IB history - Great Depression

Republican Policies of the 1920s

• Tax cuts for everyone

• took laissez-faire approach: based on believe in self regulating nature of markets and there was little gov regulation

• commitment to tariff policies limited trade and little gov regulation, leading to risky banking practices

Overproduction

• Overproduction occurs when too much of a certain good is produced, surpassing demand and causing low prices.

• Initially, high demand for goods like radios and cars led to increased production and hiring, boosting the economy.

• However, when production exceeds demand, prices and incomes decline, leading to a recession.

• During WWI, increased food production and subsidies for farmers led to overproduction of crops - found difficult to pay debt when prices dropped

• As a result, falling prices and decreased incomes caused economic instability.

Banking Practices

• solution to overproduction and wages not keeping up wiht prices was to let product be purchased on credit. (Buy now pay later

  • cause business to start losing money from selling those items on credit

• banks allowed depositors to take out loans to buy stock and bankers took part of deposit to speculate on the market themselves 

  • when the stock market crashed, the money from the down payments weren’t able to be paid back and the depositor money began to disappear

Federal Reserve Policies

• federal reserve was created to stabilize the banking industries by regulating and insect the banks, making sure they had enough cash, and regulate the amount of circulating money known as the monetary policy

• Monetary policy

  • stimulate growth with by lowering interest rates, decrease amount of money required in reserve, increase lending, 

  • Slowed growth (inflation): raise interest, increase amount of money, and decrease lending 

Bank Runs

Loss of confidence in banks, mass withdrawals, and cash reserve depletion, contributing to economic instability.

• people loss confidence in the stocks and the security of their money being held in banks

• customers raced tot heir banks to withdraw their saving, and closed account

• left banks wiht cash reserve, which put them on a brink of failure

Stock Market Crash

Rapid price drops, Black Tuesday in oct 1929, buying on margin, and magnifying losses during the Great Depression.

• stock market prices rapidly dropped from mass selling

• Crashed on October 29 1929 - black tuesday - regarded as the start of Great Depression b.c it signaled loss and confidence in financial system

  • people lost money in banks  

• buying on margin: purchasing shares with down payment 

  • those who bought on margin panicked as well due to stocks falling

  • magnified the losses

Hoover's Failures

• was seen as a “do nothing” president and lost credibility with voters 

• Criticized for being inadequate and ineffectice 

• his commitment to laissez faire ecnomic led him to believe it would self correct itself which proved wrong

Volunteerism

• belief that charities, churches, state, and local gov should provide relief and assistance to the poor and not fed gov

  • most were not equipped to deal wiht the number of people in need, so voluteerism didn’t not help address the problems if they could not do much

Reconstruction Finance Corporation (RFC)

Providing loans to failing businesses, but mainly benefiting the wealthy and failing to aid those in need.

• established to make loans to failing banks, insurance, railroad, and construction companies 

• made about $2 billion in loans

  • 50% of the loans only went too 7% if the borrows where most was the wealthy

  • did not help the ones in need and small businesses and individuals gained little and still struggled 

Smoot-Hawley Tariff

Increased tariffs leading to retaliatory measures, reducing global trade and worsening the economy.

• raised traffics by 50% on European goods

• ended up jabbing European countries retaliate causing US exports to fall by almost 70%

• lowered global trade and cause further damage to us economy

Revenue Act of 1932

Raised business taxes, leading to lower profits, layoffs, and increased unemployment during the Great Depression.

• raised business taxes and on every bracket 

• business facing lower profits had to now pay more taxes, meaning less money to pay to works and now had to lay off workers = more unempl

Balancing the Budget

Spending cuts leading to layoffs, unemployment, reduced tax revenue, and higher deficits during the Great Depression.

The New Deal

Set of Relief, Recovery, Reform programs by FDR to aid the unemployed (Relief), stimulate economic growth (recover), and prevent future depressions through measures (reform)

Court Packing

FDR's proposal to expand the Supreme Court to counter resistance to New Deal policies.

Critics of the New Deal

• American Liberty League - conservative org oppose to new deal policies 

• Dr. Francis E. Townsend- advocated for a pension plan for elderly, influencing creation of social security 

• Father Charles E. Coughlin - intitall support Roosevelt but later turned against and citizens that new deal was not enough to help the poor 

• Senator Huey P. Long - proposed radical wealth redistribution policies and didn’t think FDR was doing enough for the poor 

Causes of the Great Depression in Brazil

Collapse of coffee prices, declining exports demand, and foreign investment withdrawal.

• collapse of coffee prices

  • highly dependent on coffee exports, which accounted for a substantial portion of its export earnings.

  • The oversupply of coffee led to a sharp decline in prices, resulting in decreased export revenues and economic hardship for coffee producers.

•  declining demands for Brazilian exports 

  • Reduce demands for exports like coffee and cocoa and rubber

  • export earnings declined, leading to a contraction in economic activity and increased unemployment.

• , and withdrawal of foreign investment 

  • Foreign investment played a crucial role in Brazil's economic development, 

  • Due to depression, economic uncertainty and financial instability caused investors to withdraw their capital from Brazil, further exacerbating the country's economic challenges

  • hindering the country's ability to finance development projects and stimulate economic growth...

Import Substitution Industrialization (ISI)

Strategy to promote domestic industrialization, reduce dependence on imports, protect the economy, and create job opportunities.

• ISI was a strategy to reduce dependence on foreign imports by promoting domestic industrialization

• reduce dependence = protect economy from fluctuations of markets

• involve tarries, subsidies, and other protection measures

• encouraged growth of domestic manufacturing

• creation of domestic industries

• created job opportunities which reduce unemployment and alleviate poverty

Getulio Vargas' Response in Brazil

Economic nationalism, social reforms, labor laws, and modernization efforts during the Great Depression.

• Aim was to modernize Brazil’s economy and strengthen the role of the state 

• He centralized power, implemented protectionist economic policies to promote industrialization, and introduced labor reforms to appease the working class. While his policies contributed to economic modernization, they were also accompanied by political repression and social inequalities.

Impact of the Great Depression on African-Americans, Women, and Minorities

1. African-Americans

   1. faced high unemployment rates and discrimination 

2. Women

   1. limited job opportunity and wage disparities even when new deal provided employment 

3. Minorities

   1. experiences discrimination adn economic hardship, 

New deal - FDIC (federal deposit insurance corp)

1. created to insure individuals bank deposits and restore public confidence

2.  Glass seagull separated commercial and investment banking to prevent  future crisis 

New deal - PW (public works administration)

1. aimed at stimulating industrial recovering and providing employment through construction project 

New deal - TVA (Tennessee valley authority)

1. created to provide flood control, electricity, and ecnomic development in Tennessee valley region 

New deal - CCC (civillian conservation corp)

1. provided employment and shelter for young men in conservation and infrastructure projects

New deal - NRA (national recovery administration)

1. established codes of fair competition for business and workers to promote recovery through cooperation 

new deal - Social security act

1. Created a system of old age pensions, unemployment insure, and welfare benefits