The Great Depression 1929-1941

1. The Great Depression 1929-1941

2. Roaring Twenties • Optimistic Time • Wealth and productivity • Medical advancements • Decrease in infant mortality • Life expectancies increased 10 years from 1900

3. Warren Harding (1921-23) Calvin Coolidge (1923-1929)

5. Main cause of collapse: hubris? • excessive pride or self-confidence; arrogance • “We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor house is vanishing from among us.” - Herbert Hoover, 1928

6. What accounted for severity? • Lack of Diversification • Maldistribution of purchasing power • Credit structure of economy • America’s position in international trade • International debt structure • Protective tariffs

7. Warning signs: • Uneven wealth • In 1929 richest Americans (0.1%) had held 34% of the country’s savings • 71% of individuals earned less than $2,500 (minimum standard of living) • 200 largest companies controlled 49% of industry

8. Warning sings continued… • Rise in personal debt • Buying with credit (installment plans) • Radios, vacuums, refrigerators • 80% families had no savings, even though entire families were working

9. Overproduction • Rising Productivity • Wages Rose, but assembly lines produced goods too quickly • Caused some industries to slow • Automobile, housing • BUT… Stock market kept rising

10. Playing the Stock Market • Before WWI, only wealthy invested • After, “Get rich quick” attitude prevailed • Newspapers reported on ordinary people • Small investors bet life savings • Buying “on margin” • Buy stock for fraction of the price and borrow the rest

11. Stock Market Crash • By 1929, prices of stocks soared above their real value • Peaked in Sept., then slowly declined • Tuesday, Oct. 29, 1929, investors raced to get their money out of the stock market • Initially, only affected investors • 1929 only 4 million of 120 million

12. Ripple Effects • Risky loans hurt banks • Consumer borrowing • Bank runs • Bank failures • Savings wiped out • Cuts in production • Rise in unemployment • Further cuts in production

13. Economic Effects (1930-1933) • Collapse of Banks • 6,000 bankrupt or closed • Depositors lost $2.5 billion • Widespread unemployment • 15 million, 25% of workforce • Collapse of farm economy • By 1932, farm income down 60% • 2/3 of farm families lose land

14. Normal Business Cycle • Economic… • Expansion • Peak • Contraction • Trough • Recession vs. Depression • Depression = prolonged and severe

15. Great Crash of 1929 triggered most severe depression in U.S. history • Great Depression (1929-1941) • As for welfare capitalism • Henry Ford shut down Detroit auto factories • Put 75,000 out of work • The GNP: $104 billion (1929) to $56 billion (1933)

16. Cycles of Depression • Investors and Businesses • Businesses lose profits, Investors lose $$$ • Businesses and Workers • Consumer spending drops, businesses cut investment and production (some fail), workers are laid off • Banks • Businesses and workers cannot repay loans, banks run out of money/fail, bank runs occur, savings accounts are wiped out

17. World Payments • Overall U.S. production plummets • U.S. investors have little/no money to invest • U.S. investments in Europe/Germany decline • German war payments to Allies fall off • Europeans cannot afford American goods • Allies cannot pay debts to United States

18. Interdependent World • By 1930s, international banking, manufacturing, trade connected nations • Latin American depended on U.S. for goods • Europe depended on U.S. loans/investment • U.S. was world’s leading economy • After WWI, Allies (France/G.B.) relied on Germany’s reparations to repay U.S. • After market crash, U.S. stopped $ to Germany • German economy failed, Allies’ payments to U.S. ended

19. Great Depression Part II

20. President Hoover (1929-1933)

21. Future 1st Lady Lou Henry (age 17)

22. “Hoovervilles” • Shantytowns named for President Hoover

23. Sacramento, 2009

24. Social Effects • Hardships at all levels • Few prospects for laid off white-collar workers • Poorest hit hardest • Hunger, sickness, homelessness • Homeless/jobless became drifters • “hit the rails”

25. Farm Distress • Crop prices plummeted • Families could not pay mortgages/loans • Families lost farms to banks • Banks would auction farms off • In South, landowners expelled tenant farmers and sharecroppers

26. The Dust Bowl (1931-1940) • Severe drought and over-farming • Severe soil erosion, soil (“dust”) clouds • Removal of prairie grasses exposed topsoil • Wind blew it for hundreds of miles • Cities in east had darkened skies • Reports of soil landing on ships in Atlantic

28. Dust Cloud Approaches Stratford, TX, 1935

36. “Okies” driving to California

40. “Migrant Mother”by Dorothea Lange (1936)

41. Surviving the Depression • Nothing wasted • Planted “relief gardens” in cities • Breadlines and soup kitchens widespread • Farm families stuck together • Penny auctions • Millions left home to “ride the rails”

42. Americans took their failures personally • Widespread Shame • Especially w/ men who lost jobs • Many were embarrassed or too ashamed to accept charity • Discrimination • Nativism • Deportation • Higher unemployment in minority groups

43. Americans sought political solutions • In Europe, riots and political upheaval • Most Americans trusted democratic process • Communism and Socialism made small gains • Eventually, Americans blamed Hoover directly

44. Hoover’s Limited Strategy • Insisted on confidence in system • Blamed depression on world-wide crisis • Supported voluntary controls by industry • For example, to maintain min. wages • Hoover held rigidly to his plan (voluntary controls and confidence), and economy continued to worsen

45. Finally, The Government Acts • Began with govt. spending on public buildings, roads, parks, dams • Hawley-Smoot Tariff (1930) • Highest import tax in history • Backfired, Europeans raised their tariffs • Still, Hoover believed: • state and local govts should handle relief • direct federal assistance would destroy people’s self respect and create a large beaureacracy