Unit 2: The Great Depression & The New Deal 1930s

1928 Election

• Herbert Hoover as president

• Easily won against Al Smith (Governor of NY)

• Carried on the Republican pro-business policies of the 1920s

President Hoover’s Beliefs

• Gov’t should not play a role in regulating businesses

  • Must support businesses so that the businesses may support their workers

• Only focusing on our country and staying away from foreign issues that don't concern the U.S.

• Practiced Isolationism and supported disarmament as the gov’t will be able to cut money spent on war and reinvest it into our own country

• Supports low tariffs in order to boost the economy and be sure that all citizens benefit.

• Supports stopping corruption present in the government including any cracking down on radical communists.

Hoover’s principles con’td

• Compassion for children

• Wrote The Child’s Bill of Rights in the 1920s

• Elimination of waste

• Volunteerism

• Equal opportunity and individual achievement 

• Rugged individualism 

Rugged Individualism vs. Gov’t Regulation

• Rugged Individualism:  indicates that an individual is self-reliant and independent from outside, usually state or government assistance

  • idea that success comes through individual effort and private enterprise

• Government Regulation/collectivism:  the practice or principle of giving a group priority over each individual in it

GNP - Gross National Product

• Total values of goods and services produced in a nation during a specific time

  • Rose 30% in 1920s, false economic prosperity

1920s - promise endless economic growth

• Industries expanded - steel, oil, rubber (car industries)

• Farmers and rural areas suffered declining prices and debt

• Economic inequality widened: wealth concentrated among the rich

Stock Market

• Where stocks are bought & sold

Stock

• Ownership in a company sold in shares

  • Stock prices increased in the 1920s as people invested (bought) stocks

Buying on Margin

• Investing in stocks by borrowing the money

  • Buying stocks became a popular way to get rich quickly

• Expanded the stock market; number of people involved in it grew; happened quickly

• Rising stock prices created a speculative bubble—prices no longer reflected real company values.

• Economists and leaders falsely believed the economy had reached a “permanent high plateau.”

Warning Signs Before Crash

• Declining automobile sales and department store revenues.

• Falling farm prices and rising unemployment.

  • However, most Americans kept buying stocks.

Stock Market Crash of 1929 (Great Crash)

• Collapse of the American stock market in 1929

Dow Jones Industrial Average

• An average of 30 top stocks from various industries

Black Thursday

• October 24, 1929 – stock prices fell, phase of selling stocks began

  • Bankers such as J. P. Morgan & others flooded the market with money in an attempt to stabilize the market and calm fears in the economy

• First day of the Crash

Black Tuesday

• October 29, 1929 – stock sales began again; could not be saved; $30 billion decrease in stock value (same amount of money that WWI cost)

• Originally the crash was viewed as part of the business cycle: periodic growth and contraction of a nation’s economy

Federal Reserve System

• Serves as the nation’s central bank

• The Federal Reserve Board takes actions and sets policies to regulate the nation’s money supply in order to promote healthy economic activity.

• In late 1920s, the Federal Reserve Board decided to make it more difficult and more costly for brokers to offer margin loans to investors.

• Successful at first

  • Borrowing from banks by brokers began to decrease, but it was replaced by money from a new source.

  • Large American corporations began providing brokers with the cash to make margin loans to investors.

  • As a result, the run-up of the stock market continued

Crash Impact on Individuals

• Margin buyers were particularly hit hard. When stock prices began to fall, brokers demanded that they pay back the borrowed money.

• To meet these margin calls, investors were forced to sell their shares for far less than they had paid for them.

• Investors often owed enormous amounts of money to their brokers for stocks they had been forced to sell below cost.

Effects on Banks from the Crash

• Depositors rushed to banks to withdraw their money, draining banks of funds. 

• Many banks invested in the stock market, had purchased stock in companies whose shares were now crumbling in value. 

• In addition, banks had made loans to stockbrokers, who in turn had loaned the money to investors on margin.

  • When individual investors failed to cover their margins, the banks absorbed losses, too.

Effects on Businesses from the Crash

• Money scarce, banks and investors were suddenly unwilling or unable to provide industry with the money it needed to grow and expand.

• Consumers began to spend less, companies lay off workers

• Unemployed workers had even less money to make purchases, and the cycle of layoffs and reduced consumer spending accelerated quickly.

