chapter 10 & 11

Chapter 10 and 11 Test Bank Notes

Economic Problems of the 1920s

  • Factors Hiding Economic Issues: In the 1920s, Americans increasingly purchased consumer goods on credit, creating a facade of economic prosperity while hiding underlying vulnerabilities. Wages were rising in tandem with productivity, creating optimism and fueling consumer spending. However, this reliance on credit led to unsustainable debt levels, ultimately contributing to the economic collapse that followed in the 1930s.

Causes of Bank Failures during the Great Depression

  • Bank Failures: One of the primary causes of bank failures during the Great Depression was the phenomenon of "bank runs," where too many depositors attempted to withdraw their funds simultaneously, resulting in insolvency. Additionally, banks had heavily invested in the stock market, which had crashed in 1929, further destabilizing their financial standing.

European Reaction to the Hawley-Smoot Tariff

  • International Response: The Hawley-Smoot Tariff, which raised tariffs on imported goods, drew significant ire from European nations. In retaliation, these countries imposed their own protective tariffs, which stifled international trade and deepened the global economic downturn, leading to a decline in exports and a rise in unemployment on both sides of the Atlantic. Tariffs are taxes imposed by a government on goods and services imported from other countries. They are used to increase the price of foreign products, making domestic products more competitive, as well as to generate revenue for the government.

John Maynard Keynes' Economic Views

  • Keynesian Economics: John Maynard Keynes was a pivotal figure who argued that the Great Depression was not merely a part of the regular economic cycle but a result of inadequate government intervention. He believed that injecting government spending into the economy could help stimulate demand, boost production, and ultimately foster recovery.

Dust Bowl Migration

  • Impact of the Dust Bowl: The Dust Bowl, a period of severe dust storms and drought that plagued the Great Plains, displaced thousands of families, particularly affecting those in agricultural sectors. These refugees, often referred to as "Okies" (though many were from Texas and Oklahoma), migrated westward, particularly to California, in search of work and better living conditions.

Unemployment Rates

  • Urban Unemployment Trends: During the Great Depression, urban unemployment rates soared, peaking at around 25% by 1933. The significant loss of jobs in manufacturing and service sectors exacerbated the economic challenges faced by American cities.

Taxpayers Protection League

  • Community Solidarity: The Taxpayers Protection League emerged as a grassroots organization wherein members pooled their resources together to prevent evictions, reflecting the strong sense of community and collective action that arose amidst widespread economic hardship.

Contributions to Dust Bowl

  • Agricultural Practices: Intensive farming practices, such as over-plowing and the removal of protective grasses that held the soil in place, led to soil erosion and contributed significantly to the Dust Bowl phenomenon, worsening the plight of rural farmers during the economic crisis.

Impact on African American Unemployment

  • Disproportionate Impact: The unemployment rate for African Americans during the Great Depression was approximately double that of the national average, resulting in heightened poverty and limited access to job opportunities within both urban and rural communities.

President Hoover's Reaction

  • Cautious Leadership: President Herbert Hoover's response to the escalating economic crisis was characterized by caution. He believed that the economy would eventually correct itself without significant government intervention, a view that was increasingly at odds with the reality of growing distress among Americans.

Reconstruction Finance Corporation (RFC)

  • Purpose and Impact: The RFC was established in 1932 to provide financial support to banks, railroads, and other businesses in order to stimulate economic activity. By providing loans, the RFC aimed to restore public confidence in banks and help sustain business operations during the economic downturn.

Public Sentiment towards Leadership

  • Desire for Change: As the Great Depression worsened, public sentiment towards President Hoover shifted dramatically. Many Americans yearned for new leadership and solutions, feeling that Hoover’s policies had failed to adequately address the growing crisis.

Failure of Volunteerism

  • Limitations of Volunteerism: The concept of volunteerism, which encouraged communities and businesses to take collective action to alleviate hardships, faltered due to individual self-interest and insufficient widespread participation, highlighting the limitations of relying solely on voluntary efforts during an economic crisis.

Bonus Army March

  • Protests for Veterans' Rights: In 1932, the Bonus Army, a group of World War I veterans marching to demand early payment of bonuses promised to them, faced violent dispersal at the hands of federal troops. This event highlighted the desperation of many Americans and compounded public anger towards the federal response to the Great Depression.

Factors Contributing to Rural Farmers' Poor Conditions

  • Economic Pressures: Falling prices for crops and livestock created severe economic strain on rural farmers, exacerbated by drought conditions and the Dust Bowl, leaving many in dire financial situations and unable to sustain their livelihoods.

Policy of Volunteerism

  • Dependence on Local Assistance: Hoover’s policy of volunteerism promoted less reliance on government assistance, advocating for increased charitable contributions. However, this approach proved inadequate in the face of widespread need during the Great Depression.

Reasons for Early Banking Sector Trouble

  • Confidence Erosion: Banks were among the first financial institutions to feel the effects of the stock market crash, which led to a widespread loss of depositor confidence and a rush to withdraw funds, prompting many banks to fail and increasing financial instability.

Information on Dust Bowl Migration

  • Destination for Migrants: The majority of Dust Bowl migrants flocked to California's central valley, driven by the hope of finding employment in agriculture and better prospects, seeking respite from the environmental and economic devastation in their home regions.

Global Impact of the Great Depression

  • International Dimensions: The Great Depression not only had devastating effects within the United States but also curtailed investment capital flowing to Europe, contributing to an economic spiral that challenged the stability of many European nations.

African American Unemployment Rate

  • Economic Disparities: The rate of unemployment among African Americans remained sharply elevated, reflecting systemic racial discrimination that was prevalent in both employment practices and economic opportunities, further entrenching socioeconomic disparities.

Hoover's Beliefs

  • Economic Philosophy: Hoover's belief in limited government intervention extended to his understanding of the economic downturn, as he maintained that market forces and individual initiative should guide recovery efforts rather than reliance on federal assistance.

Bonus Army's Protest Reasons

  • Advocacy for Veterans: The bonus marchers were driven to protest Hoover’s veto of the early bonus payment, mobilizing in Washington D.C. to demand economic justice and recognition of their service to the nation.

RFC Purpose

  • Stimulating the Economy: The RFC's role was to issue loans that would assist banks and businesses to maintain operations and restore the flow of credit within the economy, with the broader aim of fostering economic recovery during a time of unprecedented fiscal distress.

Collapse of Banks

  • Mass Withdrawals: Many banks experienced catastrophic failure at the outset of the Great Depression due to massive withdrawals by depositors who lost faith in the banking system, which intensified the financial crisis.

Hawley-Smoot Tariff Effects

  • Trade Implications: The adverse effects of the Hawley-Smoot Tariff rippled through the global economy, instigating similar protective measures from countries worldwide, significantly impacting international trade relationships.

Stock Market Crash of 1929

  • Investor Panic: The stock market crash of 1929 was marked by an overwhelming lack of investor confidence, leading to a dramatic and rapid divestiture of stocks, which marked the onset of the Great Depression.

Discrimination Faced by Minorities

  • Racial Inequality in Employment: During the Great Depression, both African Americans and Mexican Americans faced intensified discrimination, often being the first to be laid off and the last to be hired, exacerbating their economic hardships and social marginalization.

Federal Response to Economic Collapse

  • Government Initiatives: In response to the economic collapse, the federal government initiated several programs aimed at job creation and economic recovery, laying the groundwork for future economic policy and assistance during crisis situations.