Causes of the Great Depression

• During the 1920’s people believed that this prosperity would continue. The newly elected president, Herbert Hoover, was so confident that he believed poverty would be eliminated in the future!

Causes of the Great Depression

1. Consumers in extreme debt– Get behind on payments such as the

installment plan

2. Key industries were barely making a profit– Textile, Steel, Coal, Railroads– Foreign producers– Automobiles– New forms of energy:• Hydroelectric power• Natural gas

Causes of the Great Depression3. Failing Agricultural Sector• Took out equipment loans when crop prices rose

during the war• Crop prices fell 40% when the war ended– Many lost their farms because they couldn’t pay off their

loans– Rural banks fail as a result

Causes of the Great Depression

4. Consumers buy less– Rising prices and

Stagnant wages– Unequal distribution

of wealth• 70% lived below the

standard of living

5. Buying on Credit– led to a false sense

of prosperity– Living on borrowed

money

Overproduction & Under consumption

• American manufactures were producing products faster than they were being bought– Due to new technology and

new production methods– Response: slow down

production• Lay off workers – who become

poor consumers• Vicious cycle downward

continues

• Today things are made to break – keeps consumption up

The Stock Market Crash

• 1920’s - many invest because stock values were high

• Many engaged in risky transactions– Speculation: buying and selling stock while

ignoring the risks– Buying on Margin: paying a down payment

on the stock’s value and borrowing the rest

• When stock values fell they lost their investments and couldn’t pay off their loan

The Stock Market Crash

• October 29, 1929 – the stock market crashed when 16.4 million shares were dumped (nicknamed “Black Tuesday”)– By November investors

had lost $30 billion• Amount equal to what

the US spent during WWI

The Stock Market Crash• Once it crashed most of the stock that was sold, sold

for less than what the owner originally paid.– Some when from wealthy to poverty because they lost all

the money they thought they had.

• The Crash signaled the beginning of the Great Depression

http://www.youtube.com/watch?v=RJpLMvgUXe8

Bank and Business Failings• Many panicked and rushed to withdraw their

money• Many banks couldn’t cover the withdrawals

because they had also invested in the stock market– 1929: 600 banks were forced to close– 1933: 11,000 banks closed (out of a total 25,000)

Bank and Business Failings

• 9 million people lost their savings account (no FDIC)

• 90,000 businesses went bankrupt

• Unemployment rose from 3% to 25% – 13 million workers lost

their jobs– Those that kept theirs

often faced pay cuts and reduced hours

“ There was much hardship. Many people sold pencils on the street for 1 penny. Others were so devastated, they committed suicide by jumping out of windows of a skyscraper in New York City.”

- Thomas Johnston

Suicides were so frequent that one hotel clerk reportedly asked patrons at check in, “Is this for sleeping or for jumping?”

Rural v. Urban• Those living in cities faced extreme hardships:

– Evictions, (forced to live on the streets or in shantytowns)• Many who were renting could not pay rent & were kicked out.

There were some who let people stay out of compassion

– Food shortages (forced to raid the garbage of the employed, beg on street corners, wait in government bread lines)

– Conditions for minorities were worse because they were already poor before the depression hit

Rural v. Urban

• To avoid panhandling (begging), many farmers and businessmen would sell apples to make their living

• There were over 5,000 apple sellers in New York City alone

Fred Bell, a wealthy businessman who was forced to sell apples after the Crash to make even a meager living

Rural v. Urban

• Rural areas had 1 advantage over the cities – the ability to grow their own food– But many lost their

farms when they couldn’t pay off their debts

– Between 1929 – 1932 nearly 400,000 farms were lost to foreclosure

The Dust Bowl• 1930’s – severe storm swept across the Great

Plains carrying large amounts of dust with them– One storm in 1934 was so bad that the dust reportedly

reached the East Coast– Caused by overproduction of land, followed by drought – Few trees and little grass to hold the soil down

The Dust Bowl• Cows were found dead, bellies loaded with dust.• It also killed people: “There was so much floating

particulate matter in the air that children would develop “dust pneumonia” – a form of silicosis, and die of suffocation.”

http://www.youtube.com/watch?v=1_nG9LX0Ioo

The Dust Bowl• Many farmers were forced to leave their homes• Most were tenant farmers so when the dust killed the

grain crops they couldn’t pay the rent– Several traveled to California searching for work as migrant

laborers because they said there were plenty of jobs there. – However they couldn’t accommodate all the thousands of

people who moved there looking for jobs– Nicknamed “Oakies” – a term used for all immigrants

