The Great Depression - USA

1. The Great Depression - USA History 12 Ms Leslie

2. What is a depression? • It’s when trade, production levels, employment and standards of living falls sharply. • This pattern started right after the stock market crash of 1929. • By 1932,countries around the globe began to follow suit and the USA dragged everyone into a depression.

3. Background • Britain was no longer the leading economic power, USA was. • Post war governments were trying to pay of war-loans. • To do so they needed to increase trade and borrow money. • Britain loans out almost $2.75 billion and the USA $5.75 billion. This helped out the countries borrowing the money, until the lenders would ask for it back.

4. Most European nations experienced a boom in production, except for Britain. • Despite an increase in production, trade did not increase due to heavy tariffs that governments put up to encourage domestic purchases. • Central and Eastern Europe wanted to create ‘autarky’ in their countries. Meaning they wanted to be completely self-sufficient and not needing trade. • If countries could not sell their products to other countries, there would be no profits and no way to pay back war time loans.

5. 1. The Gold Standard • Before WWI trade was paid for in gold or in currencies based on gold. • It creates stability and confidence among traders. WWI destroyed this practice as countries were borrowing large amounts of money to fund their war. • To pay for goods, governments printed a lot more paper money, creating inflated dollar values.

6. 2. OVERPRODUCTION • Prices for agriculture fell by 30% world wide in 1929. Too much supply, not enough demand. • Farmers were no longer able to purchase machinery and other goods for their farms. • Industry was producing more then the consumer could buy - Factories closed

7. 3 Stock Market Boom • People were investing in America and so European nations were loosing out on investment funds. • Europe could not borrow money for USA • European industry began to decline and millions lost their jobs. • Massive amount of speculation meant that the stock market was mostly bought with credit - not actual money - depended on stocks to keep going up to make a profit

8. 4. ECONOMIC NATIONALISM AND TARRIFS • In the USA was the Fordney-McCumber Act of 1922, which raised the price of imported goods to be beyond that of domestic goods. This act was part of the American isolationist policies. • Because America put up protective tariffs, other countries had to as well. Bringing trade to a stand still

9. 5. International Debt after WWI Everyone owes America $ Everyone depends on selling goods to America to make $ to pay back loans When America raises tariffs, they can’t sell, they can’t make $, they can’t pay back loans

10. Consequences Unemployment Globally, about 25% unemployed That’s 25% fewer people buying stuff No welfare or EI

11. Bank Failure Businesses and farmers could not pay their mortgages - causing banks to go bankrupt Depositors lost their life savings 6000 banks closed

12. Political Consequences Americans began to doubt the “American Dream’ Fear of revolution - poor economies = communist Germany’s govern’t failed due to depression

13. Government Role changes Realized you have to take care or the unemployed Laissez faire was dead Regulation is necessary Cure depression with government spending

14. How to fix it?!?! John Meynard Keynes British economist had radical solutions Govern’t should spend money - infuse country with cash Borrow money and pay back later when economy is better - Deficit Financing Spend money on projects of value - modernizing infrastructure Most Countries ignored him except for - USA, Germany and Japan! The ones who got out quickly!

15. America’s first response • President = Herbert Hoover • Hoover’s first move after the market crash was to cut taxes and ease interest rates. • His intention was to spur spending and increase business confidence; unfortunately it ran in tandem with the Smoot-Hawly Tariff

16. Smoot-Hawley Tariff 1930 • worst trade legislation in history • This tariff was another increase against foreign products; the purpose was to help American business pick up again. • All it did was cause other countries to raise their tariffs (Australia, Cuba, France, India, Italy, Mexico, New Zealand, Spain and Switzerland.) • International trade was at a virtual standstill.

17. As trade ended, industry collapsed and people were unemployed. • People were forced into bread lines and lived in shantytowns named ‘Hoovervilles’ because they could no longer pay rent.

