The Great Depression

1929-1939

Impacts of Depression

Prices of stock dropped 40% 86,000 business failed 9,000 banks went out of business 9 million saving accounts Wages were decreased by at least

60% Unemployment from 9% to 25% 15 million people unemployed

The 6 Causes1. Unequal distribution of Wealth

- 2% owned 3/5 (60%) of wealth…- … 98% shared the remaining 2/5 (40%)- ½ population living

below poverty level- unequal balance

between productionand consumption

The 6 Causes2. Unequal distribution of

corporate power

- mergers reduced competition- when company fell = loss of jobs & stock- 200 corporations controlled 50% of all products being made

The 6 Causes3. Poor banking structure

- no regulations- small banks “owed” to larger banks- unequal loan to deposit ratio (esp. small towns)

“It’s A Wonderful Life” movie clip** List at least three actions taken by George

that would not be permitted in banks today.

The 6 Causes4. High Tariffs and War Debts

- Hawley-Smoot Tariff = tax on imports- What was the goal?- Led to unbalanced foreign trade &

…- economic warfare = other countries did same

- war debt: U.S. as creditor; E. couldn’t repay

The 6 Causes5. Overproduction in Industry & Agriculture

- farmers bought machinery on credit…

- …to increase production - >> overproduction - >> no jobs = no $ to buy - >> couldn’t pay off debt... - … foreclosures on farms

The 6 Causes6. Stock Market Crash

- Reasons for investing in market

- had $ already to invest- “buying on margin”: borrow $ to invest hoping to get rich quick

- October 24th: Black Thursday- JP Morgan: financer- October 29th: Black Tuesday ($16

mil)

Want to buy 100 shares of a stock that costs $50 per share

You would need $5,000 (plus commission) to buyBuy stock on margin: borrow up to $2,500 (50%) of the purchase price and pay remaining $2,500

yourself

If the stock goes up to $75 and you sell it, you would be able to pay the $2,500 (plus interest)

and keep roughly $5,000 (a 100% gain). 

Buying on margin can greatly enhance investing returns…

But, if stock falls – you are in trouble.   

Buying on Margin

The Effects

Widespread unemployment > poverty > hunger

- national income:1929 = $81 billion1932 = $41 billion

- 15 million jobless

The Effects

Breakdown of Families1. personal suffering >> suicide2. high school drop out rate >>

- kids working in sweatshops3. runaways (Hobos riding the rails)

The Effects

Organized Protests

- farmers marching on banks with pitchforks and guns

- tried to prevent foreclosures

The Bonus ArmyWho were they?

What did they want?What did they do?

What happened to them?

The Effects

The Bonus Army

- WWI soldiers promised $1 per day extra served

- To be paid in 1945- Allowed to borrow

against it in 1931- 1932 asked for full

amount = denied

-Thousands from all over U.S. marched with their familieson Capitol Building in D.C. to protest

- Sent home with money from their bonus pay

-Calvary, tanks-Used tear gas and bayonets

Rugged Individualism

No direct relief given by federal government

Money would be given to businesses

Local government should give aid

Was nothing new – up until this time, this was the norm…

… but this was not what people wanted

Resulted in: Hoovervilles – shantytowns of cardboard

Hoover Blankets & Hoover Flags

Hoover’s Policies Boulder

(Hoover) Dam Hydroelectric

power

Federal Farm Marketing Board Limited

production Helped market

crops

Arizona/Nevada

Hoover’s Policies Reconstruction

Finance Corporation Loans to

banks, railroads, businesses

Home Loan Bank Act Prevented

foreclosures on farms and homes

3 Characteristics:1.Over-cultivated

land2.Severe drought

3.High Winds

1932 Election: Hoover vs. FDR

“This campaign is more than a contest between two men. It is more than a contest between two parties. It is a contest between two philosophies of government.”

- What is this saying about Hoover & FDR?- Their political ideologies?

- How was the federal government’s role going to change?