The Effects of the Depression on Families

• Men – Felt pressure to provide for their families– Many became

discouraged and quit trying

– Hoboes – 2 million left their families and traveled across the country looking for work or escape

The Effects of the Depression on Families

• Women: Many had to work outside the home– Others did what they

could at home– Often faced more

harsh conditions because they were too embarrassed or timid to ask for help

The Effects of the Depression on Families

• Children: Lack proper diet and health care– 300,000 schools

had closed by 1933 due to less tax revenue

– Many found jobs or left home in search of work or “adventure” (became known as “Hoover Tourists”)

The Effects of the Depression on Families

• Social and Psychological Effects:– Many lose the will to survive– Suicide rate increased 30%– More people admitted to

mental hospitals– Stop going to the doctor– Fewer attend college– Have fewer children (if any)– More pessimistic– For many, fear of poverty

and hardship never disappeared (even today)My own Grandfather was sent to an

orphanage because his mother couldn’t afford to care for all her children. (8)

Hoover’s Response

• Hoover believed the govt. should have a limited role in providing relief– Giving people a handout

would weaken their self-respect and morality. Direct relief would make people lose their sense of self reliance

– Asked Congress to reduce federal income tax in hopes people will spend the money to get the economy going. But it wasn’t enough.

Hoover’s Response

• He tried to find solutions to the crisis, but most people felt he was doing nothing to help and even blamed him for the depression itself.– Will Rogers summed up

the mood of the nation: “If someone bit an apple and found a worm in it, Hoover would get the blame.”

Hoover’s Response

• People blamed Hoover for the Depression– Developed slang to show

their dislike for the president

– “Once upon a time, my political opponents honored me as possessing the fabulous intellectual and economic power by which I created a worldwide depression all by myself.”

– Herbert Hoover

Hoover’s Response

• Shantytowns became known as “Hoovervilles”

• Newspapers became known as “Hoover Blankets”

• Empty pockets turned inside out became “Hoover flags”

• Armadillos fit for eating became “Hoover Hogs”

• Rail cars converted into homes became “Hoover Pullmans”.

Hoover’s Response

• Hoover still opposed federal welfare, but realized he must take some action

• Established building programs to help create jobs– Included The Boulder Dam

(often called Hoover Dam) on the Colorado River• Created jobs• Provided flood control and

regular access to water• Improved agriculture

– Hoover created other programs but it was “too little, too late”.

The Bonus Army

• 1930 – nearly 200,000 veterans marched on Washington D.C. to support a bill that would give them $500 as bonus for their service during WWI– The bonus was

supposed to be paid to them in 1945, but they argued that it was needed NOW instead of later

The Bonus Army

• Hover ordered the marchers to go home when the bill failed– He called in soldiers when

nearly 2,000 refused to leave

– Soldiers released tear gas into the crowds and burned their camps.

– An 11 month old was killed, and 8-year old was partially blinded, 2 were shot, and many injured.

– Hatred for Hoover became stronger than ever

The Election of 1932

• Hoover v. Franklin D. Roosevelt– FDR was a 2-term

governor of New York who had helped improved conditions for the people of his state

• FDR won in a landslide because of his positive attitude

The Election of 1932

• He promised government would take an active role in relief

• While campaigning he took a train from state to state and promised to try various federal programs to help the people and if they would fail he would try again.

“When you get to the end of your rope, tie a knot and hang on.”

“The only thing we have to fear is fear itself.”

The New Deal

• Between November 1932 – March 1933 FDR began working on his plans for relief

• FDR worked with his “Brain Trust” to find solutions – Hand picked advisors

considered the most brilliant minds in America• Professors, lawyers,

journalists, economists, etc.

The New Deal

• His “New Deal” focused on 3 major goals:1. Relief (for the

Needy)2. Recovery (Economy)3. Reform (Finances)

The Hundred DaysMarch 6 – June 16, 1933

• FDR pushed 15 major pieces of legislation through Congress– Significantly expanded the

govt’s. role in the economy

• Bank Holiday– March 5, 1933: FDR closed

all banks to prevent withdrawals and allow the Treasury Department to inspect them

– Stable banks would reopen– Unstable banks would

remain closed– Restored confidence in

banks

The Hundred Days

• Fireside Chats:– Radio addresses in

which FDR explained the New Deal

– Made Americans feel important and connected to the president and reduced fear

– Kept phone lines to the White House open to the public – guaranteed assistance from the president or a member of his staff

The Hundred Days

• March 12 – FDR gave his first chat the day before the banks reopened. Explained:– The banking system– Why large #’s of

withdrawals hurt even strong banks

– Public can help by putting their money back into the banks

– $1 billion returned in a few weeks

The Hundred Days

• Repealing the 18th Amendment:

• 1933 – FDR convinced Congress to pass the 21st Amendment– Allowed the

manufacture and sale of alcohol

– Purpose was to raise government funds by taxing alcohol.

