Potential economic problems Potential economic problems in U. S. apparent in 1920s in U. S. apparent in 1920s

Textile, steel & railroad industries Textile, steel & railroad industries in trouble.in trouble.

Railroads lost business to newRailroads lost business to newforms of transportation.forms of transportation.

Textile mills faced competitionTextile mills faced competitionfrom mills in Japan,from mills in Japan, India,India,

China,China,and South America and South America

that used cheaper labor that used cheaper labor to sell at cheaper prices to sell at cheaper prices

Coal mining hit especially Coal mining hit especially hard due to competition hard due to competition from new forms of energy: fuel oil, from new forms of energy: fuel oil, hydroelectric power,hydroelectric power,and natural gas.and natural gas.

1930s, these new sources supplied 1930s, these new sources supplied more than half the power once more than half the power once provided by coal.provided by coal.

New house construction fellNew house construction fellsteadily after peaking in 1925steadily after peaking in 1925

The decline The decline caused other caused other businesses businesses dependent ondependent onconstruction to construction to decline also.decline also.

Furniture,Furniture, and house-and house-hold hold appliancesappliances

Agriculture suffers in 1920s Agriculture suffers in 1920s World War I: demand for World War I: demand for wheat, corn, etc. soared wheat, corn, etc. soared

Prices rose Prices rose Farmers planted more Farmers planted more Took out loans for more Took out loans for more land and equipment land and equipment

After war, demand fell—After war, demand fell— prices declined by 50% or prices declined by 50% or moremore

Because of low prices, Because of low prices, farmersfarmers could not repay loans could not repay loans

Agriculture suffers in 1920s Agriculture suffers in 1920s

Banks foreclosed and seized farms Banks foreclosed and seized farms and equipment and equipment as paymentas payment

Agriculture suffers in 1920s Agriculture suffers in 1920s McNary-Haugen Bill in Congress McNary-Haugen Bill in Congress

ProposedProposed federal price supports federal price supports for key products for key products

• Government would buy surplus Government would buy surplus crops at guaranteed prices higher crops at guaranteed prices higher than market rate than market rate • Government would then sell crops Government would then sell crops on world market for lower prices on world market for lower prices • To compensate for losses, To compensate for losses, taxed taxed domestic food sales.domestic food sales.

Agriculture suffers in 1920s Agriculture suffers in 1920s McNary-Haugen Bill in Congress McNary-Haugen Bill in Congress Cost passed to consumers Cost passed to consumers Coolidge twice vetoed Coolidge twice vetoed Farmers began to Farmers began to experience severe financialexperience severe financialdifficulties.difficulties.

The economy of the late The economy of the late 1920s: 1920s:

People: less disposable income People: less disposable income Farms and factories continued Farms and factories continued to produce more to produce more People bought less creating a People bought less creating a surplus surplus that caused farmers and that caused farmers and businesses to go further into businesses to go further into debt.debt.

The economy of the late The economy of the late 1920s: 1920s: Many Americans lived beyond their Many Americans lived beyond their means means

Bought goods on credit Bought goods on credit Distribution of wealth very unevenDistribution of wealth very uneven Rich got richer; poor got poorer Rich got richer; poor got poorer

1928 election: 1928 election: Republicans: Herbert Hoover Republicans: Herbert Hoover

Iowa, engineer, had Iowa, engineer, had not previously run for not previously run for elective office elective office ““A chicken in every A chicken in every pot; 2 cars in every pot; 2 cars in every garage.”garage.”

Democrats: Alfred Smith Democrats: Alfred Smith Brooklyn, New York; Brooklyn, New York; Catholic; career politician.Catholic; career politician.

1928 election: 1928 election: Hoover won an overwhelming Hoover won an overwhelming victory.victory.

People liked the Republican People liked the Republican message: “The poorhouse is message: “The poorhouse is vanishing among us.” vanishing among us.”

1928 election: 1928 election:

The Stock Market The Stock Market Many Americans invested in Many Americans invested in stocks and bonds stocks and bonds

A “bull market”A “bull market”—rising prices —rising prices 1929—4 million Americans (3%)1929—4 million Americans (3%) owned stocks owned stocks

Many investors engaged in Many investors engaged in speculation—short term ownership speculation—short term ownership of particular stocks—of particular stocks—ignored risks ignored risks to make quick profits.to make quick profits.

