THE GREAT DEPRESSION AND THE NEW DEAL Unit 2: Chapters Notes PROSPERITY? The 1920s were dominated by the Republican Party, who tended to allow the economy to prosper on its own without government intervention It worked: Consumption of American goods increased Gross national product increased Stock market went up to all time highs The Election of 1928 brought much of the same- America was in no hurry for change Republican Candidate Herbert Hoover was easily elected President PROSPERITY? The American farmer did not enjoy the same prosperity as other Americans during the Roaring 20s To meet demand during WWI, farmers had worked more land, grown more crops, and invested in mechanized equipment to meet the governments needs PROSPERITY? After the war: Demand for farm goods decreased sharply Supply was still increasing and farmers couldnt sell their surplus product As a result, farmers couldnt pay off the debts they owed the banks Farmers did not have the money or the time to purchase many consumer goods during the 1920s Many lived on credit- borrowing month-to-month PROSPERITY? CAUSES OF THE GREAT DEPRESSION There is no one single cause of the Great Depression- it was a combination of several major factors: Struggles of the American Farmers Uneven Distribution of Wealth Credit Stock Market Crash Collapse of the Banks Rising Unemployment International Trade Issues Global Economic Issues CAUSES OF THE GREAT DEPRESSION Uneven Distribution of Wealth: Wages for factory workers increased, but so did productivity Corporate profits rose 65%- wages only increased 8% The top 1% of the population earned the same as the bottom 42% Why does this matter? The top 1% buys consumer goods, but not enough to make up for what the poorer werent buying The rich couldnt buy enough goods to make up for overproduction Credit In the 1920s, 80% of radios and 60% of cars were bought on credit Stock was bought on credit- investors were investing money that they did not have! Allowed Americans to live beyond their means CAUSES OF THE GREAT DEPRESSION Stock Market Crash Many investors were putting money into stock speculation (prices not based in reality) As stock prices dropped, investors got nervous and pulled their money out October 29, 1929 (Black Tuesday) 16 million shares were sold and the market crashed CAUSES OF THE GREAT DEPRESSION Collapse of the banks: The Fed had discouraged lending in so when the market crashed, people went to the banks to get the hard money that they had left As people took their money out of the banks, the banks ran out of money and closed! banks failed banks failed banks failed Rising Unemployment: To survive, businesses closed factories, laid-off workers, and maintained prices of their surplus goods Problem: as workers were laid-off they couldnt buy consumer goods, which led to more factories cutting back, which led to more workers laid-off CAUSES OF THE GREAT DEPRESSION International Trade Issues: To help protect American goods, Congress passed the Hawley-Smoot Tariff on foreign goods Foreign goods couldnt compete with American goods- so other countries did the same thing to American goods! As a result, foreign trade came to a halt worldwide CAUSES OF THE GREAT DEPRESSION Global Economic Issues Germany owed Britain and France $33 billion from WWI, but needed money from the US to pay it France and England owed war debt to the US- which they used Germanys reparation money to pay it When the US economy collapsed, Germany could no longer pay reparations, thus Britain and France could no longer pay the US As a result, the Depression spread around the world Unemployment: Between , annual average unemployment was never higher than 3.7% By 1933, it was 24.9% (50% for African Americans) Those who did keep their jobs found shorter hours, lower wages No movement up the social order; instead went from unemployed to unemployable LIFE DURING THE GREAT DEPRESSION Hoovervilles: As people lost their homes, they slept anywhere they could find shelter Makeshift shantytowns popped up on public land People covered themselves in Hoover blankets (newspaper) LIFE DURING THE GREAT DEPRESSION Rural Life: Prices continued to fall after the Depression started Wheat: $2.16/bushel $0.38/bushel Cotton: cents/lb cents/lb The Dust Bowl: Severe drought, combined with new, aggressive farming methods created disastrous conditions in the Great Plains during the 1930s Dust storms rose upwards of 8,000 feet and moved as fast as 100 mph LIFE DURING THE GREAT DEPRESSION Refugees from the Dust Bowl regions were known as Okies Many went to California in search for opportunities that werent actually there Others went to cities of the Northeast or Midwest, increasing the population of states with large cities Effect on the family: Men who lost their jobs often felt like they betrayed their families Some rode the rails and went from town to town searching for work Some sank into depression and left their families Women stopped having children because they couldnt support a larger family Children dropped out of school, looked for work, or ran away LIFE DURING THE GREAT DEPRESSION