THE GREAT DEPRESSION - USA
History 12
Ms Leslie
WHAT IS A DEPRESSION?
 It’s
when trade, production levels,
employment and standards of living falls
sharply.
 This pattern started right after the stock
market crash of 1929.
 By 1932,countries around the globe began
to follow suit and the USA dragged
everyone into a depression.
Background
 Britain
was no longer the leading
economic power, USA was.
 Post war governments were trying to pay
of war-loans.
 To do so they needed to increase trade and
borrow money.
 Britain loans out almost $2.75 billion and
the USA $5.75 billion. This helped out the
countries borrowing the money, until the
lenders would ask for it back.
 Most
European nations experienced a boom in
production, except for Britain.
 Despite an increase in production, trade did not
increase due to heavy tariffs that governments
put up to encourage domestic purchases.
 Central and Eastern Europe wanted to create
‘autarky’ in their countries. Meaning they
wanted to be completely self-sufficient and not
needing trade.
 If countries could not sell their products to other
countries, there would be no profits and no way
to pay back war time loans.
1. THE GOLD STANDARD
 Before
WWI trade was paid for
in gold or in currencies based
on gold.
 It creates stability and
confidence among traders.
WWI destroyed this practice as
countries were borrowing large
amounts of money to fund their
war.
 To pay for goods, governments
printed a lot more paper money,
creating inflated dollar values.
2. OVERPRODUCTION
 Prices
for agriculture
fell by 30% world wide
in 1929. Too much
supply, not enough
demand.
 Farmers were no longer
able to purchase
machinery and other
goods for their farms.
 Industry was producing
more then the consumer
could buy - Factories
closed
3 STOCK MARKET BOOM
 People
were investing in America and so
European nations were loosing out on
investment funds.
 Europe could not borrow money for USA
 European industry began to decline and
millions lost their jobs.
 Massive amount of speculation meant that
the stock market was mostly bought with
credit - not actual money - depended on
stocks to keep going up to make a profit
4. ECONOMIC NATIONALISM AND
TARRIFS
 In
the USA was the Fordney-McCumber
Act of 1922, which raised the price of
imported goods to be beyond that of
domestic goods. This act was part of the
American isolationist policies.
 Because America put up protective
tariffs, other countries had to as
well. Bringing trade to a stand still
5. International Debt after WWI
Everyone owes America $
 Everyone depends on selling goods to America to
make $ to pay back loans
 When America raises tariffs, they can’t sell, they
can’t make $, they can’t pay back loans

Consequences
Unemployment
 Globally, about 25% unemployed
 That’s 25% fewer people buying stuff
 No welfare or EI

Bank Failure
 Businesses and farmers could not pay their
mortgages - causing banks to go bankrupt
 Depositors lost their life savings
 6000 banks closed
Political Consequences
 Americans began to doubt the “American Dream’
 Fear of revolution - poor economies = communist
 Germany’s govern’t failed due to depression
Government Role changes
 Realized you have to take care or the unemployed
 Laissez faire was dead
 Regulation is necessary
 Cure depression with government spending
How to fix it?!?!
John Meynard Keynes
 British economist had radical solutions
1. Govern’t should spend money - infuse country
with cash
2. Borrow money and pay back later when
economy is better - Deficit Financing
3. Spend money on projects of value - modernizing
infrastructure
Most Countries ignored him except for - USA,
Germany and Japan! The ones who got out
quickly!

America’s first response
 President
= Herbert Hoover
 Hoover’s first move after the
market crash was to cut taxes
and ease interest rates.
 His intention was to spur
spending and increase business
confidence; unfortunately it ran
in tandem with the SmootHawly Tariff
SMOOT-HAWLEY TARIFF 1930
worst trade legislation in history
 This tariff was another increase
against foreign products; the
purpose was to help American
business pick up again.
 All it did was cause other
countries to raise their tariffs
(Australia, Cuba, France, India,
Italy, Mexico, New Zealand, Spain
and Switzerland.)
 International trade was at a virtual
standstill.

