IB History of America's - The Great Depression
Business Cycle: The natural fluctuation in the economy primarily driven by shifting demand for durable goods (consumer goods that are meant to last a long time) and capital goods (items used to produce other goods). During the late 1920s, the business cycle demonstrated a softening demand for homes and cars, which led to a fall in total spending by the summer of 1929 and caused businesses to cut production.
Installment buying: A form of excessive credit use where consumers purchased durable goods on credit, essentially buying items now with the promise to pay for them later. When individuals and businesses could no longer pay back these loans, it created a devastating chain reaction for the banking system.
Trickle Down Economics: An economic policy approach that involves providing tax cuts to businesses and the wealthy.
Keynesian Explanation: An economic theory proposed by British economist John Maynard Keynes which argues that the Great Depression was fundamentally caused by a massive fall in total demand. According to this explanation, the only way to achieve recovery was through large increases in government spending.
Federal Reserve: The central banking system of the United States. According to the "Monetarist Explanation" of the Depression (associated with Milton Friedman), the Federal Reserve's tight monetary policy was largely to blame. Fed officials failed to measure or watch the money supply and refused to respond to bank panics, leaving many banks reluctant to make loans because they feared the Fed would not support them.
International Explanation: The theory that the U.S. economic collapse was just one part of a larger global depression. This was driven by a complex, failing international debt structure from World War I; European allies like Britain and France could not repay their loans to American banks because Germany and Austria were unable to pay their war reparations. The crisis was further exacerbated by the rigid rules of the global gold standard, declining overseas demand for American products, and retaliatory tariff wars.
On-Margin: A speculative method of buying stocks using borrowed money. This excessive use of credit directly contributed to overvalued asset prices in the stock market during the 1920s.
Margin Calls: Demands from brokers requiring investors to immediately pay back the loans they used to purchase stock on margin. These calls began happening shortly after the stock market hit an all-time high on September 3, 1929, preceding the catastrophic crash in late October.
Prohibition During the worst years of the early Depression, people were unable to legally purchase alcohol to cope with their hardships. Shortly after taking office, Franklin D. Roosevelt supported the legalization of 3.2% beer as an interim measure to generate tax revenue. Prohibition was ultimately repealed when the Twenty-first Amendment was ratified in December 1933.
Harlem Renaissance Please note: The provided sources do not contain information regarding the Harlem Renaissance. You may need to consult outside materials for this topic.
Treatment of Immigrants/Minorities Minorities were often the "last hired, first fired," facing severe displacement as white workers took over low-paying jobs. In the South, African Americans faced systemic injustice, highlighted by the Scottsboro case in which nine black teenagers were falsely accused of rape and sentenced to death by all-white juries (though the Supreme Court later intervened). Mexican Americans (Chicanos) also faced intense job discrimination, leading an estimated 500,000 to leave the United States during the 1930s. Native Americans saw a shift in policy with the Indian Reorganization Act of 1934, which restored their right to own land collectively, though they remained the poorest demographic in the nation. While FDR's New Deal was not openly hostile and included a "Black Cabinet" of influential African American advisors, programs like the Civilian Conservation Corps (CCC) remained segregated, and the NRA tolerated lower wages for black workers.
Causes of the Great Depression & Stock Market Crash The Depression was caused by a combination of systemic vulnerabilities. Domestically, there was a lack of economic diversification, massive overproduction of agricultural and consumer goods, and severe wealth inequality (the richest 1% held 59% of the wealth, leaving the middle class too weak to sustain demand). An excessive reliance on credit and installment buying also created a fragile debt structure. Internationally, retaliatory tariffs and a complicated web of unpaid WWI debts and reparations caused global trade to collapse.
The stock market crash of October 1929 (Black Tuesday) was triggered by widespread speculative buying "on-margin" and subsequent margin calls. The crash wiped out billions of dollars and signaled the beginning of the Depression, but it was a symptom of these deeper issues, not the sole cause.
