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:
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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.
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RURAL POVERTY IN THE 1920’S
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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
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1,230,000 Americans
121,770,000 Americans
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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
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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
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STOCK MARKET SPECULATION
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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
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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
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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
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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
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"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
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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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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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1910 1918 1932
Average gross receipts
2177 3837 1512
Average expenditures
770 1655 1019
Balance 1407 2182 493
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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.
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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.
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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
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"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
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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
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• 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