The Great Depression

Causes of the Great Depression

  • High tariffs and war debts
  • Stock market crash and financial panic
  • Monetary policy
  • Unequal distribution of wealth   * Income     * Top 1% owned 35% of nation’s wealth     * Bottom 20% owned 4% of the nation’s wealth   * Fiscal policies     * Lower income tax rates increased disposable income fueling installment plans and speculation
  • Over production   * Agricultural     * Mechanization and less European demand     * Farmer income in 1929 was $273 compared to $750 avg. annual income     * Price of farm land decreased from $69 per acre (1920) to $31 per acre (1930)   * Industrial     * While production increased by 32%, wages only increased 8%     * Under-consumption due to less demand for durable goods
  • Financial Industry   * Wall Street     * Speculation inflated stock values: Dow Jones peaked at 381.17 on 9/3/1929     * Black Thursday on 10/24/1929       * Market loss 11% due to massive set-off       * Big banks purchased blue chip stocks at inflated prices to boost confidence     * Black Tuesday on 10/29/1929       * Dow Jones dropped 12% losing $14 billion in one day     * July 8, 1932 - Dow Jones avg. was 41.22   * Banking Panics     * Unregulated banking investment and growth       * 20% of bank deposits lost with bank failures     * Farm foreclosures and contractionary monetary policies     * Bank runs - Americans withdrew $6.8 nillion   * Monetary Policy     * Pursued contractionary monetary policies to reduce speculation     * Refused to provide liquidity to banks suffering bank runs, allowing them to fail
  • Foreign Policies   * Lack of American financial capital disrupted reparations and war debt repayments   * Hawley-Smoot Tariff     * Intended to encourage domestic industrial consumption and protection for domestic agriculture     * Foreign nations retaliated with higher tariffs     * Exports declined 78%     * International trade decreased from $36 billion to $12 billion

Hoover and Associationalism

  • Voluntary cooperative partnerships between businesses and government to provide for those in need
  • Encouraged concept of self-reliance, volunteerism, restraint   * Rugged individualism: no help from the state or government

Reconstruction Finance Corporation (RFC)

  • January 1932
  • Emergency loans from the federal government   * Loans provided to corporations, banks, industries (railroads, farms) to stimulate economy and recapitalize private financial systems
  • Provided loans to local and state public works
  • No relief for the avg. American

Depression by Numbers

  • Dow Jones Industrial Avg.   * 1920: 381.17   * 1932: 41.22   * The avg. stock prices dropped over 90%
  • Price Indices   * Consumer prices fell 25%   * Wholesale prices fell 32%
  • Unemployment   * 1929: 3.2%   * 1933: 24.9%   * Unemployment rates higher in specific regions
  • GDP   * 1929: $103.6B   * 1933: $56.4B
  • Bank Failures   * 1929: 659 banks ($200 million)   * 1930: 1,300 banks ($853 million)   * 1931: 2,294 banks ($1.7 billion)
  • Income   * National income fell $80B to $50B   * Salaries declined 40%     * Manufacturing wages down 60%   * Farmers’ income declined 55%
  • Industrial production   * Down 26% in 1930: 51% by 1932
  • Investments   * $10B in 1929: $1B in 1932
  • Fertility Rates   * 1928: 93.8   * 1933: 76.3

Soup Kitchens and Breadlines

  • American families struggled to put food on the table
  • Churches and charity organizations
  • Federal government financed soup kitchens

Hoovervilles

  • Displaced Americans set up shanty towns and tent cities
  • Hoover terms:   * Hoover blanket - old newspaper   * Hoover flag - empty pocket turned inside out   * Hoover leather - cardboard for worn-out shoe   * Hoover wagon - car pulled by horses

Bonus March

  • WWI veterans marched on D.C. demanding early payments of pensions
  • Federal troops sent to break up Hoovervilles

The Dust Bowl (1930-1936)

  • Causes   * Overgrazing   * Improper farming techniques: failure to implement dryland farming   * Increased cultivation   * Drought in 1934
  • Dust storms   * Black Sunday - April 14, 1935     * 300 million tons of topsoil blown across southern Plains region

Agricultural Migration

  • “Okies”   * Over a million Oklahoma and Midwest farmers displaced by Dust Bowl   * Migrated west to California     * Lived in shanty towns on outskirts of large farms
  • Mexican Repatriation   * Estimates between 200,000 to 2 million repatriated Mexicans     * 60% determined to be birthright U.S. citizens   * Government and media scapegoated them for Depression     * Marijuana and Reefer Madness     * Marijuana Timeline

Election of 1932

  • Democrat   * Franklin Delano Roosevelt (FDR)     * Criticized Hoover for government intervention
  • Republican   * Herbert Hoover
  • A Realignment Election   * End of the Republican dominance of the Fourth Party System   * Begin of the Democrat dominance of the Fifth Party System

Fifth Party System (1932-1968)

  • Democrats   * New Deal Coalition     * Catholics, Jews, Blacks, Progressive Intellectuals, Urban Machines, Populist Farmers, White Southerners, Labor Unions, Low-Income, Immigrants
  • Philosophy   * Social liberalism/social democracy     * Regulation of the market economy and expansion of civil and political rights   * Social justice   * Keynesian economics     * The central belief of Keynesian economics is that government intervention can stabilize the economy     * Increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression
  • Dominated Congress and American public for the next 36 years
  • Republicans   * Pro-business   * Economic conservatives   * Social conservatives   * Northeast, parts of the Midwest

Franklin D. Roosevelt (D) (1933-1945)

  • Great Depression
  • New Deal   * Relief   * Recovery   * Reform
  • Good Neighbor Policy   * Cooperation and trade in Latin America rather than military force
  • Arsenal of Democracy
  • Pearl Harbor
  • World War II

21 Amendment (1933)

  • Repealed the 18th Amendment   * Only amendment to be ratified by state conventions
  • End of Prohibition
  • Reasons   * Development of black market for alcohol   * Increased violence due to rise in organized crime   * Loss of revenue, industry, and employment   * Speakeasies replaced saloons

FDR’s Message of Hope

  • FDR had no specific plan for the Depression
  • Calming the nation
  • Brain Trust   * Political and economic advisers and academics to the President
  • Federal budget   * Roosevelt believed in the normal federal budget (to be balanced) and the emergency budget   * Pursued deficit spending - Keynesian economics

Economic (E) and Political (P) Systems

  • Capitalism (E) - trade and industry are controlled by private interests for profit rather than the state   * Personal property - movable property   * Private property - tools of production monopolized by few
  • Anarchism (P) - no state as it always places on class over another (hierarchies must be justified)
  • Socialism (E) - means of production are owned/regulated by the community as a whole   * Ex. Zapatistas
  • Communism (E) - no state or government, class, or money where people are provided what they need by the community   * Ex. USSR, China, North Korea → Dictatorship of the Proletariat
  • Totalitarianism (P) - the state exerts total power over its people   * Ex. Mussolini’s Italy, Stalin’s Russia, Nazi Germany, Empire of Japan, PRC under Mao, North Korea
  • Authoritarianism (P) - the people must adhere to strict obedience to the authority of the state; limited freedoms   * Ex. Cuba, China, Egypt, India, Iran, Singapore, Vietnam, Russian Federation, North Korea
  • Fascism (P) - authoritarian regime focusing on ultra-nationalism and dictatorial power
  • Neo-liberalism (E/P) - transfer control of economic factors from the public to the private   * Favor deregulation, free trade, fiscal austerity, privatization, reduction in government spending   * The state creates a framework to protect and ensure this is allowed   * Both the Democrats and the Republican parties are neoliberal

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