Overseas Effect from the Crash

• American banks that had lent heavily to European businesses and governments now called in those loans.

• Buying power down in the United States, foreign businesses were less able to export their products here.

  • They responded by laying off workers. Laying off workers in Europe meant that there was less money in the hands of consumers to buy products.

• Gov’ts in the US and in countries around the world moved to protect their own industries by passing high tariffs.

• A high tariff would make imported goods more expensive than those made at home.

  • Leaders in each country hoped that high tariffs would benefit their local manufacturers.

  • But high tariffs did more harm as world trade began to decline

Hoboes

• Homeless wanderers

Great Depression Begins

• After 1929 Crash, the economy cont’d to decline

• Banks failed when people withdrew all their money at once (“bank runs”).

• Businesses closed, and millions lost their jobs.

• By 1933, unemployment reached about 25% of the labor force.

• The Great Depression became the worst economic crisis in U.S. history.

Bank Failures

• Most people did not have money invested in stocks, but many had entrusted their savings to banks.

• No depositor insurance, banks were vulnerable to “runs” 

  • A run occurred when nervous depositors, suspecting a bank might be in danger of failing, rushed to withdraw their savings.

  • A run could quickly drain a bank of its cash reserves and force the bank to close.

Farm Failures

• Widespread joblessness and poverty reduced Americans’ ability to buy food.

• With farmers producing more than they could sell, farm prices sank.

  • Lower prices = lower income for farmers

• Typical for farmers to borrowvmoney from banks to pay for land and equipment.

• As their incomes dropped, many farmers were unable to make the payments on their loans.

• Farms went bankrupt or suffered foreclosures

Foreclosure

• Occurs when a bank or other lender takes over ownership of a property from an owner who has failed to make loan payments.

Human Impact of the Depression

• Families lost their homes and savings

• Many Americans could not afford food, clothing, or rent

• Soup kitchens and breadlines were created to feed the hungry

Hoovervilles

• Makeshift shantytowns — appeared on the outskirts of cities

Emotional Impact of the Depression

• Many who lost everything felt ashamed or hopeless.

• Families broke apart under stress; marriage and birth rates dropped.

• The crisis tested Americans’ belief in the American Dream — that hard work guarantees success.

Migrant Madonna/Dorothea Lange

• Florence Owens Thompson and 3 of her 7 kids; she’s 32 years old; pea picker;

  • Most iconic image of the Great Depression

• Dorothea Lange was a photographer, hired as a clerk-stenographer for the Resettlement Administration. Her job was to take pictures of migrant workers in California.

• Photograph symbolic of the human plight in Depression Era America was that she seemed to be depicted as a single mother with nothing but her kids clinging on to her.

  • Her face is grim, wary, and old, resembling much of the same of other families also trying to survive.

Dust Bowl

• Term coined in 1935 -AP reporter, Robert Geiger

• Affected the Great Plains - south central U. S., western third of Kansas, southeastern Colorado, the Oklahoma Panhandle, the northern two-thirds of the Texas Panhandle, and northeastern New Mexico

• Came to symbolize the hardships of the entire nation

• 1931- Dust Bowl Begins: The middle of the nation is in the midst of the first of four major drought episodes that would occur over the course of the next decade.

• 1932 - Federal Aid: Federal aid to the drought-affected states was first given in 1932, but the first funds marked specifically for drought relief were not released until the fall of 1933.

• 1937 - The Need for Aid: A bulletin by the Works Progress Administration reported that 21% of all rural families in the Great Plains were receiving federal emergency relief

• 1941 - Dust Bowl ends

Causes for the Dust Bowl

• 1920s, Contributing Factors: Due to low crop prices and high machinery costs, more submarginal lands were put into production.

  • Farmers also started to abandon soil conservation practices. These events lead to severe soil erosion that would cause the Dust Bowl.

