The Great Depression

1. The Great Depression

2. Stock Market Crash • Rising stock market symbol of prosperity during 1920s • “conspicuous prosperity” • Paper wealth (credit) masked rot in American Economy • Before crash: • Unemployment already high due to mechanization in factories • Housing starts feel in 1927 • Internationally production up and demand down • Stocks steadily increased from March 1928 to September 1929 • September 3, 1919 the Dow Jones Industrial Average of major stocks reached an all-time high of 381 • Black Thursday • October 24, 1929 • Unprecedented volume of selling • 13 million shares • Stock prices plunged • Next day, bankers bought millions in stocks to stabilize prices • Led by J.P. Morgan Jr. • Black Tuesday • October 29, 1929 • Bottom fell out • Investors wanted to sell stock • 16 million shares • By November average down to 198, in three years hit all time low of 41 • Wealth “vanished”

3. America survived through other depressions b/c people lived on farms and could provide for themselves • This depression different since America was now urbanized

4. Causes of the Crash • Uneven distribution of income • Wages rose little compared to productivity and corporate profits • Stock market speculation • Get rich by “playing” market mentality • Buying on the margin • Excessive use of credit • Belief that boom would last • Overproduction of goods • Weak farm economy • Prosperity of 20s never reached farmers • Government policies • Little business regulation • High tariffs • Hurt US farmers and trade • Global economic policies • War reparations crushing Europe’s economy

6. Effects of the Crash • GNP • Dropped from $104 billion to $56 billion in four years • Nation’s income • Declined over 50% • Banks • 20% closed • Not that uncommon • Rural banks with low funds the problem • 10 million savings accounts wiped out • Unemployment • 1933 = 13 million people • 25% of the workforce

8. Hoover’s Response • Thought prosperity would return • Urged Americans to exercise voluntary action and restraint • “best education in the world for wandering men, women, and children traveling around the world” • Urged businesses not to cut wages, unions not to strike, etc. • Didn’t ask Congress for legislative action until summer of 1930 • Believed in self-reliance • 1931- called for tax increase • Feared budget deficit

9. Too little, Too late • Hawley-Smoot Tariff 1930 • Schedule of tariff rates • Highest in history • 31 to 49% on foreign imports • Thought it would protect U.S. business • Europe responded • Trade declined for ALL • Debt Moratorium • No more payment of Dawes plan • Federal Farm Board • Created 1929, powers expanded 1931 • Authorized to help stabilize prices • To modest to handle massive overproduction • Reconstruction Finance Corporation (RFC) • Created early 1932 (election year) • Went against Hoover’s conservative beliefs • Measure to prop up faltering railroads, life insurance companies, etc. • Gave emergency loans to major economic institutions • $1.2 billion

10. Despair and Protest • Suicide rate 30% in 1932 • Unrest on farms • Farmers banded together to stop banks from foreclosing farms • Farm Holiday Association • Bonus march • Summer 1932 • One of the worst years of depression • 1,000 unemployed WWI vets marched to Washington to demand payment of bonuses • Bonuses scheduled to be paid in 1945 • Joined by thousands more • Violent clash • MacArthur called in to “disperse” crowd • 1,000 troops • Eisenhower, Patton there • Negative pubic reaction • More than 100 casualties • 2 babies

13. Election of 1932 • Depression’s worst year • Republicans • Re-nominated Hoover • Promised to repeal prohibition, keep tariff high, balance budget • Warned Dem. victory would worsen depression • Democrats • Nominated NY governor Franklin D. Roosevelt • Barely, lots of criticism • Exuded confidence • Pledged a “new deal” • Repeal Prohibition • Aid for unemployed • Public works, aid to farmers • Cuts in government spending

14. Results • Only real issue to voters the depression • 60% choose Roosevelt ticket • Congress won large democrat majority in both houses • Hoover a “lame-duck” • 20th amendment passed to shorten time between election and inauguration

15. F.D.R. and the “New Deal” • The Man • Only child • Wealthy background • Experienced politician • NY legislator • U.S. assistant to Navy • 1920 Dem. Nominee for Vice President • Suffered from Polio as an adult • Couldn't walk unaided • Strengths • Warm personality • Gifted speaker • Ability to inspire people • Eleanor • Most active first lady in history • Social conscience • Wrote newspaper column • Philosophy • Three R’s • Relief: for people out of work • Recovery: for business and economy • Reform: of U.S. economic institutions • The Brain Trust • Group of advisors from NY • Louis Howe • Chief political advisor • Professors • Rexford Tugwell • Raymond Moley • Adolph A. Berle Jr. • Appointments • Most diverse in U.S. history • African-Americans, Catholics, Jews, and women • Frances Perkins • 1st female cabinet member • Secretary of labor

