The Great Depression

1. The Great Depression 1929-1939

3. Causes of the Great Depression • The stock market crash • In 1929 Wall Street was the financial capital of the world • The heart of Wall Street was an imposing gray building, the NYSE • Here soaring stock prices reinforced optimism about the booming economy • Between Jan 1921 and Sep 1929, the NY Times average of stock prices rose from $110 to $455 • Many people began to believe that Rep econ policies had ushered in a New Era of rising prosperity

4. Causes of the Great Depression • The stock market crash http://www.youtube.com/watch?v=JDcR-ZS5fyw • Wall Street’s speculative bubble burst on Black Tuesday, Oct 29, 1929 • Waves of panic selling overwhelmed the NYSE • The selling reached a crescendo on Tues, Oct 29th • Within less than a week stocks lost 37% of their value

5. Causes of the Great Depression • The stock market crash • At first the crash appeared to hurt only the 4,000,000 investors who owned stock • U.S. vast industrial and agricultural resources were physically unhurt so there seemed no reason for prosperity to end • Hoover tried to reassure the nervous public by confidently predicting, “The crisis will be over in 60 days” • But Hoover was wrong • The crash dealt a severe blow to investors and to banks and revealed and intensified serious econ weaknesses in the U.S. economy • Crash of 1929: Sections 6 and 7

6. Causes of the Great Depression • Overproduction and underconsumption • In 1929, U.S. factories produced nearly ½ of the world’s industrial goods • Generated enormous profits but the wealth was unevenly distributed – the richest 5% of the pop earned nearly 1/3 of all personal income • Meanwhile, 60% of all U.S. families earned less than the $2,000/yr needed to buy basic necessities • 80% of the nation’s families had NO savings • Thus, most families were too poor to buy the goods being produced and had no savings to fall back on if they lost their jobs • The U.S. econ was thus simultaneously experiencing overproduction by business and underconsumption by consumers • Store owners reduced orders and factories began to cut back production and lay off workers • These actions started a downward econ spiral

7. Causes of the Great Depression • The plight of the farmer • Many American farmers never shared in the prosperity of the 1920s • New methods and inventions enabled farmers to dramatically increase the yield of crops per acre • U.S. farmers also faced new competition from grain growers in AU and AR • The global surplus of agricultural products drove prices and farm incomes down • Unable to sell their crops at a profit, many farmers could not pay off their loans • These bad debts forced weakened banks to close

8. Hard Times • Down! Down! Down! • By 1932 investors lost $74 billion as stocks lost 89% of their value • During these 3 years 86,000 businesses closed their doors and 9,000 banks declared bankruptcy wiping out 9 million savings accounts • The burden of hard times fell most heavily on those least able to afford it • Unemployment rose from just 3.2% in 1929 to a staggering 24.9% in 1932 • Poverty soon became a way of life for 1/4 of the population

9. Hard Times • The Dust Bowl • A strong, protective carpet of buffalo grass had once covered the Great Plains • The grass held moisture in the soil and kept the wind from blowing it away • However, as the demand for wheat increased, farmers plowed under the buffalo grass exposing the land to wind and sun • Early 1930s, farmers watched a prolonged drought and intense heat dry out the GP • Disaster struck without warning or mercy • Great black clouds of dust darkened the sky and covered homes and barns • “The storms were like rolling black smoke,” reported a Texas schoolboy, “We had to keep the lights on all day. We went to school with headlights on and with dust masks on.” • KS, the TX panhandle, OK and eastern CO became known as the Dust Bowl

10. Hard Times • The Dust Bowl • Agriculture virtually ceased in the hardest-hit areas of the DB • Over 350,000 desperate people fled the GP during the 1930s • Called “Okies,” they loaded their meager belongings into battered cars and headed west along Route 66 to CA • John Steinbeck captured the ordeal faced by these proud but impoverished migrants in his powerful novel, The Grapes of Wrath • Surviving the Dust Bowl: Chapter 3 and 5