The Stock Market The Stock Market Unrestrained buying and Unrestrained buying and selling selling

Prices rose—paper wealth Prices rose—paper wealth Stock prices often became Stock prices often became far greater than the real far greater than the real worth of the companies represented worth of the companies represented by particular stocks. by particular stocks.

The Stock Market The Stock Market Many investors bought on Many investors bought on margin—borrowed on the value of margin—borrowed on the value of the stock. the stock.

Company X=$10.00 per share Company X=$10.00 per share Buy 400 shares: $4,000.00 Buy 400 shares: $4,000.00 Pay 25% down: $1,000.00 Pay 25% down: $1,000.00 Borrow 75% from Borrow 75% from Stockbrokers: Stockbrokers: $3,000.00 $3,000.00

As prices rose and investors sold, As prices rose and investors sold, paid off debt and kept profits paid off debt and kept profits

The Stock Market The Stock Market September 1929: stock prices September 1929: stock prices peaked; began to decline due to peaked; began to decline due to surpluses and increasing business surpluses and increasing business and farm debt. and farm debt. October 24, 1929: stocks plunged.October 24, 1929: stocks plunged.October 29, 1929: October 29, 1929: Black Tuesday Black Tuesday

Prices spiraled downward Prices spiraled downward People sold frantically People sold frantically to cut to cut their losses their losses 16 million shares dumped16 million shares dumped

The Great Depression The Great Depression

The Great Depression: Five factors The Great Depression: Five factors Lack of economic diversification Lack of economic diversification Misdistribution of purchasing power,Misdistribution of purchasing power, weakness in consumer demand weakness in consumer demand Credit structure: farmers too deeply Credit structure: farmers too deeply in debtin debtDecline in European demand for U. S. Decline in European demand for U. S. goods goods International debt structure International debt structure

The Great Depression The Great Depression Begun by Stock Market crash Begun by Stock Market crash Other causes: Other causes: Old/decaying industrial base Old/decaying industrial base Farm products crisis Farm products crisis Availability of easy credit Availability of easy credit Unequal distribution of income Unequal distribution of income Low interest rates encouraged Low interest rates encouraged more borrowing; greater debts more borrowing; greater debts

The Great Depression The Great Depression People panicked; withdrew People panicked; withdrew their money from banks their money from banks (runs on)(runs on)

Many banks lost a lot of money Many banks lost a lot of money in stock market crash in stock market crash Could not cover those losses plus Could not cover those losses plus withdrawals of individual accounts withdrawals of individual accounts 1929—259 banks closed 1929—259 banks closed By By

1933, 1933, 6,000 banks (25%) had failed 6,000 banks (25%) had failed 9-million individual savings accts.9-million individual savings accts.

wiped out by 1933 wiped out by 1933

The Great Depression The Great Depression Millions of Americans lost Millions of Americans lost their jobs their jobs

Unemployment:Unemployment: 1929: 3% ( 1.6 million)1929: 3% ( 1.6 million) 1933: 25% (13 million)1933: 25% (13 million)

The 2005 film The 2005 film Cinderella ManCinderella Man depicted the hard depicted the hard times of the Greattimes of the GreatDepression Depression

The Dust BowlThe Dust Bowl

The Dust BowlThe Dust Bowl

The Dust BowlThe Dust Bowl

The Dust BowlThe Dust Bowl

John Steinbeck & The Grapes of Wrath

The Scottsboro Case The Scottsboro Case

Gracie Allen and George Burns

Jack Benny

Orson Welles

Hollywood Moguls Hollywood Moguls

Louis B. Mayer Louis B. Mayer MGMMGM

Jack WarnerJack WarnerWarner BrothersWarner Brothers

It Happened One Night It’s A Wonderful LifeIt Happened One Night It’s A Wonderful Life

Frank Capra Frank Capra

Snow Wight and the Seven DwarfsSnow Wight and the Seven Dwarfs (1937) (1937)

Walt DisneyWalt Disney

The Wizard of Oz

Margaret MitchellGone With the WindGone With the Wind

Greta GarboThe Marx Brothers

President President Hoover tried to Hoover tried to reassure Americans that reassure Americans that the American economy was on the American economy was on solid ground solid ground in late October 1929in late October 1929..

