The Depression and the New Deal

Smoot-Hawley Tariff Act June 1930

- Passed by Hoover to combat the GD

- Created 40% tariffs on imported agricultural and industrial goods

- Passed senate by 2 votes

- Intended to promote and stimulate american business over foreign ones

- European nations abandoned free-trade, leading to less exports and imports ( International trade fell by $1.2 Bn in 1931)

Other foreign policy passed by Hoover to combat GD

-Postponed war debt by 18 months in hope europe would do the same ( response to europe repudiating)

- Intended to release finances for investments

- USA didn't receive any finances and received unwillingness to trade as uncertainty during the lame-duck presidency period.

The Reconstruction finance corporation (1932)

- Allowed to lend up to $2Bn to rescue financial institutions that were in distress

- Attempt to rebuild or insure small banks that had failed or gone bust

- 90% was supposed to go to small or medium banks

- 70% went to banks in towns with a population under 5000

- 50% of all loa ns went to the 7% of borrowers who happened to be the biggest banks

- Of the first $61 million loaned, 41 million went to 3 institutions.

Emergency relief and construction act (1932)

- Authorised the RFC to loan up to $1.5 Bn to states for public works

- designed to create temporary employment and improve public facilities

- However was limited in efficiency as states had to declare bankruptcy and the works had to pay off the loans

- Led to construction of the Hoover Dam

1932 election results statistics

- FDR won 58% of the popular vote vs Hoovers 40%

- FDR won 472 electoral college votes vs Hoovers 59

Reasons people voted for FDR in 1932

- He was good at public speaking and had a warm and friendly manner

- He travelled thousands of miles across america on his campaign to meet millions of people. Americans felt he cared about them

- The democrats had positive policies to deal with the GD

- His determination had help him overcome POlio and personal difficulties so americans felt her could overcome their problems

- He promised direct action for example relief from the federal governme nt to help those in need and schemes for unemployed young people

- He promised to end prohibition and the social evils it created (gangsterism)

- He promised a 'New Deal' to get industry back on its feet and get people back into jobs and create a fairer society

- Americans felt they could trust him

Reasons Americans did not vote for hoover in 1932

- The republicans seemed determined to carry on prohibtion

- Republican policies were not doing enough to help find a way out of the depression, to provide more relief or jobs

- He was unpopular. He seemed to be cold and distant he did not appear to care about the thousands of suffering citizens

- He thought the depression was just a small blip, and insisted that prosperity was right around the corner

- His shameful treatment of the Bonus marchers and the nicknames 'Hoovervilles' and 'Hooverblankets' gave people a dislikeable impression of him

- The republicans relied on business to get the USA out of the GD but the americans no longer trusted buisness

Agricultural Adjustment Administration, AAA (1st New Deal)

- Tried to stablise agricultural prices, by reducing production and introducing subsides, provided by agricultural companies taxation

- Reduced surplus to increase prices, by 1935 35million acres had been removed from cultivation

- People didnt like witnessing the destruction of excess food as some starved

- Sharecroppers still didnt benefit from this

- Farm income rose form 4.5 Bn to 6.9Bn in 1935

- Ruled unconstitutional by the supreme court in 1936

Civilian Conservation Corps, CCC (1st New deal)

- Set up works programmes in national parks forests and public lands, supervised by the army

- Manual Labour offered to young men (17-24) for 0.5-2 years

- Lived on camps and were paid $1 a day plus lodging and food. Became available to 2500 of the Bonus army

- 250,000 people off the unemployment list

- 3 million people participated

- 125,000 miles of road built

- planted 3 million trees

Civilian Works administration, CWA (1st new deal)

- Temporary administration to help millions through the harsh winter of 1933-4

- Hired over 4.2 million workers in 4 months, using the $400 million budget

- Built 400 airports and 225,000 miles of roads

- Provided emergency relief

- Only a temporary administration and so they would become unemployed again.

Federal emergency relief administration, FERA (1st new deal)

- Intended to give unemployed respect not just handouts

- $500 million budget

- Provided work resulting in over 5000 public buildings

- Oversaw state relief for the unemployed and threatened to withdraw federal funds if refusal to take part (GA, OR)

- Tried to keep morale high in unemployed

National Recovery Administration, NRA (1st new deal)

- Issued codes of practice for all industries

- Aimed to ensure fair competition, wages and hours of work

- Banned labour under age 16

- Allowed unions to collectively bargain for wages

- When a company adopted their codes, they were awarded a Blue eagle sign

- Issued 557 codes of practice.