Hoover’s Reaction to Great Depression President Herbert Hoover initially favored "rugged individualism" and voluntarism, believing the economy would recover naturally. He urged businesses not to cut wages or lay off workers and asked private charities to handle relief, arguing that direct federal welfare to individuals would destroy their self-reliance. His reluctance to provide direct federal aid made him appear uncaring, leading the public to name shantytowns "Hoovervilles" and newspapers used for warmth "Hoover blankets".
Bonus Army In 1932, roughly 20,000 World War I veterans marched to Washington, D.C., demanding the early payment of military bonuses that were not scheduled to be paid until 1945. Hoover, wanting to balance the budget, denied their request and ordered the military—led by General Douglas MacArthur—to clear out their encampments. The army used tear gas, machine guns, and tanks to disperse the veterans, an event that further destroyed Hoover's public standing.
Roosevelt’s Reaction to Great Depression FDR campaigned on the promise of a "New Deal" for the American people, committing the federal government to active intervention through Relief, Recovery, and Reform. During his "First 100 Days," he called a special session of Congress, declared a national bank holiday to stabilize the financial system, and utilized radio "Fireside Chats" to successfully restore public confidence. Over his presidency, his policies transformed the federal government into a "broker state" that actively mediated between corporate interests, labor unions, and consumers.
Unemployment Rates Unemployment reached devastating levels, peaking at roughly 25% of the civilian workforce (about 13 million people) in 1933. Unemployment rates steadily declined from 1934 to 1937 due to New Deal relief programs, but they spiked back up to 19% during the "Roosevelt Recession" of 1937–1938 when the administration temporarily cut spending.
Smoot Hawley Tariff Passed in 1930, this was the highest tariff in U.S. history, placing a 31–49% tax on foreign imports in an attempt to protect American businesses. It was a massive failure; European nations quickly retaliated with their own tariffs, severely reducing international trade and worsening the global economic collapse.
Gold Standard The U.S. was initially tied to the rigid rules of the international gold standard, which prevented the Federal Reserve from expanding the money supply. To allow for a government-managed currency and to intentionally raise prices, FDR officially took the U.S. off the gold standard in April 1933.
Bank Failures Triggered by defaulted agricultural and consumer loans, the banking system completely collapsed. As panic spread, massive "bank runs" occurred where depositors rushed to pull out their cash. Between 1930 and 1933, 9,000 banks failed, wiping out 10 million savings accounts and shrinking the nation's money supply by more than a third.
Reconstruction Finance Corporation (RFC) Established by Hoover in 1932, the RFC was a federal agency designed to provide $1.5 billion in loans to troubled banks, railroads, and other large businesses. It proved highly ineffective because administrators were hesitant to actually spend the funds, and the public deeply resented it because it functioned as "trickle-down" economics without providing direct relief to starving individuals.
Agricultural Marketing Act Proposed by Hoover in 1929, this was the first major government program designed to help farmers maintain commodity prices through the use of cooperatives. It was ultimately ineffective at stabilizing the agricultural market.
Critics of the New Deal The New Deal faced fierce opposition from both sides of the political spectrum:
Conservatives & Big Business: Organizations like the American Liberty League (led by the Du Pont family) claimed the New Deal gave the government dictatorial powers, interfered with free enterprise, and bordered on socialism.
Dr. Francis E. Townsend: Felt the New Deal neglected the elderly and proposed a plan to give all Americans over age 60 a monthly pension of $200 (which helped inspire Social Security).
Huey Long: The populist Louisiana Senator argued FDR was not doing enough to redistribute wealth. He launched the "Share-Our-Wealth" Society, proposing to confiscate the fortunes of the rich to guarantee every family a $5,000 homestead and an annual wage.
Father Charles E. Coughlin: A popular Catholic priest and radio host who initially supported FDR but turned against him, claiming the president was too closely tied to banks and "money powers." He established the National Union for Social Justice and eventually turned to fascist and anti-Semitic rhetoric.
