1

4

UNEVEN DISTRIBUTION

OF WEALTH OVER PRODUCTION

HIGH TARIFFS AND WAR

DEBTS

CAUSES OFTHE GREAT

DEPRESSION

AGRICULTURE

INDUSTRY

MONETARY POLICY

STOCK MARKET CRASH AND

FINANCIAL PANIC

Historians disagree as to the causes of the Great Depression. Most scholars would include:

5

The 1920s: prosperous time, but

not for everyone

Installment buying, using credit and

paying back in small amounts allowed

people to buy cars, radios and other new

products.

Farmers, however, were in a depression throughout the whole

decade.

6

RURAL POVERTY IN THE 1920’S

7

Wages had risen relatively little compared to the large increase in productivity and profits

The top 1% received a 75% increase in their disposable income while the other 99% saw an average 9% increase in their disposable income.

80% of Americans had no savings at all.

UNEVEN DISTRIBUTION OF WEALTH

Happy Feet song

8

1,230,000 Americans

121,770,000 Americans

9

65

70

75

80

85

90

1923 1929

income

The economy grew by billions throughout the 1920s. Total realized income rose from $74.3 billion in 1923 to

$89 billion in 1929

10

Chart showing wages of unskilled workers. Notice how little the wages changed during the supposed prosperity

of the 1920’s.

• Get rich quick by “playing the market”

• Buying on margin– Down payment of 10%, borrow the rest of the

cost of stock from stockbrokers who borrowed from banks

• Hoped that price would go up in order to repay loan

• When prices dropped, market collapsed

11

STOCK MARKET SPECULATION

12

HIGH TARIFFS AND WAR DEBTS

European nations owed over $10 billion to the US. Their economies had been devastated by war and they had no way of paying the money back.

Forced the allies to demand Germany pay the reparations. All of this later led to a financial crisis when Europe could not purchase goods from the US

1922: US passed the Fordney-McCumber Act, which instituted high tariffs on industrial products.

1930: Hawley-Smoot Tariff set the highest tariff rates in US history (31 to 49%). European countries passed their own higher tariffs in US goods. Both national and international economies sank further into depression

13

Factories were producing products, however wages for workers were not rising enough for them to buy them.

Too few workers could afford to buy the factory output.

The surplus products could not be sold overseas due to high tariffs and lack of money in Europe.

OVERPRODUCTION IN INDUSTRY

14

FARM OVERPRODUCTIONDue to surpluses and

overproduction, farm incomes dropped throughout the 1920’s.

The price of farm land fell from $69 per acre in 1920 to $31 in 1930.

Agriculture in depression until the outbreak of World War II in 1939.

1929: average annual income for an American family was $750, but for farm families it was only $273.

The problems in the agricultural sector had a large impact since 30% of Americans still lived on farms.

Surplus ears of corn

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Agricultural product

1912-1913 1932-1933

Corn (per bushel) 0.56 0.20

Wheat (per bushel) 0.88 0.41

Oats (per bushel) 0.34 0.17

Butter (per lb) 0.21 0.13

Butterfat (per lb) 0.25 0.16

Wool (per lb) 0.24 0.10

Hogs (per cwt) 7.50 3.80

Milk (per cwt) 1.79 0.90

Table shows the sharp decline in the prices of various products from American farms

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Democratic New York Governor Al Smith ran against Republican Secretary of Commerce Herbert Hoover. Many were suspicious of

Smith who was Catholic, while Hoover was popular for feeding starving Europeans after WWI.

Al Smith

17

Hoover’s winning platform was based on continued prosperity

“We in America today are nearer to the final triumph

over poverty than ever before in the history of any land. The poorhouse is vanishing from

among us.” 1928

Hoover accepting

the Republican nomination

for president

18

19

"I do not believe that the power and duty of the General Government ought to be extended to

the relief of individual

suffering. . . . The lesson should be

constantly enforced that though the

people support the Government the

Government should not support the

people." (1930)

President Hoover’s belief in self-reliance would later affect his ideas about how to best

solve the upcoming depression

President and Mrs. Hoover

20

ONE OF HOOVER’S FIRST ACTS WAS DEALING WITH THE FARM CRISIS

Candidate Hoover: "The most urgent

economic problem . . . is agriculture. It

must be solved.