18. By 1932, 25% of employable Americans were out of work. 28% of the population had no income at all. • In New York, 300,000 school children did not get an education because authorities could not run the schools.

19. The International economy fell as well. • In June of 1931, Hoover announced a moratorium on reparations and war debt payments, an action that saved the financial systems of European nations.

20. Bonus Expeditionary Force. • Hoover’s Big mistake of 1932 • These were 20,000 veterans who camped out in the middle of Washington calling for help in hard times. • The Government stood firm and Hoover called in the military to disperse the protesters.

21. Major Patton of the US Cavalry, acting on orders from the Army Chief of staff, General Macarthur, removed the BEF. • This was a PR Disaster as stories of bayonet charges into hungry but peaceful crowds while the President dined in luxury hit the media

22. Hoover ran for election again in 1932 and was defeated by Democrat Roosevelt.

23. The 1932 election saw a reversal in the republican strong hold of the government. • Roosevelt received 22.8 million votes against the 15.7 million of this opponent. (voting pop. 75 million) This time America voted for change.

24. The New Deal • Roosevelt promised to implement it within 100 days of being elected • The First New Deal plan was from 1933-35 to create jobs and set the USA on the road to recovery. • reforms in industry, agriculture, finance, waterpower, labour, and housing, vastly increasing the scope of the federal government’s activities. • Opposed to the traditional American political philosophy of laissez-faire • embraced the concept of a government-regulated economy

25. Roosevelt’s approach was direct government relief programmes. • promised to end Prohibition. • In the first 100 days he sought to restore business confidence by strengthening the banking system.

26. Emergency Banking Bill • was put in place to help the shaky banking system. Over 1/3 of America’s banks had closed. • The act closed the remaining weak ones and only allowed the strong ones of continue.

28. Second New Deal • Focused on the poor and unemployed. • In 1935 there were still 10 million people unemployed. • The Social Security Act provided funds for seniors, Widowed and the maimed. • Unemployment insurance was created for people to pay into if they wished.

29. Fireside Chats • Roosevelt also worked hard on gaining the trust of the American People. • He used the Radio for ‘fireside chats’ to convince American’s to put their savings back in to the banks. • Spoke once a week live • First President to use media this way

30. He also provided $500 million in relief aid to the unemployed and hungry. He also cut the salaries of government workers to show that everyone had to tighten their belts.

31. ALPHABET AGENCIES • Massive reforms took place with the Agriculture Adjustment Act (AAA)and the National Industrial Recovery Act (NIRA) and numerous Public Works schemes. • Many of these Public Work schemes of the first New Deal were make-work Projects, such as the Civilian Conservation Corps (CCC) that had people re-planting forests. Others had people building roads and schools.

32. The National Recovery Administration abolished child labour and set up the 8-hour day and the minimum wage. Farmers were subsidized to produce less food to drive up prices, ironic in a time where millions were starving.

33. Tennessee Valley Authority (TVA) - dyking and damming of the Mississippi River to control Flooding, irrigation and Hydroelectricity Farm Credit Association (FCA) - farm income had dropped 70% and banks were bankrupted as a result - FCA was to stabilize prices

34. Although unemployment remained high and much money was wasted in the bureaucracy of the New Deal, Roosevelt remained popular and won the next election in 1936. • Americans were happy with allowing the government to intervene with the economy and to bring regulation and social welfare. • In the past America had been run by the interests of big business.

35. Roosevelt remained popular with the public until his death in 1945 while in office. • Wealthy Americans did not support his policies. • They objected to the government interference with business and policies that strengthened trade unions. • Businesses also believed it was an individual’s responsibility to make sure they had enough money for their old age.

36. Roosevelt was accused of being a socialist and his supporters would be hunted down in the 1950’s during the ‘communist witch hunts’. • The Supreme Court ruled many of Roosevelt’s policies as unconstitutional, causing Roosevelt to threaten to remove judges from their post. • end