History - USA in the 1930's (Depression, FDR, New Deal)

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Why did the US stock exchange collapse in 1929?

Overproduction, Unequal Distribution of Wealth, Tariff Policies, and Financial Speculation.

Overproduction

Once Americans had bought cars, radios and other consumer goods, the demand for these items fell. Factories were forced to produce fewer goods. Therefore they had to cut back on the work force. Therefore fewer people could afford to buy these consumer goods.

Unequal Distribution of Wealth

During the boom years, more than half of Americans lived ‘below the poverty line’. Although the economy was generating lots of money, the money was not going into the pockets that needed it most. The people at the bottom couldn’t buy the consumer goods. The rich were the ones who suffered the stock market.

Tariff Policy

Tariffs protected US businesses at home. However, when American businessmen tried to sell their grain and goods abroad, they found that foreign governments had imposed similarly high tariffs on American goods. This made it very hard for US businessmen to sell American goods abroad.

Financial Speculation

During the 1920s more and more Americans were buying shares in companies. It was possible to buy shares ‘on the margin’, which meant you paid 10% of the cost in cash and borrowed the remaining 90% from other banks. Wall Street was enjoying a ‘bull market’ and share prices kept rising, investors expected to be fully able to sell their shares for a profit and settle their debts. This form of gambling on the stock market was called ‘speculation’. Even the poor were buying shares.

Thursday, 24th October 1929

Later known as Black Thursday. Nearly 13 million shares were sold. nobody wanted to buy and prices dived. A group of bankers spent ~$250,000,000 buying shares to encourage investors to buy. It worked, and prices stopped falling.

Monday, 28th October 1929

There was renewed panic. Over 9 million shares were sold at falling prices.

Tuesday, 29th October 1929

Panicked investors sold 16 million shares for whatever price they could get. Prices tumbled. Shareholders lost a total of $8 billion on that day alone.

Long term effects of the Wall Street Crash

USA became trapped in a cycle of Depression

More than 100,000 businesses shut down from 1929-33

People had to sell their homes and possessions

Opposite of the cycle of prosperity

Short term effects of the Wall Street Crash

In 1929 nearly 700 banks collapsed.

Shareholders lost $8 billion

Share prices fell for the next few weeks

How did the Great Depression affect Unemployment?

13 million people lost their jobs by 1932.

In the steel making city of Cleveland, 50% of workers were unemployed by 1931. In Toledo, a car making town, it was 80%

12,000 people a day were losing their jobs by 1932 as 20,000 companies went out of business.

Around 250,000 Americans stopped paying their mortgages in 1932 alone and most were evicted from their homes and took to living on the streets.

How did the Great Depression affect farms?

With so many unemployed, farmers couldnt get food prices for their food. Consequently, many couldnt pay their mortgages. By 1932, one in 20 farmers had been evicted.

For those who managed to hold onto their land, a drought combined with unsustainable farming methods turned the land into a ‘Dust Bowl’

Huge dust storms blew away millions of acres of dry topsoil, making it impossible to farm

Hundreds of landowners moved away into the farming states of California and Oregon, hoping to work on fruit farms. Most were left disappointed as some towns banned migrants and fruit farmers were suffering too.

Hobos and Hoovervilles

Some unemployed workers travelled the country, looking for work. They were named hobos and usually travelled from town to town or illegally on the top of trains. Other homeless people moved to urban waste grounds and built shacks with boxes, scraps, cloth and pallettes These caps (with no proper toilet system or sanitation) were called Hoovervilles, a sarcastic reference to the President who many thought wasnt doing enough.

Breadlines

Many unemployed people were reduced to begging or picking over rubbish dumps to earn a few cents a day by selling bottles and cans. Charities set up soup kitchens where the homeless and unemployed could get soup and bread. The huge queues were called breadlines. In 1932, the charity YMCA was giving away 12,000 free meals a day in one small district of New York.

Rugged Individualism

Hoover believed that people could overcome their problems through their own hard work, without government help. In January 1930, he confidently announced that they had ‘passed the worst’.

Road & Dam Building Programmes

Created jobs in construction. In 1932 Hoover made $200 million available for states so they could help the unemployed. Some states felt like the Federal Government had no right to meddle in their affairs, and only $30m was given out.