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22

YEAR WHEAT CORN OATS POTATOES PEANUTS

1919 216.3 150.7 76.7 191.1 9.33

1920 182.6 61.0 53.8 133.2 5.26

1921 103.0 52.7 32.2 113.5 3.99

1922 96.6 75.2 37.4 68.6 4.68

1923 92.6 83.5 40.7 91.5 6.78

1924 124.7 105.3 47.8 71.5 5.68

1925 143.7 69.9 38.8 166.3 4.56

1926 121.7 75.3 40.1 136.3 4.97

1927 119.0 84.9 47.1 108.9 5.04

1928 99.8 84.3 40.7 57.2 4.90

1929 103.4 79.8 41.9 131.5 3.83

1930 67.0 59.4 32.2 91.5 3.54

1931 39.0 32.1 21.3 46.4 2.09

1932 37.9 31.8 15.7 38.8 1.53

U.S. Department of Agriculture’s yearbook from 1934 shows the unstable prices of foodstuff

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24

1910 1918 1932

Average gross receipts

2177 3837 1512

Average expenditures

770 1655 1019

Balance 1407 2182 493

25

Federal Reserve Monetary Policy

The Federal Reserve System was created in 1913 to help stabilize the economy by establishing a central banking system for the U.S.

A major goal is to deal with bank panics.

Monetary policy manipulates the money supply to help strengthen the economy.

At the beginning of the Great Depression, the Fed did not address failing banks, and many scholars argue their idleness worsened the situation.

26

Millions of average Americans began speculating in the stock market in the 1920s. Speculating is buying risky

stocks out of a desire to get rich quick, rather than investing because of a sound investment.

27

Black ThursdayOct. 24, 1929

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STOCK MARKET CRASH AND FINANCIAL PANIC

WALL STREET ON THE DAY OF THE CRASH, OCTOBER 1929

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Stocks were overpriced due to speculation, meaning they were not worth their sale price

Massive fraud and illegal activity occurred due to a lack of regulation and rules

Margin buying, or buying using credit

Federal reserve policy

Major reasons for the stock market crash in October 1929

• Bankers call brokers wanting their money!

• Brokers go to investors to collect their money to pay the

bank loans borrowed by broker for investor

• Orders to sell any any price… swamped the market--nobody

would buy

• Brokers go under--stocks are worthless--investors loose

their savings!

• Run on the BanksRun on the Banks: People begin to panic and go to

banks---try to withdraw their money…Banks don’t have any

money to give back

• Banks close---people lost their savings

• Businesses close---could not pay back loans to banks.

• Workers loose their jobs

• No money to buy consumer products

• Sales fall---more businesses shut down

• More workers lose their jobsdomino effect

Great Great CrashCrash

Investors

Businesses and WorkersInvestors lose

millions.

Businesses lose profits.

Consumer spending drops.

Workers are laid

off.

Businesses cut investment and

production. Some fail.

Banks

Businesses and workers cannot repay bank loans.

Savings accounts are wiped

out.

Bank runs

occur.

Banks run out of

money and fail.

World Payments

Overall U.S. production plummets.

U.S. investors have little or no

money to invest.

U.S. investments in

Germany decline.

German war payments to Allies fall off.

Europeans cannot afford

American goods.

Allies cannot pay debts to

United States.

Great Great CrashCrash

Investors

Investors lose millions.

Businesses lose profits.

Great Great CrashCrash

Investors

Businesses and WorkersInvestors lose

millions.

Businesses lose profits.

Consumer spending drops.

Workers are laid

off.

Businesses cut investment and

production Some fail.

Great Great CrashCrash

Investors

Businesses and WorkersInvestors lose

millions.

Businesses lose profits.

Consumer spending drops.

Workers are laid

off.

Businesses cut investment and

production Some fail.

Banks

Businesses and workers cannot repay bank loans.

Savings accounts are wiped

out.

Bank runs

occur.

Banks run out of

money and fail.

World Payments

Overall U.S. production plummets.

U.S. investors have little or no

money to invest.

U.S. investments in

Germany decline.

German war payments to Allies fall off.

Europeans cannot afford

American goods.

Allies cannot pay debts to

United States.

Great Great CrashCrash

Investors

Businesses and WorkersInvestors lose

millions.

Businesses lose profits.

Consumer spending drops.

Workers are laid

off.

Businesses cut investment and

production Some fail.

Banks

Businesses and workers cannot repay bank loans.

Savings accounts are wiped

out.

Bank runs

occur.

Banks run out of

money and fail.

World Payments

Overall U.S. production plummets.

U.S. investors have little or no money to

invest.

U.S. investments in

Germany decline.

German war payments to Allies fall off.

Europeans cannot afford

American goods.

Allies cannot pay debts to

United States.

Effects of the Stock Market Crash

32

33

34

"Brother, Can You Spare a Dime," lyrics by Yip Harburg, music by Jay Gorney (1931)

They used to tell me I was building a dream, and so I followed the mob, When there was earth to plow, or guns to bear, I was always there right on the job. They used to tell me I was building a dream, with peace and glory ahead, Why should I be standing in line, just waiting for bread?

Once I built a railroad, I made it run, made it race against time. Once I built a railroad; now it's done. Brother, can you spare a dime? Once I built a tower, up to the sun, brick, and rivet, and lime; Once I built a tower, now it's done. Brother, can you spare a dime?

Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum!

Say, don't you remember, they called me Al; it was Al all the time. Why don't you remember, I'm your pal? Buddy, can you spare a dime?

Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum!

Say, don't you remember, they called me Al; it was Al all the time. Say, don't you remember, I'm your pal? Buddy, can you spare a dime?

•Hoover was blamed for not providing “direct reliefdirect relief”” to help Americans? WHY?WHY?

•US Govt. should not provide “direct relief”laissez faire

•Hoover was blamed for not providing “direct reliefdirect relief”” to help Americans? WHY?WHY?

•US Govt. should not provide “direct relief”laissez faire

Rugged individualism: Americans are self-sufficient and would work themselves out this depression through hard work and determination. Charitable organizations: Churches, volunteers and people helping one another.

Rugged individualism: Americans are self-sufficient and would work themselves out this depression through hard work and determination. Charitable organizations: Churches, volunteers and people helping one another.

US Government provided ““indirectindirect”” relief by assisting insurance corporations, banks, agricultural organizations, railroads and state and local governments.

The theory was that prosperity at the top would help the economy as a whole.

Many Americans saw it as helping bankers and big businessmen, while ordinary people went hungry.

BUT, no direct relief to American peopleBUT, no direct relief to American people. Why?Why? Hoover did not support federal public assistance because he believed it would destroy people’s self-respect and create big government which would violate laissez faire.

Promoting RecoveryPromoting Recovery

• Hoover reassures the public; downplayed the public’s fears.

• Critics were angry that the conditions worsened as Hoover tried to put a good face on the situation.

• Privately, Hoover is deeply worried about the economy and gathers a heads of banks, labor, railroads, labor, big business, and government officials.

The greatness of America has grown out of a political and social system and a method of a lack

of governmental control of economic forces distinctly its own. Our American system which

has carried this great experiment in human welfare farther than ever before in history....

And I again repeat that the departure from our American system... will jeopardize the very liberty

and freedom of our people, and will destroy equality of opportunity not only to ourselves, but

to our children....

HOOVER’S ATTEMPTS TO SOLVE THE GREAT DEPRESSION

HOOVER’S ATTEMPTS TO SOLVE THE GREAT DEPRESSION

• Industry pledged to keep factories open and stop slashing wages.

• This did not work: by 1931 most businesses reneged.

• Next step was public works: – government financed building projects.

• Hoover urged governors and mayors throughout the nation to increase public works spending. – Many governors and mayors did not choose to do this. WHY?

– Pay higher taxes or borrow money from banks (deficit spending) which leaves less money for banks to loan out to people.

– Hoover feared that deficit spending could delay an economic recovery.

The Midterm ElectionThe Midterm Election

• As the congressional elections of 1930 approached, most Americans felt that the party in power was to blame for unemployment.

• The Republicans lost 49 seats and their majority in the House of Representatives.

Pumping Money Into the EconomyPumping Money Into the Economy

• Hoover asked the Federal Reserve Board to pump more money into circulation.

• The National Credit Corporation was created to have a pool of money that would enable troubled banks to continue lending money in their communities

– he encouraged wealthy New Yorkers to contribute to this

Reconstruction Finance Corporation Early in 1932, Congress, responding to Hoover’s appeal,

established the Reconstruction Finance Corporation, which became a government lending bank.

With $500 million, US Government provided ““indirectindirect”” relief by assisting insurance corporations, banks, agricultural organizations, railroads and state and local governments.

The theory was that prosperity at the top would help the economy as a whole.

Many Americans saw it as helping bankers and big businessmen, while ordinary people went hungry.

BUT, no direct relief to American peopleBUT, no direct relief to American people. Why?Why? Hoover did not support federal public assistance because he believed it would destroy people’s self-respect and create a large bureaucracy.

Direct Help for CitizensDirect Help for Citizens• However, states and cities were doing it—but by 1932,

they were running out of money.

• Many Americans saw it as helping bankers and big businessmen, while ordinary people went hungry.

• Political support was building for a relief measure; Congress passed the Emergency Relief and Construction Act.– The new act called for $1.5 billion for public works and $300

million in loans to the states for debt relief.

– It was still not enough; the collapse continued.

Hunger MarchesHunger Marches• January 1931: 500 men and women in Oklahoma City broke

into a grocery store

• Rallies and “hunger marches” were held by the American Communist Party

• December 5, 1932: a freezing day in Washington, DC; 1200 hunger marchers assembled “Feed the hungry, tax the rich.”– Police herded them into a blocked-off area, where they had to sleep

on the sidewalks or in trucks.

– The police denied them food, water, and medical treatment.

– Congress insisted the right of the marchers’ to petition their government.

