The Great Depression and the New Deal

Chapter 11

What were the causes of the Great

Depression? Why was Herbert Hoover unable to cope with

the Great Depression? What were the effects of the Great

Depression? How did the New Deal offer a new approach to

confronting the Depression?

Essential Questions

The Up and down periods of business activity

in an economy are the business cycle. The down periods are called depressions,

which are characterized by business failures, high unemployment, and falling prices.

The Great Depression was the worst in our history

The Great Depression

Overproduction- Manufacturers made and sold

new products like cars or radios, but consumers didn’t have the money to buy them. The soon were producing too many goods to sell them all.

Speculation- Many people bought stocks in order to sell them for higher prices and get rich quickly. This drove stock prices up. People sometimes began buying on margin, which meant they only paid 10% of the stock price and borrowed the rest in loans.

Causes of the Great Depression

Shaky Banking- Good bankers invest their

client’s deposited money wisely in order to receive interest (earn money on deposits). There were some shady bankers however that didn’t invest in the right things, and money was lost. The government didn’t regulate the banks.

Restricted International Trade- It was hard to sell goods overseas because of high tariffs.

Causes, continued

On October 24, 1929, stocks started moving downward,

and people started selling all of their shares. No one was willing to buy in order to save it, because no one would support low prices. This was known as Black Thursday. Some bankers tried to buy more time.

Black Tuesday- On October 29, the market crashed, and stock prices were at an all time low.

The New York Stock Market Crash

With the new economic problems and low

prices, factories were forced to shut down. Demand for goods decreased. Workers lost jobs, and homeowners lost their houses. With no one to buy foreclosed homes, the economy was in a downward spiral.

Effects

The nation lost it’s optimistic outlook. Millions lost their jobs and depended on soup

kitchens for food. Writers like John Steinbeck and

photographers like Dorothea Lange recorded the misery of the depression.

Human Impact of the Depression

A series of droughts (periods without rain) in

the early 1930’s led to the dying of crops and farmers losing their farms because they weren’t making money. This was called the dust bowl.

John Steinbeck wrote articles on the Oakies (those who moved to migrant farmer camps in California). He also wrote The Harvest Gypsies and The Grapes of Wrath.

The Dust Bowl

Mexican Americans came to America to

escape the turmoil of the Mexican Revolution. They worked hard jobs for little money, and often lived in small communities called barrios. They were prohibited in Texas from attending “white” public schools.

Herbert Hoover signed the Mexican Repatriation Act in order to send some Mexican Americans back to Mexico and give their jobs to white American farmers in need of work.

Mexican Repatriation

Hoover remained true to his laissez-faire

capitalism views. He believed that giving direct aid to the

unemployed of the Depression would hurt the “rugged individualism” incentive.

He believed that eventually, people would resume buying and things would pick back up, but there was a lack of aggregate demand (total demand) overall.

Hoover Falters

When he realized his plans weren’t working, he

cut taxes, funded public projects, and established the Reconstruction Finance Corporation to give emergency loans to banks and businesses.

These policies came a little too late and Americans were unhappy with Hoover.

Little towns of shacks sprang up, called Hoovervilles.

By the end of his term, unemployment was at nearly 25%.

Hoover Picks Up

Franklin Delano Roosevelt was nominated as

a democratic candidate in 1932. He promised a New Deal to put Americans back to work.

He assembled the “Brain Trust” (a group of talented university leaders) to serve under him.

He was famous for his “fireside chats” where he explained his policies in conversational terms.

His Wife, Eleanor Roosevelt, was well known for her political activism and support for women’s rights.

Franklin D. Roosevelt

Women had to make ends meet at home while

the men searched for jobs. In 1933, Eleanor Roosevelt wrote a book called

“It’s Up to the Women” to encourage women to keep going.

Frances Perkins- The first female member of the U.S. Cabinet, and played a big role in many reform acts of the 30’s.

Women in the Great Depression

Roosevelt submitted a flood of reform

proposals in his famous First Hundred Days in office.

He explained the proposals in three terms: Relief, Recovery, and Reform.

New Deal

These were meant to tide the people over till the

economy recovered. FDR declared a Bank Holiday, which closed all

banks until they could be deemed financially sound by inspectors.

Emergency Loans were made available to people so they would not have to lose their homes.

The Civilian Conservation Corps, Public Works Administration and the Works Progress Administration gave jobs to the unemployed.

Relief

FDR wanted to put money into the hands of

the public to stimulate demand and spending. National Recovery Administration and the

Agricultural Adjustment Acts were used to put money into the economy.

Recovery

This was to remedy defects in the economy so

that a depression of this scale would not happen again.

The Tennessee Valley Authority, Securities and Exchange Commission, National Labor Relations Act, Federal Deposit Insurance Corporation, and Social Security Act were apart of these reform ideas.

Reform

Liberty League- Conservatives who thought that

FDR was trying to establish a popular dictatorship. Francis Townsend- wanted citizens over the age of

65 to be given a $200 pension every month to encourage spending in the economy.

Huey Long- wanted to give each family a $5000 a year income by taxing the rich, but was assassinated before he could run a campaign.

Father Coughlin- gave radio speeches and was very anti-Semitic. Wanted Nationalization of banks.

Reactions to the New Deal

Supreme Court ruled two New Deal reforms

unconstitutional (the Agricultural Adjustment Act and the National Industrial Recovery Act).

The NIRA allowed the president to make codes of fair practices for commerce in businesses.

Schechter Poultry v. US- appealed their conviction of failing to obey the act. Supreme Court voted in favor.

Supreme Court and the New Deal

After losing his battle in Schechter v. US, FDR

wanted to get control of the court. He proposed that the President could appoint

a judge for every judge that is over 70 years old. This would give him six spots to appoint and give him the power.

His proposal was shut down and disliked by the public.

The Court Packing Scheme