The Great Depression Descends Upon America

Transcription

1 The Great Depression Descends Upon America

2 The Post-War Economic Boom Twenties Prosperity Our American experiment in human welfare has yielded a degree of well- being unparalleled in the world. It has come nearer to the abolition of poverty than has ever been realized before. -- Hoover 1928 Americans were earning more money than ever between 1922 and 1929, national income rose from $61 billion to $87 billion, a leap of 43%! Americans had more money to spend (luxury goods and cars) U.S. factories increased the number of goods they produced - what a factory worker could produce in an hour rose by 72% during the 1920s and business profits rose by 80% The stock market was at an all time high 1927 NYSE traded over 550 million shares and by the end of 1929 it doubled to 1.1 billion shares

3 Postwar Economic Boom (cont.) The Depression Foreshadowed Unemployment was on the rise Farmers were losing their land Stock prices were dropping One author stated [the stock market crash] lowered the [U.S.] economy s resistance to the point where already existing defects could multiply rapidly and bring down the whole organism.

4 6 Key Factors Most Historians Can Agree Caused the Great Depression 1. Republican domestic and international economic policies. 2. Unchecked Stock & Speculation 3. Weak and Unregulated Banking Institutions 4. Overproduction of Goods 5. The Decline of the Farming Industry 6. Unequal Distribution of Wealth

5 1. Republican Economic Policies Three Leaders of the Republican Party President Calvin Coolidge (left), Secretary of the Treasury Andrew Melton (middle), and Herbert Hoover (right) Domestic Economic Policies included many pro-business policies Based on doctrine of trickle-down economics Tax cuts for the wealthy; cut gov. expenditures and raised taxes for middle and lower classes

6 Wealth did not trickle down b/c excess money for the rich was not used as expected International Economic Policies after WWI, most indebted nations could not repay the U.S. We lent them more money to help repay, yet raised the tariff on imported goods Europe had no market to sell their goods, fell deeper into debt, and began defaulting on loans

7 2. Unchecked Stock and Real Estate Speculation In 1929 it was strictly a gambling casino with loaded dice. I saw shoeshine boys buying dollars worth of stock with 500 dollars down payment. A cigar stock at the time was selling for 114 dollars a share. The market collapsed. The 114 dollar stock dropped to two dollars, and the company president jumped out of the window of his Wall Street office. -Studs Terkel, Hard Times Studs was talking to an interviewer in 1970 Speculation a person or organization makes a risky investment in the hope of making a quick, large profit Real Estate Speculation was popular in the early 20s Stock Market Speculation as the decade progressed (Buying on Margin especially 10-20% down)

8 Rapid Rise of the Stock Market Many had the belief that prices would continue to rise or that there would always be a bull market Investment Pools and other crooked investment schemes artificially inflated the value of stocks, thus the perceived value of the companies they represented Some economic analysts and investors predicted that the market was headed for a fall

9

10 Analyzing the Uncertainty of the Stock Market

11 Timeline of the Crash of 1929 Rising Prices - Sept. 3rd, prices hit an all time high! Sell Now - Oct. 24th, people wanted to sell to make a maximum profit; some bankers led by J.P. Morgan tried to stabilize the market, but the descent could not be stopped Oh no, Prices are Falling - Panic on Wall St. Oct. 28 th loss of over $4 billion Black Tuesday - Oct. 29th, people in mass hoped to sell stocks before all shares lost value; loss of over $16 billion

12 The Stock Market Crash of 1929 Triggered A collapse of the stock exchange system; All Sellers and No Buyers = No Stock market exchange! Prices and wages fell Production decreased Unemployment increased Many banks and businesses failed

13 3. Weak and Unregulated Banking Institutions The 1920s saw banks over-extend credit to stock investors and brokers Run on Union Bank in NYC 1933 Laissez Faire attitudes left banking virtually unregulated by government

14 Federal Reserve Board did little to prevent banks from speculating depositors money on high-risk ventures, nor did it demand that banks keep a certain percentage of their money on reserve and available. Depositors money was uninsured Stock was accepted as collateral in buying on margin loans (believed it was as safe as a house or car) Many banks had no assets, no cash reserved, and no new money coming in By 1932, 1/4 th were forced to close their doors almost 6,000 banks

15 4. Overproduction of Goods 1935 photo depicting striking workers dumping milk from the back of a delivery truck in the middle of a road as two men try to resist their protest. (Photo by American Stock/Getty Images) Henry Ford with his son Edsel standing next to the 20 Millionth automobile to leave Ford s production line on April 15, 1931.