NEW DEAL PROGRAMS
SSA (Social Security Act of 1935): A landmark piece of legislation that established the basis for the modern federal welfare system. It provided immediate assistance (up to $15 a month) to the destitute elderly and incorporated working Americans into a pension system funded by a payroll tax, which would eventually provide retirees with $10 to $85 a month. It also created an unemployment insurance system financed by employers, and established federal aid for people with disabilities and dependent children. However, it initially excluded broad categories of workers, such as agricultural laborers and domestic servants (occupations disproportionately held by women and minorities).
NRA (National Recovery Administration): Directed by the flamboyant Hugh S. Johnson, this agency called on businesses to accept a temporary "blanket code": a minimum wage of 30 to 40 cents an hour, a maximum workweek of 35 to 40 hours, and the abolition of child labor. It also included Section 7(a), which promised workers the right to form unions and bargain collectively, though it lacked enforcement mechanisms. The NRA ultimately failed; industrial production actually declined, the codes were hastily written and dominated by large producers, and the Supreme Court declared the agency unconstitutional in 1935 (the Schechter case).
FDIC (Federal Deposit Insurance Corporation): Established by the Glass-Steagall Act of June 1933, the FDIC guaranteed all bank deposits up to $2,500. This was crucial in restoring public confidence in the banking system and preventing future bank runs.
SEC (Securities Exchange Commission): Created in June 1934 to police and regulate the stock market. Its establishment reflected the public's severe loss of respect for the financial community following the 1929 crash and subsequent fraud trials of Wall Street figures.
Wagner Act (National Labor Relations Act of 1935): Introduced by Senator Robert E. Wagner to replace the invalidated Section 7(a) of the NRA. It created the National Labor Relations Board (NLRB), providing workers with a crucial enforcement mechanism by giving the government the power to compel employers to recognize and bargain with legitimate labor unions.
WPA (Works Progress Administration): Established in 1935 and directed by Harry Hopkins, this was a massive work relief program for the unemployed with an initial budget of $5 billion. It kept an average of 2.1 million workers employed building and renovating 110,000 public buildings, 600 airports, 100,000 bridges, and 500,000 miles of roads. The WPA also notably funded the Federal Writers, Arts, Music, and Theater Projects, giving unemployed professionals in the arts a government salary.
CCC (Civilian Conservation Corps): FDR's favorite relief project, designed to provide jobs to millions of young men (ages 17-24) who could not find work in cities. Working in a semimilitary environment, they lived in camps in national parks and forests where they planted trees, built reservoirs, and improved agricultural irrigation. They were paid $30 a month and provided with food, shelter, and clothing. The camps were racially segregated and excluded women entirely.
TVA (Tennessee Valley Authority): An unprecedented experiment in regional planning established in May 1933. The TVA was authorized to complete the Muscle Shoals dam and build others to stop disastrous flooding and generate and sell electricity to the public at cheap rates. While it provided electricity to thousands and revitalized the region, the Tennessee Valley remained generally impoverished, and the TVA largely excluded African Americans from employment.
FERA (Federal Emergency Relief Administration): One of FDR's first acts, directed by Harry Hopkins. It provided cash grants directly to states to prop up bankrupt local relief agencies.
PWA (Public Works Administration): Established in 1933 to administer the National Industrial Recovery Act's spending programs. It gave federal money to state and local governments to construct roads, dams, and bridges. However, it only allowed funds to slowly trickle out, not pumping appreciable money into the economy until 1938.
Bank Holiday: On March 6, 1933 (two days after taking office), FDR issued a proclamation closing all American banks for four days. This paved the way for the Emergency Banking Act, which allowed the Treasury Department to inspect all banks before reopening only the sound ones. This immediate, drastic action effectively dispelled the nationwide banking panic.
AAA (Agricultural Adjustment Act): Passed in May 1933, its goal was to halt the downward spiral of farm prices by reducing agricultural surpluses. The government paid farmers subsidies to leave land idle, plow under crops, and slaughter livestock. While it helped raise farm prices, it primarily favored larger farmers and inadvertently encouraged planters to evict tenants and sharecroppers. The Supreme Court struck down its crucial provisions as unconstitutional in 1936.