““Any lack of confidence in the Any lack of confidence in the economic future. . . is foolish.”economic future. . . is foolish.”

Americans had experienced previousAmericans had experienced previousdepressions.depressions.

Felt they were normal parts of Felt they were normal parts of the business cycle.the business cycle.

Many experts believed that Many experts believed that the best course of action the best course of action in in late 1929-early 1930late 1929-early 1930: do nothing: do nothingSecretary of the TreasurySecretary of the TreasuryAndrew Mellon: Andrew Mellon: “Let the “Let the slump liquidate itself.”slump liquidate itself.”Hoover: minimal Hoover: minimal government intervention government intervention in the economy; in the economy; but but government should playgovernment should playsome role in solving problems.some role in solving problems.

Hoover: Hoover: Logic combined Logic combined with humanitarianismwith humanitarianismHard time making Hard time making political compromises—political compromises—too inflexibletoo inflexible

Difficulty adjusting his attitudes to Difficulty adjusting his attitudes to changing desperate circumstances changing desperate circumstances of the nation.of the nation.Government’s role: encourage and Government’s role: encourage and facilitate cooperation; not control it.facilitate cooperation; not control it.

Believed Believed in “rugged in “rugged individualism”—individualism”—people people should succeed through their should succeed through their own efforts; own efforts; they shouldthey should not depend not depend on the government on the government to bail them outto bail them out..Believed individuals, charities, and Believed individuals, charities, and local organizations should local organizations should pitch inpitch inandand care for less fortunate. care for less fortunate.Federal government: direct relief Federal government: direct relief measures, but not through a measures, but not through a bureaucracy.bureaucracy.

Cautious approachCautious approachCalled together business, Called together business, banking and labor leaders,banking and labor leaders,urging them to work together urging them to work together to findto findsolutions to the nation’s economicsolutions to the nation’s economicproblems.problems.Hoover asked employers not to cut Hoover asked employers not to cut wages or lay off workers; asked wages or lay off workers; asked labor leaders not to demand higher labor leaders not to demand higher wages or strike.wages or strike.

None of his urgings did any None of his urgings did any good.good.

Unemployment roseUnemployment roseMore companies & banks went More companies & banks went out of businessout of businessIncreasing numbers of breadlines,Increasing numbers of breadlines,soup kitchens, shantytowns, andsoup kitchens, shantytowns, andhoboes.hoboes.

The “nice guy,” laissez faire (let The “nice guy,” laissez faire (let business do it) approach did not business do it) approach did not work.work.

The Great Depression The Great Depression

1930 Congress passed the 1930 Congress passed the Smoot-Hawley Tariff Act Smoot-Hawley Tariff Act Highest protective tariff in Highest protective tariff in U. S. history U. S. history Designed to protect U. S. farmers Designed to protect U. S. farmers Reduced flow of goods into U. S. Reduced flow of goods into U. S.

American imports severely reduced American imports severely reduced Further stress on European Further stress on European economies economies Difficult to sell U. S. products Difficult to sell U. S. products abroad abroad

The Great Depression The Great Depression 1930 Congress passed the 1930 Congress passed the Smoot-Hawley Tariff Act Smoot-Hawley Tariff Act European “pay back”—raised their European “pay back”—raised their own tariffs own tariffs

Limited U. S. exports Limited U. S. exports Increased U. S. unemployment Increased U. S. unemployment World-wide affect World-wide affect

World trade fell by > 40%World trade fell by > 40%World-wide crisis World-wide crisis

1930 off year elections:1930 off year elections:

Democrats win Democrats win control of the House control of the House of Representativesof Representatives

Republicans only control Senate by Republicans only control Senate by 1 vote 1 vote People very displeased with Hoover People very displeased with Hoover and the and the Republican Party (Republican Party (GOPGOP))

Americans outwardly Americans outwardly expressed anger with Hoover expressed anger with Hoover Farmers burned cornFarmers burned cornand wheat, and wheat, dumped dumped milk on roads milk on roads (rather(ratherthan sell it at a than sell it at a loss),loss),

and blocked roads to and blocked roads to prevent food from prevent food from getting to market.getting to market.