 As
trade ended,
industry collapsed and
people were
unemployed.
 People were forced
into bread lines and
lived in shantytowns
named ‘Hoovervilles’
because they could no
longer pay rent.
 By
1932, 25% of
employable Americans
were out of work. 28%
of the population had no
income at all.
 In New York, 300,000
school children did not
get an education because
authorities could not run
the schools.
 The
International economy fell as well.
 In June of 1931, Hoover announced a
moratorium on reparations and war debt
payments, an action that saved the
financial systems of European nations.
BONUS EXPEDITIONARY FORCE.
 Hoover’s
Big mistake
of 1932
 These were 20,000
veterans who camped out
in the middle of
Washington calling for
help in hard times.
 The Government stood
firm and Hoover called
in the military to disperse
the protesters.
Major Patton of the US
Cavalry, acting on orders
from the Army Chief of
staff, General Macarthur,
removed the BEF.
 This was a PR Disaster
as stories of bayonet
charges into hungry but
peaceful crowds while
the President dined in
luxury hit the media

 Hoover
ran for election
again in 1932 and was
defeated by Democrat
Roosevelt.
 The
1932 election saw a reversal in the
republican strong hold of the government.
 Roosevelt received 22.8 million votes
against the 15.7 million of this opponent.
(voting pop. 75 million) This time
America voted for change.
THE NEW DEAL
 Roosevelt
promised to implement it within 100
days of being elected
 The First New Deal plan was from 1933-35 to
create jobs and set the USA on the road to
recovery.
 reforms in industry, agriculture, finance,
waterpower, labour, and housing, vastly
increasing the scope of the federal
government’s activities.
 Opposed to the traditional American
political philosophy of laissez-faire
 embraced the concept of a government-
 Roosevelt’s
approach was direct
government relief programmes.
 promised to end Prohibition.
 In the first 100 days he sought to restore
business confidence by strengthening the
banking system.
EMERGENCY BANKING BILL
 was
put in place to help the
shaky banking system.
Over 1/3 of America’s
banks had closed.
 The act closed the
remaining weak ones and
only allowed the strong
ones of continue.
SECOND NEW DEAL
 Focused
on the poor and unemployed.
 In 1935 there were still 10 million people
unemployed.
 The Social Security Act provided funds
for seniors, Widowed and the maimed.
 Unemployment insurance was created for
people to pay into if they wished.
Fireside Chats
 Roosevelt
also worked
hard on gaining the trust
of the American People.
 He used the Radio for
‘fireside chats’ to
convince American’s to
put their savings back in
to the banks.
 Spoke once a week live
 First President to use
media this way
 He
also provided $500 million in relief aid to
the unemployed and hungry.
 He also cut the salaries of government
workers to show that everyone had to tighten
their belts.
ALPHABET AGENCIES
 Massive
reforms took place with the
Agriculture Adjustment Act (AAA)and the
National Industrial Recovery Act (NIRA)
and numerous Public Works schemes.
 Many of these Public Work schemes of the
first New Deal were make-work Projects,
such as the Civilian Conservation Corps
(CCC) that had people re-planting forests.
Others had people building roads and
schools.
 The
National Recovery Administration
abolished child labour and set up the 8hour day and the minimum wage. Farmers
were subsidized to produce less food to
drive up prices, ironic in a time where
millions were starving.
Tennessee Valley Authority (TVA) - dyking and
damming of the Mississippi River to control
Flooding, irrigation and Hydroelectricity
 Farm Credit Association (FCA) - farm income
had dropped 70% and banks were bankrupted as
a result - FCA was to stabilize prices

 Although
unemployment remained high
and much money was wasted in the
bureaucracy of the New Deal, Roosevelt
remained popular and won the next
election in 1936.
 Americans were happy with allowing the
government to intervene with the economy
and to bring regulation and social welfare.
 In the past America had been run by the
interests of big business.
 Roosevelt
remained popular with the public until
his death in 1945 while in office.
 Wealthy Americans did not support his policies.
 They objected to the government interference
with business and policies that strengthened
trade unions.
 Businesses also believed it was an individual’s
responsibility to make sure they had enough
money for their old age.
 Roosevelt
was accused of being a socialist and
his supporters would be hunted down in the
1950’s during the ‘communist witch hunts’.
 The Supreme Court ruled many of Roosevelt’s
policies as unconstitutional, causing Roosevelt to
threaten to remove judges from their post.
 end