Section B Depression and the New Deal

7/27/2019 Section B Depression and the New Deal

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Depression and the New Deal:

the USA, 1929-41


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Key Questions

How serious were the effects of the

Depression on the American people?

How did Roosevelt deal with theDepression?

How far was the New Deal successful in

ending the Depression in the USA?


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How serious were the effects of the

Depression on the American people?

The effects of the Wall Street Crash

Unemployment and its effects

Struggling farmers The attempts of Hoovers government to deal

with the Depression

The unpopularity of Hoover and the electionof Roosevelt


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Background

The 1920s boom in America ended in 1929 with theWall Street Crash

By 1932 nearly one quarter of the workforce wasunemployed

In 1933 the new President, Franklin D Roosevelt,promised a New Deal

The US government provided millions of jobs, but thismeant that recovery was dependent on government

money The US Supreme Court declared the New Deal unlawful

The US economy only fully recovered because of itsinvolvement in World War Two


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The effects of the Wall Street Crash

The New York Stock Exchange collapsed onBlack Thursday 24 October 1929 when 1.3million shares were sold

Prices continued to fall for three years untilshares lost, on average, 80% of their value

100,000 companies went bust between 1929

and 1933 Banks failed because of bad debts; the

Depression followed


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Unemployment and its effects

12 million Americans were out of work in 1932

Investors lost their money; those who hadbought shares on the margin (on credit) were

also in debt to banks Weekly manufacturing wages fell from $28 to

$22 by 1933

The unemployed would sit on street cornersselling apples or set themselves up asshoeshine boys; others just begged


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Struggling farmers

Farm incomes dropped by 60% from 1929 to

1933

The goods farmers needed to buy fell in price

by only 15%

Many farmers sold up and left

A further problem was the dustbowl whereover farming, drought and wind blew away

fertile top soil


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Struggling farmers

Many farm labourers drifted around as

hoboes, riding he railroad in search of work

By 1933 a million people were travelling

around

The homeless set up home in makeshift camps

called Hoovervilles after the then President,

Herbert Hoover


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The attempts of Hoovers government

to deal with the Depression

Hoover was elected in 1928 and assumedoffice in 1929

He, like many Americans, favoured a laissez-

faire (leave business alone to sort itself out)approach to the crisis

This had been the traditional response to

cyclical economic trends It was job of charities, not government, to

assist those in need, he said


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He did offer $4 billion for major construction

projects like the Hoover Dam

The Smoot-Hawley Tariff of 1930 (tax of 40%

on imports) was intended to discourage

imports

However, other countries retaliated which

affected the US export market

Farmers were then left with huge surpluses


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In 1932 Hoover was forced to approve the

Emergency Relief Act which provided $300

million to states to help the unemployed

In 1932 Hoover set up the Reconstruction

Finance Corporation (RFC) which provided

loans of $1.5 billion to businesses to help

them recover


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The unpopularity of Hoover and the

election of Roosevelt

Hoover was unfairly blamed for the

Depression because he didnt intervene on a

large scale

He followed policies such as laissez-faire

(leave business alone) and rugged

individualism (stand on your own two feet)

However, he did expand government lending

and he did encourage public work schemes


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He said: Economic depression cannot be cured

by government action. Economic wounds must

be healed by the producers and consumers

themselves Only later in the 1930s did economists like Keynes

argue that direct government action was

necessary Hoovers reaction to the demands of the Bonus

Army were, however, a serious miscalculation


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WW1 veterans asked for their war bonus

early; it was not due until 1945

In June 1932 20,000 camped outside

Washington

The House of Representatives (like our House

of Commons) voted in favour; the Senate (like

our House of Lords) overruled it because of

cost


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Hoover offered $100,000 for the Bonus Armys

travel home

Hoover used troops under General Douglas

MacArthur to clear the camps using tanks and

tear gas

Two babies died from the effects of gas

Hoover was blamed


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Roosevelt

As Governor (like being President on anindividual state) of New York from 1928-32FDR had intervened in the economy

For example, he increased state tax to provide$20 million of emergency relief in the winterof 1931-2

FDR use the radio effectively and appealed tothe forgotten man; in the 1932 election hewon in 42 out of 48 states


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How did Roosevelt deal with the

Depression?

Roosevelts fireside chats

The New Deal

Banking Agriculture

Industry

Public Works Social Security


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Roosevelts fireside chats

The first was March 1933; his voice was

reassuring and he helped people to believe

that everything was going to be alright

FDR invited ordinary people to write to him

with their problems; a staff of 50 was needed

to handle the mail


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Banking

Within his first 100 days in office FDR began arange of programmes to bring about relief,recovery and reform

Many banks had failed because businesses andindividuals were unable to pay their loans

FDR closed every bank for 4 days to give time fornew laws to be passed

The Emergency Banking Act allowed onlyfinancially sound banks to reopen; the Glass-Steagall Act separated investment fromcommercial banking


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Farming: the Agricultural Adjustment

Act, May 1933

FDR aimed to end overproduction in farming;

this would be achieved by farming less and

finding jobs for displaced workers

Destroying food when millions of Americans

were short of it, however, was controversial

Between 1932 and 1935 total farm income

rose from $4.5 to $6.9 billion

As an emergency measure the AAA worked


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Relief: the Federal Emergency Relief

