great depression

Overview of the Great Depression

  • The Great Depression occurred from 1929 leading up to World War II, marked by economic turmoil and high unemployment.

  • Franklin Roosevelt's response to the crisis was termed the New Deal, aimed at economic recovery.

The Stock Market Crash

Black Thursday (October 24, 1929)

  • Significant day that marked the start of the Great Depression.

  • 16 billion shares of stock were sold, resulting in a loss of approximately $4 billion ($80 billion today) in one morning.

  • Panic set in; by noon the stock exchange closed.

Black Tuesday (Aftermath)

  • The market continued to decline, with the Dow Jones dropping significantly by 1932.

  • An unnamed economist stated that the crash's devastation worsened over time, not just in the immediate aftermath.

Understanding the Crash

  • Only 3% of Americans owned stock at the time, yet the crash symbolized broader economic instability.

  • The 1920s economic boom was largely due to easy access to credit.

  • Many purchases, including stocks, were made with loans; when values dropped, people could not repay, resulting in a financial crisis.

Economic Ripple Effects

  • Banks faced substantial losses due to unpaid loans; thus, they stopped lending for essential items like cars and appliances, leading to decreased consumer spending.

  • The economic downturn caused bankruptcies, high unemployment (25% at the peak), and increased homelessness.

Herbert Hoover's Presidency

  • Hoover, a self-made millionaire and qualified president, faced criticism for his ineffective response to the economic crisis.

  • His optimistic predictions led to public disillusionment as conditions worsened.

  • Emergence of "Hoovervilles," shabby towns built by the homeless as a direct response to his policies.

The Impact on Farmers

  • Farmers faced sustained declines in crop prices, worsened by drought conditions.

  • The Dust Bowl phenomenon resulted in mass abandonment of farms and migration to California.

Migration and Migrants

  • Many displaced Americans sought work in California, often met with increased competition and few job opportunities.

  • Dorothea Lange documented the struggles of migrant families through her poignant photography.

Mexican Repatriation

  • Between 1929 and 1933, half a million Mexicans/Mexican Americans left the US due to job scarcity and discrimination.

  • A significant number of those affected were US citizens, many forced to leave amidst rising anti-immigrant sentiment.

  • This repatriation highlighted complex issues surrounding immigration and the economy.

The New Deal Goals

Four Major Goals of the New Deal

  1. Economic Stimulus: To inject money into the economy and create jobs.

  2. Regulatory Improvements: To reform financial regulations to prevent another crisis.

  3. Psychological Relief: To restore public confidence in the economy and the system.

  4. Infrastructure Modernization: To invest in lasting infrastructure projects while providing employment.

FDR's Legacy

  • FDR is regarded as one of the greatest and most controversial presidents in US history, credited with the expansion of government roles through the New Deal.

  • His administration sought to restore faith in economic systems and provide a safety net for Americans during the Great Depression.

L

Lecture—The Great Depression and the New Deal

I. Economic Crisis

A. Role of Stock Market Crash (October 1929)

  • Black Thursday (October 24, 1929): A pivotal day marking the onset of the Great Depression, characterized by the sale of 16 billion shares, resulting in a staggering loss of approximately $4 billion in market value, comparable to nearly $80 billion today when adjusted for inflation.

  • The panic led to widespread uncertainty and anxiety among investors and the public, culminating in the temporary closure of the stock exchange to prevent further chaos.

B. Consumer Borrowing

  • The economic expansion of the 1920s was fueled by easy credit, which allowed consumers to finance purchases through loans.

  • As stock values began to plummet, consumers who had borrowed to invest or buy goods found themselves unable to repay their debts, resulting in a heightened financial crisis as defaults on loans increased.

  • This increased financial instability triggered failures across banks, contributing to the overall economic downturn.

C. Hoover's Response

  • Under President Herbert Hoover’s administration, the response to the economic crisis was often perceived as ineffective.

  • The emergence of “Hoovervilles”, derogatorily named as a reflection of public discontent, highlighted the inadequacies of Hoover's policies, as these makeshift shantytowns sprung up in urban areas to shelter those displaced by the economic turmoil.

II. Dust Bowl

A. Depression + Drought

  • The Dust Bowl represented an environmental catastrophe that exacerbated the effects of the Great Depression, particularly in the agricultural sector.

  • Farmers were already struggling with declining crop prices due to overproduction, and the severe drought conditions intensified these challenges, leading to widespread crop failures.

B. Black Blizzards

  • The Black Blizzards were extreme dust storms that frequently swept across the Great Plains, creating conditions in which visibility was reduced to near zero and resulting in significant damage to agricultural land.

