Great Depression. The Beginning

Transcription

1 Great Depression The Beginning

2 Great Depression The United States economy seemed very strong by 1922, only four years after World War I, but by the beginning of the 1930s, the United States was in a deep economic depression. Why do you think this happened? As the worry of war decreased, people began buying many products.

3 Great Depression For example, demand for home appliances increased, and many Americans bought such products on credit. In addition, overseas orders for American products increased as war-ravaged countries purchased goods from the United States because their own factory systems were destroyed.

4 Great Depression Factories in the United States went into full production to meet this increased postwar demand, both domestic and foreign. As war-torn countries rebuilt their factories, they began cutting their orders to American factories, which in turn contributed to American factories laying off workers or shutting down when their inventories stopped selling.

5 Great Depression A long period of rising stock prices is known as a bull market Many investors bought stocks on margin, making small cash down payments (borrowed money) Margin call, a demand by the broker for the investor to repay the loan immediately Speculation, bet on the market climbing and selling whatever stock they could to make money

6 Buying on Margin Stock Investor s initial cost Amount Broker Must Borrow Investor 1 10 Shares $7.50 Investor 2 50 Shares $ Investor Shares $75.00 Shares are being sold at $5.00 each. Initially, the investor owes 15%.

7 Roots of the Great Depression Efficient machinery led to overproduction Uneven distribution of wealth added to the country s problems. (5% of households earned 30% of the country s income) Low consumption added to economic problems As sales decreased, workers were laid off, resulting in a chain reaction

8 Roots of the Great Depression Installment plan, paying a little at a time, left little money to purchase other goods Hawley-Smoot Tariff intensified the Depression by raising the tax on imports Americans purchased less from abroad, in return foreign corporations did not buy American exports. Federal reserve lowered interest rates instead of raising them, encouraging banks to make risky loans and business thinking economy was growing

9 Causes of the Great Depression Over speculation in the stock market Over borrowing (investments made with borrowed money) Over production in factories and farms Uneven distribution of wealth Failure by the Federal Reserve to monitor banks High protective tariffs

10 Causes of the Depression Overproduction and low demand leads to employee layoffs Low wages reduce consumer buying power High tariffs restrict foreign demand for American goods (Hawley-Smoot Tariff) Unemployment reduces buying power further

11 Causes of Depression Hawley-Smoot Tariff: A high import tariff that is considered the most destructive tariff in American history.

12 CH. 24 CRASH, DEPRESSION, AND NEW DEAL 1920's had been a period of good economic times Tues. Oct. 29th, NYC Stock market crashed, causing a depression that would last until 1942

13 Depression Black Tuesday, October 29, 1929, stock prices fell drastically (stocks lost $10-$15 billion in value) This stock market crash did not cause the depression, but it weakened the nation s banks Because the government did not insure bank deposits, customers lost their money. $30 billion was lost, (roughly equal to the total wages earned by Americans in 1929), as stock prices had dropped by over 1/3.

14 The stock market: the public invests in cos. by purchasing stocks; in return for this they expect a profit b/c of booming 1920's economy, $ were plentiful, so banks were quick to make loans to investors also investors only had to pay for 10% of the stock's actual value at time of purchase this was known as BUYING ON MARGIN, and the balance was paid at a later date

15 this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck b/c of all this buying & selling, stock value increased (Ex: G.E stock $130 $396/share) this quick turnover didn't aid cos. they needed long term investments so they could pay bills (stock value was like an illusion) unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value all of this gave a false sense of security/confidence in the American market

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17 THE 1929 CRASH October 29, Black Tuesday, the bottom fell out 16 million shares were sold. Prices plummeted $30 billion was lost

18 The Stock Market Crash Affect on Banks: People can t repay loans, therefore banks lose money. Banks close and people lose life savings.

19 Bank Closings Banks had invested in the Stock Market and lost money By ,000 of the 25,000 banks nationwide had collapsed Bank run 1929, Los Angeles

20 Causes of Depression Overproduction: Machines (automation) and new technology led to creating more products than could be consumed.

21 Causes of Depression Uneven Distribution of Wealth: Most Americans were poor and could not afford to buy new products.

22 Causes of the Depression Credit: Americans who could buy things were making installment payments and could not afford to buy additional goods.

