The Great Depression

The Great Depression Economic Collapse

Here we see a billboard depicting American prosperity in a run-down, barren area. How would you describe the surrounding area? Why do you think the area is so run down? Who do you think designed the billboard? What do you think those who live in the area think of it? What is the irony in the photograph? What do you see here? What message does the billboard send?

The Postwar Economic Boom • Years following WWI are known as the “Roaring Twenties” • Hoover said we had “come nearer to the abolition of poverty…than ever before” • Effects on society • Americans earning more than ever – 43% increase • More money for luxuries – Americans owned ¾ of all the cars in the world • Increase in production – prices lower • Stock market at all-time high by 1929 – experts advised people to invest as much as they could

The Depression Foreshadowed • By late 1929, there were cracks in the US economy • Unemployment on the rise • Farmers losing land • Stock prices dropping • Number of Americans in poverty increased

The Stock Market Crash • THE STOCK MARKET CRASH DID NOT CAUSE THE 10-YEAR-LONG GREAT DEPRESSION! • There are six factors historians generally agree on: • Domestic and international economic policy • Unchecked stock speculation • Weak and unregulated banking institutions • Overproduction of goods • Decline of farming industry • Unequal distribution of wealth

Based on what you know about conservatism, how do you think they dealt with business interests in the 1920s? Here we see Republicans President Coolidge, Sec. of the Treasury Andrew Mellon, and Herbert Hoover, Sec. Of Commerce and Future President What do you see here? How are the men dressed? Describe their facial expressions. What is the mood of the photograph? Do you think the men are wealthy or poor? Do you think the men are wealthy or poor? Why? These men are conservative Republicans.

Republican Economic Policy • Coolidge’s Economic policy • “The business of America is business” • Policies that benefit wealthy would eventually benefit all Americans – prosperity would “trickle down” from upper to middle to lower classes • Andrew Mellon’s Economic policies • Slashed taxes for big business – US Steel received a $15 million refund • Cut taxes for those who made over $60,000 a year • Cut government expenditures • Raised taxes for those in the middle and lower classes

Republican Economic Policy • Trickle-down effect did not work • Businesses used income to expand work facilities, increase production, and line their pockets • Some new jobs created, but used new machines primarily instead of people • Owners kept workers’ wages low • Widened the gap between rich and poor

International Business Policy • During WWI, the US lent $11 billion to European allies • After war, countries in economic ruin – appealed to the US not to have to repay loans or reduce amount • Coolidge’s administration refused • Rescheduled loan payments • Began lending nations more money • Nations fell deeper into debt • High tariffs so that people would buy American • Europe had no market for goods, and couldn’t buy American goods or invest in the economy

What building do you see? What do you see here? What does this cartoon reflect about stockbrokers during this period? Who are the people on the ground? Who are the people on top of the building? What are they doing? Here we see a political cartoon called “The Anglers” showing Wall Street stockbrokers “hooking” Americans to invest through speculation.

Real Estate Speculation • Speculation – a person or organization makes a risky investment in the hope of making a quick, large, profit – widespread in the 1920s • Many speculated on real estate • Over 1 million moved to southern California after WWI • Prompted investors to buy up huge tracts of land to sell to housing developers for a large profit • Boom went bust when the amount of land for sale exceeded the demand for new homes

Real Estate Speculation • Turned to Florida • Reputation for vacation and retirement • Speculators used same tactics as in California • However, sometimes sold to other speculators, who sold it at still higher prices • Many buyers were northerners who bought land before they saw it • Dishonest scams – land would be alligator infested swampland or be underwater at high tides

Stock Speculation • Investors felt stock market would go up indefinitely and that profits would continue to increase • The value of many companies’ stock became artificially inflated and bore little connection to the companies’ actual worth • Some investors used unethical practices to inflate prices • Some economic analysts predicted the market was headed for a fall

How do you think the people trying to get their money are feeling? Here we see a group outside of the Union Bank in New York in April 1933. What might they be saying? Why might they be crowded around the bank? This bank is failing. What do you see here? What is the building you see? What do you think the people are doing? How do you think bank failures affected the nation?

