The Great Depression in the Americas, 1920s to 1940s

Global Context

• The Great Depression (1929 - late 1930s) impacted the global economy, exacerbated by unstable post-WWI recovery reliant on US credit.

• Responses varied: autocratic extremism/militarism (Germany), dictatorship/expansionism (Italy), "Greater East Asia Co-Prosperity Sphere" (Japan).

• Increased tariffs shrank markets. The Depression deeply affected a generation, with roots in WWI's aftermath.

• War in the late 1930s ended the depression; political consequences were far-reaching.

Timeline

• 1919: Versailles settlement.

• 1929: Wall Street Crash; Hoover takes office (USA).

• 1930: Smoot-Hawley Tariff Act (USA).

• 1933: FDR takes office (USA); New Deal begins.

• 1937: War in Asia begins (Marco Polo Bridge incident).

• 1939: WWII begins (German invasion of Poland).

• 1941: Pearl Harbor; US enters WWII.

Conceptual Understanding

• Key questions:

  • How did US consumer culture contribute to the Depression?

  • How did the Wall Street Crash affect Latin America?

  • How did 1920s prosperity create problems in Canada?

• Key concepts: Causes, Consequences.

3.1 The Great Depression: Political and Economic Causes in the Americas from the 1920s and 1930s

Latin America

• Depression roots in late 19th-century policies. Post-independence: agriculture-based units mirroring Spanish latifundias.

• US/Europe industrialization increased Latin American commodity value.

• UK trade relations strengthened post-independence (e.g., Argentina exporting beef/wheat).

• US-owned plantations profited from tropical fruits; Chilean copper/nitrates demand revived.

• Limited local industrial development; reliance on imports created export-import dynamic.

• Elites favored foreign investment due to perceived lack of local skills; US investors bought land/mines.

• Latin America benefited during WWI but faced post-war weaknesses.

• Supply exceeded demand before the Depression.
  -susceptible to overseas policy decisions.

• On downward slope before Great Depression

• Argentina wheat price peaked in May 1927; Cuban sugar in March 1928; Brazilian coffee in March 1929.

Canada

• Political Fragmentation: Conscription Crisis of 1917 divided Canada.

  • Laurier’s Liberals split; Borden’s Union government was temporary.

  • New leaders needed post-war (King for Liberals, Meighen for Conservatives).

  • Rise of non-traditional parties (National Progressive Party, United Farmers).

  • Regional discontent: Maritime Rights Movement.

  • Fractured landscape introduced regulation of industry, financial support for farmers, social security into political discussion.

Economic Fragility

• Depression traced to post-1918 economic changes. Only USA emerged strong; world owed USA money.

• US boom pulled Canada up; demand for minerals and newsprint increased.

• US companies established branch plants in Canada.

• Car industry stimulated economy; road construction increased.

• Agriculture recovered, then faced global competition.

• Pulp, paper, mining outstripped demand by 1928. Railroads felt declining trade.

• Reasons for the end of boom:

  • Increased tariffs.

  • Supply exceeding demand.

  • Overdependence on staples, USA, and heavy debt.

The USA

• 1920s: Prosperity for some, but political/economic actions led to Depression.

• USA emerged as creditor nation; technological revolution fueled itself via assembly lines.

• Government policies reduced taxes/regulation, increasing profits.

• 1920 census: shift to urban dwellers. Great Migration: African Americans moved north.

• Republican presidents (Harding, Coolidge, Hoover) aimed for prosperity, peace, efficiency, growth.

• Mellon's fiscal policies (lower tax rates) reduced national debt but benefited the rich.

• Little oversight of banking industry; Federal Reserve System not universal.

• Easy credit led to stock market escalation; borrowing on the margin.

• High tariffs (Fordney–McCumber Tariff Act) protected US farmers.

• 1920: Women's suffrage; 1924: Native American suffrage. Xenophobia: immigration quotas, KKK resurgence.

