Chapter 14 – The Great Depression Begins

Section 1The Nation’s Sick Economy

Economic Troubles on the Horizon

• Industries in trouble:– Mining and lumbering– Railroads– Radio– Steel– Automobiles

• All of these industrial weaknesses signaled a declining economy

Agriculture and the Farmers

• Prices for crops had been at an all-time high during WWI– Farmers had planted more and

taken out more loans to buy more equipment

– Government was buying food from the farmers at at a very high rate and cost

• After the war prices dropped by over 50%– A lot of farmers were unable to

repay their loans and lost their farms

Farmers cont…..

• Banks begin to fail because farmers couldn’t repay their loans

• McNary-Haugen Bill– Attempt by Congress to help farmers– Price-supports – the government

would buy surplus crops at guaranteed priced and sell them on the international market

• This bill was vetoed twice by President Coolidge

Living on Credit

• Credit – buy now pay later – usually with high interest rates

• Faced with rising debt, many consumers started cutting back on spending (slowed the economy)

Uneven Distribution of Income

• More than 71% of the population earned less than $2500 per year

• The rich were getting richer and the poor were getting poorer

Hoover Takes the Nation

• Election of 1928– Herbert Hoover v. Alfred E. Smith– Hoover wins the election easily and becomes the

31st president of the United States

Stock Market

• Americans who could afford it (and some who couldn’t) invested in the market

• Dow Jones Industrial Average – most widely used barometer of the stock market’s health– Measure based on the

prices of stocks from 20 large companies

Stock Market cont…

• Speculation – people were buying stocks and bonds on the chance of a quick profit while ignoring risks

• Buying on margin – paying a small percentage of a stock’s price as a down payment and borrowing the rest

• Both speculation and buying on margin caused stock prices to rise– They caused over-investment

because people bought more than they could pay for

The Stock Market Crashes

• Black Tuesday– October 29, 1929– A record 16.5 million shares

were sold– Millions more could not find

buyers– People who had bought stock

with loans were stuck with huge debt and unable to pay

Financial Collapse

• The stock market crash was the first sign of the Great Depression– Period between 1929 and

1940 in which the economy plummeted and unemployment skyrocketed

– The Great Depression was not just isolated to America – it was felt around the world

Bank and Business Failures

• Banks also invested in the stock market – and they too lost their money

• In 1929 around 600 banks closed – people could not get their money from the bank

• By 1933 11,000 of the nation’s 25,000 banks had failed and lost their money– Millions of Americans lost

all they had

Unemployment

• 1 out of every 4 Americans did not have a job by 1933

• Those who did have a job were working for very little money with very little hours

Hawley-Smoot Tariff

• 1930• Established the highest

protective tariff in United States history

• Designed to protect American farmers and manufacturers from foreign competition

• But had the opposite effect…..

Hawley Smoot Tariff cont…

• By reducing the flow of goods in to the U.S. other countries lost revenue – which they were using to repay their loans to the United States

• Also made unemployment higher

• World trade declined almost 50%

Causes of the Great Depression

• Tariffs and war debt policies• Crises in the farm sector• Availability of easy credit• Unequal distribution of

income

Hardship and Suffering During the Great Depression

Chapter 14 Section 2

Depression in the Cities• People lost their jobs• Evicted from their

homes• Ended up with

nothing, wandering the streets

• Shantytowns – little towns consisting of shacks (built out of anything they could throw together for shelter)

Depression in the cities cont….

• Soup kitchens – offered free or low-cost food

• Bread lines – lines of people waiting to receive food – Usually provided by

charities or public agencies

Minorities during the Depression

• Often had it harder than did whites

• Suffered higher unemployment

• Lower pay• And racial violence

Depression in Rural Areas• Had one advantage

over living in the city:– Some farmers were

able to grow their own food

• However, with falling prices, rising debt, and the drought, many farmers lost their land

• Between 1929 and 1932 over 400,000 farms were lost through foreclosure

The Dust Bowl• Regions that were hardest hit:

– Kansas– Oklahoma– New Mexico – Colorado– Texas

• Farmers had cultivated so much land that there was nothing to hold the soil down

• Exhaustion of the land from overproduction

Dust Bowl cont….• Route 66

– Route to California followed by many devastated farmers and their families

– Became known as Okies– Black blizzards – the most severe

dust storms• Often reached all the way to

the East Coast cities

Direct Relief

• Cash payments or food provided by the government to the poor

Women and Children during the Depression

• Women– Had to manage tight

household budgets; encountered opposition in holding jobs outside the home

• Children– Suffered from poor

diets and inadequate healthcare; many welfare programs and schools were shut down

The Legacy of the Depression• The Great Depression shattered many people’s

dreams. But in terms of mental health there are two lessons to be drawn from the experience.

1. It is clear that the suffering of the Great Depression became part of the national legacy. Fears of broken lives and ill health were handed down from parents to children.