16. “Alphabet Soup”

17. The 1st 100 days • Sworn in March 4, 1933 • Called congress into a special 100-day long session • March 9- June 16 • Congress passed every law • Laws • Bank Holiday • 1st act of business • Banks closed March 6 • Nationwide, holiday • 1st fireside chat • Banks would reopen after governments reorganized • Emergency Banking Act • Permitted healthy banks to reopen • Procedures for failed banks • Repeal of Prohibition • Beer-Wine Revenue Act • Repealed 18th amend. • Fireside chats • Started March 12, 1933 • Reassured Americans • Explained legislation • Financial recovery • Emergency Banking relief Act • Federal Deposit Insurance Corporation • Designed to protect savings up to $5,000 • Home Owners Loan Corporation • Refinanced loans, prevented foreclosures • Farm credit Administration • Loans to farmers

18. 100 days continued • Relief for the unemployed • Federal Emergency Relief Administration • 1st welfare program • Grants of federal money to states and local governments for soup kitchens, other relief • $500 million to state and local agencies • Public Works Administration • Money to build roads, bridges, dams, other pubic works • Civilian Conservation Corps • Employed young men on projects on federal lands (18- 25) • Worked relief with environmental programs • By 1935- 500,000 employed • Tennessee Valley Authority • Hydroelectric power program • Industrial recovery • National Recovery Administration 1933 • 1st National Recovery Act • Government control of production, labor and costs • NRA would enforce it • Attempt to guarantee reasonable profits for business and fair wages and hours for labor • Gave workers right to organize • Used by Frances Perkins to ban child labor • Farm production control • Agricultural Adjustment Administration • Encouraged to reduce production, raise farm prices • Paying farmers not to plant

20. Other New Deal Programs • Civil Works Administration • Created jobs • Hired laborers for temporary construction projects for government • FDR worried about creating a permanent underclass dependent on welfare • Securities and Exchange Commission 1934 • Created to regulate the stock market and to place limits on speculative practices that led to crash in “29 • Placed Joe Kennedy in charge • Would know all the tricks • Federal Housing Administration • Gave construction industry and homeowners a boost by insuring bank loans for building new houses and repairing old ones • Off the Gold Standard • Looked at in an effort to halt deflation (falling prices)

21. Failures and Controversies • NRA • Lots of violations, complaints • 1935 Supreme court declared unconstitutional in Schechter v. U.S. • Regulatory powers belonged to Congress not President • NRA regulated commerce within states • AAA • Did not help farm laborers/ migrant workers • Found unconstitutional in 1936 • Illegal use of the governments power to tax

22. Second Hundred Days1935 • Democrats re-elected to congress in 1934 • Increased congressional majorities • New legislation focused on relief and reforms • Relief • Works Progress Administration • Spent billions to provide jobs • Work not handouts • 1st year employed 3.4 million • Total over 8 million • Construction, writing, art • Offered youth money to stay in school • Resettlement Administration 1935 • Picked up slack of AAA • provided loans to sharecroppers, tenants and small farmers • established migrant worker camps • Reforms • National Labor Relations (Wagner) Act 1935 replaced NRA • guaranteed right to join union • Rural Electrification Administration • loans to electric cooperatives • Federal taxes • Revenue Act 1935 increased taxes of wealthy few

23. Social Security Act 1935 • Most important of all new deal laws • Drafted by Frances Perkins • Created federal insurance program based on automatic collection of taxes from employees and employers throughout working career • Caused brief recession in 1937 • Trust fund would pay monthly payments to retired over age 65 • Establishe the principle of federal responsibility for social welfare • Laid foundation • Also receiving benefits under law: • Unemployed • Disabled • Dependent children and mothers

25. Election of 1936 • Economy had improved but still weak and unstable • Democrats • Re-nominated F.D.R. • Enormously popular among workers and small farmers • “one issue, its myself, and the people must either be for me or against me” • Republicans • Nominated Alf London • Supported by Business • Part of American Liberty League • Group of business leaders that opposed F.D.R. • Fiscal conservative • Results • Landslide victory for F.D.R. • Greatest asset ability to restore confidence • New coalition of democratic voters • African-Americans • VERY important!!