Hawley-Smoot Tariff

Tariff introduced by Hoover in 1930, which placed a higher tax on foreign imported goods. He hoped this would make Americans buy cheaper US goods on sale, but other nations taxed US goods, so American exports dropped dramatically.

How did some groups react to the problems of the Depression?

Some united to organise protests calling for change. Poor farmers in Iowa used guns and pitchforks to chase away government officials who tried to evict farm owners who couldnt pay their mortgages.

Bonus Army

The biggest protest by far took place during the Summer 1932 when 25,000 unemployed ex-soldiers marched to Washington D.C and asked for their war pension or ‘bonus’ to be paid early. Hoover set the army on them, who drove away the ‘Bonus Army’ away with guns, tanks, and tear gas.

Herbert Hoover (Pre-Depression)

At 21 he worked as a gold miner, and he was not a good public speaker. Orphaned at 8 and raised by 2 uncles. Had an excellent early career in politics as a Republican, doing much to feed the starving after WWI. Became President when many were making a lot of money and could afford luxuries.

Franklin D. Roosevelt (Pre-Depression)

An only child with very rich parents, and was very spoilt. Educated at home by private tutors. Studied law in Harvard. Had an important job organising the navy in WWI, but contracted polio in 1921, and almost died. He never fully regained the use of his legs. Went back into politics in 1928 as a Democrat.

Herbert Hoover (Depression)

Didn’t do a lot to begin with. Thought of Americans as rugged individuals who could overcome any challenge without help and could achieve success through their own hard work. Let America recover on it’s own. Took a few years for him to finally take action. His beliefs made him look uncaring and made him unpopular. His election trains were often pelted with eggs and tomatoes.

Franklin D. Roosevelt (Depression)

Spent $20 million (tax) to help the unemployed. He promised America 3 R’s, calling his idea a New Deal for the USA. His disability gained him empathy votes. Voters liked him for overcoming personal obstacles. They thought he had the right experience, and saw hope in him.

Roosevelt’s 3 R’s

Relief: Help for the old, sick, homeless and unemployed.

Recovery: Government schemes providing jobs.

Reform: Making America great for ordinary people and preventing another Depression.

Why did HH lose the 1932 Election?

Popular Democrat Policies: FDR promised to end prohibition and the social evils it created. Promised a New Deal to get America back on its feet. Travelled through America to campaign.

Roosevelt’s Personality: He was a very good public speaker. Americans felt like they could trust him, and he seemed warm and friendly.

Unpopular Republican Policies: Republicans were determined to continue Prohibition, and their policies werent making any direct action.

Unpopularity of Hoover: He seemed cold and distant, and he seemed to think that the Depression was just a blip.

Lame Duck Months

The 4 months after an Election where the new President cannot begin working, allowing the old President to finish off their work.

FDR’s promise speech

During his election campaign, FDR had promised the American people a ‘New Deal’. In his inaugural address, he pledged ‘action and action now’. In his first 100 days, Roosevelt worked closely with a group of experts called the Brain Trust. Together, they created a new set of laws aimed to help America overcome the Depression. As the economy was in such a poor state, Congress realised that drastic measures needed to be taken and Roosevelt was given greater powers to bring about change. This special session of Congress lasted exactly 100 days and during this time new laws were passed to deal with the Emergencies.

The Banking Crisis

Roosevelt immediately closed all the banks for a ‘four day holiday’ and rushed an Emergency Banking Act through Congress in just 8 hours. Only the banks that the government decided were well run and honest were allowed to reopen. These banks were supported by government loans to help them to continue operating and to reassure people that their money would be saved. The public’s confidence in the banking system was restored and the customers redeposited $1 billion shortly after the banks reopened.

Loss of Confidence

Eight days after his inauguration, he gave the first of his famous radio broadcasts, which were known as ‘Fireside Chats’. He explained his actions in a simple and direct way, and asked Americans to work with him. His broadcasts had astonishing success, and earned the people’s trust.

The need to raise money

FDR introduced the Economy Act, which cut the pay of everyone working for the government and the armed forces by 15%. This saved nearly $1 billion.

FCA

Farm Credit Administration:

Lent money to farmers who couldnt keep up with payments. $100 million loaned out in 18 months.