Americans outwardly Americans outwardly expressed anger with Hoover expressed anger with Hoover Shantytowns: HoovervillesShantytowns: Hoovervilles

Americans outwardly Americans outwardly expressed anger with Hoover expressed anger with Hoover Newspaper blankets: Hoover blanketsNewspaper blankets: Hoover blankets

Hoover flagsHoover flagsPeople started thinkingPeople started thinkingof Hoover as cold and of Hoover as cold and heartlessheartless

Still, he refused to consider Still, he refused to consider direct direct relief from the government orrelief from the government or any any form of federal welfare.form of federal welfare.

By 1930, Hoover did take By 1930, Hoover did take a more activist approach toa more activist approach tostimulating the economy.stimulating the economy.

Genuine sensitivity to people’sGenuine sensitivity to people’ssuffering. Began to listen to others.suffering. Began to listen to others.

Initiated public-works projectsInitiated public-works projectsRoads, dams, bridges Roads, dams, bridges

Approved $800 million for projectsApproved $800 million for projectsEffort to stimulate business and Effort to stimulate business and provide jobs provide jobs

Most famous federal project:Most famous federal project:Boulder Boulder (now Hoover)(now Hoover) Dam. Dam.

Other local, with someOther local, with somefederal assistance, federal assistance, projects included:projects included:

Golden Gate and TransbayGolden Gate and TransbayBridges over S. F. BayBridges over S. F. Bay

Other efforts by Hoover Other efforts by Hoover to to help the U. S. out of the help the U. S. out of the Depression:Depression:Creation of the Federal Farm Board—Creation of the Federal Farm Board— designed to keep crop prices high designed to keep crop prices high 1933—Glass-Steagall Banking Act—1933—Glass-Steagall Banking Act— increased bank reserves for easier increased bank reserves for easier loans loans Federal Home Loan Bank Act—lowerFederal Home Loan Bank Act—lowermortgage rates and money for mortgage rates and money for farmers to refinance farm loansfarmers to refinance farm loans

Other efforts by Hoover:Other efforts by Hoover:1932—Reconstruction 1932—Reconstruction Finance Corporation Finance Corporation

Emergency financing to banks,Emergency financing to banks,life insurance companies, railroads, life insurance companies, railroads, and other large businessesand other large businesses

Hoover’s theory: money would trickleHoover’s theory: money would trickledown to average citizen through jobdown to average citizen through jobgrowth and higher wages.growth and higher wages.

The Bonus ArmyThe Bonus Army1932: 10,000-20,0001932: 10,000-20,000World War I veterans and familiesWorld War I veterans and familiesarrived in Washington, D. C.arrived in Washington, D. C.Bonus to World War I Bonus to World War I veterans veterans who had not who had not been paid adequately been paid adequately for wartime servicefor wartime service

Congress passed the Congress passed the bonus in 1924 to be paid in 1945bonus in 1924 to be paid in 1945as a life insurance policy.as a life insurance policy.

The Bonus ArmyThe Bonus Army

Patman believed the bonus should Patman believed the bonus should be paid immediately be paid immediately

Hoover provided food Hoover provided food and supplies so the and supplies so the veterans could erect a veterans could erect a shantytown in sight of shantytown in sight of the capitolthe capitol

Patman Bill Patman Bill Congressman Congressman Wright Patman of Wright Patman of Texas Texas

June 17, 1932—CongressJune 17, 1932—Congressvoted down the Patman Billvoted down the Patman Bill

The Bonus ArmyThe Bonus Army

Hoover asked the veterans to leave;Hoover asked the veterans to leave;all but about 2000 did. Theyall but about 2000 did. Theymarched on the capitol.marched on the capitol.

Hoover calls out the Army to Hoover calls out the Army to disband the Bonus Army.disband the Bonus Army.Army, led by General Douglas Army, led by General Douglas MacArthur,MacArthur, assisted by assisted by

future generals Georgefuture generals GeorgePatton and Dwight D. Patton and Dwight D. Eisenhower,Eisenhower,

The Bonus ArmyThe Bonus Army. . . uses tear gas, bayonets,. . . uses tear gas, bayonets,and the “flats” of cavalry swordsand the “flats” of cavalry swordsto disband the Bonus Army.to disband the Bonus Army.

11-month-old baby killed,11-month-old baby killed,8-year-old partially blinded8-year-old partially blinded2 people shot2 people shot

American people American people outraged and outraged and blame Hoover for blame Hoover for the incident.the incident.