Causes of the Depression Wall Street Crash Stock prices both a symbol amp source of wealth during 1920s Stock prices increased steadily from March 1928 to Sept 1929 average investor who bought 1000 in ID: 791045
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Slide1
Chapter 24 – The Great Depression and the New Deal, 1929-1939
Slide2Causes of the Depression
Wall Street Crash
Stock prices =both
a symbol
&
source of wealth during
1920s
Stock prices increased steadily from March 1928 to
Sept
1929
average
investor who bought $1000 in
stocks:
doubled
their money in less than a year
Slide3Causes of the Crash
Black Tuesday
[October 29,
1929
]
millions
of investors sold their stocks
From that
day on
prices on Wall Street kept going down
Slide4Causes of the Crash
Uneven Distribution of Income
top
5%
of
richest Americans received over
33%
of all income
When demand for products declined, businesses laid off
workers
Slide5Causes of the Crash
Stock Market Speculation
People in all economic classes believed they could get rich by “playing the market”
Believed
price
of a stock would go up allowing them to sell it for a quick profit
Slide6Causes of the Crash
Buying on the Margin
Allowed people to borrow most of the cost of the stock, making the down payments as low as
10%
Investors depended on the price of the stock increasing so they could repay the loan
When the market collapsed, they lost everything they had borrowed and invested
Slide7Causes of the Crash
Excessive Use of Credit
Low interest rates
& belief
that
economic
boom was permanent led to increased borrowing and installment
buying (many people in debt)
This
would
result in defaults on loans, leading to bank failures
Slide8Causes of the Crash
Overproduction of Consumer Goods
Business growth, aided by increased productivity and use of credit, had produced
a high amount of goods
that workers with low wages could not continue to purchase
Slide9Causes of the Crash
Weak Farm Economy
Prosperity of
the 1920s never reached the farmers
Suffered from
overproduction, high debt, and low prices
Severe weather and a long drought will add to their difficulties as the depression continued
Slide10Causes of the Crash
Government Policies
During the 1920s
the gov. did
little to
regulate
business
High tariffs protected U.S. industries, but hurt farmers
& international
trade
Federal
Reserve tried to preserve the Gold Standard rather than stabilize banks, the money supply, and prices
People panicked
to get their money out of banks, causing more banks to fail
Slide11Causes of the Crash
Global Economic Problems
Nations had become more interdependent because of international banking, manufacturing,
&
trade
Europe was still recovering from WWI
U.S insisted on loan repayment in full
High tariffs weakened Europe
&
contributed to the worldwide depression
Slide12Effects of the Crash
Gross National Product
[GNP] – value of all goods and services produced by a nation in one year – dropped from
$104
billion to
$56
billion between 1929-1932
Nation’s income declined by over 50%
20%
of all banks closed, wiping out 10 million savings accounts
By
1933,
25%
unemployment [13 million people not counting farmers]
Slide13Effects of the Crash
Ended Republican domination of the government
People accepted the expansion of the federal government
Poverty and homelessness increased
Mortgage foreclosures and evictions were commonplace
Homeless traveled in box cars and lived in shantytowns [
Hoovervilles
]
Slide14Slide15Slide16Hoover’s Policies
Encouraged
voluntary action and restraint
Urged businesses not to cut wages, unions not to strike, and private charities to increase their efforts
T
hought
public relief should come from state and local governments,
not the federal government
Slide17Hawley-Smoot Tariff [1930]
One of the worst mistakes of Hoover’s presidency
Signed into law a schedule of tariff rates that was the highest in history
Set tax increases ranging from 31-49% on foreign imports
In retaliation, European countries enacted higher tariffs on U.S. goods
This reduced trade for all nations, sinking national and international economies deeper into the depression
Slide18Hoover’s Domestic Programs
Federal Farm Board
Created in 1929, power enlarged to meet the economic crisis
Helped farmers stabilize prices by temporarily holding grain and cotton surplus in storage
Could not handle the continued overproduction of farm goods
Slide19Hoover’s Domestic Programs
RFC [
Reconstruction Finance Corporation
]
Created by Congress in 1932 to prop up faltering railroads, banks, life insurance companies, and other financial institutions
Emergency loans would help to stabilize key businesses
Benefits would then “trickle down” to smaller businesses, leading to the recovery of the economy
Slide20Bonus March
Summer of 1932, 1000 unemployed WWI veterans marched to Washington, D.C., to demand immediate payment of bonuses promised in 1945
Thousands of other veterans and their families camped in improvised shacks near the Capitol
Congress failed to pass the bonus bill
After 2 veterans were killed in a clash with police, Hoover ordered the army to break up the encampment