HOLC

Home Owners Loan Corporation:

Gave loans to people who were struggling to pay mortgages. Helped 300,000 in their first year.

CWA

Civil Works Administration:

Designed a short-term scheme to give as many people as many jobs as possible (4 million over the Winter of 1933-34). Some useful work, such as building roads was carried out, but many of the jobs such as sweeping up leaves in parks or getting out-of-work actors to give free shows, simply gave people something to do.

CCC

Civil Conservation Corps:

Unemployed 18-25 year olds were employed in the countryside to plant trees, dig canals, clear footpaths, etc. They could sign on for periods of 6 months, which could be renewed if they could still not find work. The money earned generally went back to the men’s families. round 2.5 million young men were helped. It started a programme to control mosquitoes and ended malaria in America.

AAA

Agricultural Adjustment Agency:

Set quotas to reduce farm production in order to force prices gradually upwards. It paid farmers to produce less and destroy some of the food they had already produced. The AAA also helped farmers to modernise and to use farming methods that would help conserve and protect the soil. In cases of extreme hardship, farmers could also receive help with their mortgages. Between 1933 and 1939 farmers income doubled. However, food was being destroyed at a time when millions were starving.

NRA

National Recovery Administration:

Set up by the NIRA. Aimed to increase workers wages so they had more to spend on goods, increase prices of factory goods to help factory owners make more profit and employ more men, and to give workers a fairer deal in the workers, including better working conditions and shorter hours. Codes were drawn up for each industry which owners and business men were encouraged to sign. These codes fixed prices for goods, minimum wages and forbade child labour. Workers were given the right to join trade unions. Businesses that signed up could use the NRA’s sign, and publicity campaigns encouraged the public to buy from businesses with this sign.

PWA

Public Works Administration:

Used government money to build schools, roads, dams, bridges and airports. These would be vital once the USA had recovered, and in the short term they created millions of jobs.

FERA

Federal Emergency Relief Agency:

Was given $500 million to help homeless Americans who were penniless and on the brink of starvation. Most of the money was used to increase the number of soup kitchens and to provide clothing, schools, and employment schemes.

TVA

Tennessee Valley Authority:

Was set up to solve the problems of poverty, underdevelopment and soil erosion in states along the Tennessee River. Federal control allowed it to achieve more than state governments could. Provided work building dams, and electric power stations along the Tennessee River, one of the poorest areas in America.

Priming the Pump

FDR’s theory behind many of his Alphabet Agencies was simple - the government creates jobs by spending money. Once the workers earn wages, they start buying goods. Firms and businesses then start hiring new workers; these new workers spend money, and so on. Some people used the phrase ‘priming the pump’ to describe this idea.

Why did the Rich oppose the New Deal?

To help pay for the New Deal, FDR made rich people pay more taxes, which most of them didnt like. They thought the way some Alphabet Agencies paid people to plant trees, paint building and stock rivers with fish was a waste of money.

Why did Business Owners oppose the New Deal?

Business owners did not like the government interference in their affairs. They were angry about Roosevelt’s support for trade unions and the campaign to raise wages. They disliked having to pay social security contributions for their workers. They objected to schemes like the TVA, which they said competed with privately owned businesses, and criticised the codes of the NRA as confusing. In 1934, a group of business leaders formed the Liberty League, opposing the New Deal.

Why did the Supreme Court oppose the New Deal?

America’s highest court. In 1935, the Supreme Court ruled that the AAA Alphabet Agency was illegal. The court said that giving help to farmers was a matter for state governments, not the Federal Government. As a result, all the help that the AAA gave to farmers stopped. They also declared many of the NRA codes illegal.

Why did the Republicans oppose the New Deal?

Many Republicans were rugged individuals and were horrified by how the New Deal was dominating peoples lives. Some said Roosevelt was behaving like a dictator, others said all this government help would make people unable to stand on their own two feet. Some worried America would be ruled like Russia. They objected to the huge cost of the New Deal, claiming that most of the money was being wasted.

Why did Huey Long oppose the New Deal?