• Increased purchasing power, technological revolution, urbanization led to construction boom.

• Vast contradictions: rich-poor disparity, rural poverty, declining farm incomes, small businesses squeezed out.

• Stock speculation: easy stock purchases led to falsely high prices.

• 1928: Hoover elected, concerned with social welfare, willing to intervene, but changes seen as radical. Agricultural Market Act implemented, but end was disastrous. The extension of credit fueled the market, but the market was manipulated by large investors and small investors were left holding the stocks. Expansion of credit also helped fuel consumer demand.

The Wall Street Crash and the Onset of the Great Depression in the USA

• Stocks fell; market took wild swings. On 24 October, the market crashed and large banks responded by announcing that funds would be made available for purchasing stocks. The market appeared to stabilize. On 29 October, Black Tuesday, the market crashed and the banks’ efforts could not stop the sell-off. Confidence in the market fell along with stock prices

• Trends: income disparity, dependence on automobile/construction, declining European demand.

• Factors contributing to the Great Depression:

  • Wall Street Crash: Stockholders lost over $40 billion. Dow Jones was at a high of 381 points, and on 29 October 1929 it had fallen to 41 points after a week of panic selling.

  • Farm overproduction: Farm incomes dropped, farmland value fell. problems in the agricultural sector had a large impact since 30% of Americans still lived on farms.

  • Reduction in purchasing: Led to less production, reduced workforce, instalment plans could not continue.

  • Unequal distribution of wealth: Top 1% owned over 33% of wealth.

  • Government policies that limited regulation in key industries: Bank deposits uninsured, banks unwilling to create new loans. Americans began to withdraw their money, 10 763 of banks failed between 1929 and 1933.

3.2 Nature and Efficiency of Solutions in the US

Herbert Hoover’s Responses to the Onset of the Depression, 1929–32

• Hoover believed in self-reliance/Protestant work ethic. He felt that the government’s duty was to remain passive so that market forces could take effect.

• Initial policies: reduce debt, tighten money supply, protect domestic production.

• He summoned governors to accelerate infrastructure projects, urged corporations to keep employees hired, and advocated high wages.

• He was pro-union and believed that the American people would help each other.

• Hoover believed individual states should assist individuals.

• The Dust Bowl: drought beginning in 1930, affecting the central plains region in particular. Over 2 million farmers left.

• Smoot-Hawley tariff (1930): high protective tariff that led to retaliation and decreased exports.

• Lack of control over local banks led to bank failures.

• Reconstruction Finance Corporation (RFC) granted loans to banks/railroads/states.

• Federal spending increased but was funded by increased taxes.

• Hoover did not give money to individuals as the government should not interfere with individual initiative. He believed American individualism would get the country out of the economic downturn.

• Policies detrimental: GNP decreased, production fell, unemployment soared.

• Agricultural Marketing Act created the Federal Farm Board to limit production and buy surplus, and programs to provide credit to farmers and buy excess crops began.

• RFC created and allocated 500 million to assist the failing economy.

• One public relations disaster pertained to veterans of the First World War requesting they receive their bonus immediately. Bonus Army congregated in Washington DC to demonstrate, so Hoover requested assistance from the US army and on 28 July General Douglas MacArthur dispatched troops. As the conflict intensified, MacArthur attacked the veterans and their families with tanks, tear gas and troops

Franklin Delano Roosevelt’s Responses to the Great Depression, 1933–41

• FDR viewed that the depression was rooted in economic imbalance; he looked to address the imbalance by altering the relationship between government and the people.

• Fireside chats: radio addresses to the American people that explained what he wanted to do and reassured the American people.

• The New Deal: FDRs plan to reform capitalism through forceful government intervention; policies to stabilize the economy and reduce unemployment.

• Three components of the New Deal:

  • Relief: Addressed immediate suffering.