Farmers RevoltFarmers Revolt• 1930-1934: creditors foreclosed on nearly one million

farms, taking possession of them and evicting families

• Some farmers began destroying their crops in a desperate attempt to raise prices by lowering the amount of crops on the market.

– In Nebraska grain growers burned corn to heat their homes in the winter.

– In Iowa food growers prevented the delivery of vegetables to distributors.

– Georgia dairy farmers blocked the highways and stopped milk trucks, emptying the milk cans into ditches.

Banks lost their investments in the Market after the Crash

Millions of Americans were caught in the panic of the Stock Market

crash.

Went to their banks to withdraw their savings accounts.

Banks loaned out their $$$ and had no reserve funds to give customers

withdrawing their savings.

Once banks ran out of $$$ they closed their doors and left people

stranded.

1929 = 659 and by 1933 = 5190

The Great Depression (1929-1941)The Great Depression (1929-1941)

DEBTS

•Bonus Army MarchBonus Army March in the summer of 1932 over 20,000

veterans from WWI marched on

Washington, DC.

•Demanded their Bonus promised to

them by the government for

fighting in WWI.

•They were out of work and wanted to feed their families.

DEBTS

•Bonus Army refused to leave Washington, Bonus Army refused to leave Washington, DCDC until Congress gave them their Bonus. Congress voted not give the Bonus to the veterans.

•They were ordered to leave by President HooveThey were ordered to leave by President Hoover r but disobeyed the order. Eventually, President Hoover would order the army to force these veterans out

of Washington, DC

•July 28, 1932

•President Hoover orders the army to remove Bonus Army

from Washington, D.C.

•General Douglas MacArthur, later a WWII hero, was part of removing the Bonus Veterans.

DEBTS

•Julyt 28, 1932, Julyt 28, 1932, US troops supplied with tanks fought skirmishes, made arrests and burnt down the camps of the Bonus veterans.

•The American people were appalledAmerican people were appalled how President Hoover solved the problem. People felt Hoover had no compassion and would blame him for the Depression.

He would not be re-elected in 1932.

•Some people starved and thousands went hungry.•Children suffered long-term effects from poor diet and inadequate medical care.•Social and Psychological Effects

•1928–1932, suicide rate rises over 30%•Admissions to state mental hospitals triple

Impact on Health

•Living conditions declined as families crowded into small houses or apartments.•Men felt like failures because they couldn’t provide for their families.•Working women were accused of taking jobs away from men.

Stresses on Families

•Competition for jobs produced a rise in hostilities against African Americans, Hispanics, and Asian Americans.•Lynchings increased.•Aid programs discriminated against African Americans.

Discrimination Increases

Poverty Strains SocietyPoverty Strains Society

55

Great Depression in the Cities

• In cities across the country people:– lost their jobs– Were evicted from their

houses– Ended up living on the

street.

• Shantytowns, soup kitchens and bread lines appeared

Employment Employment LineLine

                                                                                                    

•The Dust BowlDust Bowl was an ecological and human disaster that took place in the southwestern

Great Plains region, including Oklahoma, in the 1930's.

•It was caused by misuse of land and years of sustained drought.

•Millions of hectares of farmland became useless, and hundreds of thousands of people were forced

to leave their homes----many migrated to migrated to CaliforniaCalifornia.

•As the land dried up, great clouds of dust and sand, carried by the wind, covered everything

and the word "Dust Bowl" was coined.

                           

““Necessity is the mother of inventionNecessity is the mother of invention””Taming the Great PlainsTaming the Great Plains

                           

HomeworkHomework 19001900

In 18301830 it took 3 hours to produce a bushel of grain, by 19001900 it took 10 minutes.

1830

dust bowl

The The Election of Election of

19321932

Prosperity isProsperity isjust aroundjust around the cornerthe corner

I promiseI promise a New Deala New Deal!

Herbert Hoover Believed that federal government

should not try to fix people’s fix people’s problemsproblems.

He believed direct reliefdirect relief would destroy people’s self-respect.

He believed it would create a big government which would violate

laissez fairelaissez faire.

Franklin Roosevelt

Believed government had a responsibility to help people in need

and provide direct reliefdirect relief. Believed capitalism and laissez faire

needed to be reformedreformed. Governmental involvement in people’s lives was a good sourcegood source for

those in need.

The Election of 1932The Election of 1932

•FDR FDR promised relief for the unemployed,

help for farmers and a balanced

budget.

•ProhibitionProhibition, whether it should

be repealed or not.

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Key Quotes: FDR’s Inauguration Speech

This Nation asks for action, and action now. Our greatest

primary task is to put people to work. I shall ask Congress for broad executive power to wage

war against the emergency.

Link to:•Text of Speech

•Video

89

• Series of radio addresses by FDR

• 30 total between 1933 to 1944

• FDR used these to calm American people down.

• CLICK on the radio to link to hear the 1st chat on the Bank Crisis