Chapter 12: The Great Depression

Section 1: The Nations Sick Economy

I. Economic Troubles on the Horizon

A. Industries in Trouble

1. A number of key industries were barely making profit in the mid 1920’s.

2. There was a diminished need for many goods produced in wartime.

3. Production of consumer goods, homes, and virtually every other product declined.

B. Farmers need a lift

1. Problemsa. Demand for farm products lower than prior to

WWI

b. Many farmers had gone deep into debt to meet the needs of WWI.

c. Many farmers began to default on their loans.

2. McNary Haugen bill – Proposal to prop up the farming sector within the U.S.

a. Price supports – Support of a certain price level at or above market value by the U.S. government

b. 3 parts of the bill…1. Government to buy surplus of crops at guaranteed

prices..above market value2. Government sell those crops overseas for whatever

they can get3. To make up for losses..the government would

increase taxes on food.

** in other words..the loss would be spread throughout society rather than on farmers alone.

C. Consumers Have less $$ to Spend

1. As incomes fell ---- families had less money to spend on necessities.

D. Living on Credit

1. Credit – Arrangement between consumer and business where the consumer buys now and pays later.

** Many Americans had been living beyond their means

2. Businesses were encouraging Americans to use credit..it was the only way many could buy

E. Uneven Distribution of Income

1. Less than 50% of U.S. families earned $1500 per yr.

2. Wealthy class kept on getting richer and the middle class was disappearing..and becoming part of the growing lower class.

3. The prosperity experienced during the “roaring 20’s” never reached most Americans.

F. A New President

1. Alfred E. Smith – Democratic Governor of NY. Career politician, Catholic (so?), opposed prohibition.

2. Herbert Hoover – Republican, Worked in Wilson, Coolidge, and Harding’s administrations. Had full support of the Republican Party and could point to the 1920’s as years of prosperity under republican leadership.

II. The Stock Market Comes Tumbling Down

• By 1929, many economists were warning of serious economic “downturns”.

• The Stock Market became the most visible symbol of the American economy.

• Many Americans thought that investing in the market was their way to get rich.

Stock Market Floor 1920’s

A. Dreams of Riches in the Stock Market

1. bull market – Period of time when the stock markets prices are rising.

2. by 1929 nearly 4 million Americans owned stock.

3. speculation – buying of stocks and bonds on the chance that you may make a quick profit.

4. buying on margin – Paying only a % of the stocks price as a down payment and borrowing the rest from the brokerage house.

a. The idea being that you would make your money on the stock and then sell it to pay back your money.

b. If prices went up - $$$ if not ??

B. Black Tuesday

B. Black Tuesday – October 29, 1929 – The Day that the bottom fell out of the stock market – Prices crashed!

BLACK TUESDAY (5:06)

1. People dumped their stocks as fast as they could

2. Most people lost everything that they owned or worked for their entire lives.

3. By 11/1/1929 - $30 billion had been lost

Where did it go? Into the pockets of the wealthiest investors who were able to sell all their stocks before anyone realized what was happening.

C. Causes of the Great Depression

• Great Depression – Economic downturn in the U.S. that lasted from 1929 – 1941.

1. Old and decaying industrial base

2. Crisis in the farming sector

3. Easy credit = high debt

4. Unequal distribution of wealth

• Dow Jones Industrial Average – The average value of a share of stock from the nations 30 largest firms that trade their stock on the U.S. stock market.

• This is a standard measure for the condition of the U.S. economy

III. Financial Collapse

A. Banks collapsed

1. people panicked and began to withdraw all their money out of the banks

a. soon banks ran out of cash and could not cover the withdraws and had to close down.

2. By 1933 – 6k banks had shut down in the U.S.

B. Businesses failed

1. Nations output of goods and services dropped 50% over the depression

2. 85,000 businesses went bankrupt

C. Economy spiraled out of Control

1. Millions of workers lost their jobs

2. 23.8% unemployment rate in 1932. ALL TIME HIGH!!

D. Worldwide Shockwaves

1. Hawley-Smoot Tariff – Was designed to help farmers by reducing foreign competition.

a. Highest tariff in history

b. Other countries raised tariffs on U.S. goods

c. Further reduced the amount of American goods being bought.\

2. Huge depression in Europe prevented them from buying American products and helping to rebuild our economy.

Section 2: Hardship and Suffering during the Depression

I. The Depression Devastates Peoples Lives

A. Depression in the Cities

1. shanty towns – Little “towns” consisting of shacks on the outskirts of towns.

Shantytown “Shack”

2. soup kitchens – Places where food is offered by charitable organizations to people who are needy.

• 3. Bread Lines – LONG lines of people waiting for free bread a often supplied by charitable organizations.

B. Depression in Rural America

1. Between 1929 – 1932 – 400,000 farmers lost their farms.

** The one advantage that farmers had over city dwellers…growing food, was then gone.

C. The Dust Bowl

1. Dust bowl – Territory of the Great Plains (Texas to N. Dakota). Called this because of intense wind storms that whipped up large dust storms.