    • Civilian Conservation Corps (CCC): Employed young men in rural infrastructure projects.

    • Federal Emergency Relief Administration (FERA): Gave grants to states for relief efforts.

  • Recovery: Designed to help the economy recover.

    • Agricultural Adjustment Act (AAA): Subsidized farmers to reduce production.

    • National Recovery Administration (NRA): Cooperative agreements among industries to reduce production and raise prices.

  • Reform: Prevented another depression.

    • Wagner Act: Recognized rights of unions to organize and bargain collectively.

    • Social Security plan: Old age pensions, unemployment compensation, payments to families with dependent children.

• Banking reform: FDR declared "bank holiday" and stabilized banks. The Glass-Steagall Act created the Federal Deposit Insurance Corporation (FDIC) to insure bank deposits.

• Securities and Exchange Commission (SEC): Regulated the stock market and protected investors from fraud.

• Keynesian economics: the idea that government spending should increase during business slumps and be curbed during booms

• Second New Deal (1935). Called for Social Security, higher taxes for the wealthy, and new programs such as the WPA.

• Works Progress Administration (WPA): Employed millions of jobseekers to carry out public works projects. It employed more than 8.5 million Americans on 1.4 million projects The new deal provided jobs for 33% of Americans.

Legal Challenges to the New Deal:

• The Supreme Court initially struck down several New Deal programs, arguing they exceeded the federal government's powers.

  • Schechter Poultry Corp v. United States (1935): Declared the National Recovery Administration (NRA) unconstitutional.

  • United States v. Butler (1936): Found the Agricultural Adjustment Act (AAA) unconstitutional.

• FDR responded with the "court-packing plan" in 1937, aiming to add more justices favorable to his policies, but faced significant opposition. The plan was ultimately unsuccessful.

FDR’s Third New Deal (1937–1938)

• Not officially labeled a "Third New Deal" by FDR, but historians refer to late New Deal efforts (1937–1938) as such.

• Marked a shift from expansive reform to defensive consolidation of earlier programs.

• Focused on strengthening labor protections, housing, and addressing racial inequalities to some extent.

• Key actions included:

  • Fair Labor Standards Act (1938): Established minimum wage, 40-hour work week, and restrictions on child labor.

  • Continuation of support for the Wagner Act and Social Security.

• Faced growing congressional opposition, conservative backlash, and Supreme Court challenges.

• New Deal momentum slowed due to political resistance and economic downturn.

Roosevelt Recession (1937–1938)

• A sharp economic downturn during FDR’s second term.

• Causes:

  • Federal budget cuts: FDR reduced New Deal spending to balance the budget.

  • Social Security taxes began to be collected, reducing disposable income.

• Effects:

  • Industrial production dropped by nearly 33%.

  • Unemployment rose from 14% in 1937 to 19% in 1938.

• FDR responded by:

  • Reinstating government spending (Keynesian approach).

  • Asking Congress for $3.75 billion in emergency relief and public works funds.

• Highlighted the fragility of recovery and the importance of government stimulus.

Critics of the New Deal

• Conservative Critics:

  • Believed FDR's policies expanded federal power too much.

  • Feared socialism and government interference in the economy.

  • Felt programs discouraged individual initiative and self-reliance.

• Business Leaders:

  • Opposed regulations and labor protections (e.g., Wagner Act).

  • Claimed the New Deal was anti-business and hurt economic recovery.

• Supreme Court:

  • Declared several New Deal programs (e.g., NRA, AAA) unconstitutional.

  • Argued FDR exceeded executive authority.

• Left-Wing Critics:

  • Thought the New Deal didn’t go far enough.

  • Huey Long promoted "Share Our Wealth"—called for wealth redistribution.

  • Father Charles Coughlin criticized banking reforms and promoted populist ideas.

Supporters of the New Deal

• Democratic Party & Working-Class Americans:

  • Valued the relief, reform, and recovery programs.