• Environmental Factors:

  • Naturally had shallow topsoil

  • Had been held in place by the region's native grasses lost due to:

    • extensive farming and overgrazing - due to WWI

    • periodic droughts

• Agricultural Practices:

New farmers plowed up the grasslands to plant crops, - wheat.

exposed the soil to wind erosion

• Drought: prolonged and severe during the 1930s

  • Made the above causes worse

  • No rain - soil increasing lost to wind erosion

Dust Storms

• massive dust storms - "black blizzards"

  • could darken the sky for days made it difficult to breathe and causing widespread health problems

Economic Hardship

• Dust Bowl led to

  • failure of agriculture

  • Crop failures

  • inability to sustain livestock

• many people lost their farms and livelihoods

Migration

• hundreds of thousands - "Okies" and "Arkies," left

• search of a better life in California -work as migrant laborers

Okies

• slur name Californians gave to those who were coming to California due to the Dust Bowl

Woody Guthrie

• sang the Dust Bowl song & Sacco and Vanzetti song

Legacy of Dust Bowl

Soil Conservation:

• Implemented sustainable land management and soil conservation

  • government initiated programs to prevent soil erosion and promote more responsible farming practices.

Cultural Impact:

• remembered in literature, music, and art, such as John Steinbeck's "The Grapes of Wrath" and Dorothea Lange's iconic photographs

• captured the struggles and resilience

Environmental Awareness

• reminder of the potential consequences of environmental degradation

Hoover as President - Rugged Individualism

• Hoover believed that unnecessary gov’t not only threatened prosperity but also dimmed the very spirit of the American people.

  • A key part of this spirit was what he called “rugged individualism.”

Associative State

• Hoover’s term for his vision of voluntary partnerships between business associations and government.

Hoover Dam

• Dam used Colorado River to provide electricity and water to a vast area

• Stimulate business by ordering supplies and putting people to work during GD

Voluntary Cooperation w/ cooperative

• Cooperative: an organization that is owned and controlled by its members, who work together for a common goal.

• Hoover put this into practice before the Crash, particularly for struggling farmers

• The idea behind farmers’ cooperatives was that large groups of farmers could buy materials such as fertilizer at lower prices than individual farmers could.

• Cooperatives also helped farmers market crops in ways that would raise crop prices and increase farmers’ income.

• After the stock market crash, Hoover continued to rely on his basic belief in voluntary action and cooperation between business and government. He called together many of the nation’s top business and government leaders and urged them not to lay off workers or cut wages.

  • In the face of economic disaster, individuals made decisions according to their own economic interests.

  • Businesses cut jobs and wages. State and local governments stopped their building programs, throwing many people out of work.

Reconstruction Finance Corporation

• A key clause in the RFC legislation authorized up to $2 billion in direct government loans to struggling banks, insurance companies, and other institutions.

• Later that year, Hoover asked Congress to create the Federal Home Loan Bank.

  • New program encouraged home building and reduced the number of home foreclosures.

  • These measures marked a historic expansion of the role of the federal government in the business of the American people.

Smoot-Hawley Tariff Act

• The new tariff raised the cost of imported goods for American consumers, making it more likely that they would purchase the cheaper American goods.

• When European nations responded with tariffs on American goods, trade plunged.

Bonus March

• Demonstrators and WWI veterans marched on Washington D.C. → demanded their bonuses to be paid earlier than 1945 for fighting in WWI

• Hoover opposed, believed gov’t must have a balanced budget, to spend no more money than it takes in

  • Used military force to push back Bonus marchers

Smedley Butler

• WWI veteran, spoke out for Bonus Army

• When invited to lead a coup against FDR → exposed their secret plan

  • However, it was covered up as a hoax by the NY Times

FDR

• Distant relative to Teddy Roosevelt

• Struck w/ polio → left him paralyzed in his legs

• Became governor of NY in 1929

• Launched a groundbreaking relief program to aid the state’s many victims of the Great Depression.

  • By 1932 Roosevelt’s program had provided help to 1 of every 10 New York families.

FDR’s 1932 Campaign

Some general ideas:

• He promised relief for the poor and more public works programs (gov’t-funded building projects) that would provide jobs

• Talked abt lowering tariffs

• Attacked Hoover and the Republicans regarding their approach to the GD

Election of 1932 - FDR vs. Hoover

• FDR won with a landslide victory

• Democrats gained 90 seats in the House of Representatives and 13 seats in the Senate to take control of both houses of Congress.

Fireside Chats

• Roosevelt also possessed a warmth and charm that made him an effective communicator.

  • As president, he used the radio to great effect, particularly for fireside chats

• These addresses were meant to sound as though Roosevelt were in the listener’s living room, speaking personally with the family.

  • Spoke calmly and clearly and in a way that ordinary people could understand.

  • Conveyed real concern and gave reassurance to millions of troubled Americans.