Tanks and tear gas were used to destroy the shantytown and drive the veterans from Washington
Slide21Slide22Slide23Slide24FDR
More than any other president, FDR expanded the size of the federal
government &
greatly enlarged presidential powers
He would dominate the nation
&
the government for 12 years and 2
months; one of most influential world leaders
Slide25New Deal
He pledged to help the “forgotten man at the bottom of the economic pyramid”
His
New Deal
programs were to serve three Rs:
Recovery
–
for business and the economy as a whole
Reform
–
of American economic institutions
Relief
–
for the people out of work
Slide26The First Hundred Days
Immediately after being sworn into office on March 4, 1933, FDR called Congress into a
hundred-day-long
special
session:
Congress
passed into law every request of President Roosevelt, enacting more
laws
than any single Congress in history
Slide27First New Deal Programs
Banks were failing at a frightening rate, as depositors flocked to withdraw funds
Over 5,000 banks failed in 1933, as many that had failed since the crash in 1929
To restore confidence in the banks, FDR closed the banks for a
bank holiday
on March 6,
1933
Slide28First New Deal Programs
FDR kept his campaign promise to repeal Prohibition
The
Beer-Wine Revenue Act
was passed legalizing the sale of beer and wine
This helped to raise needed tax money
Later in 1933, the
approval
of the
21
st
Amendment
repealed the 18
th
Amendment, bringing Prohibition to an end
Slide29Fireside Chats
FDR went on the radio on March 12, 1933 to present the first of many
fireside chats
to the American people
He assured listeners that the banks reopened after the bank holiday were safe
The public responded by depositing money in the reopened banks that exceeding the money earlier withdrawn
Slide30Slide31First New Deal Programs - Recovery
Emergency Banking Relief Act
– authorized the government to examine the finances of banks closed during the bank holiday and reopen those judged to be sound
Home Owners Loan Corporation
[HOLC] – provided refinancing of small homes to prevent foreclosures
Farm Credit Administration
[FCA]– provided low-interest farm loans and mortgages to prevent foreclosures on property of
farmers in debt
Slide32First New Deal Programs - Recovery
National Industrial Recovery Act
[NIRA] created the
National Recovery Administration
[NRA] – an attempt to guarantee reasonable profits for business and fair wages/hours for labor
With the antitrust laws temporarily suspended, the NRA could help each industry set codes for wages, hours of work, levels of production, and prices of finished goods
The law creating the NRA also gave workers the right to organize and bargain collectively
Slide33Slide34First New Deal Programs - Recovery
Agricultural Adjustment Act
[AAA] – encouraged farmers to reduction production [to boost prices] by offering to pay government subsidies for every acre they plowed under
Slide35First New Deal Programs - Reform
Glass-Steagall Act
– increased regulation of the banks and limited how banks could invest customers’ money
The
Federal Deposit Insurance Corporation
[FDIC] guaranteed individual bank deposits
The gold standard was restricted to international transactions in order to halt inflation
The value of the dollar was set at $35 per oz. of gold, Americans could no longer exchange dollars for gold
Slide36First New Deal Programs - Reform
Securities and Exchange Commission
[SEC] – created to regulate the stock market and to place limits on the kind of
practices
that caused the crash in 1929
Also required
financial
disclosure by corporations to protect investors from
fraud &
insider trading
Slide37First New Deal Programs - Reform
Federal Housing Administration
[FHA] – gave both the construction industry and homeowners a boost by insuring bank loans for building new houses and repairing old ones
Slide38First New Deal Programs - Relief
Federal Emergency Relief Administration
[FERA] – offered grants of federal money to states and local governments that were operating soup kitchens and other forms of relief for the jobless and homeless
Public Works Administration
[PWA] –
gave
money to state and local governments for building roads, bridges, dams, and other public works
These construction projects were a source of thousands of jobs
Slide39First New Deal Programs - Relief
Civil Works Administration
[CWA] – added to the PWA and other programs for creating jobs
This agency hired laborers for temporary construction projects sponsored by the federal government
Civilian Conservation Corps
[CCC] – employed young men on projects on federal land and paid their families small monthly
amounts
Slide40Slide41First New Deal Programs - Relief
Tennessee Valley Authority
[TVA]
–hired
thousands of people in one of
nation’s
poorest regions, the Tennessee Valley, to build dams, operate electric power plants, control flooding and erosion,
&
manufacture fertilizer
Also sold
electricity to residents of the region at rates that were well below those previous charged by private power companies
Slide42Second New Deal
Concentrated more on
relief
and
reform
Reform legislation reflected FDR’s belief that industrial workers and farmers needed to receive more
gov.