Fair Labor Standards Act: Passed in 1938, this act established for the first time a national minimum wage, a forty-hour workweek with overtime, and strict limits on child labor (under age 16). Much like Social Security, its initial provisions excluded the great majority of women and minority workers.
Alf Landon: The moderate Republican governor of Kansas who ran against FDR in the 1936 presidential election. He waged a generally pallid campaign and lost in a massive landslide, carrying only two states (Maine and Vermont) and receiving just 36% of the vote compared to FDR's 61%.
Calvin Coolidge: The 1920s Republican President who famously declared, “The business of America is business”. His administration heavily favored government economic policies that supported big business, including trickle-down economics and tax cuts for the wealthy.
Dorothea Lange: A brilliant documentary photographer commissioned by the Farm Security Administration to chronicle the lives of ordinary people and the agrarian world during the 1930s. She is most famous for her carefully posed photograph of destitute people standing in a breadline beneath a billboard trumpeting the "American Dream".
Douglas MacArthur: The U.S. Army General ordered by President Hoover to violently disperse the Bonus Army (a group of protesting World War I veterans) from their encampment in Washington D.C. in 1932. Under his command, the military utilized cavalry, machine guns, tear gas, and tanks against the marchers.
Dwight D. Eisenhower: Please note: This personality is not mentioned in the provided sources. You may need to consult outside materials.
Eleanor Roosevelt: FDR’s wife and a highly influential advocate for women's rights, humanitarian causes, and racial equality. She proposed the "She She She" (FERA) camps to provide work for women, continuously pressured the federal government to ease discrimination against African Americans, and famously helped arrange for the Black singer Marian Anderson to perform at the Lincoln Memorial after the Daughters of the American Revolution barred her from their concert hall.
Frances Perkins: The first female cabinet member in the nation's history, appointed by President Roosevelt as Secretary of Labor. Emerging from the progressive era feminist tradition, she was instrumental in creating support for and shaping the Social Security Act of 1935.
Francis E. Townsend: An elderly California physician who led a movement of more than 5 million members criticizing FDR for neglecting the elderly. He proposed the Townsend Plan, which advocated for the federal government to give all Americans over the age of 60 a monthly pension of $200, provided they retired to open up jobs and spent the money in full each month. His movement helped build public support for the creation of the Social Security system.
Franklin Delano Roosevelt (FDR): A pragmatic Democratic politician from a wealthy New York family who was paralyzed from the waist down by polio. Easily defeating Herbert Hoover in the 1932 election, he implemented the sweeping "New Deal" to combat the Great Depression, utilizing optimism and radio "fireside chats" to restore public confidence. Under his leadership, the federal government transformed into a "broker state" that actively mediated between competing interest groups.
Huey Long: Known as "The Kingfish," he was a flamboyant populist Senator and former governor of Louisiana who completely dominated his state's politics. He eventually broke with FDR to propose the radical "Share-Our-Wealth" Plan, which sought to confiscate the surplus fortunes of the wealthiest Americans to guarantee every family a $5,000 minimum homestead and a $2,500 annual wage. He was assassinated in 1935.
Herbert Hoover: The conservative Republican President during the 1929 stock market crash. He favored "rugged individualism" and voluntarism, believing businesses should voluntarily maintain wages and charities should handle relief rather than the federal government. Widely blamed by the public for the economic collapse and his harsh treatment of the Bonus Army, his name became synonymous with the era's failures, spawning terms like "Hoovervilles" (shantytowns) and "Hoover blankets" (newspapers).
George S. Patton: Please note: This personality is not mentioned in the provided sources. You may need to consult outside materials.
Mary McLeod Bethune: An influential African American leader who served as the director of Negro activities for the National Youth Administration (NYA). She was a highly active member of FDR's informal "Black Cabinet," a network of African American officeholders who consulted on issues of racial justice.
Charles E. Coughlin: A Catholic priest from the Detroit suburbs who built a massive national radio audience. Initially a warm supporter of FDR, he turned into a fierce critic claiming the president was too sympathetic to "money powers," and established the National Union for Social Justice to demand banking nationalization and monetary reform. He later became notorious for his sympathy for fascism and his outspoken anti-Semitism.