Public works administration, PWA (1st new deal)

- Created as a result of the national industrial recovery act

- aimed to provide long term solutions to unemployment and the GD

- Used Pump-priming to help

- Created public works programmes like school and road building

Tennessee Valley Authority, TVA (1st new deal)

- Covered 7 states that were known for flooding, poor infrastructure, standard of living and high liability to flood

- Created a network of 20 dams to increase agricultural production, revitalise the reforestation and generate hydroelectric power

- Helped an area of 40,000 sq miles and 2 million people

- Previously only 2% of farms had access to electricity

Federal Housing Administration, FHA (1st new deal)

- Created to stimulate building industry by providing small loans for home construction

- Offered federal insurance to protect the ability to repay mortgages on new houses

Home Owners Refinancing Corporation, HORC (1st new deal)

- Offered new loans/mortgages at low interest rates over long periods.

- Designed to help people keep their homes from reposession

- Would often only cover 50% of mortgages so not always effective.

How does pump-priming work?

- Government spends money on alphabet agencies

- More jobs are created

- More money is spent on goods

- Demand for products is increased

- Production is increased

- Providing more jobs and the cycle repeats

Roosevelts first 100 days

- 15 bills for the new deal passed

- aimed to use pump priming

- USed active government and intervened into the economy, something the previous rep. gov had neglected

Aims of the first new deal?

1. Relief - Set up agencies which provided temporary immediate relief to the homeless and unemployed

2. Recovery - Help the businesses, industry and agriculture to stabilise and get moving again

3. Reform - Measures taken to provide permanent stability and prevent the depression from reoccurring

Opposition to the 1st new deal - The rich

- Didnt appreciate the higher rates of tax they were facing

- Opposed the extensive government spending

Opposition to the 1st new deal - Trade unions

- Believed that more should be done to protect workers, as NIRA regulations were often ignored

- Wanted to form the Committee for industrial organisation (CIO)

Opposition to the 1st new deal - Republicans

- Believed in Lassiez-faire attitude towards the economy

- Opposed many policies as they were by the democrats in general

Opposition to the 1st new deal - Francis Townsend

- Concerned with the treatment of the elderly, who could claim pensions in only 20 states

- Proposed that all people over 60 should recieve $200 a month, Paid for by a 2% sales tax

- Owned a club of similarly minded people, which reached 500,000 members by 1935

Opposition to the 1st new deal - American Liberty League

- Do not believe that private property and businesses should be regulated

- Belief that welfare and relief are the steps to communism

- Belief that government was wasting the publics money

- Peaked at 125,000 members in 1935

Opposition to the 1st new deal - Huey Long

- Governor of Louisiana

- Established the 'share our wealth society'

- Promised each family an allowance of $5000 and a minimum income of $2000.

- Paid for by taxation of the rich and confiscation of any wealth over $5 million

- 27,000 share our wealth clubs by 1935

Opposition to the 1st new deal - Supreme Court

- Majority republican

- Declared 11 of 16 cases unconstitutional

- Overturned laws that dealt with issues impacting only certain states

Opposition to the 1st new deal - Father Coughlin

- Radio show host with 35 million listeners

- Set up 'National league for social justice'

- Wanted to reform the monetary system

- Critical of Jewish members of FDRs administration (antisemetic)

Reforms of the financial system - Emergency Banking Act (1933)

- Ordered a National Bank holiday from 6th-9th March 1933

- Used funds from the RFC to help stop all banks collapsing

- US treasury investigated and only allowed the most trusted banks to reopen on 10th March (5,000 of them)

- Reconstruction finance company became the largest bank in USA

- Restored confidence if banks reopened, people knew they were safe and could be trusted

Reforms of the financial system - Glass-Steagall Banking Act (1933)

- Separated commercial from investment banking

- Created the Federal deposit insurance corporation (FDIC) which guaranteed all bank deposits up to $5000

- Ensured peoples saving were safe, most people didn't have more than $5k so felt secure in financial institutions

Reforms of the financial system - Federal securities act (1933)

- All new share purchases had to be registered with the FTC

- Created the Securities exchange commission which regulated all share transactions and stock exchanges in the US

-Reduced fraudulent speculation

Reforms of the financial system - Silver purchase act (1934)

- Government purchased all domestically produced silver at an artificially high price

- aimed to raise prices by increasing the amount of silver in US coinage to increase the money supply to encourage more economic activity

- Was ineffective, didn't do anything

Reforms of the financial system - Gold Reserve act (1934)

- Devalued the US dollar against the rate of Gold to make US exports cheaper

- This ended all private holding and use of gold as money, and the government called in all gold held by private hands

