchs (landowners) ran the parties.

Getulio Vargas

Vargas and Roosevelt

Similarities to FDR

Radically changed role of government

Was President during Depression and World War II

Appealed to lower class for support.

Adopted Corporatist framework to fix the economy (as was done in Roosevelt’s NRA).

Differences with Roosevelt

Not Democratically elected

Did not tolerate dissent Authoritarian Dictator

Did not create social welfare state

Focused more on reforming the economy than relieving it.

1930 Coup #1

When the Depression hit Brazil, Washington Luis was the president.

Luis followed the conservative response of Hoover.

Luis also represented Sao Paulo and many around the country were upset that so much power was resting there.

In 1930, unrest across the country led to rebellion.

The military scrambled to find a leader that would avoid full-scale revolution, but would also please the masses.

This leader was Getulio Vargas.

The “Estado Novo” (Coup #2)

During his leadership, there were several attempts to remove him from power from both the left and right.

A failed coup in 1937 gave Vargas the justification to suspend the Constitution entirely and rule Brazil as a dictator.

After 1937, Vargas would call his plans to revive Brazil socially and economically the “Estado Novo.” (New State)

His policies mirrored those of Mussolini, Franco, and Salazar (many call Vargas a Fascist).

Vargas Economic Reforms (Trade

Policy)

Vargas’ economic goals met with his political goal of reducing the power of Sao Paulo.

Vargas pursued Diversification through ISI.

In other words, tariffs would be placed on specific goods that Vargas wanted Brazil to make (airplanes, steel, etc.)

Incentives would be given to infant-industries to produce these goods for Brazilian consumers.

Quote

“If you were to ask me what is the program of

the Estado Novo, I would tell you that its

program is to crisccross the nation with

railroads, highways, and airlines; to increase

production; to provide for the laborer…to

expand exports; to prepare the armed forces

so that they are always ready; to organize

public opinion so that there is, body and soul,

one Brazilian thought.

Vargas Economic Policy (Domestic

Coffee)

To deal specifically with Coffee, Vargas created the National Department of Coffee.

Reduced coffee tree planting ordered.

Coffee planters in Brazil would be forced in a ‘cartel’ wherein they would have the amount that they could sell on the market reduced in exchange for higher prices.

The goal was to make Coffee exports more profitable for the country and reduce the country’s reliance on those exports.

Critics would point out that this increased unemployment in the Coffee sector.

Vargas Economic Policy (Unions---

”O Pai do Povo”)

Rather than limit the power of unions, Vargas aimed to appeal to and co-opt them (Co-opt means to control by including).

Unions were given the legal right to exist, but all workers had to join state-sponsored unions.

Employers were also forced to join large industry organizations

The state became the arbitror of industrial relations in labor disputes.

This model was first developed by Mussolini and is called “Corporatism.”

Through this model, workers received minimum wages and health/safety protections in exchange for a lack of genuine voice.

Quote

“The Estado Novo does not recognize the

rights of the individual against the collective.

Individuals do not have rights; they have

duties. Rights belong to the collective.

Vargas Racial Policy

Vargas promoted the idea that racial distinctions were contrary to the unified vision of the Estado Novo.

All discussions of racism were banned. Eugenicists were arrested. Brazilians were taught nobody was one race, but all Brazilians were a mixture of races (usually White, Black, and Indian).

A racial class system still existed in many ways, but he indoctrinated Brazilians to believe in a color-blind society.

Vargas Denouement

Vargas finally held elections in 1945 and lost them to Gaspar Dutra.

In 1951, Vargas ran again and won.

In 1954, after an attempted assassination of one of Vargas’ rivals (Carlos Lacerda) was traced back to Vargas, the military asked Vargas to resign.

Instead, Vargas committed suicide.

Suicide Note

I was a slave to the Brazilian people, and today I am freeing myself for eternal life. But this people, whose slaves I was, will no longer be slave to anyone. My sacrifices will forever remain forever in their souls and my blood will always be the price for their ransom. I fought against the exploitation of Brazil…I have fought with my whole heart…Now I offer you my death. I fear nothing. Serenely I take my first step towards eternity and leave life to enter history.

Social Impact: Soccer

Historiography

Vargas Traditionalist: Policies were too radical and led to his

demise.

Revisionist: During the 1960s-1980s period, he was seen as a precursor to the military dictatorship that then consumed the country.