Canada 1920s/Depression
R.B. Bennett: A wealthy corporate lawyer from Calgary and the Conservative Prime Minister. He initially opposed federal relief, believing welfare should be left to provinces and municipalities. He is most remembered for creating deeply unpopular, military-style federal relief camps for single men (paying them only 20 cents a day) and became a symbol of the era's failures (e.g., the "Bennett Buggy"—cars pulled by horses because people couldn't afford gas). His 1935 "Bennett New Deal" (proposing minimum wages and unemployment insurance) was deemed unconstitutional by the courts and seen by the public as "too little, too late," leading to his massive electoral defeat in 1935.
Mackenzie King: A career politician and pragmatic liberal Prime Minister. He was initially highly conservative with spending, famously giving a 1930 speech where he declined to give even a "five-cent piece" to Tory provincial governments for relief. After returning to power in 1935, he dismantled Bennett's relief camps and slowly built Canada's social safety net, culminating in the historic Unemployment Insurance Act in 1940.
Wheat pool: A reference to the Canadian Wheat Board, established in 1935 to stabilize catastrophic drops in agricultural commodity prices. The crash in wheat prices (from roughly $1.60 per bushel in 1929 to under $0.40 in 1932) decimated the Prairie provinces and was the major domestic cause of Canada's depression.
Dust Bowl: Known in Canada as the "dirty thirties," this severe drought devastated the Prairie provinces, specifically Southern Saskatchewan and Alberta. Successive years of crop failures and fierce winds blew the topsoil away, leaving the region entirely dependent on government aid.
CCF (Saskatchewan): The Co-operative Commonwealth Federation, founded in 1932. It was a democratic socialist political party that demanded the nationalization of industries and the expansion of social services, arguing that Bennett's conservative policies were deeply unfair to workers and farmers. It was the forerunner of today's New Democratic Party.
1937 Padlock Law: (This term is not mentioned in the provided sources. Please consult your class notes).
Bennett Relief Camps: Federally-run labor camps established for unemployed single men without families. They operated under strict, army-like conditions and paid laborers only 20 cents a day, fueling immense resentment. They were eventually dismantled by Mackenzie King in 1936.
On-to-Ottawa Trek: A massive 1935 protest where roughly 1,000 men from British Columbia relief camps boarded freight trains heading to Ottawa to demand better pay and an end to the horrific camp conditions. Bennett ordered the RCMP to stop the protesters, which resulted in the violent Regina Riot.
German reparation debts: A major structural cause of the international depression. European allies (like Britain and France) could not repay their massive WWI loans to American banks because Germany and Austria were unable to pay their war reparations. When this international debt structure collapsed, global trade plummeted, severely dragging down Canada's heavily export-dependent economy.
Treatment of immigrants/minorities: Canada shared a fierce stigma against receiving relief ("the dole"). To discourage dependency, aid processes were deliberately humiliating; relief workers inspected homes, and families were often given non-cash relief to strip away their dignity. Additionally, the severe economic distress allowed fascist groups to find a small foothold, such as Adrien Arcand, who headed a fascist organization in Quebec.
Tariffs: Canada's economy relied heavily on exports and was devastated when trading partners blocked market access. After the U.S. passed the Smoot-Hawley Tariff in 1930, Bennett retaliated by raising Canadian tariffs to protect local industries, but this ultimately caused further damage to exports. In 1932, Bennett hosted the Imperial Economic Conference in Ottawa to negotiate preferential trade agreements exclusively within the British Empire.
The leadership of the United States and Canada during the Great Depression followed strikingly similar trajectories, beginning with wealthy, conservative leaders who favored limited government intervention (Herbert Hoover and R.B. Bennett), followed by pragmatic, liberal leaders who fundamentally expanded the role of the federal government (Franklin D. Roosevelt and Mackenzie King).Here is a detailed comparison of their backgrounds, philosophies, policies, and legacies:
The Conservatives: Herbert Hoover (US) & R.B. Bennett (Canada) Both Hoover and Bennett were wealthy, self-made corporate men who held power during the initial devastating years of the economic collapse, and both shared a deep reluctance to provide direct federal welfare,.