help than members of the business and privileged classes
Slide43Second New Deal - Relief
Works Progress Administration
[WPA] – spent billions of dollars between 1935-1940 to provide
jobs to the unemployed
After its first year, it employed 3.4 million people
People
were put to work constructing new bridges, roads, airports, and public buildings
Slide44Second New Deal - Relief
WPA Continued…
Unemployed
artists, writers, actors, and photographers were paid by the WPA to paint murals, write histories, and perform in
plays
One part of the WPA, the
National Youth Administration
[NYA], provided part-time jobs to help
youth stay
in high school
/
college or
until
could get a
job w/ private company
Slide45Second New Deal - Relief
Resettlement Administration
[RA] – provided loans to sharecroppers, tenants, and small farmers
It also established federal camps where migrant workers could find decent housing
Slide46Second New Deal - Reform
National Labor Relations [Wagner] Act
– replaced the labor provisions of the
National Industrial Recovery Act
[NIRA] after it was ruled unconstitutional
This act guaranteed a worker’s right to join a union and a union’s right to bargain collectively
It also outlawed business practices that were unfair to labor
The
National Labor Relations Board
[NLRB] was empowered to enforce the law and ensure workers’ rights were protected
Slide47Second New Deal - Reform
Rural Electrification Administration
[REA] – this new agency provided loans for electrical
companies
to supply power in rural areas
Social Security Act
[1935] – created a federal insurance program based on the automatic collection of payments from employees and employers throughout peoples’ working careers
The Social Security trust fund would then be used to make monthly payments to retired persons over 65
Also receiving
benefits under this law: workers
who lost their jobs [unemployment compensation], persons who were blind or otherwise disabled, and dependent children and their mothers
Slide48Results of the Election of 1936
Through the 1930s-1960s, the Democratic or New Deal coalition
consisted of: the South,
white ethnic groups in
cities
, Midwestern farmers,
&
labor unions
& liberals
New support for the Democrats came from African Americans, mainly in northern cities, who left Lincoln’s party [Republican] for the
Democratic party
Slide49Opposition to the New Deal
New Deal programs were extremely controversial and became the target of attacks
Liberal critics
– criticized the New Deal for doing too much for business
&
too little for the unemployed and the working poor
They also charged that FDR failed to address the problems of ethnic minorities, women and the elderly
Slide50Opposition to the New Deal
Conservative critics
– attacked the New Deal for giving the federal government too much power
They charged that relief programs like the WPA and labor laws [Wagner Act] bordered on socialism or even communism
Business leaders were alarmed by:
Increased regulations
Second New Deal’s pro-union stance
Financing of government programs by means of borrowed money [
deficit financing
]
Slide51Opposition to the New Deal
Several critics used the radio to reach a mass audience, proposing simplistic schemes for ending the New Deal
Father Charles E. Coughlin
–
“evil conspiracies”
Founding the National Union for Social Justice which called for issuing an inflated currency and nationalizing all banks
His attacks on the New Deal became increasingly anti-
Semitic (ant-Jewish)
Slide52Opposition to the New Deal
Dr. Francis E. Townsend
– guaranteeing economic security for the elderly [pre-Social Security Act]
Proposed a 2% federal sales tax be used to create a special fund, from which every retired person over 60 would receive $200 a month
The economy would be stimulated when recipients would spend their money, soon bringing the depression to an end
Slide53Opposition to the New Deal
Huey Long
– proposed a “Share Our Wealth” program that promised a minimum annual income of $5000 for every American family, to be paid for by taxing the wealthy
Redistribution of wealth
Slide54The Supreme Court and the New Deal
Conservative decisions of the U.S. Supreme Court
frustrated FDR
Ended both
the NRA [National Recovery Administration] for business recovery and the AAA [Agricultural Adjustment Administration] for agricultural recovery by deciding that the laws creating them were unconstitutional
Slide55The Supreme Court and the New Deal
FDR hoped to remove the Court as
obstacle
to the New Deal by proposing a judicial-reorganization bill in 1937
It proposed that the president be authorized to appoint to the Supreme Court an additional justice for each current justice that was older than 70 ½ years
The bill would have allowed FDR to add up to six more justices to the Court
who shared his liberal beliefs
A
“Court-packing”
bill – was not popular among the public
Slide56The Supreme Court and the New Deal
The justices backed off their former resistance to FDR’s programs
In 1937, the Supreme Court upheld the constitutionality of several major new deal laws, including the Wagner Act and the Social Security Act
Several justices retired during FDR’s second term, enabling him to appoint new justices who were more sympathetic to his reforms
Slide57Rise of Unions
NIRA [National Industrial Recovery Act] and the Wagner Act legalized labor unions