  • Benefited from job creation and social welfare initiatives.

• Labor Unions:

  • Supported pro-labor laws like the Wagner Act.

  • Gained recognition and bargaining power.

• Minorities & Marginalized Groups:

  • Programs provided some economic aid (though often discriminatory).

  • FDR gained loyalty from African Americans and women despite limitations.

• Historians & Scholars:

  • Credit the New Deal with stabilizing the economy and restoring faith in democracy.

  • Seen as a turning point for federal involvement in welfare and the economy.

3.3 Critics and Supporters of the New Deal

Critics of the New Deal

• Conservative Critics:

  • Believed FDR's policies expanded federal power too much.

  • Feared socialism and government interference in the economy.

  • Felt programs discouraged individual initiative and self-reliance.

• Business Leaders:

  • Opposed regulations and labor protections (e.g., Wagner Act).

  • Claimed the New Deal was anti-business and hurt economic recovery.

• Supreme Court:

  • Declared several New Deal programs (e.g., NRA, AAA) unconstitutional.

  • Argued FDR exceeded executive authority.

• Left-Wing Critics:

  • Thought the New Deal didn’t go far enough.

  • Huey Long promoted "Share Our Wealth"—called for wealth redistribution.

  • Father Charles Coughlin criticized banking reforms and promoted populist ideas.

Supporters of the New Deal

• Democratic Party & Working-Class Americans:

  • Valued the relief, reform, and recovery programs.

  • Benefited from job creation and social welfare initiatives.

• Labor Unions:

  • Supported pro-labor laws like the Wagner Act.

  • Gained recognition and bargaining power.

• Minorities & Marginalized Groups:

  • Programs provided some economic aid (though often discriminatory).

  • FDR gained loyalty from African Americans and women despite limitations.

• Historians & Scholars:

  • Credit the New Deal with stabilizing the economy and restoring faith in democracy.

  • Seen as a turning point for federal involvement in welfare and the economy.

3.4 Nature and efficacy of solutions in Canada

William Lyon Mackenzie King (Liberal PM: 1921–30, 1935–48)

Initial Response (1929–1930):

• Approached the Depression cautiously, believing aid was a provincial responsibility per the British North America Act.

• Refused to increase federal subsidies to provinces (most were Conservative-led).

• Lost the 1930 election due to inaction and lack of relief programs.

Return to Power (1935):

• Won with slogan “King or chaos” against Bennett’s failed New Deal.

• Still lacked a strong recovery plan at first.

• Referred Bennett’s New Deal laws to the Supreme Court, which ruled many unconstitutional.

• Later adopted moderate Keynesian policies:

  • Increased public works spending.

  • Created a National Employment Commission in 1938.

• Helped stabilize the Liberal Party and economy, but full recovery came only with WWII.

R.B. Bennett (Conservative PM: 1930–35)

Early Policies:

• Raised tariffs by 50%—hurt trade, raised prices.

• Gave $20 million for relief, but relief was a patchwork system across federal, provincial, municipal, and private sectors.

• Set up work camps for single unemployed men (earned 20 cents/day), widely criticized ("Royal Twenty Centers").

• Relief efforts were underfunded; cities like Montreal eventually faced bankruptcy.

Later Reforms:

• Introduced federal programs:

  • Canadian Wheat Board

  • Farmer’s Creditors Arrangement Act

  • Prairie Farm Rehabilitation Act

  • Bank of Canada (first central bank)

  • Canadian Radio Broadcasting Commission

Bennett’s “New Deal” (1935):

• Modeled after FDR’s policies.

• Proposed laws on:

  • Minimum wages, working hours, unemployment insurance, farm credit, and resource marketing.

• Seen as a desperate election ploy; rejected by the Supreme Court as unconstitutional.

• Lost 1935 election.

Overall Assessment:

• King favored cautious, provincial-led recovery and later moderate stimulus.