The Stock Market Crash • Warnings from analysts made some investors nervous • Many began selling while they could still get a good price • As investors began to withdraw, prices began to fall • Companies began to lower production, which led to price drops • October 24, 1929 – investors flooded the NYSE with sell orders to get rid of their stocks • Group of bankers tried to stabilize market by purchasing investors’ stocks at a higher price than the market was offering • Still continued its descent

The Stock Market Crash • October 28– investors sold stocks at loss of over $4 billion • October 29 – called “Black Tuesday” – orders to sell at any price flooded market • First National Bank executive George Baker claimed he lost $15 million • One distraught president threw himself from hotel after company’s stock fell from $113 to $4 • At the end of the day, investors had lost $16 billion

Unregulated Banking Institutions • Stock market crash triggered collapse of US banking industry – instability in the 1920s was due to two main reasons: • Laissez faire (Leave alone) • Federal Reserve did nothing to stop banks from speculating depositors’ money on high-risk ventures • Didn’t make banks keep certain amount of money on reserve and available • Depositors money was uninsured – no way for them to get money back after banks failed

Unregulated Banking Institutions • Over-extension of credit to stock investors and brokers • Allowed investors to buy stocks on large margins of credit • Allowed investors with little money to purchase large amounts of stock • Put down 10-20% of total; allowed to borrow the rest and use the stock itself as collateral

The Banking Industry Collapse • Families that had played the stock market lost all their savings • Investors who bought stocks on margin couldn’t sell stock at all, or had to sell at low prices • Little or no money to repay bank’s loan • Banks could not replace depositors’ money, so people who hadn’t even invested lost all their money • Increasing number of people began defaulting on mortgages and other loans • By 1932, ¼ of nation’s banks had closed – 6,000 banks

At the top, we see striking dairy farmers emptying milk from a non-striker’s truck during a blockade near Harvard, Illinois. They organized the blockade to raise prices and heighten awareness of oversupply. At the bottom, we see Henry Ford with his son Edsel standing next to the 20 millionth automobile to leave Ford’s production line on April 15, 1931. What are the men on the bottom doing? What do you see here? What are the men on the top doing? Why might they be spilling milk on the ground? How do you think they are feeling? These men are Henry Ford and his son Edsel. Why are they celebrating? What kinds of economic problems might dampen the mood at the Ford plant? How might the economic collapse be explained by what you see in these two images?

Overproduction of Industrial Goods • Consumer demand for goods was very high after WWI • Newly invented machines allowed US factories to produce more goods in less time • American industrialists believed in unrestricted capitalism and unrestricted growth • By 1929, many companies had more plants than they needed, and the market was saturated with goods that few Americans could afford to buy.

Overproduction of Agricultural Goods • During WWI, American farmers supplied both US and Europe with foodstuffs • Mechanized much of their work • Farmers became more efficient • Produced more than ever • After the war, European farmers resumed their own production, and the demand for US goods dropped significantly • Farmers often stuck with surplus of crops they couldn’t sell or could only sell for a low price

What impact do you think the Dust Bowl had on farmers during the Depression? Why do you think there are no people in the picture? Here we see an abandoned farmhouse surrounded by several feet of dust after a major dust storm. What do you see here? In what condition are the wheels in the foreground? Why do you think they left? Where might they have gone?

The Toll on the Farming Industry • Farming had historically been the backbone of the American economy, but by 1929, the industry was in decline • Farmers borrowed heavily to pay for new, advanced equipment • Farmers failed to sell surplus crops and became unable to pay back loans • Many farmers defaulted on their loans • Some lost farms to foreclosures • Bank would attempt to resell land and equipment, but other farmers were barely able to hold onto their own farms • Farming trouble caused many banks to collapse

Farming During the Depression • Between 1929 and 1933, farmers’ income dropped by 50 percent • Hit with drought so severe that soil swept across the plains in choking black clouds • The region became known as the “Dust Bowl,” and farmers left the region in droves • Over one million families lost their farms between 1930 and 1934

The Dust Bowl • Farmers fleeing Dust Bowl headed to California in search of employment and land • Known as “Okies,” since many of them came from Oklahoma • Many lived in makeshift shacks and shanties outside city limits • One outside of Salinas, California, contained nearly 10,000 residents

What do you see here? How are the people in the center dressed? Where do you think the wealthy people are going? What might their home look like? How might their life be different from that of the doorman? How might extraordinary wealth on one hand and low wages on the other have contributed to the economic collapse of the late 1920s and 1930s? Here we see a wealthy couple arriving at the opera in New York City in 1929.

The Gap Between Rich and Poor • While Americans were more prosperous than ever, most wealth remained in the hands of a few at the top of the economic pyramid • 1% of the population possessed 59 % of the country’s wealth • 60% lived on or below the poverty level of $2,000 • Average American saw a wage increase of 9%; the rich saw an increase of 75% • In short, the rich were getting richer

The Great Depression