Dust Storm

2. Okies – A derogatory term used to describe migrants from Oklahoma who left their home state to find a better life out of the dust bowl.

II. Effects on American Families

A. Family Lives Changed

1. families had to turn to each other to survive..move in with relatives etc..

2. The stress of the Depression led many families to break up.

B. Men in the streets/on the rails

1. Approx 2 million men wandered the U.S. looking for ?????

2. The “hobos” as they were called, became the uprooted, unwanted members of society.

Unwanted!?

3. Direct Relief – Cash payments, handouts, food provided to the needy by the government.

• There was NO SUCH system in this time period

• Citizens began to beg for/demand it.

• Hoover – “Pull yourself up by your bootstraps”.

C. Women and Children struggle to survive.

1. “Penny pinchers” – Women worked very hard to scrimp and scrape to get their families by. Made their own clothes, canned food.

2. Women were forced to work outside the home.3. Children suffered the worst – in many cases

they were left to fend for themselves.4. By 1933 2,600 schools were shut down = 300k

students without school.5. Many children had to work in sweat shops to

help the family.

D. Social & Psychological Effects of the Depression

1. Many were demoralized & lost their will to live.

2. Suicide rate rose 30%. Mental health admissions Tripled.

3. No ecducation, Dr. and Dentist put off, put off marriage/kids, basically put their lives on hold.

4. Achieving financial security became a life long pursuit of many…a lifetime of scraping by left permanent marks on peoples souls.

Section 3: Hoover Struggles with the Depression

I. Hoover Tries to Reassure the Nation

** most thought that the Depression was just a normal part of the business cycle.

A. Hoover’s Philosophy of Government

1. The economy should function with minimal interference from the government.

2. Government should take a ROLE in solving economic issues like this

3. Hoover was a humanitarian.4. Rugged individualism – The idea that

people should succeed on their own, not rely on others to solve their problems.

E. Hoover takes cautious steps

1. Hoover was not a career politician so..he found it tough to compromise.

2. He was VERY cautious as to how to handle issues.

3. Hoover asked businesses to work hard to help end the crisis without government assistance.

4. Basically…Hoover did not do much to solve the issues that faced society. And people blamed him for making things worse …not better.

F. Democrats win 1930 Congressional Elections

1. Obviously the Republicans had failed the people.

2. Democrats quickly won control of both the House and the Senate. (Much like 2008)

3. People began to call shantytowns…hoovervilles

III. Hoover takes action

Boulder Dam – A power plant project designed to build a hydroelectric facility AND provide jobs to jumpstart the economy.

** Hoover was finally listening to the people

** $800 million cost

A. Boulder Dam & Other Government Projects

1. Public Works Programs – to build roads, dams, power plants, RR etc.. To provide jobs and stimulate the economy.

2. Federal Home Loan Bank – Lowered bank interest rates for mortgages and allowed farmers to refinance their loans so they would not lose their farms.

• Reconstruction Finance Corporation – Was authorized by Congress to provide emergency funds to banks, insurance companies & RR.

B. Gassing the Bonus Army

1. Bonus Army – WWI Vets who wanted to get their military service bonus NOW when they needed it instead of when the government promised them.

** $1 per day served & $1.25 served overseas

** Not payable until 1945.

2. Walter Waters – Leader of the Bonus Army’s march to Washington D.C. to protest Congress’ previous decision to not give the bonus early.

3. Congress voted again on the issue and voted NO….Vets stayed in protest

4. President Hoover ordered the protestors removed

a. General Douglas MacArthur used the U.S. Army

b. Used bayonets to “push” protestors out.

c. Tear gas was deployed * 1k people gassed, 1 infant dead, 8 yr old boy blinded.

Burning the Encampments

5. The whole thing was a public relations nightmare for the President as his faltering image now looked even worse.

6. Citizens were outraged…and the Presidential election was just around the corner.

Chapter 13 The New Deal

Section 1: A New Deal Fights the Depression

A. Electing Franklin Deleno Roosevelt (FDR)

1. Republicans knew they had little chance of getting Hoover Re-elected.

2. Gov. of New York, reform minded – fix unemployment.

3. “Can do” attitude that voters wanted. He wasn’t afraid to try to fix things.

B. Waiting for FDR to take over

1. America’s problems worsened while waiting for March’s inauguration.

2. New Deal – FDR’s plan for fixing economic problems of U.S.

3. 100 Days – Period from 3/9-6/16 in which FDR and his government intensely passed laws and provisions designed to fix our economy. Fifteen pieces of legislation passed in this time.

C. Reforming banking and finance1. Bank Holiday – On March 5, 1933 FDR

declared a national bank holiday. All banks to close until they could prove that they were stable.

2. Banking Relief Act – Allowed the U.S. Treasury Department to inspect banks to determine if they were stable enough to open.