Eleanor Roosevelt

• Wife of FDR, distant cousin to him 

• With his mobility impaired, Franklin Roosevelt relied on his wife to collect and share information gained in her wide travels.

  • He deeply valued his wife’s keen insight.

• Eleanor became a powerful political force.

  • She threw her energies into several major social issues, including the campaign to stop the lynching of African Americans.

  • In the process, she helped change the role of First Lady.

First Inaugural Address

“…the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”

Took action 2 days after

• The shaky state of the nation’s banks had led many ppl to withdraw all their money from their accounts.

  • They feared losing their savings if the bank collapsed.

  • Such large-scale withdrawals could—and did—ruin even healthy banks. 

  • This created more panic, more withdrawals—and more bank failures.

• To stop this, FDR issued executive order to temporarily close all of the nation’s banks → FDR called it bank holiday

Emergency Banking Act

• Law gave gov’t officials power to examine each bank, determine its soundness, take steps to correct problems, close bank if necessary 

• Within days, banks began to reopen with government assurances that they were on solid footing.

  • Ordinary people, who had been frantically taking money out of their banks, started to return funds.

  • Some banks never did reopen, but the crisis was over.

Glass Steagall Act 1933

• Created the Federal Deposit Insurance Corporation, or FDIC.

  • This provided government insurance for depositors’ savings.

  • Individual depositors no longer needed to fear losing their savings if their bank collapsed.

Hundred Days

• Critical period of gov’t activity beginning w/ resolution of bank crisis

New Deal (first)

• Name of FDR’s new program

• Involved Congress passing new laws

• Aimed at accomplishing three goals, the 3Rs

3Rs

• (1) relief for those suffering the effects of the GD

• (2) recovery of the depressed economy

• (3) reforms that would help prevent serious economic crises in the future

Civilian Conservation Corps (CCC) 1933

• Sought to address an immediate problem: unemployment among young men 18 to 25 years old.

• Americans enrolled in the CCC were paid to work on a variety of conservation projects, such as planting trees and improving parks.

• CCC workers lived in army-style camps and were required to send most of their earnings to their families.

Agricultural Adjustment Act (AAA)

• Gave farmers a subsidy (gov’t payment), to grow fewer crops

  • Smaller supply of crops would increase demand for them 

    • Would drive prices up and help farmers

United States v. Butler

• found the part where tax was used to raise the money for farmer subsidies in the AAA—-unconstitutional

National Industrial Recovery Act

• Mandated that businesses in the same industry cooperate w/ each other to set prices up and levels of production

• Included $3.3B for public-works programs → managed by the Public Works Administration (PWA)

• Labor unions also benefited

  • For the first time, labor got federal protection for the right to organize

National Recovery Administration 1932

• an agency created by NIRA

• set up codes for fair business practices, including regulation of labor practices and business product

Schechter Poultry Corporation v. United States

• Supreme Court ruled key parts of NIRA—unconstitutional

Federal Securities Act

• forced companies to share certain financial information with the public

  • The purpose was to help investors and to restore confidence in the fairness of the markets

Securities and Exchange Commission (SEC)

• served as a government watchdog over the nation’s stock markets

Tennessee Valley Authority (TVA) 1933

• One of the most ambitious programs of the ND

• Charged with developing the resources of the entire Tennessee River Valley

  • built dams and other projects along the Tennessee river and it’s tributaries

Civil Works Administration (CWA) 1933

• this agency provided winter employment to 4 million workers

Indian Reorganization Act 1934

• reversed, previous policies by recognizing the tribe as the key unit of social organization for Native Americans

  • it limited the sale of Indian lands and provided assistance to native groups in developing their resources, economy, and culture

  • granted limited self-rule

National Youth Administration 1935

• provided young people part-time jobs in and around their schools

  • during GD, many young ppl had to drop out of school to work so their families could survive

Fair Labor Standards Act 1938

• established labor laws, including minimum wages, maximum hours, and overtime compensation

Huey Long

• Senator of Louisiana, believed FDR’s policies were too friendly to banks and businessss

• Set up his own political organization, the Share Our Wealth Society

• Long’s idea was to give every family $5000 to buy a home plus an income of $2500 a year

