The Great Depression and the New Deal

The Great Depression and the New Deal Unit 2: Chapters 12-13 Notes

Prosperity? • The 1920’s were dominated by the Republican Party, who tended to allow the economy to prosper on its own without government intervention • It worked: • Consumption of American goods increased • Gross national product increased • Stock market went up to all time highs

Prosperity? • The Election of 1928 brought much of the same- America was in no hurry for change • Republican Candidate Herbert Hoover was easily elected President

Prosperity? • The American farmer did not enjoy the same prosperity as other Americans during the “Roaring” 20’s • To meet demand during WWI, farmers had worked more land, grown more crops, and invested in mechanized equipment to meet the government’s needs

Prosperity? • After the war: • Demand for farm goods decreased sharply • Supply was still increasing and farmers couldn’t sell their surplus product • As a result, farmers couldn’t pay off the debts they owed the banks

Prosperity? • Farmers did not have the money or the time to purchase many consumer goods during the 1920s • Many lived on credit- borrowing month-to-month

Causes of the great depression • There is no one single cause of the Great Depression- it was a combination of several major factors: • Struggles of the American Farmers • Uneven Distribution of Wealth • Credit • Stock Market Crash • Collapse of the Banks • Rising Unemployment • International Trade Issues • Global Economic Issues

Causes of the great depression • Uneven Distribution of Wealth: • Wages for factory workers increased, but so did productivity • Corporate profits rose 65%- wages only increased 8% • The top 1% of the population earned the same as the bottom 42% • Why does this matter? • The top 1% buys consumer goods, but not enough to make up for what the poorer weren’t buying • The rich couldn’t buy enough goods to make up for overproduction

Causes of the great depression • Credit • In the 1920’s, 80% of radios and 60% of cars were bought on credit • Stock was bought on credit- investors were investing money that they did not have! • Allowed Americans to live beyond their means…

Causes of the great depression • Stock Market Crash • Many investors were putting money into stock speculation (prices not based in reality) • As stock prices dropped, investors got nervous and pulled their money out • October 29, 1929 (Black Tuesday) 16 million shares were sold and the market crashed

Causes of the great depression • Collapse of the banks: • The Fed had discouraged lending in 1929- so when the market crashed, people went to the banks to get the hard money that they had left • As people took their money out of the banks, the banks ran out of money and closed! • 1929- 641 banks failed • 1930- 1350 banks failed • 1931- 1700 banks failed

Causes of the great depression • Rising Unemployment: • To survive, businesses closed factories, laid-off workers, and maintained prices of their surplus goods • Problem: as workers were laid-off they couldn’t buy consumer goods, which led to more factories cutting back, which led to more workers laid-off…

Causes of the great depression • International Trade Issues: • To help protect American goods, Congress passed the Hawley-Smoot Tariff on foreign goods • Foreign goods couldn’t compete with American goods- so other countries did the same thing to American goods! • As a result, foreign trade came to a halt worldwide

Causes of the great depression • Global Economic Issues • Germany owed Britain and France $33 billion from WWI, but needed money from the US to pay it • France and England owed war debt to the US- which they used Germany’s reparation money to pay it • When the US economy collapsed, Germany could no longer pay reparations, thus Britain and France could no longer pay the US • As a result, the Depression spread around the world

Life during the great depression • Unemployment: • Between 1921-1929, annual average unemployment was never higher than 3.7% • By 1933, it was 24.9% (50% for African Americans) • Those who did keep their jobs found shorter hours, lower wages • No movement up the social order; instead went from unemployed to unemployable

Life during the great depression • Hoovervilles: • As people lost their homes, they slept anywhere they could find shelter • Makeshift shantytowns popped up on public land • People covered themselves in Hoover blankets (newspaper)

Life during the great depression • Rural Life: • Prices continued to fall after the Depression started • Wheat: • 1919- $2.16/bushel • 1932- $0.38/bushel • Cotton: • 1919- 35 cents/lb • 1932- 6.52 cents/lb

Life during the great depression • The Dust Bowl: • Severe drought, combined with new, aggressive farming methods created disastrous conditions in the Great Plains during the 1930s • Dust storms rose upwards of 8,000 feet and moved as fast as 100 mph

Life during the great depression • Refugees from the Dust Bowl regions were known as “Okies” • Many went to California in search for opportunities that weren’t actually there • Others went to cities of the Northeast or Midwest, increasing the population of states with large cities

Life during the great depression • Effect on the family: • Men who lost their jobs often felt like they betrayed their families • Some rode the rails and went from town to town searching for work • Some sank into depression and left their families • Women stopped having children because they couldn’t support a larger family • Children dropped out of school, looked for work, or ran away

The Great Depression and the New Deal