The Great Depression and The New Deal

1. The Great DepressionandThe New Deal Unit 7

2. Causes of the Great Depression • OVER production of consumer goods • OVER use or excessive use of credit cards • OVER speculation and the stock market • OVER use of farmland and weak farm economy • OVER sight on government policies • OVER spending during World War I

3. What Caused the Great Depression? • Economic problems in America were in part due to a global depression in post WWI Europe which was made worse by high American tariffs on imports. • European countries had huge war debts, massive war damage and foreign consumers couldn’t buy US goods • Reduction of money supply and an increased gap between rich and poor meant that most people did not have the buying power to help boost the economy • The increased number of purchases made on credit caused many people to default on loans.

4. The Stock Market Crash • Millions of dollars were invested in the stock market in the 20’s, as stock value rose often stocks sold for far more than their true value. • On October 24, 1929 (later nicknamed Black Thursday) investors who feared rising interest rates began dumping shares of stock • Stock prices continued to plummet until it CRASHEDon what is now called ‘Black Tuesday’. • Investors that had purchased stocks on credit were forced to pay back cash immediately.

5. Banks and Businesses Begin to Fail • Even though only a small percentage of Americans had money in the stock market, most people soon began to feel the impact of the crash. • As investors were not able to pay back loans, banks became low on cash. As people began to make large withdrawals, some banks closed • Peoples fear of a long depression caused them to stop spending money and businesses suffered from a shortage of consumers and investors • Over 50,000 businesses went bankrupt in two years.

6. The Face of Unemployment • By 1933 some 15 million Americans were unemployed and those who kept their jobs faced massive pay decreases. • African American and immigrant workers were often laid off before white workers. • Unemployed workers often sold on the street and waited in lines for bowls of soup and bread that were given as charity. • About half a million Mexican-American workers were forced to return to Mexico as part of the Mexican Repatriation Program. • Many were forced to give up their homes and shantytowns nicknamed Hoovervilles rose outside cities

7. Psychological Effects on the Family • Mothers often had the job of stretching every cent to provide enough food and clothing for her family. • Marriage rates and birth rates declined dramatically during the Great Depression. • More than 20,000 Americans committed suicide in 1932. ….. up 28% from 1928. • People that lived through the Great Depression often kept habits of scrimping and saving and making every penny count.

8. President Hoover’s Policies • President Hoover believed that the stock market crash was a temporary problem. • Hoover was against government handouts of jobs or food. He believed that using tax money for aid would just create an inflated federal budget and a dependence on government. • Hoover instead encouraged workers to lift themselves up with hard work and character. • Hoover believed that aid should come from private charities and not the government.

9. Hoovers Economic Reforms • Hoover did not want the government to directly aide the unemployed, he believed the rugged individualism of the American people would cause them to “lift themselves up by their bootstraps”. • Hoover encouraged businesses to keep producing even if goods were not selling and he gave cheerful radio addresses trying to lift the spirits of American workers. • Hoover would also approve $800 million of works programs including the Hoover Dam, but these projects couldn’t bring the economy out of the depression.

10. Hoover Tries to Help Farmers • Hoover resisted giving direct aid to farmers • The President created the Federal Farm Board which helped create and fund farmers co-ops that would buy seeds and farm equipment in bulk. • The FFB bought surplus food stocks hoping to keep prices up, but this caused farmers to increase production and prices stayed low. • The government also backed loans specifically for farmers, offering a low rate to farmers with little collateral.

11. Herbert Hoover Reforms Too Late • In 1932 Hoover created the Reconstruction Finance Corporation and authorized the spending of $2 billion of taxpayer money. • The RFC gave money to troubled banks, insurance companies, and railroad companies. • Most felt that the money came too late and wasn’t given to the truly needy people • Many began to blame Hoover for the country’s problems, and the mere sight of him in movie newsreels sparked angry boos from crowds. (Ouch!)

12. Bonus Army and the Election of 1932 • In May of 1932, Congress rejected the “Bonus Bill”, which would have allowed early payment of pension accounts to WWI veterans. • When some 2,000 veterans became encamped in abandoned military buildings, Hoover deployed the army to drive the veterans out by force. • Many Americans were shocked by Hoovers treatment of the veterans and his support dwindled. • In 1932 Franklin D. Roosevelt was easily elected president and his Democratic Party also won a majority in both the House and Senate.

13. Roosevelt’s New Deal • During his campaign, Franklin Roosevelt had put forth a 15 measure plan for restoring the economy called the “New Deal’. Once he was elected Congress passed all 15 measures • The first measure was to shut down all banks for a few days and only allow financially sound banks to reopen. • In a series of fireside chats FDR encouraged people to put money back into the reopened banks. • FDIC was established to insure deposits; in one month, $1,000,000,000 was deposited into banks due to increased confidence.