28. Opponents of the New Deal • Liberal Critics • Socialists, extreme liberals • Clifford Odet -Waiting for Lefty 1935 • Said N.D. did too much for business and too little for unemployed and working poor • Conservative Critics • Thought government had too much power • Relief programs bordered on Socialist • American Liberty League • Al Smith • Demagogues • Father Charles Coughlin • Weekly radio broadcasts • From Detroit • Wanted to nationalize banks • Called F.D.R. the “great betrayer” and a liar • Dr. Francis Townsend • Hero to senior citizens • Proposed 2 % federal sales tax to pay retired $200 a month • Required to spend $ within 30 days • Huey Long • “Kingfish” Gov. from Louisiana • “Share our wealth” • 100% income tax over 1 million dollars • Everyman would be a King • Ran for Presidential nom. • Attempted assassination

30. The Supreme Court • Most difficult challenge in F.D.R.’s first term • Killed NRA and AAA • Plus 9 other measures • All conservative judges • Court-Reorganization • Thought re-election meant he could solve court problem • Proposed bill 1937 • President be allowed to appoint additional justice for each justice over age 70.5 • Reaction • Called “court-packing” bill • Both Republicans and Democrats upset • 1st major congressional defeat • Opened floodgates • Aftermath • Negative reaction • Court already changing views before bill • 1937 upheld Wagner Act and Social Security Act

33. Rise of Unions • National Industrial Recovery Act 1933 and Wagner Act 1935 • Legalized unions • Membership increased • Formation of C.I.O. • Committee of Industrial Organizations 1935 • Leader John L. Lewis • Broke off from A.F.L. • Welcomed all workers in a particular industry regardless of gender, skill, or race • Strikes • Automobiles • GM Plant Michigan 1937 • Sit-down strike, organized by CIO • Strike successful United Auto Workers union organized • Not so lucky at Ford plant • Steel • 1936 • Memorial day 1937 Chicago • Republic Steel Company • Fair Labor Standards Act • Minimum wage, max workweek of 40hrs, child-labor restrictions

34. Last Phase of the New Deal • New deal slowed down • Recession 1937-1938 • Causes • Government policy • Social Security reduced consumer spending • Withdrew $2 billion from circulation • Keynesian Economics • Mistake trying to balance budget • Deficit spending needed to initiate economic growth • Worked- late 1938 • Unemployment declined, industrial output increased • Weakened New Deal • Economy improved but: • Court-packing left distrust with congress and people • New coalition formed to block new deal legislation • Fears of Nazi Germany

36. Life during the Depression • Women • Added pressures • More women sought work • More government positions • Still paid less than men • Dust Bowl Farmers • Severe drought early 1930s • Region became a dust bowl • “Black rollers” • Called “dirty thirties” • Neighbors came together to try and save each others farms • Called “penny auctions” • Thousands of “Okies” migrated to California • John Steinbeck’s “The Grapes of Wrath” • Also called “exodusters” or “Arkies” • African Americans • Discrimination continued • Unemployment rate higher • Often excluded from relief programs • Racial tensions in South • Anti-lynching bill defeated • Scottsboro 8 • Nine teenage boys accused of rape in Alabama • Framed, all-white jury • Improvements • WPA, CCC = jobs • Government positions • Fair Employment Practices Committee • Executive order 1941 • F.D.R. appointed African-Americans to government positions

40. Life during Depression • Native Americans • Granted citizenship and voting rights in 1924 • Indian Reorganization Act 1934 • Repealed Dawes Act of 1887 • Returned lands to control of tribes and supported preservation of native culture • Enabled natives to buy back land • John Collier • Commissioner of Bureau of Indian Affairs 1933 • Improved life on reservations • Conservation and CCC projects to employ natives • Mexican Americans • Two million in U.S. • Suffered from discrimination • Principal source of labor in 1920s • During depression high unemployment and drought caused dramatic growth in white migrant workers • Thousands returned to Mexico • 500,000 • Voluntary and forced

41. How did people get through it?

43. Popular Actors • Shirley Temple • Clark Gable • Carol Lombard • Mae West • Comedians • Jack Benny • George Burns

44. Literature • Grapes of Wrath- Steinbeck • Music • Gershwin- “Porgy and Bess” • Swing dancing, music

46. Looking Ahead • What ended the depression? • FDR’s 1st term • Annual growth up 9% • Unemployment down from between 25-33% TO 9-14% • 2nd term • Unemployment up again • Would not go down until after 1941