Post-Revisionist: After 1985, historians have given him a kinder look, focusing on his merits as an effective and charismatic politician compared to the brutality of the military’s generals.

Race Degler: Sees Brazil’s embrace of Vargas’ racial policy as

evidence of its inherent muliticulturalism.

Hanchard (Orpheus in Power): Vargas’ policy removed discussions of racial inequalities, but not racism from Brazilian society.

Overall Ideology of Vargas

Populism—

Base reforms on the perceived desires of the

people.

Modernize Brazil into an economic world

power.

Strengthen the nation.

Programs

ISI (restrict imports to encourage eventual

exports)

Diversification (move away from cash-crops)

Corporatism (Simplify the running of the

country by putting people into organizations

that would represent their interests).

V. Effect of Depression on

Minorities

Minority Groups: Women, Mexican-Americans,

African-Americans, Native Americans

A. Women

1930s saw the end of the 1920s Flapper ideal.

New job opportunities available to women in the 1920s vanished in the 30s.

Depression became stress on family life. Rise in divorces.

Husbands became insecure about losing their breadwinner status.

Few New Deal programs dealt with women’s issues as these were overshadowed by the mass number of men who were unemployed.

B. Mexican-Americans

Mexican-Americans that were economically

encouraged to come to America and California

suffered the reverse when the Depression hit.

White migrants from the Midwest pushed out

Mexican agricultural workers in California and

in the Southwest.

C. African-Americans

Blacks that experienced new opportunities in the 1920s saw those opportunities vanish in the 1920s.

Despite voting for Roosevelt, not much in the New Deal helped African-Americans.

AAA did not help sharecroppers.

Early work programs were run through the states so often discriminated against African-Americans.

Later national organizations (WPA, CCC) actively sought to employ African-Americans.

NAACP charged that Social Security discriminated against African-Americans.

CIO recruited African-Americans, which the AFL did not. (Both national unions)

D. Native Americans

John Collier oversaw radical changes in the treatment of Native Americans through the Bureau of Indian Affairs

Indian Reorganization Act undid the Dawes Act (which had made assimilation and individualism the goal of Federal Indian policy).

Native American cultural practices were collected, breaking up of communal lands was halted, and power was returned to tribal councils.

Orthodox: Radical shift in policy for the benefit of Native Americans.

Revisionist: Policy still was paternalistic and Native Americans remained rightfully suspicious.

Historiography

Orthodox (Degler)

New Deal transformed the lives of minorities,

which is why they overwhelmingly voted for

Roosevelt.

Revisionist (Bernstein)

New Deal failed to deliver its promise to its

minority constitutients. Its limited reforms

purposely or unpurposely left out minority groups.

VI. Effect of Depression on Arts,

Literature, and Film

Art: Community Murals

Government supported mural projects through

the WPA.

Murals reflected a type of populist art---from

the people, by the people.

Emphasized work, community, and realism.

Literature:

Novelist focused on the realistic deprivations caused by the Depression

Plight of Migrant Workers (John Steinbeck—Grapes of Wrath, etc.)

Racism (Richard Wright—Native Son)

Southern Backwardness and Poverty (William Faulkner—As I Lay Dying, etc.)

Comic Books (Superman) with escapist fantasies also became popular.

Film: Escapism and Realism

Three different types of film became prevalent:

Gangster Movies: Glorified the rebel individualist.

Escapist Movies: Made people forget the burdens of their own life. (The Thin Man, The Wizard of Oz)

Realist Movies: Showed people living through the Depression and overcoming life’s obstacles. (“Grapes of Wrath,” “I’m a Fugitive From a Chain Gang.”)

Here are the Lecture Slides from

Last Year

1. Crisis in the Farm Sector

New inventions (mechanized cotton picker, tractor) corresponded with new demand from Europe for food

Farms began to overproduce

Caused a drop in prices farmers produce more to make the same profitmoreoverproduction, etc.

Farmers couldn’t pay back loans they had taken out during World War I

Foreclosures, Dust Storms, Environmental Devastation

2. Uneven Distribution of

Wealth The wealthy prospered during the

1920s

A middle class emerged, but was very small

In 1929, the top 5% of America owned 33% of the wealth

Wealthy have proportionally less demand for “durable” goods appliances, cars

When everyone who could buy a car bought one, there was nobody left to buy them.

