Chapter 24The Great Depression & the New Deal

Mr. Logan GreeneWest Blocton High SchoolAP United States History

Chapter Objectives

• What triggered the Great Depression?

• Why did Herbert Hoover’s actions to resolve the Great Depression fail?

• What were the main achievements of the early New Deal?

• Which economic and social reforms made up the “Second New Deal?”

• What impact did New Deal programs have on women and minorities?

• Why were late New Deal programs unsuccessful?

The Cause of the Crash

• There is NOT one single cause to the Great Depression as the causes are complex and NUMEROUS

• The deciding factor in the Great Depression was the combination of a “balloon” economy, an unregulated stock market, closed international trading, uneven monetary distribution, and the over use of credit

The Cause of the Crash

• “Balloon” economy:– The economy of the 1920’s was growing at an

unbelievable pace; however, it was growing to fast. The government under Harding and Coolidge allowed this growth to go on unsupervised and the economy outpaced the nation’s ability to stabilize it

The Cause of the Crash

• Unregulated stock market– The stock market of the 1920’s was still a very new

entity. People were pumping incredible amounts of wealth into the stock market. Two main issues caused problems for the stock market. Margin buying is where a person buys stock by only paying a portion of the price. Speculation buying also led to problems as people bought stock at prices for assumed gains that had not happened yet and stocks were highly overvalued. Many people based their entire wealth on the stocks they owned that may have only been partially paid for and drastically overvalued.

The Cause of the Crash

• Closed International Trading– Throughout the 1920’s the government had consistently

raised tariff rates to protect American businesses. However, this hurt Europe’s already FRAGILE economy by not allowing them to do business in the United States. The danger this posed was the American economy was completely based upon American industry. The safety net of international trade was non-existent.

The Cause of the Crash

• Uneven Distribution of Wealth– A major contributing factor to the crash was the uneven

distribution of wealth in the United States. By 1929 0.1 percent of American families controlled as much wealth as the lower 42%. Their wealth was based entirely on industry and was far to reliant on stocks. As well, this meant there was not enough purchasing power to sustain the ever expanding materialistic economy.

The Cause of the Crash

• Credit– Credit was virtually non-existent before the 1920’s.

During the overly materialistic 1920’s people bought massive amounts of items on credit and saved little money. This led to little safety net in case of economic trouble. Coupled with many people’s wealth being entirely based on stocks many upper class and upper middle class families were living in an illusion of economic security.

THE CRASH

• The balloon market (this was also a Bull Market where prices continually rise as opposed to a Bear Market where prices stagnate or fall) could only continue to work as long as new investors entered and continued to pump money in the system

• By late 1929 there were no new investors

• By October brokers sensed danger and began calling in credit and demanding payment for stocks

• On October 29, 1929 “Black Tuesday” the Stock Market crashed losing 12% in one day.

THE CRASH

• Without international trade and with such a small percentage of the country controlling so much money there was no way to control the crash

• By mid 1930 the country’s economy was on the verge of complete and total collapse

• As well, my mid 1930 bank runs were becoming all to common as people rushed to withdraw their money from banks

• Over 10,000 banks closed by December of 1930 with several states lacking a single open bank

Unemployment• By 1932 almost 25% of the country was unemployed as

factories cut back production

• This led to a vicious cycle of the Depression increasing as fired people could not buy which is extended the Depression further

Farmers

• Farmers were particularly hurt by the Great Depression

• The agricultural sector had already been hurting due to the over production and collapsed prices of the 1920’s

• The lack of buying power in the country depleted farmers customers and their economic power collapsed as thousands of farmers watched their homes foreclosed upon

Hoovervilles

• Evictions were not isolated to rural families as numerous factories workers were evicted upon losing their jobs

• These families moved into “Hoovervilles” or shanty towns named after President Hoover where thousands of people lived in dreary conditions until they could find work

Families

• Families saw incredible amounts of stress during the depression

• Desertion (leaving your spouse with divorce) skyrocket, marriages declined, birthrates fell, and unemployed men became increasingly depressed as they could not be the “bread-winner”

• Many parents starved themselves to ensure their children’s health

Hoover and the Depression

• In keeping with his Big Business roots Hoover refused to allow major government intervention to try to curb the growing crisis

• Hoover believed in “volunteerism” or the idea of businesses voluntarily keeping workers at a loss or even hiring more workers to try to help the economy