23 Causes of Depression Under-consumption: Low sales led to factory lay-offs. Creating a chain reaction: Lay-offs led to lower sales, led to more lay-offs..

24 Effects of the Great Depression Unemployment: By 1933, 1 out of every 3 American workers were unemployed. Bread lines / Soup Kitchens created to feed the poor

25 The Impact of The Great Depression Unemployment increased Homelessness increased Workers became more militant Farmers lost their farms Workers migrated in search of jobs

26 The Depression Worsens Bread lines people waited for free food Soup kitchens private charities gave a free meal to the poor Many homeless built shacks in shantytowns, which they referred to as Hoovervilles because they blamed the president who had been inaugurated in March As crop prices fell, many farmers left their fields uncultivated

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29 Hoovervilles Hoover Flags Hoover Blankets Hoovervilles

30 Hoovervilles

31 Hoovervilles

32 Hoovervilles

33 Unemployment Lines

34 Unemployment Lines

35 Bread Lines

36 Bread Lines

37 Bread Lines

38 Soup Kitchens

39 Soup Kitchens

40 Soup Kitchens

41 THE DUST BOWL A severe drought gripped the Great Plains in the early 1930s Wind scattered the topsoil, exposing sand and grit The resulting dust traveled hundreds of miles Kansas Farmer, 1933

42 The Depression Worsens A drought in the Great Plains, beginning in 1932, caused the region to become a Dust Bowl Farmers lost their farms and many families moved to California hoping to find a better life To escape these hardships Americans turned to movies and radio programs These shows contained stories of triumph over adversity and visions of a better life

43 Dust storm approaching Stratford, Texas

44 Dust buried cars and wagons in South Dakota in 1936

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46 Coping with the Depression Movies and Radio: allowed people to temporarily forget the problems that they faced. Stories tended to focus on people overcoming hardships to achieve success. Snow White, Wizard of Oz

47 The Depression Worsens Movies like The Wizard of Oz, Gone with the Wind, and Snow White became popular Books were written about the depression, the most famous was The Grapes of Wrath by John Steinbeck. It was about an Oklahoma family fleeing the Dust Bowl to find a new life in California.

48 Headlines of 1932 U.S STEEL LAYS OFF ANOTHER 10,000 GENERAL MOTORS STOCK DOWN FROM $500 A SHARE TO $10 A SHARE CHICAGO TEACHERS FEED 11,000 HUNGRY CHILDREN IOWA CORN WAY DOWN IN PRICE KENTUCKY COAL MINERS FOUND LIVING ON DANDELIONS 110 CHILDREN IN N.Y.C. DIE FROM MALNUTRITION

49 Some Interesting statistics National Income: $81 billion $41 billion Business Failures: ,000 Banks: ,000 failures and 9,000,000 accounts wiped out Per capita income: $ $495 Weekly income of a stenographer: $ $16

50 Hoover s Response: Initial Response: Laissez-Faire: Left the economy alone the ship would right itself. Rugged Individualism: Americans should pick themselves up by their boot straps. Hoovervilles = shanty-towns built by migrant populations that had lost their farms, homes, jobs, etc.

51 Later Response: Reconstruction Finance Corporation (RFC): Loaned money to companies to keep businesses running. The government also bought surplus grain from farmers. Both measures were too little, too late!!

52 Promoting Recovery Public Works government-financed building projects Hoover increased public works and asked the nation s mayors and governors to do the same Hoover tried to persuade the Federal Reserve to put more currency into circulation, but they refused He set up the NCC (National Credit Corporation) creating a pool of money to rescue the banks, it was not enough to help

53 Promoting Recovery He set up the Reconstruction Finance Corporation to make loans to banks, railroads, and agricultural institutions, but the economy continued to decline He opposed the federal government s participation in relief money that went directly to very poor families He felt that was the responsibility of state and local governments

54 TOO LITTLE TOO LATE public works projects Reconstruction Finance Corporation created to strengthen banks and businesses through government loans Hoover s flurry of activity came too late to save the economy or his job prosperity would trickle down to the average citizen

