The Great Depression and the New Deal

Unit 9

The Great Depression

Gross National Product

Unemployment

Workers’ Yearly Wages

Business Failures

Bank Closures

Photo Courtesy of Dorothea Lange

1929 - Bull Market

Buying On Margin

The Great Crash – Oct. 29, 1929

CAUSESCAUSES• Decrease in consumer

spending

• Unequal distribution of wealth

• Overproduction of goods

• Huge farms surpluses

• War debts not paid back

• Buying on margin (Credit)

EFFECTSEFFECTS• Under consumption of goods and

services---not buying goods

• Families had limited income to purchase goods

• Led to falling prices of goods

• Led to drop in farm prices

• Banks didn’t get back their $$$

• Speculation on stocks• Investors buy stocks on credit• Wealth on paper

events

• 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

President Herbert Hoover’s Response (31st President)

• Republican• WWI – Food

Administration• Secretary of Commerce

under President Harding and Coolidge

• “A chicken in every pot and a car in every garage.” – H. Hoover

Impact of the Crash

Bank Failures

5,197 banks collapse

500,000 farms and homes foreclosed

Stock Value: $87bi $19 bi

Hoovervilles

Business Failures

• Steel Production drops 80%

• Industrial Output drops 50%

Unemployment

• Chicago = 50%• Farmers = 33%• Nationwide =

25% - 40%

Psychological Impacts

•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

Hoover’s Response to the Crash

Federal Farm Board (1930)

Hawley-Smoot Tariff (1930)

Volunteerism

Public Works

Hoover Dam

Reconstruction Finance Corporation

Norris-LaGuardia Anti-Injunction Act (1932)

“Rugged Individualism”

Bonus Army

Dust Bowl

dust bowl

The Election of 1932

Herbert Hoover Franklin Delano Roosevelt

FDR’s Campaign

“I pledge you, I pledge myself to a NEW DEAL for the American people.”

Government Aid to the People (Direct Relief)

Repeal of Prohibition

Hoover’s Campaign

Higher Tariffs

Rugged Individualism

20th Amendment

21st Amendment (1933)

The New Deal

Brain Trust

FDR’s Inner Circle

Cordell Hull: Sec. of State Frances Perkins : Sec of Labor

Harold L. Ickes: Sec of Interior, Head of PWA

Harry Hopkins: Head of FERA and later PWA

Eleanor Roosevelt

FDR’s First Hundred Days

– Bank Holiday – Federal Emergency Relief

Association (FERA) – Civil Works Administration

(CWA) – Public Works

Administration (PWA) – Civilian Conservation Corps

(CCC) – Homeowner’s Loan

Corporation (HOLC)

The Three R’s

• Relief - direct aid to the people• Recovery – fix the current economy• Reform – prevent a future collapse

Bank Holiday

Banking Crisis

• 5,190 Banks Failed in 1933 – Total: 10,951

• 38 Banks closed • Only banks who were solvent could reopen • Gold Standard • Emergency Banking Relief Act of 1933

Federal Emergency Relief Association (FERA)

Headed by Harry Hopkins

Civil Works Administration (CWA)

Public Works Administration (PWA)

Headed by Harold L. Ickes

Civilian Conservation Corps (CCC)

Home Owners Loan Corporation (HOLC)

The New Deal

• Works Progress Administration (WPA) • National Industrial Recovery Act ( NIRA) • National Recovery Administration (NRA) • Agricultural Adjustment Act (AAA) • National Youth Administration ( NYA) • Federal Housing Act (FHA)

Works Progress Administration (WPA)

National Industrial Recovery Act ( NIRA)

National Recovery Administration (NRA)

• Blue Eagle

Created under leadership of Hugh Johnson

Agricultural Adjustment Act (AAA)

• Federal Farm Loan Act

Headed by George Peek

National Youth Administration ( NYA)

Federal Housing Act (FHA)

The New Deal• Glass-Steagall Act • Federal Deposit Insurance Corporation (FDIC) • Securities and Exchange Commission (SEC) • Wagner Act created National Labor Relations Board

(NLRB) • Fair Labor Standards Act (FLSA) • Tennessee Valley Authority (TVA) • Social Security

Federal Deposit Insurance Corporation (FDIC)

• Glass-Steagall Act

Securities and Exchange Commission (SEC)

National Labor Relations Board (NLRB)

• Yellow Dog contracts

Fair Labor Standards Act (FLSA)

Tennessee Valley Authority (TVA)

Housing Reform • Federal Housing Administration (FHA) • United States Housing Authority (USHA)

Social Security Act

Revenue Act of 1935

Indian Reorganization Act

Indian Emergency Conservation Program

Criticisms of the New Deal

Critics

• The American Liberty League • Father Charles Coughlin • Senator Huey P. “Kingfish” Long • Dr. Francis Townsend

The American Liberty League

Father Charles Coughlin Senator Huey P. “Kingfish” Long

Dr. Francis Townsend

Old Age Revolving Pension Plan

Criticism of the New Deal

• Failed to fix the Great Depression• National debt doubled • America becoming a Handout state • Class status (Business and Labor/farmers) • FDR’s want to change the Supreme Court • Planned economy• Millions Still Unemployed • The New Deal didn’t cure Depression, WWII did

Court Challenges to the New Deal

• Schechter vs. US

Butler vs. US

• AAA is unconstitutional

Judiciary Reorganization Bill

• Court Packing

End of the New Deal

Pump Priming Practice

FDR employed economic theory of John Maynard Keynes

Support of the New Deal

Help relieved the worst crisis in 1933Help prevent hunger by managing

economy

• Distribution of national income

• Americas economic system kept from collapse

Citizens retain self respect

FDR saves America’s free enterprise system from socialism and anti-

business interests

FDR Cured Capitalism of its abuses

Middle of the Road Approach