Philosophy on Relief: Hoover (a mining engineer and Republican) favored "rugged individualism" and voluntarism. He believed the government should foster private charity and local cooperation, arguing that direct federal handouts would destroy American self-reliance,. Bennett (a corporate lawyer and Conservative) similarly insisted that welfare and relief were strictly the responsibilities of local municipalities and provinces, not the federal government.
Economic Actions: Both implemented policies that were heavily criticized for favoring businesses over starving individuals. Hoover created the Reconstruction Finance Corporation (RFC) to pump federal loans into troubled banks and railways, which the public resented as an inefficient "trickle-down" measure,. Bennett established federally-run relief camps for unemployed single men, but they were run under strict, army-like conditions and paid laborers a degrading 20 cents a day. Furthermore, both leaders worsened the collapse of global trade through protectionist policies; Hoover signed the disastrous Smoot-Hawley Tariff in 1930, and Bennett retaliated by raising Canadian tariffs that same year,.
Response to Protests & Downfall: Both leaders violently suppressed massive protests by desperate citizens. Hoover ordered the military (under General Douglas MacArthur) to tear-gas and bulldoze the Bonus Army—WWI veterans marching on Washington for early bonus payments,. Bennett ordered the RCMP to stop the On-to-Ottawa Trek (a protest by relief camp workers), resulting in the Regina Riot.
Public Perception: Consequently, both men were widely despised and became synonymous with the era's failures, spawning mocking terms like "Hoovervilles" (shantytowns), "Hoover blankets" (newspapers used for warmth), and "Bennett Buggies" (cars pulled by horses because owners couldn't afford gas),,,. While Hoover stubbornly stuck to his conservative principles, Bennett attempted a last-minute "Bennett New Deal" in 1935 (proposing minimum wages and unemployment insurance modeled after FDR). It was dismissed as "too little, too late" and mostly struck down by the courts,,. Both suffered massive landslide electoral defeats,.
The Reformers: Franklin D. Roosevelt (US) & Mackenzie King (Canada) FDR and Mackenzie King replaced their conservative counterparts and, through highly divergent leadership styles, laid the foundations for the modern welfare state in their respective nations.
Backgrounds & Personalities: FDR was a product of the New York aristocracy who had been paralyzed from the waist down by polio. He was a charismatic pragmatist and experimenter who utilized radio "fireside chats" to project infectious optimism and restore public confidence,,. Mackenzie King, by contrast, was a career politician who was entirely uncharismatic, cautious, calculating, and sometimes considered boring,. King had actually been Prime Minister at the start of the crash but was voted out in 1930 after his infamous "five-cent speech," where he stubbornly refused to give federal relief money to Tory provincial governments. He returned to power in 1935.
Approach to Relief and Reform: FDR believed the federal government must take immediate, active control. In his "First 100 Days," he pushed through a whirlwind of massive experimental legislation, closing banks to stabilize the financial system and creating a massive "alphabet soup" of agencies like the CCC, PWA, FERA, and TVA to provide jobs and relief,,. Later, his "Second New Deal" produced the Social Security Act and the Wagner Act to empower labor unions. King, conversely, took a much slower, incremental approach. Upon returning to power, he dismantled Bennett's hated relief camps, increased financial transfers to the provinces, and slowly constructed a social safety net, ultimately culminating in the historic Unemployment Insurance Act of 1940,.
Legacy & Critics: FDR was incredibly beloved, winning four terms and transforming the US government into an active "broker state" that mediated between corporate interests, organized labor, and agriculture,. He faced intense criticism from the right (the American Liberty League, which called him a socialist) and the populist left (Huey Long and Father Coughlin, who claimed he didn't do enough to redistribute wealth),,,,. Mackenzie King, while lacking FDR's overwhelming public adoration, was highly respected as a steady, dependable leader. Like FDR, King faced critics from both sides: the business community opposed his expansion of government power, while the democratic socialist CCF party continuously attacked him for being too conservative and slow regarding social reforms