• Hoover complained “You know, the only problem with capitalism is the capitalists; they’re to damn greedy”; however, he still rejected governmental intervention

Hoover and the Depression

• Hoover relied on private programs to combat the growing issues; however, there was a simple problem with this plan: very few private programs existed

• Eventually Hoover tried to enact policies to help the crisis but it was to late as the Depression had spiraled into a cyclical monstrosity that would take years to subside

The Bonus Army

• An incident in 1932 epitomized Hoover’s issues and disconnect with the American people

• In the mid 1920’s Congress allocated pensions for World War I veterans to be paid in 1945

• As the depression worsened in 1932 the veterans marched on Washington demanding the pensions and even camped outside the capital

• Nicknamed the Bonus Army they were dispersed violently under Hoover’s orders leaving the country even more disgusted with Hoover’s leadership

1932 Election

• Somewhat surprisingly the Republicans re-nominated Hoover in 1932

• Democrats nominated the popular New York governor Franklin Delano Roosevelt (cousin of TR)

• Roosevelt won easily as the election showed the country had a total distaste for Hoover’s leadership

• Roosevelt although confined to a wheel chair due to polio as a child Roosevelt was the realistic but optimistic and energized leader the country craved

The First New Deal

• The first three months of FDR’s term were known as the Hundred Days as still stand as possibly the most important period of any American presidency (easily the most important non war time period)

• Roosevelt was determined to be active and attack the Great Depression with his cabinet known as the “Brain Trust”

• Roosevelt asked the American people to trust him and his “New Deal”

The First New Deal

• The New Deal was FDR’s program (really a group of programs) aimed at stabilizing the economy, growing jobs, and renewing American’s faith

• FDR convinced the country of the worthiness of his cause through his weekly radio broadcasts known as “Fireside Chats”

• The first of these acts was the Emergency Banking Relief Act which closed banks with a bank holiday and required approval from the federal government to reopen

Act or Program Acronym Year Enacted Significance

Agricultural Adjustment Act AAA 1933 Protected farmers from price drops by providing crop subsidies to reduce production, educational programs to teach methods of preventing soil erosion.

Civil Works Administration CWA 1933 Provided public works jobs at $15/week to four million workers in 1934.

Civilian Conservation Corps CCC 1933 Sent 250,000 young men to work camps to perform reforestation and conservation tasks. Removed surplus of workers from cities, provided healthy conditions for boys, provided money for families.

Federal Emergency Relief Act FERA 1933 Distributed millions of dollars of direct aid to unemployed workers.

Glass-Steagall Act FDIC 1933 Created federally insured bank deposits ($2500 per investor at first) to prevent bank failures.

National Industrial Recovery Act NIRA 1933 Created NRA to enforce codes of fair competition, minimum wages, and to permit collective bargaining of workers.

National Youth Administration NYA 1935 Provided part-time employment to more than two million college and high school students.

Public Works Administration PWA 1933 Received $3.3 billion appropriation from Congress for public works projects.

Rural Electrification Administration REA 1935 Encouraged farmers to join cooperatives to bring electricity to farms. Despite its efforts, by 1940 only 40% of American farms were electrified.

Securities and Exchange Commission SEC 1934 Regulated stock market and restricted margin buying.

Social Security Act 1935 Response to critics (Dr. Townsend and Huey Long), it provided pensions, unemployment insurance, and aid to blind, deaf, disabled, and dependent children.

Tennessee Valley Authority TVA 1933 Federal government build series of dams to prevent flooding and sell electricity. First public competition with private power industries

Wagner Act NLRB 1935 Allowed workers to join unions and outlawed union-busting tactics by management.

Works Progress Administration WPA 1935 Employed 8.5 million workers in construction and other jobs, but more importantly provided work in arts, theater, and literary projects.

