The Great Depression & New Deal
The Great Depression
Causes of the Great Depression Overproduction/Underconsumption Led to mass unemployment. High Tariffs High tariffs protected American markets, but restricted trade. The Smoot-Hawley Tariff led to cut in U.S. trade by half. Stock Market/Banking Practices Speculation led to an overvalued stock market. Credit was over-extended and citizens borrowed more than they could afford to pay back.
Stock Market Crash On October 29, 1929, the stock market crashed. Prices went lower as everyone competed to sell and no one was willing to buy. $30 billion dollars disappeared in three weeks.
Effects of Stock Market Crash Businesses could not raise money by selling stock. Businesses began closing their doors and unemployment increased. People who lost money in the crash could not pay back loans. Led to systemic bank failures.
President Hoover s Response Hoover was advised not to interfere with the economy. Once taking action, Hoover: asked business leaders not to layoff workers. cut taxes. increased federal spending on public works projects. Hoover rejected direct aid to the unemployed and needy.
President Hoover s Response Reconstruction Finance Corporation (RFC) Voluntary action by local government and charities was not effective. The RFC gave emergency loans to banks and businesses. The amount loaned by the RFC was not enough to fix the decline in corporate spending.
The New Deal
The New Deal President Franklin D. Roosevelt s (FDR) plan to fix the economy was called the New Deal. It established that the government was responsible for the well-being of the economy and protection of Americans from extreme economic problems. Relief, Recovery, Reform.
Fixing the Banking Crisis Bank Holiday The Bank Holiday closed all banks and allowed them to reopen after the government declared them financially stable. The government helped unstable banks with emergency money.
Fixing the Banking Crisis Federal Deposit Insurance Corporation (FDIC) Insured deposits in banks to give people confidence that they would not lose all of their savings if a bank failed. Securities and Exchange Commission (SEC) Federal agency to oversee the operations of the stock market. Tasked with preventing fraud and to ensure investors were not mislead.
Unemployment Relief Civilian Conservation Corps (CCC) Gave outdoor jobs to young men planting trees and draining swamps. Public Works Administration and Civil Works Administration Built public facilities like highways, bridges, hospitals, airports, and courthouses.
Unemployment Relief Tennessee Valley Authority (TVA) Built and maintained dams that controlled floods produced hydroelectricity, and manufactured fertilizers. The TVA brought greater prosperity to impoverished regions of the South.
Tennessee Valley Authority
Recovery Efforts National Recovery Administration (NRA) Increased collaboration among businesses in the same industry. The goal was to increase prices and reduce wasteful competition by encouraging businesses to collaborate by setting standard prices and limits to production.
Recovery Efforts Agricultural Adjustment Acts (1933 and 1938) Intended to promote the recovery of farmers. The AAA limited production to limit production in order to obtain a rise in crop prices. The government paid farmers to plant fewer crops and kill excess livestock.
The Second New Deal Works Progress Administration (WPA) Increased employment by creating nine million jobs through new public works projects to build public schools, courthouses, roads and bridges. The WPA encouraged creative arts by hiring artists, architects, writers, and musicians.
The Second New Deal Social Security Act (1935) Most important law passed by the New Deal. The law provides a safety net to fall back on if unemployed. Provided unemployment insurance, retirement benefits, and assistance to the disabled.
Social Security Act
The Second New Deal National Labor Relations Act (1935) The Wagner Act gave workers the right to form unions, to bargain collectively, and submit grievances to the National Labor Relations Board. This was an effort to increase wages, purchasing power among workers, and create fair working conditions.
Sit-Down Strike (1936) Sit-down strikes are where workers occupy the factory and prevent the owners from using it. General Motors automobile workers held a sit-down strike in Flint, Michigan. The government refused to help General Motors breakup the strike. As a result, General Motors agree to recognize the auto workers union.
Sit-Down Strike
FDR s Court Packing Plan The Supreme Court ruled the National Recovery Act and the Agricultural Adjustment Act unconstitutional. President Roosevelt was worried the Supreme Court may overrule all of the New Deal. FDR wanted to appoint a new Justice for each justice who did not retire at age 70. He would have been able to add six new Justices. The plan was widely criticized. Congress rejected the proposal.
FDR s Court Packing Plan
End of the New Deal As a result of the Court Packing Plan, the South refused to back additional New Deal efforts. The economy was recovering in 1936 and government spending was reduced. This led to worsening economic conditions. As a result, FDR resumed government spending. The New Deal never restored normal employment levels. This only happened as the U.S. prepared for World War II.
Long-Term Effects of the New Deal Reduced unemployment. Completed valuable public works projects. Created a safety net with social security and insuring bank deposits. Increased the power of organized labor. Established the federal government should oversee the economy and protect citizens from economic disaster.
Long-Term Effects of the New Deal