Unit 5: Great Depression & New Deal

1. Unit 5: Great Depression & New Deal

2. Stock Market Crash • October 29th, 1929 • Great Depression: 1930s • President Franklin D. Roosevelt’s “New Deal” • Dominates all phases of life in US in the 1930s • Changes America forever • Includes economic, social, political, psychological issues • Forces re-evaluation of American values • Challenges whole concept of the “American Dream”

3. Before the crash… • Things “appeared” to be good • “Boom Times” • However: • Major problems beneath surface • Vicious economic cycle • Low interest rates • Encourages borrowing money • People borrow to buy stocks • People sell stocks to make money • Higher interest rates to entice saving • Banks, businesses demand payments on loans = less money • Less money = less stock buying = stock prices drop • Stock prices drop = value of companies, businesses, dollar drops • Business fail = can’t pay off loans • Workers fired = can’t pay off loans • Banks fail = no loans for businesses • Businesses fail = fire workers

4. PLEASE NOTE… • The Stock Market Crash did NOT cause the Great Depression, it only signaled the beginning of it. The causes of the Depression were already in place

5. Prosperity Shattered • Economic troubles on the horizon, but nobody noticed • Confidence credit purchases 6x higher • Low interest rates  more borrowing/buying • Playing the stock market (Bull market) • Problems • Not stable • No long term growth • Stock prices inflated (supply and demand) • Margin buying Buying stocks on credit

6. Stock Market Crash • Many investors sold stocks because of concerns about rising interest rates • This caused investor confidence to drop which led to less demand for stocks which led to a drop in prices which led to sell-offs = PANIC!!! • October 24, 1929 “Black Thursday” • October 29th, 1929 “Black Tuesday” • 16 million stock shares sold • US stockholders lost $30 billion

7. Banking Crisis • Banks call in loans but borrowers defaulted (can’t pay off loans) = banks close • Depositors rush banks to get money out • 1930-1932 = 5,000 banks fail and shut down • No banks = no businesses = fire workers = no buying/borrowing = businesses fail • 1930-1931: 56,000 businesses fail • 1929 GNP = $103/1933 = $56 billion • 1929 = 3.2% unemployment/1932 =23.6%

8. Three Major Causes… • Overall global depression • WWI war debts = no buying US goods • Smoot-Hawley Tariff 1930 • Income gap and domestic consumer debt • Disposable income of top 1% up 63% • Disposable income of lowest 93% down 4% • Normal business cycles based on supply and demand: • Overproductionsurplusdemanddropspricesdroploss of profitstoo much borrowing, etc.

9. Hard Times • Big issue was unemployment • 1929: 1.5 million Americans out of work • 1933: 15 million Americans out of work • Drop in wages/work hours for employed • African Americans suffer even more • Some women benefit: Cheaper to hire

10. Life in the City • Hunger • Homeless • No jobs • Shantytowns • Bread lines • Loitering • Crime • 20% of kids in NYC were malnourished NO GOVERNMENT ASSISTANCE = LAISSEZ FAIRE

11. Life on the Farm • Major drop in sales of products • Produce and livestock destroyed because of a major loss in profits • No profits = farmers can’t pay back loans • Banks foreclose on mortgages • Farm equipment repossessed • Land becomes useless = Dust Bowl • Many farmers hit the road = migrants

12. Family Life • 1930s=Huge strain on traditions • Role of father/husband/provider questioned • Delayed marriages = lower US birthrate • Psychological pressures = suicides up 28% • Popular culture/entertainment = escapism (realism)

13. Media • Literature during the Depression = Realism • John Steinbeck: Grapes of Wrath • Zora Neale Hurston: Their Eyes Were Watching God • Richard Wright: Native Son • Margaret Mitchell: Gone With the Wind • Films: Escapism = Marx Brothers, the Three Stooges

14. Do Something! • People looked to Hoover for guidance • He believed in American values and ingenuity • He saw the Great Depression as just part of the business cycle and refused to make a move to better the economy • Called the most hated man in America