2. The resiliency of a people, who banded together to help each other, with millions of anonymous acts of kindness illuminated an otherwise bleak landscape.

Hoover Struggles with the Depression

Chapter 14 Section 3

Herbert Hoover

• Elected president in 1928• His beliefs for the government:

– Laissez faire– Foster cooperation between business and labor– Individuals, charities, and private organizations should help the poor and

suffering out (not direct relief from the government)

Hoover’s Cautious Steps

• Asked employers not to cut wages

• Asked employers not to lay off workers

• Asked workers not to go on strike

• In the end, none of these steps were working

Boulder Dam

• Later renamed Hoover Dam• Started in 1930 – completed in 1936• 30 miles from Las Vegas• Provided jobs & water/electricity to SW

“Hoovervilles”

• Americans started calling all the shantytowns that had popped up “Hoovervilles”

• Directed at the president for not doing enough for the poor during the depression

Federal Home Loan Bank Act

• Law enacted in 1931• Lowered home

mortgage rates• Allowed farmers to

refinance their loans and avoid foreclosures

Reconstruction Finance Corporation (RFC)

• Agency established in 1932

• Provided emergency financing to banks, life insurance companies, railroads, and other large businesses

Bonus Army• Between 10,000 and 20,000

WWI veterans (1932)• Gathered in Washington to

demand their pay promised to them and their families for time served in WWI

• Most dispersed in peace• The ones that stayed are gassed

and pushed away with force• This incident made Americans

dislike Hoover even more

Chapter 15 The New Deal

Section 1

A New Deal Fights the Depression

Franklin Delano Roosevelt

• Elected president in 1932

• Served longest term of all the presidents (12 years)

• 5th Cousin of Teddy Roosevelt

Roosevelt’s New Deal

• New Deal policies focused on three general goals:– Relief (for the needy) – the immediate

effort to help the one-third of the population that was hardest hit by the depression

– Economic recovery – the effort in numerous programs to restore the economy to normal health

– Financial reform – government intervention to stabilize the economy, and to balance the interests of farmers, business and labor

The First 100 Days

• March 4th – June 16th

• Roosevelt and Congress passed more than 15 major pieces of New Deal legislation

The “Bank Holiday”

• Roosevelt closed all the banks on March 5th

• Passed the Emergency Banking Act– Banks could only be re-

opened under the Treasury Departments supervision

– Federal loans were handed out as needed

• Helped restore the publics confidence in the nation’s banking system

Regulating Banking and Finance

• Glass-Steagall Act (1933)– Established the Federal Deposit Insurance

Corporation (FDIC)– Provided federal insurance on each bank

account– Restored confidence to the customers with

the banks

Federal Securities Act (1933)

• Required corporations to provide complete information on all stock offerings

• Created the Securities and Exchange Commission to regulate stock market

Help for the Farmers

• Agricultural Adjustment Act (AAA)– Sought to raise crop prices

by lowering production– The government paid

farmers to leave some of their land fallow (unseeded)

– This lowered production which in turn raised crop prices

New Deal Projects

• Civilian Conservation Corps (CCC)– Put young unemployed men to work building

roads, developing parks, planting trees, and helping in soil-erosion and flood-control projects

National Industrial Recovery Act (NIRA)

• Established codes of fair practice for Industries and to promote industrial growth

• Example:– Public Works

Administration (PWA) - Provided money to states to create jobs chiefly in the construction of schools and other community buildings

Food Clothing and Shelter

• Home Owners Loan Corporation (HOLC)– Provided government loans to

homeowners who faced foreclosures• Federal Housing Administration (FHA)

– Furnishes loans for home mortgages and repairs

• Federal Emergency Relief Administration (FERA)– Provided direct relief for the needy

Deficit Spending

• Spending more money than the government receives in revenue

• FDR regarded deficit spending as a “necessary evil” to bring the United States out of the depression

The Supreme Court Reacts

• 1935 found the NIRA to be unconstitutional

• 1936 found the AAA to be unconstitutional and struck it down

FDR vs. Supreme Court• Supreme Court in the early

1930’s was more conservative (did not favor New Deal) & declared many programs unconstitutional

• In 1937 FDR proposed a Congressional bill to reorganize the Supreme Court calling for 6 new justices (And by law, he gets to appoint those justices!!!)

• Congress and press were outraged at his “Court-Packing” Bill – Why?