  • would be paid for through heavy taxing on wealthy Americans

  • attracted millions of followers

• FDR used the IRS to investigate him, feared him as competition

• Assassinated Sept. 8, 1935

Father Charles Coughlin

• Catholic priest

• Used to support FDR

• Ran a radio program that attacked the nation’s bankers & financial leaders

  • also attacked FDR when he concluded the president was not doing enough

  • attacked Jewish figures in FDR’s administration as well

• Began to lose influence, radio program was forced to end

Dr. Francis Townsend

• Criticized ND for not doing enough for older Americans

• Proposed a plan for providing pensions to ppl 60+

Court Packing

• Supreme Court ruled many of FDR’s programs as unconstitutional

• 1937 - FDR wanted to “pack” the court w/ Democrats

  • wanted 15 Justices

  • wanted them to retire at 70 or their vote’s wouldn’t count if they still remained

• Congress rejected the court-packing bill

  • both sides rejected this

ND & Race

• GD made racial conditions worse

• African Americans often “last hired, first fired”

• FDR did have a “black cabinet”

  • spoke out abt lynching but did not push for an anti-lynching bill

• Marian Anderson - black woman who sang in front of the Lincoln Memorial after being denied by FDR to use the Constitution Hall

ND & Women

• FDR‘s administration hired the first woman in the cabinet, Frances Perkins

• Eleanor Roosevelt thought women could humanize the gov’t

• Women were paid less for the same work as men

Concerns About Spending

• conservative Republicans disagreed with the ND

  • Thought it hurt businesses with heavy taxes and regulations

American Liberty League 1934

• included mostly Republicans

• Al Smith joined

• Conservative Democrats disapproved and tried to rally public opinion against the ND

  • published pamphlets and sponsor radio programs argued that the ND was destroying personal liberty

• Failed to gain support and dissolved 1940

Second New Deal

• happened during the Second Hundred Days

• Essentially, Congress passed laws extending gov’t oversight of the banking industry & raising taxes for the wealthy

  • funded new relief programs

Federal Emergency Relief Act 1933

• Provided direct relief to the unemployed for the first time in our nation’s history

Works Progress Administration (WPA) 1935

• created jobs on a wide variety of construction projects, such as hospital schools parks, as well as for people in the arts

Social Security Act 1935

• during GD Americans had no protection against the risks of unemployment and old age

• Created a national system of pensions for the elderly and unemployment compensation for people who lost their jobs

Wagner Act 1935

• After NIRA was weakened by the Supreme Court, FDR turned to support this act

• during the GD workers often fired if they organized a union

• Established laws guaranteeing workers right to organize and bargain collectively, and created the National Labor Relations Board

American Federal of Labor (AFL)

• A new union devoted to the interests of industrial workers arose to challenge the traditional hold of the nation’s largest union

• created as a collection, or federation, of smaller unions representing the interests of skilled workers.

• Looked down on unskilled factory workers, many of whom were immigrants

Committee for Industrial Organization (CIO)

• growth of mass production in the 1920s, however, greatly swelled the ranks of unskilled workers.

• John L. Lewis, head of the United Mine Workers, recognized this opportunity.

• Lewis led a group that broke away from AFL in 1935 to form CIO

GM Sit-down Strike

• 1936 the United Auto Workers, which was part of the CIO, launched a new kind of strike.

• Workers at the General Motors (GM) plant in Flint, Michigan, simply sat down inside the factory and stopped working.

• Sit-down strike: required the strikers to stay at the factory day and night until the dispute was resolved.

  • They relied on supporters outside the factory to provide food and to look after their families at home.

• Could not use traditional methods to break the strike

• Any effort to take back the factory might turn violent.

  • Valuable property inside the factory could be destroyed, and the risk of negative publicity, such as images of workers being beaten or killed, was too high.

• State gov’t & police were of no help

• After a tense six weeks, GM finally gave in and agreed to recognize the union.

  • The workers had won.

Election of 1936

• FDR is re-elected

1937 Stock Drops Significantly Again

• FDR had hoped to cut back on government spending fearing the growing federal budget deficit

  • New spending was supported by the theories of British economist John Maynard Keynes - argued that deficit spending could provide jobs and stimulate the economy

Rural Electricity

• Roosevelt in May signed the Rural Electrification Act.

• It empowered the Rural Electrification Administration (REA) to loan money to farm cooperatives and other groups trying to bring electricity to people living outside of cities and towns.