55 in early 1931 these measures appeared successful, but then...the TARIFF WARS Democrats in Congress passed a high tariff (SMOOT HAWLEY) to protect U.S. industry (hoped to stimulate purchasing of U.S. goods) this turned out to be a fatal error... Congress did not understand that the world had become a GLOBAL ECONOMY in retaliation other countries passed high tariffs and no foreign markets purchased American goods, so U.S. productivity decreased again

56 AMERICANS REACT TO HOOVER Hoover was increasingly unpopular, but he continued to try... he persuaded Congress to establish the RECONSTRUCTION FINANCE CORPORATION had power to make emergency loans to banks but it was too little too late and Hoover wouldn't involve himself in any programs of direct governmental aid to individuals -didn't want to erode Americans sense of "RUGGED INDIVIDUALISM"

57 people were frustrated - isolated protest movements EX: Dairy farmers frustrated w/low price of milk refuse to sell (dump it) EX: WW1 veterans (pensions discontinued by congress) march on Washington = BONUS MARCH (by BONUS ARMY) they reached Washington by 1931, set up shantytowns = HOOVERVILLES (food scraps = HOOVER-MEALS, hitchhiking journeys = HOOVER RIDES) after one year they were forcibly dispersed by the Army (MacArthur/Eisenhower)

58 1932 ELECTION 1 out of 4 was unemployed nationl income was 50% of what it had been in 1929 Repubs. nominated Hoover no hope winner by a landslide = FRANKLIN DELANO ROOSEVELT (Dem - N.Y. governor)

59 ROOSEVELT WINS OVERWHELMING VICTORY Democrat Roosevelt, known popularly as FDR, was a 2-term governor of New York FDR was a distant cousin of Teddy Roosevelt The Democrats also won huge victories in the house and senate Greatest Democratic victory in 80 years FDR easily won the 1932 election

60 The New Deal Franklin D. Roosevelt elected in 1932 the only thing we have to fear is Eleanor Roosevelt: Supporter of the little person Radio talks with America: Fireside Chats

61 FDR promised a new deal for the American people He took office with a flurry of activity known as The Hundred Days The 100 Days lasted from March to June 1933 FDR LAUNCHES NEW DEAL

62 CONGRESS GETS BUSY FDR s philosophy was to get people help and work through deficit spending During the 100 Days, Congress passed more than 15 major pieces of legislation that significantly expanded government s role in the nation s economy and welfare

63 FDR created a program of relief and reform called the New Deal Federal $ was granted to states to provide the needy w/clothes, food, shelter Public works programs hired people to construct public buildings, roads, and other projects

64 Franklin Delano Roosevelt The only thing we have to fear is fear itself. What did Roosevelt mean by this statement?

65 Roosevelt s Approach to Solving the Problems of the Great Depression Relief: Programs such as the Works Progress Administration (WPA) provided direct payment to workers. Recovery: Programs such as the Agricultural Adjustment Administration (AAA) were developed to bring the nation out of the Depression over time. The Tennessee Valley Authority (TVA) was also established.

66 Roosevelt s Approach to Solving the Problem of the Great Depression Reform: Programs such as the Federal Deposit Insurance Corporation (FDIC) were developed to prevent similar problems in the future. The Social Security Act provided retirement protection.

67 TO DO LIST: #1- HELP BANKS First order of business was to get the banking system in order On March 5, one day after taking office, FDR declared a bank holiday He persuaded Congress to pass the Emergency Relief Act, which authorized the Treasury Department to inspect the nation s banks

68 Roosevelt s Hundred Days President FDR sent many bills to Congress Congress passed 15 major acts to help the economy, these programs made up the First New Deal The Securities and Exchange Commission (SEC) was created to regulate the stock market and prevent fraud The Glass-Steagall Act prohibited commercial banks from speculating on the stock market. It created the Federal Deposit Insurance Corporation (FDIC)

69 MORE 100 DAYS ACTIVITY Federal Securities Act: Required stock info to be accurate and truthful Agricultural Adjustment Act: (AAA) Raised crop prices by lowering production Tennessee Valley Authority: (TVA) Focused on direct relief to hard hit area created ambitious dam projects

70 Managing Farms and Industry The FDIC provided government insurance for bank deposits up to $5,000. It covered peoples savings in the banks from loss Agricultural Adjustment Administration (AAA) helped some farmers but mostly just the large commercial farmers who raised one crop The National Industrial Recovery Act suspended antitrust laws PWA broke down long standing racial barriers in the construction trades. (Public Works Administration)