• Bennett initially failed, then shifted to interventionist policies, but too late.

• Neither ended the Depression—WWII economic boom was key to recovery.

Po

litical Responses

• New parties and ideologies emerged in response to the economic crisis.

• Union Nationale (Quebec):

  • Led by Maurice Duplessis.

  • Populist, nationalist, and conservative; appealed to Catholic rural voters.

  • Passed the Padlock Law (1937) to suppress suspected communists and left-wing critics.

• Communist Party of Canada:

  • Influential in labor activism but lacked mass support due to Comintern control and government repression (e.g., Padlock Law, Tim Buck’s imprisonment).

• Ontario Premier Mitchell Hepburn (Liberal):

  • Fought unionism; created ‘Hepburn’s Hussars’ to break the 1937 GM strike in Oshawa, clashing with federal PM King.

Unionism

• Union strength declined overall, but only by 15%.

• Traditional unions (e.g., TLC) focused on protecting employed members.

• Workers Unity League (WUL):

  • Created in 1929 under Comintern direction.

  • Organized militant strikes across sectors.

  • Instrumental in events like the On-to-Ottawa Trek and the Relief Camp Workers Union.

  • Viewed as a communist threat and dismantled by the state and rival unions.

Role of Religion

• Religion offered spiritual comfort and political influence:

  • Social Gospel Movement: Advocated Christian-based social reform; inspired founding of the CCF (e.g., Tommy Douglas).

  • ‘Bible Bill’ Aberhart: Used the pulpit to preach economic reform via the Social Credit Party.

  • Catholic Church (esp. in Quebec):

    • Supported traditional values and charity.

    • Opposed communism and consumerism.

    • Promoted back-to-the-land solutions as moral renewal.

Depression-Era Culture

• Radio became a powerful cultural tool; spread U.S. jazz and country music across Canada.

• Canadian musicians like Guy Lombardo were popular.

• Art:

  • Painters like Emily Carr and Illingworth Kerr reflected local and national themes.

  • Influence of Group of Seven persisted in Canadian visual identity.

• Literature:

  • Depression themes in works by Morley Callaghan, WO Mitchell (Who Has Seen the Wind).

• Hockey emerged as a national unifier:

  • Radio broadcasts (e.g., Hockey Night in Canada) brought escapism and solidarity.

  • NHL adjusted to economic pressures but remained central to national identity

3.5 Impact of the Great Depression: Latin America

Economic Impact

• Collapse of export markets: Latin American economies, heavily reliant on commodity exports (e.g. coffee, copper, bananas), were devastated as global demand and prices plummeted.

• Currency devaluation and unemployment rose sharply.

• Foreign investment and credit dried up; countries struggled to repay debts to US and European banks.

• Exceptions: Venezuela (oil) and Honduras (bananas) remained relatively solvent due to niche exports.

Political Consequences

• Widespread coups d’état: Military took power in Argentina, Brazil, Chile, Guatemala, Honduras, and Peru within a year of the Wall Street Crash.

• These authoritarian regimes often curtailed civil liberties but implemented more state-led economic planning.

• Rise of populist and corporatist regimes, e.g., Getúlio Vargas in Brazil.

Economic Solutions

• Shift to Import Substitution Industrialization (ISI):

  • Reduced dependence on foreign goods.

  • Promoted local manufacturing.

• Government regulation:

  • Set price controls.

  • Limited production to stabilize prices.

• New central banks and financial regulations improved economic stability.

• Many countries left the gold standard and pegged currencies to the US dollar.

Social Effects

• Increased hardship for rural laborers, indigenous peoples, and the urban poor.

• Migration to cities surged; class and racial tensions intensified.

• Populist leaders emerged to channel dissatisfaction and build support among workers and the middle class.

Recovery

• Recovery was uneven and often politically repressive.

• Latin America began to emerge from the Depression by the late 1930s, with full recovery occurring due to World War II demands for resources