16 WWI Conservation = $ to burn + WWI Mechanizati on Improves in Industry and Farming After WWI Consumer demands for goods and a higher standard of living is high; so is the belief in unrestricted capitalism and production. Farmers were use to producing food for the war and they kept up the pace after, expecting the demand to be the same

17 5. The Decline of the Farming Industry Farmers failed to sell surplus crops They became unable to repay loans (from WWI machinery) The dust bowl disaster only worsened the plight of the farmer

18 6. Unequal Distribution of Wealth The Rich got Richer In the USA too much wealth had fallen into too few hands, with the result that consumers were unable to buy all the goods produced. The trouble came to a head mainly because of the easy credit policies of the Federal Reserve Board, which favored the rich. Its effects were so profound and so prolonged because the government did not fully understand what was happening or what to do about it. -John A. Garraty, The American Nation (1979) & the Poor got Poorer. Hoovervilles constructed by the Homeless; Named for Hoover s lack of action to help the poor.

19 Homelessness - Hoovervilles (aka shanty towns); people become migrants or squatters Health Conditions Worsened - poor diet and inadequate medical care Family Problems - Men feel a sense of failure; domestic disputes; abandonment Increased Discrimination - conditions of unemployment are worse for minorities and women. The Human Impact of the Great Depression

20 The Impact of the Depression on American Social Groups Children Confused; sickness Businessmen Embarrassment; suicide is only way out Women Trying to hold the family together Migrant Workers constant travel; negative image African Americans last to be hired, first to be fired Mexican Americans deportation; discrimination Farmers lost farms; dust bowls Families life in Hoovervilles was hard

21 Conservative, Liberal, and Radical Solutions to the Great Depression Say that civilization is a tree which, as it grows, continually produced rot and dead wood. -FDR, 1932 Conservative Hoover / Republicans Don t touch it! Liberal FDR / Democrats Let s prune, so that we lose neither the old trunk nor the new branches. Radical Socialism / Communism Cut it down!

22 Hoover Reacts with Little Action Herbert Hoover (Rep) OPPOSED federal programs of assistance and believed private charity would end the depression He believed in the idea of laissez faire (federal government should not regulate business) To stimulate the economy, he cut taxes and started public works programs to create jobs (Ex. The Hoover Dam) Still, the people were not satisfied and looked to a new leader by 1932 FDR!

23 Roosevelt and the New Deal

24 The Public Reacts at the Polls in 1932 President Franklin D. Roosevelt As the Great Depression worsened, the public lost faith in Hoover and the Republican Party. In 1932, they elected Democrat Franklin D. Roosevelt who promised a NEW DEAL to help the American people.

25

26 FDR s First 100 Days During the first 100 days in office, FDR (aided by his brain trust of college professors, lawyers, labor leaders, and social workers) and Congress passed laws focusing on: 1. Bank Reform 2. Loan Assistance and Relief Programs 3. Government Jobs for the unemployed

27 FDR s New Deal(s) FDR s First Term ( ) programs were known as the New Deal. Civilian Conservation Corps (CCC) Federal Deposit Insurance Corporation (FDIC) Federal Emergency Relief Administration (FERA) Public Works Administration (PWA) His Second Term ( ) programs were known as the Second New Deal. Social Security Act Rural Electrification Administration (REA) Works Progress Administration (WPA) Fair Labor Standards Act

28 City of Milwaukee work project for the Depression-era WERA (Wisconsin Emergency Relief Administration) Copyright 1997 State Historical Society of Wisconsin

29 Maxine Albro, WPA Federal Art Project marble mosaic over entrance to hall of the Natural Science Building, San Francisco State College University Photograph, ca. 1934, from the Federal Art Project Photographic Division records, Archives of American Art.

30 Key Ideas Behind FDR s New Deal Plan An opposition to laissez-faire principles (little gov. involvement in business) More extensive government intervention and regulation of the economy through alphabet soup agencies. More government involvement in the lives of people. The government spent money to create employment and relief.

31 Opposition to the New Deal Business leaders claimed it discouraged free enterprise and was the beginning of socialism in America. Others claimed that the New Deal had created a WELFARE STATE. This system of government institutions provides for the basic needs of citizens (like health care and unemployment benefits) Still others claimed that the New Deal encouraged DEFICIT SPENDING.

32 Effectiveness of the New Deal New Deal programs helped many people. Home loans, farm subsidies, bank deposit insurance, relief payments and jobs, pension programs, and unemployment insurance helped Americans get through the Depression. New laws regulating working standard and workers rights were established. It wasn t until WWII, however, that America was truly out of the economic depression of the 1930 s