D. Fireside Chats – Radio talks that FDR gave that discussed issues affecting the people. They were informal and relaxed and it helped ease many people’s fears about the Depression. FDR would explain his actions and New Deal policies so people would understand what he and the Government were doing.

1st fireside chat

1. “We have provided the machinery to restore our financial institutions and it is now up to you to make it work.”

2. Glass-Steagall Banking Act – Established the (FDIC) which guaranteed that all bank deposits would be available for withdrawal.

3. Federal Securities Act – required all companies selling shares on the stock market to provide complete information on the company’s finances or be liable for any misrepresentations.

II. Helping the American People

A. Assisting Farmers

1. Agricultural Adjustment Act – Sought to raise farm prices by reducing crop output. Government paid farmers for letting their fields stay empty.

1. Reduced quantity would raise prices

B. Providing Work Projects – to provide relief through paying jobs.

1. Civilian Conservation Corps – Put young men (18-25) to work building roads, developing parks, planting trees, helping in soil erosion and flood prevention projects sponsored by the government paid $30/week, $25/week was sent home to the family.

2. Federal Emergency Relief Administration – Provided $500 million in direct relief for citizens for food, clothing and housing.

1. Public Works Administration – Provided money to states to create jobs. Mainly the construction of schools and public buildings.

2. Civil Works Administration – Replaced the PWA. More money and effort to find jobs for the unemployed. Paid for the building of 40k schools and paid 50k teachers.

3. National Industrial Recovery Act – Sought to promote industrial growth by mandating fair business practices, set prices for many products, banned child labor, and set standards for wages and hours.

C. Helping People with Housing

1. Home Owners Loan Corporation – Provided government funded loans to families who faced foreclosure on their homes. Led to the creation of the FHA which continues to help homeowners today.

III. New Deal comes under attack

A. Critics on both sides

1. Liberals believed the New Deal did not go far enough to help people stuck in poverty.

2. Conservatives believed that FDR spent way too much money on direct relief for the citizens.

• B. Supreme Court Reacts to New Deal1. Supreme Court ruled that the National Industry

Recovery Act was unconstitutional because the Federal Government had no authority to set the laws and procedures that they wanted to set. Just the beginning as the SC challenged the legality of many of FDR’s policies/programs.

2. FDR accused of “stacking the court” with Supreme Court Justices that would pass his policies.

3. As Supreme Court Justices retired, quit ect…FDR was able to appoint seven Justices that obviously he viewed as allies to his plans.

C. Three Fiery Critics

1. Charles Coughlin – Catholic Priest that had a fiery radio talk show that was critical of FDR’s policies and practices as he felt they were not strong enough. Was asked by the Catholic Church to back off.

2. Francis Townsend – A physician and Health Care officer in California. Believed that FDR wasn’t doing enough to help the needy. Believed that the government should provide monthly cash benefits to the aged. That would help the economy by putting more cash into circulation.

• 3. Huey Long – Louisiana Senator, and eventual Governor who fought for increased distribution of wealth among all citizens in the U.S. Even campaigned for the Presidency. His main program/policy (Share our Wealth) drew massive amounts of supporters.

a. Huey Long was assassinated by a gunman at the height of his popularity.

Section 2: The Second New Deal Takes Hold

I. The Second Hundred Days

**name given to the second new deal

• A. Eleanor Roosevelt – First lady who prodded her husband/President to work for the “forgotten man”.

i. She traveled the country seeking out social conditions that needed improving.

ii. She worked tirelessly to inform the President of the immense suffering of the American people.

• B. Re-Electing FDR

1. “Are you better of today than four years ago”

1. FDR won re-election in 1936.

II. Helping Farmers

A. Farming communities continued to suffer the worst.

B. Soil Conservation and Domestic Allotment Act – Paid farmers for not growing soil depleting crops like cotton.

C. Attempts were made to help sharecroppers, migrant workers and other poor farmers.

1. Resettlement Administration – provided loans to small farmers to help set up on new land and get a fresh start.

2. Was replaced by the farm security administration.

III. Helping Youth, Professionals, and Others

A. Works Progress Administration (WPA) – Set out to create as many jobs as possible as quickly as possible.

1. Had eight million workers who built airports, schools, roads, parks, libraries, hospitals…etc..

2. “You worked, your got a paycheck, and you got some dignity”

3. Teachers, musicians, and artists were also hired for their abilities.

B. National Youth Administration (NYA) - Was created to help the youth of America. 200k students received aid and assistance.

IV. Labor and Other Reforms

A. Improving Labor Conditions1. National Labor Relations ACT – (Wagner ACT)

- Defined unfair labor practices.

a. Established the national labor relations board which investigated claims of unfair or illegal business practices.

b. Threatening workers, unjust firings, banning labor unions ect…

2. Fair Labor Standards ACT – Established maximum hours and minimum wages.

1. Old age insurance for workers 65 and older and their spouses. (social security)

2. Unemployment compensation

3. Aid to families with dependant children and the

disabled.