He had been elected the Governor of Louisiana in 1928. Won the election by promising to increase taxes for the rich and use money to build more roads, hospitals, and schools. Ran the state with corruption. Attacked the New Deal for not doing enough for the poor. He proposed a ‘Share the Wealth’ scheme. He wanted all personal fortunes of over $5 million to be confiscated and the money to be shared out. He said every American family should get at least $4000-5000. Also proposed a minimum wage, free education, and pensions.

Why did Francis Townsend oppose the New Deal?

He proposed that everyone over the age of 60 should get a pension of $200 a month, provided they spent the money during the month and quit their job. He thought this would provide more jobs for the youth, create a demand for goods, and help the old who had been neglected.

Why did Charles Coughlin oppose the New Deal?

He broadcast his ideas on the radio to 40 million Americans on Sunday during the ‘Golden Hour of the little Flower’. His praise for Roosevelt quickly turned to attacks. Accused Roosevelt of not tackling the problems of the poor. He set up the National Union for Social Justice which attracted millions across America. Audience largely faded at 1940.

What happened in the 1936 Election?

In November 1936, FDR faced his second election. The Republican party chose a very popular politician, Alf London, to run against him. In speeches, London called FDR’s New Deal a waste of taxpayers money. He outlined different sections of society who he felt hadnt benefited from FDR’s presidency. But FDR won easily, getting more votes than any other President in US history.

Did the New Deal help create a New Society?

It helped millions of Americans.

Social Security Act set up a national system of social welfare and pensions for the elderly.

Anyone out of work could receive government help.

In 1938 some commented America was sliding downhill again.

FDR acknowledged that the New Deal came to an end.

Did the New Deal help Industrial Workers?

The number of workers going on strike decreases in 1936 and 1938

Alphabet Agencies provided work for skilled and unskilled workers.

Millions got at least a basic wage.

Wagner Act allowed workers to join unions.

Big businesses remained powerful and unions were treated with suspicion by employers.

Strikes were ended with striking workers being attacked by thugs.

Did the New Deal help unemployment and the economy?

2.5 million 18-25 year olds got work in the CCC, one of FDR’s best known Alphabet Agencies.

New Deal created jobs.

Prices of crops raised.

Loans available to save farmers from eviction.

There was always 1/10 people unemployed in 1930’s USA.

Millions were still very poor.

Help only went to large scale farmers and small ones did not see benefit.

Did the New Deal help African Americans?

200,000 African Americans gained jobs in the CCC.

An African American (Mary McLeod Bethune) was appointed an important post in government.

Did not end the severe discrimination - many Alphabet Agencies continued it.

African American’s werent allowed to live in new areas.

Roosevelt didnt end racism out of fear of losing support.

Did the New Deal help Women?

Many found work with the Alphabet Agencies or on the SSA.

No New Deal programmes aimed towards women.

Still faced discrimination.

NRA codes set wages lower than mens.

10,000 out of 2.5 million women employed.

Did the New Deal help Native Americans?

Helped Native Americans increase the land they owned.

Government loans were provided.

Indian Reservation Act of 1934 gave Native Americans the right to manage their own affairs/court laws.

Many still lived in great poverty and suffered discrimination - a situation which still persists.

Changes in Unemployment due to the New Deal

New Deal gave relief to people as unemployment fell, helping the USA. Rose again gradually in 1938, but fell thanks to the War.

Changes in Gross National Product due to the New Deal

Peaked in 1929, then dropped rapidly. The New Deal gave a boost but it couldve gone down without the War.

Changes in Business Failures due to the New Deal

Peaked around 1932 then dropped severely as many businesses werent left to close. New Deal gave relief and trust.

Changes in Bank Failures due to the New Deal

Spiked in 1933 (Emergency Banking Act) then fell below 100 for the next few years. New Deal gave relief.

Was the New Deal a success?

Some people say that while the New Deal created lots of jobs, it failed to solve unemployment completely. Some critics argued that the New Deal ‘interfered’ too much in citizens lives and wasted money on work programmes. Defenders of the New Deal helped groups in society that had previously been neglected by the government - farmers and the very poor, for example.

SSA

One of FDR’s proudest achievements was the Social Security Act (SSA) of 1935, America’s first system of social welfare. It included a national system of pensions for the elderly, widows, and disabled people and payments for the sick and unemployed. However, millions remained very poor throughout the 1930s.