FDR vs. Hoover

FDR: Keynesian or "pump priming" economics - Based on beliefs of economist John Maynard Keynes - Money should be invested in people, the working

class- Then, spending would increase with new money in

circulation, then businesses would expand to meet the new demand and hire new workers

Hoover: supply side or "trickle down" economics- Money was to be invested at top, in business- Then, businesses would expand, hire new workers and

in turn, spur on spending and further economic growth

http://www.socialstudieshelp.com/USRA_New_Deal.htm

Escapism

Movies Car rides Smoking

“We’re the first nation to go to the poorhouse in an automobile.”

- Actor Will Rogers

The Arts in the 1930sPainting

Grant WoodAmerican Gothic

The Arts in the 1930sLiterature

The Arts in the 1930sLiterature

Of Mice and Men

The Arts in the 1930sLiterature/Cinema

Margaret Mitchell

The Arts in the 1930sLiterature

Orson Welles“Citizen Kane”

Getting out of the Depression

Frances PerkinsSec. of Labor

Eleanor Roosevelt

A woman is like a tea bag- you never know how strong she is until she gets in hot water.

Great minds discuss ideas; Average minds discuss events; Small minds discuss people.

No one can make you feel inferior without your consent.

It is not fair to ask of others what you are unwilling to do yourself.

I could not at any age be content to take my place in a corner by the fireside and simply look on.

Fireside Chats

The The FirstFirst

1. ReliefImmediate action to halt economy’s

deterioration

2. Recovery"Pump - Priming" Temporary programs to

restart flow of consumer demand

3. ReformPermanent programs to avoid another

depression & insure citizens against economic disasters

 

RELIEF Bank Holiday

Closed all banks for inspection Reopened “safe” banks (some with loans)

Federal Emergency Relief Act (FERA) Direct loans to people to prevent foreclosures

Civilian Conservation Corps (CCC) Jobs building roads, plants trees, soil erosion

Civilian Works Administration (CWA) Jobs building bridges, causeways, hospitals

Recovery Tennessee Valley Authority (TVA)

Jobs building factories & dams (elec. to farms)

Works Progress Administration (WPA) Work for artists & build roads, libraries,

schl. National Recovery Act (NIRA)

Priced products, set min. wage, work condit. Agricultural Adjustment Act (AAA)

Paid to reduce crops, unseeded acres, plow under crops/kill animals

Reform Security & Exchange Commission (SEC)

Watch stock market – no fraud / insider trading

Federal Deposit Insurance Corporation (FDIC) Insured all bank accounts to $5,000

National Labor Relations Act / Board (NLRA/B) Wagner Act – fair business (no monopolies)

Social Security (SS) Today’s workers pay for today’s retirees

Senator Huey Long

“Share the Wealth”- Socialist - Guaranteed $5,000 to all- Take millionaire’s $ and

divide- Everyone gets car,

house, radio- “Every man a king”- Shot and killed in 1935

Father Charles Coughlin

- More economic & political talks on radio than religious

- Supported FDR in 1932- Economic reform =

anti-comm. & anti-capit.- Supported fascism- Anti-semitic (nickname)

- Isolationist- Silenced

UnconstitutionalState

Gov’t toRegulateIntrastateBusiness…

Hurt small business

CongressCan’t

Regulateagr

Court PackingChanging the Supreme Court…. WHY???

FDR’s LegacyPROS

- Unemploy. decreased

- Increased income- Preserved resources- Cushion for

elderly/sick- Supported unions- Ensured bank safety

CONS- National debt

increased- Doubled fed.

Bureaucracy- Didn’t increase

small business activity

FDR’s Legacy

Set a precedent that the federal government is

responsible for the economic welfare

of the people

F. D. Roosevelt:

“You have nothing to fear, except

fear itself”

IN AT LEAST A ONE PARAGRAPH RESPONSE:

Evaluate the effectiveness of FDR’s NEW DEAL legislation. Look at: impact both short and long term. What should have been done differently? Are there any lessons that Barack Obama should specifically learn from FDR, in your opinion? How has this recession impacted or how will impact you in the long run?