Most Important Agencies

• NRA (National Recovery Administration)– Halt price slides, lowering wages, and uemployment

– Helped Businesses more than labor

• Social Security Act– Gave everyone a social security number

– Gave pensions for citizens over the age of 65

• TVA (Tennessee Valley Authority)– Electrified the Tennessee Valley and gave thousands of

jobs to unemployed workers to build dams

Critics of the New Deal

• Not everyone loved FDR’s programs

• Huey Long, a senator from Louisiana, campaigned for more social welfare

• Francis Townshend called for pensions for anyone over 60

• Charles Coughlin, a catholic priest, called for even more help than the New Deal was giving

• As a response to these attacks FDR authorized the Social Security Act in 1935

• As well, some critics attacked the biggest issue with the New Deal: it was terribly expensive

The Dust Bowl

• Since the large scale movement to the Midwest at the turn of the century farmers had uprooted much of the topsoil of the Midwest

• This led to major erosion

• As thousands of people left the Midwest during the depression their crops were no longer there to hold the soil in place creating dust storms and a huge area of desolate dusty conditions known as the Dust Bowl from northwestern Texas to Oklahoma and Kansas

The Second New Deal

• Roosevelt attempted to expand relief with the Second New Deal in 1935

• Agencies such as the WPA (Works Progress Administration) gave jobs to 9 million people

• Agencies such as the Emergency Relief Appropriation act gave millions of dollars to jump start the economy

• Although unemployment was starting to drop Roosevelt was beginning to have some issues

The Supreme Court

• In 1935 the Supreme Court began examining the New Deal

• In mid 1935 they declared the NRA an unconstitutional infringement of government upon the free market economy

• One after another the Supreme Court began declaring New Deal programs unconstitutional much to the chagrin and anger of FDR

The 1936 Election

• FDR went into the 1936 election riding a wave of lower unemployment and the 1935 programs of the second New Deal had destroyed much of the criticism he faced (as well his main competition Huey Long had been shot)

• The Republicans backed Alfred Landon but knew they had little chance of winning the election

• FDR won in one of the biggest election landslides in American history losing only 2 states

Scaling Back of the New Deal

• As FDR rode a wave of success into his second term he took on the Supreme Court that had declared several of his New Deal programs unconstitutional

• FDR attempted the Court Packing plan. In this he proposed increasing the Supreme Court to 13 justices

– Therefore he could appoint the 4 new justices giving him control of the court

• The public immediately issued harsh criticism to FDR for trying to disrupt checks and balances

• Although the court packing plan was stopped it had the desired effect as the Court stopped declaring New Deal programs unconstitutional

The Recession

• What hurt FDR more than anything was the Recession of 1937

• Just as the country was about to his pre-depression levels economically a recession hit due to Roosevelt bowing to pressure in 1936 and trying to balance the budget

• By removing government money being pumped into the economy while private business was still stagnant the economy collapsed

• Roosevelt had no choice but to increase spending

Political Stalemate

• As the recession hit in 1937 the Republicans managed to win a large amount of seats in the Congress in the mid term elections

• This created a log jam in congress and kept many important New Deal legislation items from coming to fruition

• As well, many of the New Deal programs were simply hitting their limitations and the economy needed the private sector to also begin to up production

Foreign Policy

• As the Depression entangled domestic policy at home FDR began to open the door to trade internationally specifically with Latin America with the Good Neighbor policy

• Outside of the Western Hemisphere FDR lowered tariffs and took the drastic step of recognizing the Soviet Union to encourage trade between the two large powers

Foreign Policy

• The 1930’s were tumultuous for Europe

• Germany became entangled in a Depression that dwarfed Americas (we hit a maximum of 25% unemployment while Germany hit a high of 65%)

• In their desperation Germany turned to a radical fascist (government behind one dictator where government, economy, and military are all aimed at one goal) named Adolf Hitler

• FDR aimed for neutrality at all cost and Hitler did not see the USA as a threat

War

• Europe plunged into war in 1939 as Germany invaded Poland

• FDR pledged neutrality while quietly preparing for war not only against Germany but also an increasingly hostile Japan in the Pacific

• The increase in industrial orders from Great Britain and France helped finally pull the United States out of the Great Depression

The Legacy of the New Deal

• The Great Depression and the New Deal left a lasting impression on the United States

• The Federal Reserve gained new power and a heightened sense of responsibility over the economy

• The power of the Federal Government grew immensely

• For the first time the United States adopted a welfare policy of protecting its citizens from economic disaster

Chapter Objectives

• What triggered the Great Depression?

• Why did Herbert Hoover’s actions to resolve the Great Depression fail?

• What were the main achievements of the early New Deal?

• Which economic and social reforms made up the “Second New Deal?”

• What impact did New Deal programs have on women and minorities?

• Why were late New Deal programs unsuccessful?