Notes on The Great Depression and New Deal

Prelude to the Great Depression

• Stock Market Crash of 1929

  • Buying on the margin inflated stock prices.
  • Investors borrowed money from brokers, leading to high debt levels.
  • If the market crashed, brokers demanded repayment.
  • Resulted in a 90% loss in the Dow Jones index within three years.
  • By 1930, 60% of Americans lived in poverty.

• Economic Factors Contributing to the Crash

  • High levels of debt due to easy credit.
  • Low interest rates incentivized businesses to borrow excessively.
  • Agriculture already in recession, affecting sales in other sectors like steel, railroads, textiles, and auto industries.
  • Increased unemployment led to less consumer spending, decreasing demand and jobs, creating a self-reinforcing cycle.

The Great Depression

• Bank Failures and Economic Collapse
  • By 1933, approximately 25% of banks had failed.
  • 9 million savings accounts lost, wiping out personal investments.
  • 400,000 farms foreclosed; many families migrated westward for work.
  • Natural disasters such as the Dust Bowl exacerbated hardships.
  • Hawley-Smoot Tariff of 1930 instituted a trade war.
  • Hoover's laissez-faire policy: limited government intervention and minimal aid to consumers despite providing $2 billion to businesses.

Election of 1932

• Political Shift
  • Hoover's unpopularity highlighted by shantytowns known as Hoovervilles.
  • Franklin D. Roosevelt, optimistic and wealthy, rose to prominence after surviving polio.
  • Won a decisive victory with the slogan, "The only thing we have to fear is fear itself".

The New Deal: A New Era of Government Intervention

• Objectives and Philosophies

  • Aim to address the powers of big business and redistribute wealth.
  • Questions arose about the effectiveness of capitalism versus possible socialism.
  • Government increased its regulatory role, abandoning laissez-faire while maintaining capitalism.

• Main Themes of the New Deal

  • Boosting demand to stimulate the economy; purchasing power was emphasized.
  • Stabilizing key sectors: banks and agriculture.
  • Infrastructure projects aimed at creating jobs, fostering future growth, and providing social welfare.

FDR's First 100 Days

• Key Legislation Passed
  • JOBS AND RELIEF:
  • March 31: Civilian Conservation Corps established.
  • May 12: Federal Emergency Relief Act passed.
  • RURAL REFORMS:
  • May 12: Agricultural Adjustment Act introduced.
  • May 18: Tennessee Valley Authority Act enacted.
  • FINANCIAL REFORMS:
  • March 9: Emergency Banking Act.
  • June 16: Glass-Steagall Banking Act aimed to separate commercial from investment banking.
  • Insured deposits through FDIC to restore public trust in banks.

Outcomes of the New Deal

• Establishment of Key Programs

  • Civilian Conservation Corp (CCC): employment in public works projects.
  • National Recovery Administration (NRA): established minimum wage and child labor laws.
  • Social Security: retirement benefits and unemployment insurance created to support families.
  • Notable figures like Frances Perkins made significant contributions, particularly regarding labor rights.

• Long-term Effects

  • The New Deal's effectiveness was debated; it relieved suffering but did not end the Depression.
  • Created stability within capitalism without radical changes.
  • Recognized the importance of consumer demand; however, it largely catered to the existing societal structures favoring certain demographics over others.

Retrospective of the New Deal

• Social Impact
  • Social Security and unemployment benefits primarily targeted established workers, with many marginalized groups excluded (women, Black individuals).
  • Contribution and benefit systems reinforced gender and racial inequalities.

Global Context of the Great Depression

• Worldwide Economic Trends
  • The Great Depression was not isolated to the United States; it affected global economies.
  • Trade wars led to deteriorating international markets.
  • Rise of extremist political responses: fascism in Italy, Spain, and Germany as reactions to the economic chaos.