The Great Crash, the Depression and the New Deal policies, 1920–41

Flashcards about the Great Crash, the Depression, and the New Deal policies, 1920-41.

Stimulus of First World War

Increased demand for agricultural and industrial products and loans to Britain and France.

Impact of ending of First World War

Some factories had to change from munitions to peacetime products, farm incomes fell as other countries recovered, unemployment rose, falling prices, and high interest rates – lack of investment.

Industrial development in 1920s

Automobile industry, electricity industry and its impact on other industries, USA took markets formerly held by Germany and Britain.

Agriculture During and After WWI

Did well during First World War but hit by ending of First World War due to over-production and falling prices.

Mass production and oversupply

Mass-production saturated the market, problems when demand fell after 1929, and over-production in agriculture.

Republican presidents 1921–33

Lacked understanding of the post-war international economy and let market forces rule.

Government policies assumptions

Government should not regulate industry or agriculture, privately owned businesses were the key to US wealth, and individuals, not governments, were responsible for health, employment.

Growth of consumerism

Demand for new products, such as refrigerators, radios, cars, entertainment, rapid growth in consumer credit, and stock market boom during 1920s.

Problems in the US economy during 1920s

Politicians and businessmen failed to see potential problems, unequal distribution of wealth and income, political instability in overseas markets, and high tariffs hitting US exports.

Main features of the Great Crash, October 1929

Increased interest rates, decline in investment, speculation by unregulated banks, insurance companies and businesses, and declining confidence in stock market.

Collapse of the financial system

Banking crisis and closure of New York stock exchange.

Mass unemployment and its social impact

Mass unemployment and decline in law and order, many people lost their homes., and lack of welfare state.

Hoover’s attitude

Felt it was not government’s responsibility to intervene, lacked the means to force Congress to take action, and blamed the crisis on other countries.

Hoover’s actions

Persuaded Federal Reserve Bank to increase money supply, Smoot-Hawley Tariff Act 1930, insisted on remaining on the gold standard, and increased taxes.

Hoover’s other actions

Agricultural Marketing Act, Federal Home Loan Bank Act, Reconstruction Finance Corporation (RFC), Relief and Reconstruction Act, and Bank Credit Act.

Response of industry

Collapse of business confidence and lack of investment.

Reasons for Roosevelt`s election victory in 1932

Many Americans blamed Hoover and Republicans for the crisis, Roosevelt seemed to offer hope and optimism, charisma and use of radio broadcasts, united Democratic party, and offered a ‘New Deal’.

Roosevelt’s strategies

Establishment of Brains Trust, Appointment of moderate Republicans to the cabinet, Fireside chats aimed at restoring confidence.

Roosevelt’s actions

Emergency Banking Act, Economy Act, Farm Relief Act (Agricultural Adjustment Act, AAA), Civilian Conservation Corps (CCC), Emergency Relief Administration, National Industry Recovery Act.

Support for agriculture

Government regulation of production and prices, helped to ease rural poverty, bankruptcies and unemployment.

Industry – the work of the NRA

Stabilised prices, minimum wage, 40-hour working week, and conservation projects to reduce unemployment.

Banking, finance and stock market

Regulation of banks, powers of Federal Reserve Bank increased, and regulation of utilities.

Support for the unemployed

Focus on providing jobs.

Emergency Relief Appropriations Act

Injected $4 billion into the economy and provided jobs in labour-intensive projects.

Social Security Act

Unemployment and pension insurance and first step towards creating a welfare state.

1935 Banking Act

Increased power of Federal Reserve Bank.

Successes of the New Deal

GNP and real incomes increased, 1933–37 – unemployment fell from 25% to 14%, no more stock market or banking collapses, steady growth in agriculture and manufacturing, and confidence restored.

Weaknesses of the New Deal

Unemployment rose again, prices of farm produce remained high, and government borrowing increased.

Roosevelt’s political strategies

Good communicator – use of radio and press and ability to work with various groups.

Roosevelt re-elected in presidential election 1936 due to

Popularity of New Deal, criticism of Supreme Court, support from trade unions and African Americans.

Return of recession – possible reasons

Part of normal business cycle , less investment by banks due to new regulations, cut back on federal spending in attempt to balance budget, and businesses unwilling to invest.

Divisions within the administration

Some wanted to balance the budget and some wanted to spend even more.

Opposition from the Supreme Court

Supreme Court revoked 11 other New Deal Acts as unconstitutional.

Opposition from the liberal left

Wanted government to spend more and wanted even greater regulation of the economy.

Opposition from the conservative right

Conservative Coalition, Hoover’s opposition to the New Deal, Southern Democrats in Congress, Banks, businesses and the press.

Roosevelt’s responses to opposition

Failure of ‘Court Packing’ Plan and Roosevelt’s skill in predicting and dealing with opposition to New Deal.