- Was ineffective at solving the GD

Wagner act (1935) - The second New deal

- Unions had rights for collective bargaining

- Workplaces could join trade unions, following a private ballot

- National Labour Relations board was established, comprised of three individuals who ensured unions and workplaces acted correctly

- Excluded agricultural, service, public employees and those employed outside of interstate commerce

- Also excluded black americans, hispanics and women

Guffey-Snyder Act (1935) and Guffey-Vinson Act (1937) - The second New deal

- Enabled a national coal commission to set minimum wages and hours

- removed unfair practices and competitions

- Provisions of labour removed in G-V act

- Initial act was struck down by the supreme court

- Unpopular due to its socialist values

Fair Labour Standards act (1938) - The second New deal

- Prohibited child labour

- Created minimum wages and overtime pay

- 700,000 people had a pay increase

- Increased profits and wages leading to less strike action

- HAd to work 40 hours or more to qualify

- Only impacted interstate commerce worth over 500K

- Did not include executives or seasonal work

Social security act (1935) - The second New deal

- Pensions of $10-85 per month created

- Unemployment benefits of under $18 per week for 10 weeks

- Excluded Farm workers, domestic servants and the self-employed

The revenue act (1935) - The second New deal

- Income tax rates at 79% for incomes over $5 million

- Only 10% of americans earned over $3,200 per year

- Increased tax on property

- Only raised $250 million per year (not that much in grand scheme)

- Criticism from the rich that FDR was a 'class traitor'

Works Progress Administration (1935)

- Employed 8 million workers (1/3 of workforce)

- Construction of schools, roads, hospitals, parks

- Helped women and black americans, by funding them (Orson Welles, funded by the WPA was the first black oscar winner)

- Spent $11Bn

Help for farmers - The second New deal

- Resettlement administration relocated 45,000 farming families from dustbowl areas

- Rural electrification administration gave low interest loans to provide electricity

- 1930- 10% had electricity 1945-40%

Opposition to the second new deal - Wealth inequality

- Wealth and economic power were concentrated with a small number of people

- In his second inaugural address in jan 1937, FDR claimed 1/3 of USA was still poor

- Henry Ford, Rockerfellers and Du Ponts had millions of dollars

Opposition to the second new deal - Political Competition

- 1936, Communist presidential candidate Earl Browder received a mere 79,000 votes

- 1936, Socialist presidential candidate, Norman Thomas got

Opposition to the second new deal - Union threat

- Wagner act 'encouraged' industrial action

- In 1936 there had been over 2000 strikes involving 778,000 workers. By 1937 this had risen to 4,470, involving 1.9 million workers

- December 1936, auto workers occupied the factory owned by the Cleveland F sher company and carried out a month long sit-in preventing the factory from opening

- Many unions led by the CIO, organised strikes eg United automobile workers' union

Opposition to the second new deal - Anti-capitalism

- Wanted government ownership and sharing out of USA's wealth equally

- Socialists and communists wanted to destroy the current economic system that allowed private ownership of property, business, agriculture and industry

Why was the second new deal necessary?

- Europe was recovering way faster than the USA from the GD

- Supreme court had overturned 11 alphabet agencies, many of these administrations needed to replaced

- Lots of opposition, gaining lots of public support (Father coughlin 35 milliion listeners)

When did the second new deal start?

June 14th 1935

The election of 1936 key details

- Democratic party became the majority

- Democrats broadened their constituency by appealing to small farmers in the midwest, urban political bosses, ethnic blue collar workers, jews, intellectuals and african americans

- Democrats got 60% of the votes, gaining 46 states

- Decline in socialist and communist voters, as trade unions representation (wagner act) and the social security act

1938 Midterms

- Democrats lost 7 senate seats and 70 House of representatives seats

- Due to lack of recovery at that point.

Roosevelt recession, 1937-38

- Democrats cut government spending, which caused

- Stock market crash where 17 million shares were dropped

- Work relief by WPA was increased by 500%

- Employment in manufacturing reduced by 23%

- Revealed that the GD was far from over and that the pump priming was essential to stimulate the economy at that point in time.

Judiciary Reform Bill (1936)

- FDR attempted to introduce this in order to gain a more left wing supreme court

Stated that:

- President could replace a judge when they reached 70 and didnt retire in 6 months

- Looked to increase total judges to 15, increase of 6

- FDR claimed it was to ensure they could keep up with the workload, but clearly was an attempt to 'Pack the court' as none of the SC were appointed by FDR

- Senate rejected the bill 70:20

- Unpopular with public who viewed this as a dictatorial move

- Some judges were pressured to retire (Van devanter)

- Others began to uphold legislation such as national labour regulations and the social security acts