71 AGRICULTURAL ADJUSTMENT ACT (AAA) - passed in 1933 to aid formers- its objective was to restore farmers' purchasing power and to restore the family farm - AAA had farmers cut back on crop production by paying them equivalent SUBSIDIES (paid not to produce) - bad side: 1) food production down when millions were starving 2) Black sharecroppers were hurt: white landowners paid not to farm so they got rid of Black tenant formers in 1935, AAA was declared unconstitutional by courts (too much control over individual states), so it was revised and introduced as new legislation EX: Food Stamp Act of gave away surplus food to poor, also guaranteed (small) farmers a market

72 UNEMPLOYMENT - still a major problem FDR like Hoover was wary of gov't handouts - he wanted people to earn their keep so gov't agencies were created - temporarily - to address the unemp. problem CIVILIAN CONSERVATION CORPS (CCC) - in set to establish work for young men (18-25) in areas of reforestation, soil conservation, flood control, road construction - also took them out of urban labor markets - but Blacks not permitted to enroll

73 Spending and Relief Programs The Civilian Conservation Corps (CCC) gave unemployed men aged 18 to 25 the opportunity to work with the national forestry service They planted trees, fought fires, and built reservoirs. The most important aspect of Roosevelt s New Deal was the change in the spirit of the American people. Their faith in America was restored.

74 ALPHABET AGENCIES CCC Civilian Conservation Corps put young men to work Men ages 18 to 25 worked building roads, parks, planting trees (200 million trees in Dust Bowl areas) By 1942 three million men worked for the CCC

75 ALPHABET AGENCIES PWA workers construct a public building in Hartford, Connecticut PWA Public Works Administration was part of the NIRA (National Industrial Recovery Act) The PWA provided money to states to construct schools and community buildings

76 ALPHABET AGENCIES CWA Civil Works Administration built 40,000 schools and provided salaries for 50,000 teachers in rural America Also built 500,000 miles of roads CWA School in Woodville, CA

77 ALPHABET AGENCIES Repaired business in Childersburg, Alabama FHA Federal Housing Administration provided home loans, home mortgages and repairs

78 Long-Term impact of New Deal The long term impact of Roosevelt's New Deal was an increased role of the federal government. Federal government grew larger and gained more power which we are still dealing with today. He used the government to try to solve economic problems which stemmed from the government interference in the free market system in past administrations. (Ex: T.R., Taft, and Wilson)

79 Review What 5 weaknesses appeared in the global economy during the postwar era? 1. Europe couldn t produce much of its own food/products. 2. US farmers struggled w/debt and Dust Bowl 3. Economic nationalism, or protectionism 4. Speculation, or risky investments 5. Buying stocks on margin (using credit)

80 Review How did nations initially respond to the Great Depression? 1. Protectionism, or economic nationalism = countries protect domestic businesses 2. Surpluses were destroyed

81 Review How did the New Deal mark a shift in the U.S. government s relationship with its citizens and the economy? It provided $ for relief and reform programs It provided jobs for many US citizens to stimulate the economy

82 CRITICS EMERGE Despite the renewed confidence of many Americans, critics from both political spectrums emerged Liberals (left) felt FDR s program was NOT doing enough Conservatives (right) felt that government intervention was TOO much and interfered with our free market economy

83 WINSTON CHURCHILL Any man who is under 30, and is not a liberal, has no heart; and any man who is over 30, and is not a conservative, has no brains.

84 SUPREME COURT REACTS The Supreme Court By the mid-1930s, the Supreme Court struck down the NIRA as unconstitutional (citing too much government control over industry) The Court also struck down the AAA on the grounds that agricultural was a local matter -- not a federal matter

85 FDR REGAINS CONTROL OVER SUPREME COURT From the mid to late 1930s, FDR was able to appoint 7 new judges to the Supreme Court, thus assuring that his programs would carry on unabated

86 CONGRESS PROTECTS WORKERS In 1938, Congress passed the Fair Labor Standards Act which set maximum hours at 44 per week and minimum wage at 25 cents per hour