3. Industrial Overproduction 1920s Businesses assumed they would be able to sell everything

they produced

New technologies of the 1920s (like the assembly line) allowed production on an unprecedented scale

Consumers could not keep up with production

Warehouses began to pile up with inventory.

Businesses fired workers to slow down production.

4. Trade Tariffs

Tariff is a tax on imports (imports are goods

that enter the country).

During the 1920s, America had high

tariffsEurope retaliated with high tariffs

Meant that overproduction of American goods

could not be sold to Europe

5. Speculation

For the first time, ordinary middle class Americans began investing in the Stock Market

This created a bubble where people assumed it would grow forever

Investors began taking out short-term loans to invest in the Stock Market Called “buying on margin”

Eventually, bubbles burst!

. Availability of Easy Credit

Banks assumed the booms would continue forever

Began getting high returns from lending money for everything on installment plans

Installment Plan=Paying for something over several months or years instead of all at once

System worked fine until loans became so large that people couldn’t even pay their installments

6. The Crash

The bubble burst in late October 1929

“Black Tuesday” October 29, 1929 Stock prices dropped rapidly

Investors began to liquidate (sell) their stocks while they still could

In September of 1929, the Dow Jones was at 381. By July 1932, it had fallen to 41.

Billions of dollars in assets evaporated.

People that had bought on margin couldn’t pay their loans back. Banks and businesses started running out of money

7. Depositor Panic

As people defaulted (couldn’t

pay back) on their loans, banks’

reserves became depleted

Nervous depositors scrambled

to the bank to withdraw their

funds before the Bank’s

reserves ran out

This panic caused banks’

reserves to run out.

8. Business Response

Businesses needed loans to continue to expand. Banks had no more money to lend.

Businesses continue to accumulate inventory until they layoff workers

More unemployment means even less people can buy more unemployment less people to buy, etc.

9. Hoover’s Stubbornness Hoover subscribed to the economic theories of his

day: Protectionism, Laissez Faire, and Fiscal Discipline

Believed that the reason for the depression was that too much money was leaving the country

Congress Raised tariffs (Smoot-Hawley Tariff) Made it more difficult for businesses to sell abroad,

creating more unemployment

Hoover also felt it necessary to cut spending and raise taxes to make up for the deficit caused by the depression Further decreased consumer spending and business

investment

10. The Federal Reserve

The difference between the Great Depression (1929-1939) and the Great Recession (2008-present) was the actions of the Federal Reserve

Some economists blame the entire Great Depression

on mismanagement by the Federal Reserve

Instead of expanding the money supply during the banking crisis, the federal reserve drastically decreased it.

Banks not given emergency loans

Interest Rate policies contributed to the deflation

The Successes

CCC, PWA, CWA, WPA All had one goal: Give people jobs.

Why give people jobs and not money?

CCC (young men) plant trees, make trails, clean the environment

PWA/CWA States employ people to build schools and libraries

WPA (biggest jobs program in American history) Built airports, roads, public buildings, sewage

systems, electricity systems.

Painted Murals, collected histories, put on plays

Specifically directed to employ women and minorities

Wagner Act (National Labor

Relations Act) Finally gave unions the legal right to

exist and protections from attacks by

businessmen.

Made it illegal for anyone to prevent

union organization.

Created an arbitration panel that helped

to fairly settle collective bargaining

disputes.

Fair Labor Standards Act Established

first national minimum wage laws,

Social Security

Began as a grassroots movement (from

California) to give seniors a stable

income.

Had 3 components

1. Fixed income for retired people over 65

2. Unemployment payments

3. Welfare for those with children (AFDC)

and the disabled.

AFDC: Aid to Families with Dependent

Children

The Failures

AAA

Agricultural Adjustment Act

Purpose was to help farmers

Paid farmers to not grow food.

Resulted in food shortages, unemployment,

and worked against the purpose of the rest of

the New Deal

NRA (NIRA)

National Recovery Administration (National Industrial Recovery Act)

Failure in multiple ways:

Based on the assumption that the cause of the Great Depression was too much competition, resulting in dropping prices

Attempted to limit competition by creating regulated oligopolies

Each industry created a set of competition standards, creating cartels.

Consumers were encouraged to only buy from businesses that flew the NRA logo

NRA Continued

Difficult to administer

Not clear that it had any economic benefit

Constitutionality illegal

Supreme Court rules it unconstitutional in 1935