THE GREAT DEPRESSION AND THE NEW DEAL 1929 -1941

I. CAUSES OF THE GREAT DEPRESSION

A. CONSEQUENCES OF THE STOCK MARKET CRASH1. A loss of confidence in the stock market2. A reduction in the output of manufactured goods3. A decline in investment in capital goods4. Bad distribution of wealth – too much $ in too few hands

B. OVERPRODUCTION AND UNDERCONSUMPTION 1. Companies overproduced consumer goods

2. Consumers had no money or any credit to purchase these goods

C. DECLINE IN FARM PROSPERITY1. The problems in the 1920s for farmers led up to troubles for all Americans in 1930s2. Falling farm prices was the warning sign for troubles ahead

D. INTERNATIONAL TRADE1. serious dislocations in international trade would make the crash contagious2. Smoot-Hawley Tariff Act of 1930 which raised taxes triggered a fall in trade - 40% !!!

II. HERBERT HOOVER AND THE GREAT DEPRESSION(1929-1933)A. THE BONUS ARMY = ruins Hoover’s reputation

1. In 1932, a ragtag “army” of WW I vets known as the BONUS ARMY marched on DC to demand that Congress pay them a bonus, which had been promised to veterans

2. Hoover sent the regular army to disband the Bonus Army: tanks, tear gas, and machine guns used

B. HOOVER’S ECONOMIC POLICIES = make him a “failed” POTUS1. He believes the economic recovery of the USA was the business community’s job2. Private charity not the government was responsible for feeding the hungry/house the homeless3. Hoover supported government loans to corporations not to the unemployed or farmers4. Hoover establishes the RFC- Reconstruction Finance Corporation to fight the Great Depression

Hoover believed in “rugged individualism” not government activity to improve the economy. Unfortunately for him, the voters saw him as uncaring and a boob in 1932

Bonus Army - 1932 Hoover-ville

III. FRANKLIN D. ROOSEVELT AND THE NEW DEAL

A. GOALS

1. The three R’s were … RELIEF … RECOVERY … REFORM2. Unlike Hoover, FDR favored direct federal relief for individuals3. NEW DEAL was a reform program that sought to re-structure American

capitalist system rather than replace it with a socialist system.4. Use of “deficit spending” on public works programs to revive the economy

British economist John Maynard Keynes advocated government intervention into the economy to create stability

B. FIRST 100 DAYS

1. Restoring public confidence in banking and the stock market : FDIC and SEC2. Creating new jobs in the public sector: building roads, dams, picnic grounds, stadiums, …etc: WPA3. Raise farm prices by restricting production: AAA4. Providing mortgage support for homeowners5. Create the Tennessee Valley Authority: hydroelectricity; flood control; model for regional planning: TVA6. NRA: national Industrial Recovery Act- called for more government and business cooperation in running the

economy.

these programs got initial public support and seemed to be effective … so New Deal-ers pushed more ( some called more radical ) programs.

• CCC Civilian Conservation Corps• Social Security Act• Wagner Act - made it illegal for a company to prevent a union from organizing

The NEW DEAL was not free of criticism or controversy:

• Court Packing Scheme• Roosevelt Recession• Did nothing specific (legislation) but showed a concern for African-Americans

and other minorities and women in how its programs were structured and run

IMPACT OF THE NEW DEAL

1. It was a reform of American capitalism : sought to restructure not replace it2. It set the federal government off in a new direction of direct action – government can and must enhance the social, political, and economic welfare of all Americans? This attitude is highly questioned by conservatives today = Big Government !!3. It was at least partially successful in reducing unemployment and reviving economy4. Finally, the US did not fully emerge from the Great Depression until WWII