15. Hoover: “Gov. should not support the people!” • 1) Conservative, Social Darwinist, Capitalism • 2) Relief would create a large gov. bureaucracy • 3) Did not want to inflate the federal budget • 4) Fearful of reducing Americans’ self-respect • 5) Rugged individualism and volunteerism • Example: Hoover refused to support the Federal Emergency Relief Board proposed by Robert LaFollette to give $375 million for unemployment relief

16. SOME Gov’t Intervention • Hoover encouraged businesses to maintain level of production, employment and wages • Funding for public works projects: Hoover Dam used $800 million of gov’t funds

17. Farm Crisis • Agricultural Marketing ActFederal Farm Board • Home Loan Bank Act 1932 • BUT Hoover still rejects direct gov’t aid • Help yourself! No buying up of surplus

18. Other Minor Gov’t Action • Reconstruction Finance Corporation • Lend $2 billion of tax payer money to stabilize banks, insurance companies, RR • Still based on “trickle down” theories • Rumblings of Discontent • Increasing condemnations of capitalism • Bonus Army MarchMay 1932 • 1932 election of FDR

19. 1932: Time for Change • Born to a wealthy family, Governor of New York, created relief programs to help with Depression for New Yorkers

20. FDR For President! • The campaign revolved around the Depression • Roosevelt promised a “New Deal” for Americans

21. “I have no expectation of making a hit every time I come to bat. What I seek is the highest possible batting average…”

22. Restoring Hope • New Deal: Three levels of plans and policies • Relief: Short term: “stop the bleeding” • Recovery: Medium term: “get back to even” • Reform: Long term: “Never happens again” • VERY different than Hoover’s approach • 1) Strong advisory approach = “Brain Trust” • 2) Very activist approach-use of gov’t powers • 3) Took immediate steps • 4) Called Congress into special session

23. FDR’s First Steps • 1) Bank Holiday to stop massive withdrawals • 2) Emergency Banking Act—Fireside Chats • 3) Federal Deposit Insurance Corporation • 4) Homeowners Loan Corporation

24. Relief Measures (Frances Perkins: Secretary of Labor) • 1) Federal Emergency Relief Administration—H.Hopkins • 2) Civil Works Administration • 3) Civilian Conservation Corp

25. Recovery Measures • 1) Federal Security ActSecurities and Exchange Commission • 2) Concept of deficit spending: Keynes • 3) National Industrial Recovery Act • Public Works Administration • National Recovery Act • 4) Agricultural Adjustment Act • 5) Tennessee Valley Authority

26. New Challenges • Major criticisms of the New Deal • Conservatives: New Deal did too much • A. Went against capitalism • B. FDR had too much power • C. Too much against tradition • Liberals: New Deal didn’t do enough • A. Did not redistribute the wealth • B. Still focused on private property • C. Did not do enough to eliminate poverty • Francis Townsend: $200 pension per person • Charles Coughlin: Gov’t should run all banks • Huey Long: Minimum income for all Americans

27. Second New Deal • Critics do not deter FDR • More public works programs, social security, wage and hour improvements for workers • A. Works Projects Administration $5Billion budget • B. National Youth AdministrationMary M. Bethune • C. Social Security Act 1935 • D. Rural Electrification Program • E. FDR easily wins 1936 election • F. National Labor Relations Act (Wagner Act) • G. AFL merges with CIO in 1935 • FDR and the Supreme Court—major mistake by FDR

28. Life in the New Deal Era and the New Deal and the Arts • Hard life all aroundmade worse by natural disaster=droughtDust Bowl • Ruined land, forced migrations, job comp. • Hardship captured by photographers • Dorothea Lange

29. Overall Criticisms of the New Deal • Creation of welfare state • Too much spending=debt • Gov’t, especially President, too much power • Free-market capitalism threatened • Yet, relief was successful • Reforms still with us today • Recovery, though, not until WWII

30. Arts During the New Deal Era • Mix between realism and escapism • WPA $300million to create Federal Project #1 • Encourage pride in American culture by providing work and opportunities to artists