The 2nd New Deal1935 - 1936

• FDR launches a 2nd New Deal because unemployment was still high

• 2nd New Deal helped farmers, young people, and other professionals

• Also created labor reform, social security, and expanded utility companies’ reach rural areas – Government had to go into

deficit spending– FDR opposed deficit

spending but believed it was necessary to make significant improvements

Major Programs of the New Deal

• Tennessee Valley Authority (TVA)

• Goal was to provide navigation, flood control, electricity, etc. to the southern Appalachian areas. (Hit particularly hard by the Depression)– Provided electricity to

many homes that did not have it previously

– Provided many jobs as well.

Major Programs of the New Deal

• Civilian Conservation Corps (CCC)

• Employed 18-25 year old men to build roads, parks, etc.

• Designed to provide jobs for the men in large cities. Sent them to rural areas to complete various jobs– Paid $30 a month with $25

automatically being sent to their families

– Also given free food, lodging, and clothing

Civilian Conservation Corps

• Planted over 200 million trees in the Great Plains region– Tried to prevent soil erosion

and another Dust Bowl

• Purpose was to provide meaningful work to restore pride and self-respect

• Critics said they were made up jobs and a waste of money– But it enabled people to buy

food and other goods

The Wagner Act• Protects rights of workers to join labor unions,

strike, etc.• Established the National Labor Relations Board

– Investigate unfair labor practices– Workers choose if they want a union through elections

The Social Security Act

• Insurance for retirees 65+ • Unemployment compensation once a

month• Aid to families with dependent children

and the disabled• Funded by both the employer and

employee– However much the employee pays into

social security, the employer has to match it. This happens once a month

Opposition to the New Deal

• By the end of the 2nd Hundred Days, millions of Americans had benefited from the New Deal and confidence rose– Ex: 1932 there were 13

million unemployed. By 1934 unemployment dropped to 9 million

• Opponents said the New Deal didn’t do enough to end the Depression; others said it did too much (too similar to socialism/ govt. has too much power)

Opposition to the New Deal

• The Supreme Court said some programs were unconstitutional– AAA: agriculture was a

state matter, not federal

– NIRA: it gave legislative power to the Executive Branch• Authorized the President

to regulate industry and allow monopolies in an attempt to stimulate the economy

The Court-Packing Scheme

• To protect his programs, FDR proposed that 6 new justices be added to the Supreme Court

• Both supporters and opponents criticized him for violating separation of powers

• FDR was eventually able to appoint 7 justices to the court due to retirements, resignations, or deaths on the court.

Opposition to the New Deal

• Dr. Francis Townsend• Said FDR didn’t do

enough to help the poor and elderly

• He proposed the Townsend Plan– Every citizen over 60 gets

$200 a month on the condition that they spend it all in 30 days. Thus stimulating the economy

– Used this idea for Social Security

Opposition to the New Deal• Senator Huey Long:• Former Louisiana governor and

senator• One who felt Roosevelt didn’t

do enough• Known for his dramatic

speeches and slogans such as “Share the Wealth” and “Every Man a King” (opponents said he would rule like a dictator/communist)

• In his “Share the Wealth” movement, Huey Long called for redistribution of wealth by heavily taxing the rich and turn it into funds for social programs

• Assassinated in 1935

The Election of 1936• By this time unemployment had dropped from 9 million to 6

million• FDR v. Alfred Landon

– FDR’s campaign slogan “ Are you better off than you were 4 years ago?”

– FDR carried all but 2 states– 1st election that the majority of African Americans voted Democrat

Election of 1940

• FDR v. Wendell Willkie– Gained more support

than previous opponents– FDR was elected to his

3rd term (only president to serve more than 2 terms – elected to 4)

– Some credit Willkie’s support of Roosevelt’s peacetime draft as the reason for his defeat in this election• Would rather lose than

risk our national security

Impact of the New Deal

• FDR decided not to launch a 3rd New Deal because the economy was improving and he wanted to keep deficit spending low– Congress convinced him to scale back some

of his programs

Impact of New deal

• Increased workers’ rights• Set precedent for federal

farm aid• Made banking more secure• Established Social Security• Created more

environmental programs

• Economy continued to see ups and downs

• What really pulls America out of the Depression was our involvement in WWII