Union membership, which had slumped in the 1920s, shot upward from less than 3 million in the early 1930s to over 10 million by 1941 [
more than 1 out of 4
non-farm workers]
Slide58Rise of Unions
Fair Labor Standards Act
– established several regulations on businesses in interstate commerce:
A minimum wage, initially fixed at 40 cents an hour
A maximum standard workweek of 40 hours, with extra pay [“
time-and-a-half
”] for overtime
Child-labor restrictions on hiring people under age 16
*Last major reform of the New Deal
Slide59Recession of 1937-1938
From 1933 to 1937, the economy showed signs of gradually pulling out of its nosedive
Banks were stabilizing, business earnings were increasing, and unemployment, though still at 15%, had declined from 25% in 1933
In the winter of 1937, the economy once again had a backward slide and entered into a recessionary period
Slide60Recession of 1937-1938
Caused partly by government policy
The new Social Security tax reduced consumer spending at the same time FDR curtailed expenditures for relief and public works
In reducing spending for relief, FDR hoped to balance the budget and reduce the national debt
Slide61Keynesian Economics
Argues that FDR made a mistake in attempting to balance the budget
Deficit spending
is helpful in difficult times because the government needs to spend well above its tax revenues in order to initiate economic growth
It “
primes the pump
” to increase investment and create jobs
FDR adopted this theory in 1938 with positive results
As federal spending on public works and relief went up, so did employment and industrial production
Slide62Life During the Depression - Women
Added pressures were placed on the family as unemployed fathers searched for work
Declining incomes presented severe challenges for mothers in feeding and clothing their children
To supplement the family income, more women sought work, and their percentage of the total labor force increased
Women were accused of taking jobs from men, but most men did not seek the types of jobs available to women
New Deal programs allowed women to
get lower pay
than men
Slide63Slide64Life During the Depression – African Americans
Racial discrimination continued in the 1930s
Blacks were often the last hired, but the first fired
Their unemployment rate was higher than the national average
Black sharecroppers were forced off of the land in the South
Despite their extreme poverty, they were excluded from state and local relief programs
Lynching continued in the South
Slide65Slide66African American Improvements
The WPA and the CCC did provide low-paying jobs for African Americans, though these jobs were segregated
Blacks also received moral support from
Eleanor Roosevelt
She arranged for a special concert at the Lincoln Memorial by singer
Marian Anderson
after she had been refused the use of Constitution Hall by the Daughters of the American Revolution
Over 100 African Americans were appointed to middle-level positions in federal departments by FDR
Slide67African American Improvements
Fair Employment Practices Committee
– an executive order in 1941 set up a committee to assist minorities in gaining jobs in defense industries
FDR took this action only after
A. Philip Randolph
, head of the Railroad Porters Union, threatened a march on Washington to demand equal job opportunities for African Americans
Slide68Life During the Depression – American Indians
John Collier
, a long-time advocate of American Indian rights, was appointed commissioner of the Bureau of Indian Affairs in 1933
He established conservation and CCC projects on reservations
He also gained American Indian involvement in the WPA and other New Deal programs
Slide69Life During the Depression – American Indians
Indian Reorganization [Wheeler-Howard] Act [1934]
– Congress repealed the Dawes Act of 1887, which
encouraged
American Indians to be independent farmers
The new measure returned lands to the control of tribes and supported preservation of Indian cultures
Slide70Life During the Depression – Mexican Americans
Mexican Americans also suffered from discrimination in the 1930s
They had been the principal source of agricultural labor in California and the Southwest in the 1920s
During the depression, unemployment and drought in the Plains and the Midwest caused a dramatic growth in white migrant workers who pushed west in search of work
Competition for jobs forced many thousands of Mexican Americans to return to Mexico
Slide71Slide72Life During the Depression – Dust Bowl Farmers
A severe drought in the early 1930s ruined crops in the Great Plains, adding to the farmers’ problems
This region became a
dust bowl
, as poor farming practices coupled with high winds blew away millions of tons of dried topsoil
Slide73Life During the Depression – Dust Bowl Farmers
With their farms turned to dust and their health often compromised, thousands of “
Okies
” from Oklahoma and surrounding states migrated westward to California in search of farm or factory work that often could not be found
The Grapes of Wrath
[1939] by John Steinbeck
Slide74Slide75Slide76Life During the Depression – Dust Bowl Farmers
In response, the federal government created the
Soil Conservation Service
[1935] to teach
farmers
to rotate crops,
plant trees, etc.
to stop soil
erosion &
conserve water