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88 SOCIAL SECURITY ACT One of the most important achievements of the New Deal era was the creation of the Social Security System The Social Security Act, passed in 1935, had 3 parts: Old-Age Pension Unemployment compensation Aid to families with dependent children & disabled (welfare)

89 Social Security Act (1935)- feared by opponents as "creeping socialism"- this act typifies the WELFARE STATE - unemployment insurance, old age pensions Problem: it took some $ out of circulation (payroll deductions) at a time when purchasing power was already low- also, it only covered the unemployed "Soak The Rich" tax

90 Social Security Act The Social Security Act provided security for the elderly, unemployed workers, and other needy people It provided welfare payments to needy people, including those with disabilities and poor families with young dependent children It provided a monthly retirement benefit for people when they stopped working at age 65

91 WORKS PROGRESS ADMINISTRATION Helping urban workers was critical to the success of the Second Hundred Days The WPA set out to create as many jobs as possible as quickly as possible Between , the WPA spent $11 billion to give jobs to 8 million workers

92 WPA BUILDS AMERICA The Davis Street School Extension in Atlanta under construction as part of the Works Progress Administration Program, November 2, 1936 WPA workers built 850 airports, 651,000 miles of roads and streets, and 125,000 public buildings The WPA also hired artists, writers and photographers to create art

93 AFRICAN AMERICANS DURING THE NEW DEAL The 1930s witnessed a growth of activism for black Americans A. Philip Randolph became head of the nation s first allblack union the Brotherhood of Sleeping Car Porters

94 AFRICAN AMERICANS GAIN POLITICAL POSITIONS FDR appointed over 100 African Americans to positions within the government Mary McLeod Bethune headed the division of Negro Affairs of the NYA Despite these gains, FDR was never fully committed to Civil Rights Bethune

95 But Problems Still Lingered

96 NATIVE AMERICANS MAKE GAINS Native Americans made advances during the 1920s & 1930s Full citizenship granted in 1924 The Reorganization Act of 1934 gave Natives more ownership of reservations Policy was moving away from assimilation towards autonomy

97 ROOSEVELT S FIRESIDE CHATS FDR communicated to Americans via radio His frequent Fireside Chats kept Americans abreast of the government s efforts during the Depression

98 LEGACIES OF THE NEW DEAL FDIC banking insurance critical to sound economy Deficit spending has became a normal feature of government Social Security is a key legacy of the New Deal in that the Feds have assumed a greater responsibility for the social welfare of citizens since 1935

99 Chicago Tribune 1934

100 ELECTION OF FDR won easily (v Repub. Alf Landon - Kansas governor) this victory gave FDR a mandate to continue his New Deal policies first objective: to reorganize the Supreme Court - they disallowed some New Deal legislation FDR wants # of judges changed from 9 15 (to "pack the court") - great opposition, so FDR w/drew this proposal but judges retired & FDR got to appoint new ones they approved all New Deal legislation

101 the late 1930's new Qs arose FDR concerned w/ int'l issues in 1939 he proposed no new major domestic reform measures (1st time in his pres.) ELECTION OF FDR broke with tradition & ran a 3rd time FDR v. Wendell Wilkie - the big issue here was American support of the Allies (G.B.), now embroiled in WWII v. Nazi Ger. both U.S. pol. parties wanted to support G.B. but to remain neutral - in fact a CONSENSUS had developed b/n the Dems. and Repubs. both parties approved of (most) New Deal legislation & wanted an isolationist foreign policy- FDR won in 1940 (and again in 1944)

102 IMPACT OF THE NEW DEAL a 3rd revolution in American culture and politics- more gov't involvement but w/in the context of traditional U.S. democracy (not socialist ) New Deal helped in stimulating the U.S. economy, but only WWII would solve any lingering problems unemployed found jobs in munitions factories and the military as the U.S. became the ARSENAL OF DEMOCRACY New Deal saw expansion of U.S. gov't in : 1) economy - constant gov't intervention/deficit spending 2) social reform - welfare state - after this point the U.S. gov't was expected to play a role in any economic crisis so FDR fundamentally reformed (not transformed) American society

103 Please Note: The images included in this presentation, some of which may be copyrighted, are being used under the fair use provision (for educational purposes) of the U.S. law governing usage of copyrighted material.