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Unit 5: Great Depression & New Deal

+Stock Market Crash

October 29th, 1929 Great Depression: 1930s President Franklin D. Roosevelt’s “New Deal”

Dominates all phases of life in US in the 1930s Changes America forever Includes economic, social, political, psychological issues Forces re-evaluation of American values Challenges whole concept of the “American Dream”

+Before the crash… Things “appeared” to be good

“Boom Times”

However: Major problems beneath surface Vicious economic cycle

Low interest rates Encourages borrowing money People borrow to buy stocks People sell stocks to make money Higher interest rates to entice saving Banks, businesses demand payments on loans = less money Less money = less stock buying = stock prices drop Stock prices drop = value of companies, businesses, dollar drops Business fail = can’t pay off loans Workers fired = can’t pay off loans Banks fail = no loans for businesses Businesses fail = fire workers

+PLEASE NOTE…

The Stock Market Crash did NOT cause the Great Depression, it only signaled the beginning of it. The causes of the Depression were already in place

+Prosperity Shattered

Economic troubles on the horizon, but nobody noticed Confidence credit purchases 6x higher Low interest rates more borrowing/buying Playing the stock market (Bull market) Problems

Not stable No long term growth Stock prices inflated (supply and demand) Margin buying Buying stocks on credit

+Stock Market Crash

Many investors sold stocks because of concerns about rising interest rates

This caused investor confidence to drop which led to less demand for stocks which led to a drop in prices which led to sell-offs = PANIC!!!

October 24, 1929 “Black Thursday” October 29th, 1929 “Black Tuesday”

16 million stock shares sold US stockholders lost $30 billion

+Banking Crisis

Banks call in loans but borrowers defaulted (can’t pay off loans) = banks close Depositors rush banks to get money out 1930-1932 = 5,000 banks fail and shut down No banks = no businesses = fire workers = no

buying/borrowing = businesses fail 1930-1931: 56,000 businesses fail 1929 GNP = $103/1933 = $56 billion 1929 = 3.2% unemployment/1932 =23.6%

+Three Major Causes…

Overall global depression WWI war debts = no buying US goods Smoot-Hawley Tariff 1930

Income gap and domestic consumer debt Disposable income of top 1% up 63% Disposable income of lowest 93% down 4%

Normal business cycles based on supply and demand: Overproductionsurplusdemand dropsprices

droploss of profitstoo much borrowing, etc.

+Hard Times

Big issue was unemployment 1929: 1.5 million Americans out of work 1933: 15 million Americans out of work Drop in wages/work hours for employed African Americans suffer even more Some women benefit: Cheaper to hire

+Life in the City

Hunger Homeless No jobs Shantytowns Bread lines Loitering / Crime 20% of kids in NYC were malnourished

NO GOVERNMENT ASSISTANCE = LAISSEZ FAIRE

+Life on the Farm

Major drop in sales of products Produce and livestock destroyed because of a

major loss in profits No profits = farmers can’t pay back loans

Banks foreclose on mortgages Farm equipment repossessed Land becomes useless =

Dust Bowl Many farmers hit the road =

migrants

+Family Life

1930s=Huge strain on traditions Role of father/husband/provider questioned Delayed marriages = lower US birthrate Psychological pressures = suicides up 28% Popular culture/entertainment = escapism or

realism

+Media

Literature during the Depression = Realism John Steinbeck: Grapes of

Wrath Zora Neale Hurston: Their

Eyes Were Watching God Richard Wright: Native Son Margaret Mitchell: Gone

With the Wind Films: Escapism = Marx

Brothers, the Three Stooges

+Do Something!

People looked to Hoover for guidance He believed in American values and ingenuity He saw the Great Depression as just part of

the business cycle and refused to make a move to better the economy

Called the most hated man in America

+Hoover: “Gov. should not support the people!” 1) Conservative, Social Darwinist, Capitalism 2) Relief would create a large gov. bureaucracy 3) Did not want to inflate the federal budget 4) Fearful of reducing Americans’ self-respect 5) Rugged individualism and volunteerism Example: Hoover refused to support the Federal

Emergency Relief Board proposed by Robert LaFollette to give $375 million for unemployment relief

+SOME Gov’t Intervention

Hoover encouraged businesses to maintain level of production, employment and wages

Funding for public works projects: Hoover Dam used $800 million of gov’t funds

+Farm Crisis

Agricultural Marketing ActFederal Farm Board Home Loan Bank Act 1932 BUT Hoover still rejects direct gov’t aid Help yourself! No buying up of surplus

+Other Minor Gov’t Action

Reconstruction Finance Corporation Lend $2 billion of tax payer money to stabilize banks,

insurance companies, RR Still based on “trickle down” theories

Rumblings of Discontent Increasing condemnations of capitalism Bonus Army MarchMay 1932 1932 election of FDR

+1932: Time for Change

Born to a wealthy family, Governor of New York, created relief programs to help with Depression for New Yorkers

+FDR For President!

The campaign revolved around the Depression

Roosevelt promised a “New Deal” for Americans

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“I have no expectation of making a hit every time I come to bat. What I seek is the highest possible batting average…”

+Restoring Hope

New Deal: Three levels of plans and policies Relief: Short term: “stop the bleeding” Recovery: Medium term: “get back to even” Reform: Long term: “Never happens again”

VERY different than Hoover’s approach 1) Strong advisory approach = “Brain Trust” 2) Very activist approach-use of gov’t

powers 3) Took immediate steps 4) Called Congress into special session

+FDR’s First Steps

1) Bank Holiday to stop massive withdrawals 2) Emergency Banking Act—Fireside Chats 3) Federal Deposit Insurance Corporation 4) Homeowners Loan Corporation

+Relief Measures (Frances Perkins: Secretary of Labor) 1) Federal Emergency Relief Administration—

H.Hopkins 2) Civil Works Administration 3) Civilian Conservation Corp

+Recovery Measures

1) Federal Security ActSecurities and Exchange Commission

2) National Industrial Recovery Act Public Works Administration National Recovery Act

3) Agricultural Adjustment Act 4) Tennessee Valley Authority 5) Concept of deficit spending: John Maynard Keynes

+New ChallengesMajor criticisms of the New Deal

Conservatives: New Deal did too much A. Went against capitalism B. FDR had too much power C. Too much against tradition

Liberals: New Deal didn’t do enough A. Did not redistribute the wealth B. Still focused on private property C. Did not do enough to eliminate poverty

Francis Townsend: $200 pension per person Charles Coughlin: Gov’t should run all banks Huey Long: Minimum income for all Americans

+Second New Deal Critics do not deter FDR More public works programs, social security, wage and

hour improvements for workers A. Works Projects Administration $5Billion budget B. National Youth AdministrationMary M. Bethune C. Social Security Act 1935 D. Rural Electrification Program E. FDR easily wins 1936 election F. National Labor Relations Act (Wagner Act) G. AFL merges with CIO in 1935

FDR and the Supreme Court—major mistake by FDR

+Life in the New Deal Era and the New Deal and the Arts Hard life all aroundmade worse by natural

disaster=droughtDust Bowl Ruined land, forced migrations, job comp. Hardship captured by photographers

Dorothea Lange

+Overall Criticisms of the New Deal Creation of welfare state Too much spending=debt Gov’t, especially President, too much power Free-market capitalism threatened Yet, relief was successful Reforms still with us today Recovery, though, not until WWII

+Arts During the New Deal Era

Mix between realism and escapism Encourage pride in American culture by providing work

and opportunities to artists WPA $300million to create Federal Project #1