11. Hard Times • Hoovervilles • Prolonged unemployment created an army of homeless people • The jobless stood in breadlines, sold apples on street corners and slept anywhere they could find shelter • Hooverville was the sarcastic term given to shantytowns inhabited by unemployed and homeless people • For Americans used to living in a land of abundance, Hoovervilles were among the most sobering sights of the GD

12. Herbert Hoover and the Great Depression • Hoover’s philosophy of government • Hoover did not anticipate the sudden econ downturn that followed the crash • He believed the econ was sound and that the real problem was a lack of confidence • Convinced that econ recovery depended primarily on the business community, Hoover urged leaders to maintain wages, jobs, and production • He also urged private charities and local gov’ts to help unemployed workers • Hoover rejected calls for fed programs to directly help the unemployed • He opposed a gov’t dole because it was against his belief in “rugged individualism” • Hoover argued that a program of direct fed relief to individuals would violate the Constitution and undermine the cherished value of “rugged individualism” • Hoover’s philosophy hardened into a dogma that prevented him from supporting fed programs to combat unemployment

13. Herbert Hoover and the Great Depression • The Reconstruction Finance Corporation • While Hoover rejected fed programs to help the poor, he did listen to bankers who pleaded for fed aid • In early 1932 Congress created the Reconstruction Finance Corporation (RFC) to make emergency loans to distressed banks and businesses • The RFC loaned $1.78 billion to 7,400 banks, insurance companies, and railroads that needed help • The RFC went far beyond anything the fed gov’t had ever done before • Its emergency loans helped limit the number of bankruptcies • However, outraged critics accused Hoover of insisting on rugged individualism for people standing in breadlines while at the same time supporting a “billion-dollar soup kitchen” for distressed bankers

14. Herbert Hoover and the Great Depression • The Bonus Army • Hoover’s popularity fell further because of his mishandling of the Bonus Army • In 1924, Congress promised a bonus of several hundred dollars to WWI vets (payment would not be made until 1945) • Arguing that they needed the bonus money ASAP, many unemployed vets demanded to be paid ASAP • Spring of 1932 a Bonus Army of about 20,000 vets converged on D.C. to lobby Congress for a bonus bill providing immediate payment of their bonuses • Hoover opposed the bill arguing that its $2.5 billion price tag would make it impossible to balance the fed budget • The Senate rejected the bill

15. Herbert Hoover and the Great Depression • The Bonus Army • Although most of the discouraged veterans left D.C., a few thousand remained with their wives and children • Their presence embarrassed the Pres • In July Hoover ordered about 700 soldiers commanded by General Douglas MacArthur to evict the Bonus Army from downtown D.C. • Newsreel cameras captured the jarring spectacle of U.S. Army troops using bayonets and tear gas to drive the vets and their families from their shacks • Hoover misjudged outraged public opinion when he proudly boasted, “Thank God we still have a government…that knows how to deal with a mob”

16. Herbert Hoover and the Great Depression • The election of 1932 • The deepening depression crippled any chance Hoover had of winning reelection • The unending breadlines and Hoovervilles seemed to confirm the image of Hoover as a leader who was insensitive to the plight of the people • Sensing victory, the Dems nominated Franklin D. Roosevelt, the popular reform-minded Gov. of NY • In a dramatic gesture, FDR broke tradition and flew to Chicago to personally accept his party’s nomination • He inspired the convention by promising cheering delegates, “I pledge you, I pledge myself, to a new deal for the American people”

17. Herbert Hoover and the Great Depression • The election of 1932 • During the campaign FDR remained deliberately vague about the details of the “new deal” • Despite the lack of a real debate on the issues, Hoover and FDR did strongly disagree on the desirability of funding a massive program of public works to relieve unemployment • Unlike Hoover, FDR believed gov’t had a responsibility to take aggressive actions to fight the GD • Americans understood that voting for FDR meant endorsing a change in fed policy • FDR won an overwhelming victory winning 57% of the vote while carrying 42 of the nation’s 48 states

19. Prompt #5 • President Hoover made the financial crisis of the 1930s worse by failing to act. Assess the validity of this statement.