Roosevelt & the New Deal The Great Depression (1929-1941) Chapter 26, Section 2.
The Great Depression 1929-1941
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Transcript of The Great Depression 1929-1941
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The Great Depression 1929-1941
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Roaring Twenties
• Optimistic Time– Wealth and productivity– Medical advancements
• Decrease in infant mortality• Life expectancies increased 10 years from 1900
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Warren Harding (1921-23) Calvin Coolidge (1923-1929)
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Main cause of collapse: hubris?
• excessive pride or self-confidence; arrogance
• “We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor house is vanishing from among us.”
- Herbert Hoover, 1928
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What accounted for severity?
• Lack of Diversification• Maldistribution of purchasing power• Credit structure of economy• America’s position in international trade• International debt structure• Protective tariffs
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Warning signs:
• Uneven wealth– In 1929 richest Americans (0.1%) had held
34% of the country’s savings– 71% of individuals earned less than $2,500
(minimum standard of living)– 200 largest companies controlled 49% of
industry
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Warning sings continued…
• Rise in personal debt– Buying with credit (installment plans)
• Radios, vacuums, refrigerators
• 80% families had no savings, even though entire families were working
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Overproduction
• Rising Productivity• Wages Rose, but assembly lines produced
goods too quickly• Caused some industries to slow
– Automobile, housing
• BUT… Stock market kept rising
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Playing the Stock Market
• Before WWI, only wealthy invested• After, “Get rich quick” attitude prevailed
– Newspapers reported on ordinary people– Small investors bet life savings
• Buying “on margin”– Buy stock for fraction of the price and borrow
the rest
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Stock Market Crash
• By 1929, prices of stocks soared above their real value
• Peaked in Sept., then slowly declined• Tuesday, Oct. 29, 1929, investors raced to
get their money out of the stock market• Initially, only affected investors
– 1929 only 4 million of 120 million
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Ripple Effects
• Risky loans hurt banks• Consumer borrowing• Bank runs• Bank failures• Savings wiped out• Cuts in production• Rise in unemployment• Further cuts in production
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Economic Effects (1930-1933)
• Collapse of Banks– 6,000 bankrupt or closed– Depositors lost $2.5 billion
• Widespread unemployment– 15 million, 25% of workforce
• Collapse of farm economy– By 1932, farm income down 60%– 2/3 of farm families lose land
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Normal Business Cycle
• Economic…– Expansion– Peak– Contraction– Trough
• Recession vs. Depression
– Depression = prolonged and severe
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• Great Crash of 1929 triggered most severe depression in U.S. history
• Great Depression (1929-1941)
• As for welfare capitalism– Henry Ford shut down Detroit auto factories– Put 75,000 out of work
• The GNP: $104 billion (1929) to $56 billion (1933)
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Cycles of Depression• Investors and Businesses
– Businesses lose profits, Investors lose $$$
• Businesses and Workers– Consumer spending drops, businesses cut
investment and production (some fail), workers are laid off
• Banks– Businesses and workers cannot repay loans,
banks run out of money/fail, bank runs occur, savings accounts are wiped out
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World Payments
• Overall U.S. production plummets
• U.S. investors have little/no money to invest
• U.S. investments in Europe/Germany decline
• German war payments to Allies fall off
• Europeans cannot afford American goods
• Allies cannot pay debts to United States
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Interdependent World
• By 1930s, international banking, manufacturing, trade connected nations– Latin American depended on U.S. for goods– Europe depended on U.S. loans/investment– U.S. was world’s leading economy
• After WWI, Allies (France/G.B.) relied on Germany’s reparations to repay U.S.– After market crash, U.S. stopped $ to Germany– German economy failed, Allies’ payments to
U.S. ended
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Great Depression
Part II
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President Hoover (1929-1933)
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Future 1st Lady Lou Henry (age 17)
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“Hoovervilles”• Shantytowns named for President Hoover
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Sacramento, 2009
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Social Effects
• Hardships at all levels– Few prospects for laid off white-collar workers
• Poorest hit hardest– Hunger, sickness, homelessness
• Homeless/jobless became drifters– “hit the rails”
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Farm Distress
• Crop prices plummeted – Families could not pay mortgages/loans
• Families lost farms to banks– Banks would auction farms off
• In South, landowners expelled tenant farmers and sharecroppers
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The Dust Bowl (1931-1940)
• Severe drought and over-farming – Severe soil erosion, soil (“dust”) clouds
• Removal of prairie grasses exposed topsoil
• Wind blew it for hundreds of miles– Cities in east had darkened skies– Reports of soil landing on ships in Atlantic
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Dust Cloud Approaches Stratford, TX, 1935
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“Okies” driving to California
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• “Migrant Mother”
by Dorothea Lange (1936)
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Surviving the Depression
• Nothing wasted
• Planted “relief gardens” in cities
• Breadlines and soup kitchens widespread
• Farm families stuck together– Penny auctions
• Millions left home to “ride the rails”
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Americans took their failures personally
• Widespread Shame– Especially w/ men who lost jobs
• Many were embarrassed or too ashamed to accept charity
• Discrimination– Nativism– Deportation– Higher unemployment in minority groups
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Americans sought political solutions
• In Europe, riots and political upheaval
• Most Americans trusted democratic process
• Communism and Socialism made small gains
• Eventually, Americans blamed Hoover directly
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Hoover’s Limited Strategy
• Insisted on confidence
in system
• Blamed depression on
world-wide crisis
• Supported voluntary controls by industry– For example, to maintain min. wages
• Hoover held rigidly to his plan (voluntary controls and confidence), and economy continued to worsen
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Finally, The Government Acts
• Began with govt. spending on public buildings, roads, parks, dams
• Hawley-Smoot Tariff (1930)– Highest import tax in history– Backfired, Europeans raised their tariffs
• Still, Hoover believed:– state and local govts should handle relief– direct federal assistance would destroy
people’s self respect and create a large beaureacracy
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