14. FDR’S 3 R’S • FDR wanted to wage war against the depression. • FDR did so through programs with 3 different goals. • These goals were relief, recovery, and reform.

15. 3 R’s goals • Relief- immediate action taken to halt the economies deterioration. • Recovery- temporary programs to restart the flow of consumer demand. • Reform- permanent programs to avoid another depression.

16. Direct Relief for the Needy • FDR then created the Federal Emergency Relief Administration and supplied them with $500 million for direct aid to the unemployed • Half of the money was distributed to the states to establish work programs, which people often preferred to a simple handout • The Civil Works Administration created jobs picking up litter and raking leaves to provide jobs to some 4 million people. • Young men were paid $30 a month working for the Civilian Conservation Corps, often called the 3 C’s.

17. Long Term Recovery Goals • Although FDR saw relief efforts as short term remedies, he also had a vision for the economy in a ‘long term’ sense. • FDR created the Securities and Exchange Commission to oversee the stock market. (SEC) • The Public Works Administration began larger scale public works projects including the building of public roads and buildings. • The Agricultural Adjustment Administration paid farmers to reduce their output, raising prices and making farming more profitable.

18. Racial Discrimination and the Depression • The depression increased racial tensions in the country, particularly in the South. In 1933, 24 African Americans were lynched. • Although New Deal programs were offered to all races, often white and black workers were segregated and black wages were set lower • FDR appointed more than 100 black leaders to posts in the federal government. His wife, Eleanor, was a known champion for civil rights. • Congress passed the Indian Reorganization Act in 1933 to help tribes through the depression

19. Critics of the New Deal • Both conservatives and liberals found ways to criticize the New Deal. • Wealthy taxpayers saw the programs as anti-wealthy and unfair to the rich. • The American Liberty League felt that the New Deal took the ideals of free enterprise from American businesses. • Some liberals wanted FDR to go further, calling for ‘Robin Hood’ type tax plans and the nationalization of banks.

20. The Second New Deal • After Democrats increased their Congressional seats in 1934, FDR was able to pass a new series of long term economic reforms. • The Works Progress Administration employed 8.5 million people that rebuilt airports, public buildings, bridges and roads, as well as artists, musicians, and high school students. • The Social Security Act provided retirement accounts for workers over 65, unemployment payments and money for the disabled.

21. FDR’s Re-election and Supreme Court Controversies • By the 1936 election, FDR’s strong support from Democrats, farmers, African Americans and even some Republicans assured him a victory. • After his re-election The Court Packing Plan FDR proposed adding six seats to the Supreme Court and as President he would have appointed the new Justices. • Congress did not approve the additions, but the threat made the Supreme Court more receptive to FDR’s economic policies. In later years FDR would appoint eight new justices.

22. The Roosevelt Recession • In 1936 Roosevelt began to attempt to cut back government spending by decreasing money supplied to public works programs. • As the workers dropped from government programs re-entered the work force, unemployment rose and businesses suffered • This economic downturn was nicknamed Roosevelt’s Recession and FDR was forced to approve $3 billion of new spending.

23. TheDustBowl • In the mid 1930’s, drought and over production of farmlandcaused massive dust storms across the South and the Great Plains (the high grassland region of central North America).  • Nicknamed the Dust Bowl, thousands of acres of farmland were covered in dust. (http://www.youtube.com/watch?v=N_ehYkr0NhU&list=PL4E69C23E0523EC32&index=1&feature=plpp_video) • To prevent more dust storms the Department of Agriculture and the Civilian Conservation Corps planted over 217,000,000 trees. • Many farmers were forced to migrate west to California and were nicknamed the ‘Okies’=any poverty-stricken migrant from the Southwest.

24. “Okies” and “Arkies”http://www.eyewitnesstohistory.com/himdustbowl.htm • California was inundated by a huge number of these people because the farmers there kept advertising in the dust bowl areas for cheap labor. "Plenty of jobs for everyone in California," the advertisements said and the devastated Okies and Arkies loaded up their cars and trucks and left for the promised land. Texans living on both the High Plains and the Lower Plains were equally affected.

25. Evaluating the New Deal • Perhaps the longest lasting effect of the New Deal was electricity (TVA) that was brought to rural areas through federal work programs. • Some agencies like the Social Security Administration, FDIC ,and the Securities and Exchange Commission are still in use today. • The depression also forced southern planters to diversify their crops and plant more than cotton • New Deal policies helped to end the depression, but the economy did not completely stabilize until the US began to prepare for WWII.