Administration, May 1933

FERA offered $500 million to those in dire

need; it was headed by Harry Hopkins

However, there were delays distributing relief,

while southern racist states denied African

American any help at all

That said, FERA did establish the idea of the

Federal (national) government giving funds

directly for relief


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Relief: the Civil Works Administration,

November 1933

The CWA was set up to provide emergency

relief during the winter of 1933-4

It provided work on public projects such as

sewers, schools, playgrounds and airports


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Relief: the Civilian Conservation Corps,

March 1933

Unemployed men from 17-24 were recruited

to work in national forests and parks

3 million were involved for 6 months at a time

Workers lived in camps and received a small

wage most of which was sent home to family

1.3 billion trees were planted and 65,000

miles of telephone lines were laid to remote

areas


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Welfare: the National Recovery

Administration, June 1933

The NRA set out to improve workingconditions in industry and outlawed childlabour

It set out fair wages and enabled employeesto join a Trade Union (an organisation whichprotects workers from their bosses)

Each industry was encouraged to adopt a codeof practice; 557 were set up though theSupreme Court declared NRA unconstitutional


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Recovery: the Public Works

Administration, June 1933

PWA was intended to kick start the economy

(known as priming the pump)

$3.3 billion was spent on roads, dams,

hospitals and schools to stimulate the

economy

Harold Ickes was in charge

PWA was responsible for 50,000 miles of road

and 13,000 schools


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Recovery: the Works Progress

Administration, 1935

WPA was created as part of a second wave of

alphabet agencies and became a major

employer

People were employed for one year on jobs

that private companies didnt want

1,000 airport landing fields

8,000 schools

12,000 playgrounds


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Recovery: the Tennessee Valley

Authority, May 1933


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Recovery: the Tennessee Valley

Authority, May 1933

The Tennessee river ran through 7 of the

poorest states in the USA

The aim was to construct 20 dams to control

occasional floods and address the problems of

the dustbowl

In addition hydroelectric power was

harnessed

It also increased tourism


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Relief: the Home Owners Loan

Corporation, 1933

HOLC gave new loans to home buyers

Mortgage rates were low to prevent home

buyers losing their homes

300,000 loans were given out


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Relief: the Social Security Act, 1935

Old-age pensions for over-65s and

unemployment benefit

It was self-financing: paid for by employees

and employers

Pensions were based on previous

contributions and started in 1940

Unemployment benefit was a maximum of

$18 a week for 16 weeks


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How far was the New Deal successful

in ending the Depression in the USA?

The effectiveness and the limitations of the

New Deal

Criticisms and opposition to the New Deal

Supreme Court opposition

The impact of the Second World War on

American economic recovery


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The effectiveness and the limitations

of the New Deal

Between 1933 and 1935 unemployment fell

and the economy started to recover

However, criticism came both from those who

thought FDR had gone too far, and those who

thought FDR had not gone far enough

A Second New Deal in 1935 attempted to

maintain the momentum of the First New Dealfrom 1933


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of the New Deal

However, in 1937, with unemployment at 6million, FDR became concerned at the extentof government spending and debt, and cut

back on some of the New Deal programmes The result was the Roosevelt recession; the

country plunged back into depression

By the winter of 1937-8 there were over 10million unemployed; government spendingwas therefore increased again


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of the New Deal

In 1939 business was still 25% less than it had

been in 1929 and unemployment still stood at

10 million

On the eve of war the New Deal had stalled


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Criticisms and opposition to the New

Deal: not enough

Southern states did not benefit; blacks in

particular

Southern critics included Senator Huey Long

of Louisiana who said FDR favoured big

business over ordinary people

Long wanted all Americans with over $3

million to have their wealth confiscated andredistributed amongst the poor


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Deal: not enough

Father Charles Coughlin had an influential

radio show which regularly attracted an

audience of 30-40 million

He too argued that not enough was being

done to help the very poorest in US society


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Deal: too far

Republicans (right-wing) criticised FDR

(Democrat, left-wing) because of the extent of

government intervention in the economy

FDR, they said, was behaving like a dictator

High taxes, they said, encouraged people not

to work hard, handouts encouraged people to

be lazy


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A popular joke in the 1930s

Socialism: If you own two cows you give one toyour neighbour

Communism: You give both cows to the

government and the government gives you backsome of the milk

Fascism: You keep the cows but give the milk tothe government, which sells some of it back to

you New Dealism: You shoot both cows and milk the

government


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Deal: the Supreme Court

The Supreme Court ruled that New Dealagencies such as the NRA wereunconstitutional

We are of the opinion that an attempt to fixthe hours and wages of workers was not alawful use of government power

FDR planned to pack the Court with his ownsupporters and increase its size from 9 to 15;his plans came to nothing


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Opposition to the NRA


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The impact of the Second World War

on American economic recovery

In 1939, with the outbreak of war in Europe,FDR increased spending on defence

In 1940 FDR gave Britain 50 destroyers (naval

vessels) in return for the use of British militarybases

In March 1941 Congress (Americanparliament) agreed the Lend-LeaseProgramme which allowed Britain to obtainmaterials from USA without cash payment


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The impact of the Second World War

on American economic recovery

In December 1941 the Japanese attackedPearl Harbour bringing USA into WW2

Between 1939 and 1941 the US economy

began to recover because of the stimulus ofwar materials being ordered

The New Deals contribution to the recovery ishotly debated, though the New Deal certainlyrestored Americans confidence in their owncountry

Section B Depression and the New Deal

Documents

Transcript of Section B Depression and the New Deal