The Nation’s Sick Economy OBJECTIVE: Understand the causes of the Great Depression

The Nation’s Sick Economy

OBJECTIVE: Understand the causes of the Great Depression

Economic Troubles Brewing

• Big industries (steel, textiles, railroads) not making profits

• Diminishing demand for new products and new construction

• Agricultural business withering• Congress passes price supports for farmers• Pres. Coolidge vetoes price supports twice,

1927 & 1928

HOW ARE THESE BUSINESS CHANGES RELATED TO WWI?

CONSUMERS BAD HABITS

• Americans are buying less. Why?

• Business are producing more. Why?

• Americans use credit more. Why?

OUTCOME: The gap between rich and poor was rapidly spreading.

FACT: In 1929 5% of US controlled nearly a third of its wealth, while 40% of US only has 10% of its wealth.

“To get a sense of how the very wealthy have prospered over the past generation, consider this: The share of total income going to the top-earning 1 percent of Americans went from 8 percent in 1980 to 16 percent in 2004.

That doesn't mean that the average family is worse off than a generation ago; more people own homes, go to college, drive reliable cars and have access to sophisticated health care than ever before. But while the average family has done well, the very rich have done much, much better.” http://www.npr.org/templates/story/story.php?storyId=7180618

ELECTION OF 1928

CANDIDATES:Al Smith runs for DemocratsHerbert Hoover runs for Republicans

ISSUES:Smith’s Catholicism, opposition to prohibition, and connections to NYC

VERSUS the apparent prosperity under

Republicans

OUTCOME: Hoover wins handily.

President Herbert Hoover, 1928-32

Hoover runs for Republicans• Efficient bureaucrat/businessman• Well-known humanitarian• Quaker• Isolationist, “dry,” conservative

•Preaches “rugged individualism”Al Smith runs for Democrats

• His Catholicism is an issue• New Yorker• Liberal, “wet,” progressiveCAMPAIGN UGLY IN ANTI-CATHOLIC BIGOTRY

http://fisher.lib.virginia.edu/collections/stats/elections/maps/1928.gif

STOCK MARKET CRASH

CAUSES

• Buying on margin

• Speculation

• Global System of Debt and Reparations

EFFECTS

• Black Tuesday (10/29/29)

• Run on banks

• Great Depression

TARIFFS AND REPARATIONSAllies

struggle to pay

Back loans

Allies cannotmake a profit or pay loans

US demands repayment

Fordney-McCumber

Tariff !!!

Allies demand

reparations from Germany

Germany bankrupt

US loans $ to Germany

Germany gives $ to Britain and France

US paid in its own $

OUTCOME:Bad feelings all around.

Unstable economic house of cards.

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BEGINNING OF THE GREAT DEPRESSION

CAUSES EFFECTS• Old and decaying

industrial base• A crisis in the farm

sector• The availability of

instant credit• An unequal

distribution of income

• Hawley –Smoot Tariff

• Falling demand for consumer goods

• Gross Nat. Product cut in half!!!

• Unemployment rises to 25%!!!

• Interests rates fall, people borrow $ and fall into deeper debt

• Collapse of investment and banks

• Global Depression

Unemployment, in millions

15

12

9

6

3

0 1928 1929 1930 1931 1932 1933

Bank Failures, in thousands

5

4

3

2

1

0

1928 1929 1930 1931 1932 1933

Business Failures, in thousands

35

30

25

20

15

1928 1929 1930 1931 1932 1933

STOCK MARKET CRASH

STOCKMARKETCRASH

HARDSHIP AND SUFFERING DURING THE DEPRESSION

OBJECTIVE:Understand the conditions

during the Great Depression

http://www.weru.ksu.edu/new_weru/multimedia/multimedia.html

Depression in the Cities

CAUSES:Debt, unemployment and inflation

People loose their homes and apartments

EFFECTS:• Shantytowns (AKA Hoovervilles) • Bread Lines and Soup Kitchens • Minorities suffer the most

• Race Riots• Deportations• 50% unemployment (vs. 25%)

http://content.answers.com/main/content/wp/en/thumb/e/e8/270px-Hoovervilles_big.jpg

A Hooverville in Central Park, NYC

Soup Kitchens and Bread Lines

http://www.americanpresident.org/history/franklindelanoroosevelt/biography/resources/images/FDRCampaigning.image.jpg

http://www.elderweb.com/history/images/acoffee_sm.jpg

Depression in Rural Areas

CAUSES:• Falling crop prices Rising Rural Debt• Dust BowlEFFECTS: • 400,000 Farms foreclosed b/w 1929-

1932• More tenant farmers / sharecroppers• “Okies” = migration West from Dust

Bowl

Map: The Dust Bowl

The Dust BowlFrom the Dakotas southward to the Mexican border, farmers in the Great Plains suffered from a lack of rainfall and severe soil erosion in the 1930s, worsening the hardships of the Great Depression

Copyright © Houghton Mifflin Company. All rights reserved.

http://www.weru.ksu.edu/new_weru/multimedia/multimedia.html

Dorothea Lange photo of migrant mother and childDorothea Lange became one of the most famous photographers of the Depression. Her photo of a migrant mother and her children at a migrant camp in Nipomo, California, captured the human tragedy of the Depression. Seeking jobs and opportunities, over 350,000 people traveled to the state, most finding few opportunities. (Library of Congress)

Dorothea Lange photo of migrant mother and child

Copyright © Houghton Mifflin Company. All rights reserved.

Hoover’s Philosophy

• Depressions were normal, healthy part of business cycle

• Depression will correct itself• Belief in “rugged Individualism” and

voluntary action• Government should do as little as

possible• No Direct Relief

PROBLEM: Depression does not “fix itself”

• Hoover asks businesses to voluntarily hold wages and employment

• Economy continues to collapse• Democrats win 1930 Congressional

Elections• Farmers rioting & destroying crops• Starvation & Homelessness haunts US

Hoover Acts: Too Little, Too Late

• Authorizes public works projects: dams, bridges, roads

• 1932: Reconstruction Finance Corp. (RFC)

• 1933: Federal Home Loan Bank Act

CRITICISM:This aid goes to big companies and banks, does not “trickle down” to average citizens

Construction of a Dam by William Gropper. (Smithsonian American Art Museum,Washington,D.C. Art Resource, NY)

Construction of a Dam by William Gropper

Hoover does direct some government aid to major construction projects, such as the Boulder Dam (now called Hoover Dam)

Gassing of Bonus Army

IMPACT? Hoover’s popularity falls

lower. Helps FDR win in 1932.

EVALUATION OF HOOVER

HOOVER’S RESPONSE

RESULT