  • These storms caused health problems for residents, including respiratory issues, and contributed to further displacement of families unable to sustain themselves on their farms.

C. Exodus to California

  • Displaced families began a mass migration to California, seeking work and better living conditions amidst the challenges posed by the Dust Bowl.

  • Upon arrival, many faced harsh realities, including intense competition for limited job opportunities and the struggles of integrating into new communities.

D. Mexican Repatriation/Deportation

  • Between 1929 and 1933, the economic crisis spurred a wave of repatriation and deportation of over 500,000 Mexicans and Mexican Americans due to job scarcity and rising anti-immigrant sentiment.

  • This period highlighted complex immigration issues, as many deported individuals were U.S. citizens, raising questions about civil rights and the treatment of minority communities.

III. New Deal Goals

A. Economic Stimulus

  • The primary goal of the New Deal was to inject funds into the economy to stimulate growth and reduce unemployment by creating job opportunities.

  • Various programs were initiated to provide immediate relief and encourage economic activity.

B. Improve Regulation

  • An essential aim of the New Deal was to reform financial regulations to prevent another economic disaster from occurring in the future.

  • This included legislation to strengthen the banking system and enhance investor protections.

C. Psychological Stimulus

  • The New Deal also sought to restore confidence in the American economic system and government institutions, addressing the psychological toll the Great Depression inflicted on the public.

D. Modernize Infrastructure

  • Significant investments were made in infrastructure projects as part of the New Deal to create jobs and modernize the nation’s physical landscape through roads, bridges, and public buildings.

IV. The Role of FDR

A. Wealthy Background

  • Franklin D. Roosevelt was born into a wealthy and prominent family, providing him with a privileged upbringing that shaped his views and policies during the Depression.

  • His background allowed him to connect with various economic classes and understand the complexities of the crisis.

B. Importance of Disability

  • His battle with polio fueled not only his resilience but also his empathy towards American citizens facing adversity during the Great Depression, influencing his approach to leadership and policy development.

C. Charisma and Use of Mass Communications

  • FDR effectively used modern communication methods, particularly radio, to connect with the American public, delivering messages of hope through his “Fireside Chats,” which helped to build trust and confidence in his administration.

V. Restoring Confidence in the System

A. "First 100 Days"

  • Roosevelt’s initial actions during his first 100 days in office involved rapid implementation of New Deal policies designed to address the ongoing crisis, setting a precedent for future presidential terms.

B. Securities and Exchange Commission (SEC)

  • The SEC was established in 1934 to restore public confidence in the stock market by regulating the securities industry, preventing fraud, and protecting investors.

C. Banking Reforms

  1. Glass-Steagall Act: This legislation separated commercial banking from investment banking, thereby reducing the likelihood of financial conflicts of interest and enhancing overall banking stability.

  2. Federal Deposit Insurance Corporation (FDIC): Created to insure bank deposits, the FDIC aimed to protect depositors and prevent bank runs that had previously devastated the banking system.

D. Social Security Act (1935)

  • The Social Security Act introduced a social safety net for the elderly and unemployed; however, its exclusions of certain groups (like agricultural and domestic workers) highlighted gaps in coverage and sparked discussions about equality in social welfare.

VI. Job Creation and Infrastructure Modernization

A. Works Progress Administration (WPA)

  1. Artists, Theaters, Musicians: The WPA funded cultural projects, providing jobs in the arts that contributed to public morale during difficult economic times.

  2. WPA Murals: Artists were employed to create murals and artwork in public spaces, enhancing community aesthetics and nurturing artistic talents.

  3. WPA Histories of Slavery: The WPA documented personal narratives from former enslaved individuals, preserving an essential part of American history and cultural heritage.

B. Civilian Conservation Corps (CCC)

  • Established to provide relief through environmental conservation jobs, the CCC employed young men in projects aimed at preserving natural resources and improving public land.

C. Public Works Administration (PWA)

  • The PWA funded large-scale infrastructure projects, such as highways, schools, and dams, driving both job creation and modernization efforts across the country.

D. Tennessee Valley Authority (TVA)

  1. Rural Electrification: The TVA focused on providing electricity to rural areas of the Tennessee Valley, dramatically improving living standards and facilitating economic development in impoverished regions.

VII. Legacies of the New Deal

  • Franklin D. Roosevelt’s New Deal is viewed as a transformative period in U.S. history, deeply influencing contemporary government policies, expanding the role of federal government in economic life, and establishing foundational practices that set the stage for the modern welfare state.

  • The New Deal programs laid the groundwork for future social safety nets and regulatory frameworks, reflecting an enduring commitment to supporting vulnerable populations and economic stability.