• Eventually he gets his way as several justices over the next 4 years retire

The Second New Deal Takes Hold

Ch. 15 Section 2

The Second Hundred Days

• Economy had improved during FDR’s first 2 years as president

• He still wanted more improvement– Unemployment rates remained high– Production still lagged behind 1920’s levels

• Roosevelt decided to launch a Second New Deal - another burst of activity aimed at providing more help for farmers and workers

Eleanor Roosevelt

• The First Lady (FDR’s wife)• Helped her husband out every chance she got

– very important part of the second new deal

Reelecting FDR

• 1936 presidential election– FDR (democrat) vs. Alfred Landon (republican)

• Overwhelming victory by FDR

Helping Farmers

• Soil Conservation and Domestic Allotment Act– Paid farmers for cutting production

• 1938 – Second Agricultural Adjustment Act– Did not include a previous processing tax to pay

for farm subsidies

Works Progress Administration (WPA)

• Designed to help the nation’s youth, professionals, and other workers

• Headed by Harry Hopkins• Provided the unemployed

with jobs in construction, garment making, teaching, arts, and other fields

National Youth Administration (NYA)

• Created to provide education, jobs, counseling, and recreation for young people

• Also provided financial aid for high school, college, and graduate school

Wagner Act

• Reestablished the NIRA provision of collective bargaining

• Protected the rights of workers

• Allowed them to join unions without pressure from management

Social Security Act• 1935• 3 major parts:

– Old-age insurance for retirees 65 or older and their spouses

– Unemployment compensation system

– Aid to families with dependent children and the disabled

The New Deal Affects Many Groups

Chapter 15 Section 3

New Opportunities

• Several Women appointed to government positions

• Frances Perkins first female Cabinet Member (Secretary of Labor)

African-American Activism

• 1930’s saw growth of activism for African Americans

• Laid groundwork for Civil Rights Movement (1950’s-60’s)

• “Black Cabinet” – Group of influential African Americans to advise Roosevelt on racial issues.

President Fails to Support Civil Rights

• Roosevelt never committed to full civil rights for African Americans

• Did not want to upset Southern voters• NRA, CCC and TVA discriminated against

African Americans– Lower Wages– Few Jobs

Powell v. Alabama• 1932 Supreme Court Case• 9 African American men

were put on trial for raping two white women

• 8 of the 9 men were found guilty and sentenced to death in short 1 day trials

• The men didn’t have adequate legal counsel (a lawyer)

• Alabama ruled cases were legal

• Supreme Court disagreed, said that states must provide lawyers in capitol cases (death penalty)

Culture in the 1930’s

Chapter 15Section 4

Motion Pictures and Radio• Very profitable during the 1930’s• By 1940 65% of Americans were attending the

movies at least once a week• 90% of American households owned a radio

“Gone With The Wind”

• 1939• One of the most popular films

of all time• Dealt with the life of

plantation owners in the south

• Acted as a “get-a-way” from the everyday hardships of the Great Depression

Fireside Chats• Families usually spent

several hours a day together listening to the radio

• Allowed FDR to speak directly to the people.

• Spoke to them as if he were a friend, not the President.

• Comforted the common man

Orson Welles

• Actor, director, producer, and writer

• Created “War of the Worlds” (1938)

Grant Wood

• American painter• Painted “American

Gothic” – 1930• FDR appointed

writers and artists to paint murals to cheer up Americans

The Grapes of Wrath

• 1939• Written by John Steinbeck

– Also received assistance from the Federal Writer’s Project

• About the lives of a group of people from Oklahoma and their hardships during the Dust Bowl

Chapter 15 Section 5

The Impact of the New Deal

New Deal Reforms

• During 2nd Term in office FDR sought to create a Third New Deal

• FDR did not favor deficit spending• Economy had slightly recovered, and Congress

pressured FDR to scale back the New Deal• Caused more unemployment• By 1939, FDR more concerned with Europe

(Hitler’s Rise in Germany)

Critics of New Deal

• Critics – Typically Conservatives– New Deal Made Federal Government too large– Government stifled free enterprise and individual

initiative

– Liberal Critics claimed that Roosevelt did not go far enough

Supporters of the New Deal

• Supporters – Typically Liberals– FDR Struck a reasonable balance between two

extremes (unregulated capitalism and overregulated socialism)

– Helped Country recover from economic difficulties

Deep Debt

• Federal Government had to go deeply into debt to provide jobs and help Americans

• Federal Deficit – 1934- $2.9 Billion– 1937-38 - $100 Million– 1939 - $2.9 Billion

Lasting Effects

• Workers Rights – National Labor Relations Board

• Acts as a mediator in labor disputes between Unions and Workers

• Still Around today

• Banks and Finance– FDIC – Banking regulations and protection– SEC – Monitors stock market

Lasting Effects

• Social Security– One of the most important legacies of New Deal– Old Age insurance and unemployment continues

to help families. – Impacted millions of Americans since 1935

• Rural Scene– AAA – Helped farmers keep farms. – Rural Electrification Administration (REA) –

Provided electricity to people in rural areas.

Lasting Effects

• Environment– Tennessee Valley Authority (TVA) – Provided jobs

to thousands of workers in the region– Prevented floods in the Tennessee Valley– Provided cheap electricity to the region

New Deal Legacy

• Brought hope and gratitude to some people for the benefits and protections

• Also brought criticism from those who believed it took too much of their money in taxes.

• United States does not fully recover until after World War II