Lecture 8: The Great Depression Part 1

The Great Depression and the New Deal (1932-1938)

Introduction

Franklin Delano Roosevelt (FDR) promised to remember the "forgotten man" during the 1932 presidential election.
The New Deal was an unprecedented use of governmental authority and power.
Political debate centered on the extent and nature of government intervention.
Herbert Hoover and FDR had different visions of how the government should respond.
Hoover preferred minimal government intervention.
FDR initiated public works programs and social reforms.
Policies by Hoover and Roosevelt transformed the federal government's role in American society.
The New Deal did not end the Depression; World War II did.
It was a period of significant legislative activity.
Farmers, migrants, and industrial workers demanded a New Deal.
Organized labor and populist politicians supported government intervention.
The Great Depression saw ordinary Americans find their political voice.

Focus Questions

What factors contributed to the Great Depression?
What was the human toll of the Depression?
How did the economic crisis affect American psychological health?
How did it affect notions of masculinity (breadwinner role)?
What was FDR's vision of the presidency and executive powers?
How did FDR's governing philosophy differ from Hoover's and laissez-faire presidencies?
What were the goals of the New Deal?
How did the New Deal change Americans' relationship with the federal government?

Herbert Hoover

Hoover is often unfairly blamed for inaction during the Depression.
He offered more federal assistance than any prior president but opposed direct relief to individuals.
Hoover's belief in individualism was shaped by his personal story
Orphaned at age nine, shaped ambition to be self-sufficient.
During World War One, Hoover was a humanitarian, ran the Food Administration, and organized relief missions.
He won the 1928 election by a landslide.
Hoover was a poor public speaker with a lack of charisma.
He believed government should guide, not manage, the economy.
Hoover felt Americans had a responsibility to serve the community.
He envisioned a cooperative, voluntary approach to economic problems.
Hoover wanted government to organize meetings for industrialists, labor, and farmers to craft agreements.
His approach aimed to address overproduction, price wars, and labor strikes.
Hoover's refusal to directly aid individuals marked the end of a 19th-century vision of government.

Economic Problems of the 1920s

The economic downturn of 1929 took the country by surprise.
Some industries (textiles, mining) suffered from overproduction and falling demand.
By 1929, industries like automobiles, construction, and appliances struggled.
Cooling demand was a factor; ripple effects when automobile demand decreased.
Unequal distribution of income: corporate profits rose 62% (1923-1929), while worker wages rose only 8%.
Limited purchasing power of working-class Americans contributed to the financial crisis.
High tariffs protected American companies but led to retaliatory tariffs and reduced overseas markets.
Higher prices and lack of currency flow led to under consumption.
American farmers enjoyed boom times during World War One because they fed Europe.
The government offered generous prices for their crops.
When the war ended, demand fell, leaving farmers with debts and falling crop prices.
Farmers had expanded enterprises and were saddled with large farms and mortgages.
Farmers were overproducing, and crop prices went down.
Less money in circulation led to job and wage cuts.
Companies lost money, leading to further cuts.
Conditions led to a self-perpetuating cycle, making the Depression more likely.
The stock market crash in October 1929 triggered economic depression when the value of stocks plummeted.

Stock Market Crash of 1929

Before the crash, the stock market promised easy profits.
Investors buy stocks, own pieces of the company, and receive dividends.
By the late 1920s, speculators dominated the stock market, selling shares quickly for profit.
Speculation created three key financial problems.
- Inflated share prices bore little relation to company worth.
- Speculators bought "on margin" with short-term loans and could not pay back those loans.
- Investors speculated with funds from ordinary American savings accounts.
Only 10% of Americans owned stock, but life savings of millions disappeared.
In the aftermath, Hoover was angry with speculators.
Big business tycoons like J.D. Rockefeller urged the government to not interfere because the free market would work itself out.
Monday, October 20, 1929: The downward spiral started.
Black Thursday: 12.9 million shares changed hands.
Black Tuesday: 16 million shares traded; losses totaled almost $14,000,000,000$ .
James Rosenberg created "October 29, or days of wrath", expressionist portrait of the chaos on Wall Street
The image illustrated financial institutions teetering, crowds gathering, dark clouds, and stockbrokers jumping to their deaths.
Rumors circulated about ruined investors committing suicide. *Apocalyptic imagery was used.

The Great Depression (1929-1939)

No one knew the crash would begin a ten-year ordeal.
Some historians date the end of depression: middle of America's involvement in WW2 (1943, 1944).
Federal government played a minor role in the 1920s.
Businessmen urged Hoover to keep it that way, setting the stage for debate over government intervention during depression era.
Hoover attempted more than his predecessors to fix the nation's woes; he rejected laissez-faire suggestions.
He envisioned the government fostering teamwork and cooperatism.
Hoover brought leaders of banking, industry, and labor to the White House to keep the economy afloat.
Initially, industrialists agreed not to lay off workers or cut wages.
Labor leaders accepted a shorter workday and pledged not to go on strike.
Hoover asked state governments to accelerate projects to add jobs.
Hoover stepped up hiring for federal construction projects and asked Congress to extend tariffs.
Congress complied with the Hawley-Smoot Tariff (the highest tariff ever passed.)
The Farm Board was a program designed to bring farmers together, and they were asked to take land out of cultivation to stabilize prices.
Such a plan relied on mutual goodwill but was not what actually happened.
Most farmers continued to overproduce crops, driving down prices because demand was insufficient.
Hoover sought a cooperative approach rather than direct government intervention.
He said that helping needy citizens directly was the responsibility of local governments and charities.
When the crisis entered its second year, industries continued to lay off workers and slash wages.

Hoover's Response to the Crisis

He refused to directly aid the needy because he didn't want to create a class of dependent people.
Hoover proposed "supply-side" or "trickle-down" economics.
He authorized federal loans to businesses and states to benefit workers.
The Reconstruction Finance Corporation (RFC) was designed to give government loans to institutions with vital industries.
In its first year, the RFC gave $1,500,000,000$ to businesses and local governments, but little relief trickled down to workers.
Critics pressured the president to provide direct help to those without work or food.
Hoover responded with the Emergency Relief Act, lending money to states for public works programs.
Hoover had set a precedent for direct governmental management of the economy that FDR would expand.
Rexford Tugwell noted that "practically the whole new deal was extrapolated from programs that Hoover started."
Hoover's refusal to give direct government support to individuals made him unpopular by 1932.
A depression-era joke highlighted Hoover's unpopularity.
The crisis continued with total national income being halved.
Many families could not afford their homes or food.
Companies cut wages or eliminated jobs, and unemployment skyrocketed to 25%.
The unemployment rate was 11% during the Great Recession of 2008.
The depression era brought a mental health crisis for men.
Folk known as Hobos, searching for temporary work, became a symbol of the decade.
Over 2.5 million farmers hit the road in search of work.
Farmers were driven off their property, were constantly on the move, and lived in hobo jungles.
Immigrants and Mexicans became scapegoats.
Reducing competition from immigrants seeking work was another way the government tried to help native-born workers.
In 1929, the government ended legal immigration from Mexico.
Anti-immigration forces prevailed; about 415,000 Mexicans left the United States during the 1930s.

Crisis of Masculinity

There was a profound crisis of masculinity because men were seen as breadwinners.
The inability to fulfill obligations was seen as a failure of manhood.
Male suicide rates, domestic abuse, alcoholism, and prescription drug abuse increased.
There was little support for men because psychology and mental health were poorly understood and stigmatized.