Great Depression and the New Deal

Goals•Understand the causes of the

Great Depression•Understand FDR’s personality

and leadership style•Understand the New Deal•Evaluate the effectiveness of

the New Deal

Business Cycles

•Prosperity•Recession•Depression•Recovery

Prosperity• Great output of goods• Extensive factory expansion• High prices and profits• Easy bank credit• Full employment• Good wages• General feeling of optimism

Recession• A decline in the demand for goods• Decreased production• Falling prices and profits• Calling in of bank loans• Decreasing employment• Falling wages• General feeling of caution and worry

Depression• Low production• Low prices• Little or no profits• Widespread business failures• Few bank loans• Heavy unemployment• Low wages• General feeling of pessimism

Recovery• Increasing

production• Rising prices and

profits• Extension of bank

loans• Increasing

employment• Rising wages• General feeling of

hopefulness

Major Depressions in American History

•1873

•1893

•1929

Depression of 1873• Overexpansion of railroads and industry• Granting of unsound bank loans• Insufficient farm purchasing power because of

low agricultural prices• Economic distress in Europe• Failure of a leading banking house

Depression of 1893• Overexpansion of railroads and industry• Low agricultural prices• Fear of the stability of currency

Depression of 1929

• Industry overexpanded its production facilities

• Consumers lacked sufficient income to purchase the total output of industry.

• Bankers made unsound loans which led to bank failures which wiped out the savings of many people

Depression of 1929

• Get rich speculators bid up the price of real estate and stocks to unrealistic levels

• International trade declined because WWI hurt Europe’s economy and had lessend Europe’s ability to purchase goods.

• Stock market crash of 1929

Difference between 1929 and 1873 and 1893

• US no longer had the frontier with its economic opportunities

• Economy was primarily industrial• Depression was worldwide

Responses to Depression

• Republicans: Volunteerism and Rugged Individualism

"It is not the function of the government to relieve individuals of their responsibilities to their neighbours, or to relieve private institutions of their responsibilities to the public." 

- Hoover

FDR

• Member of a wealthy New York landowning family

• Groton, Harvard, Columbia Law

• 1921 struck with polio.• 1928 elected

Governor of New York• Personal warmth,

great self confidence, politician, great orator, zest for life.

Election of 1932• Republicans nominated Herbert Hoover• Democrats nominated FDR• FDR won easily.• He set out to create his New Deal.

FDR’s New Deal• Concern with the Forgotten Man• Use of the Brain Trust• Disregard of Laissez Faire• Pragmatic Approach• Relief Recovery Reform• Growth of Federal Power

Forgotten Man• FDR offered to

help the average citizen or the man at the bottom of economic pyramid.

Brain Trust• FDR sought the help of college professors to

hear varied ideas on how to improve the country. He listened to the various ideas and then planned the next moves for the country.

Disregard of Laissez-Faire

• FDR committed the government to a more important role in the economy. The government started to regulate the economy.

Pragmatic Approach• “The only thing we have to fear is fear itself.”• He believed in trial end error.• Government couldn’t sit around it needed to

act.

Three R’s• Relief- to assist distressed persons

through direct money payments, jobs and mortgage loans

• Recovery- to lift the nation out of the depression through aid to the farmers, businessmen and workers

• Reform- to eliminate abuses in the economy and to prevent future depressions through protection of bank depositors, investors, consumers, the aged and the unemployed

Growth of Federal Power

• Government greatly expands its role in society

• See all the New Deal agencies.

FDR’s strong leadership

• Bank Holiday

• Hundred Days

• Press Conferences

• Fireside chats

Bank Holiday• Immediately upon taking office FDR closed all

banks by declaring a bank holiday.• He called Congress into special session and

quickly obtained legislation to allow Treasury officials to examine banks and reopen those that were solvent. This action greatly restored the public’s confidence in banks.

Hundred Days• During the first three months of offcie FDR

proposed many new laws, and secured passage of a large majority of them.

Press Conferences• FDR held frequent press conferences to

present his ideas and give confidence to the public.

Fireside Chats• “Listen my friends”.• He used these radio addresses to gain the

trust and confidence of the American people.

Successes of the New Deal

• Restored courage and optimism to the people and improved the economic status of most Americans

• Provided work relief which enabled the unemployed to retain self-respect and enriched the nation with roads, parks, public buildings and dams

Successes of the New Deal

• Increased government spending which offset the declines in private spending

• Reduced unemployment by 5 million and treated the unemployed humanely

• Regulated capitalism• Expanded federal power over our economic

system yet maintained democratic methods and personal freedoms

Failures of the New Deal

• Failed to gain the confidence of the business community

• Wasted money on valueless projects• Unbalanced the budget and increased

national debt through deficit spending• Failed to eliminate unemployment• Interfered with free enterprise and it passed

unconstitutional laws• Increased the number of federal employees.