Unit 8
Prosperity, Depression, and War
Chapter 26: The Great Depression (1929-1941)
I. The Bubble Burst
A. An Economy in Trouble
1. All Americans did not share in the prosperity of the 1920’s
a) The soft coal mining, textile, and railroad industries were all suffering.
b) President Hoover set up the Federal Farm Board to help farmers sell their
products and keep prices stable. Since farmers didn’t decrease production farm
prices remained low.
2. Other signs pointed to an economic slowdown.
a) Demand for new homes and office buildings fell.
b) Consumers were buying less.
c) Demand for heavy machinery fell.
d) Because, the government did not keep detailed records of the economy in the
1920s, most Americans were not aware of the trouble.
3. The Stock Market Plunges – Speculation and buying on margin caused a bull market
but there was no real value to many of the high priced stocks. By August 1929, a few
investors felt that the boom might end soon and began selling their stocks. By
September, more people began selling causing prices to fall.
a) Investors who couldn’t repay their margin loans had to sell more stock, prices
fell even further.
4. The Crash – Between October 24th and October 29th, a wild stampede of selling hit
the New York Stock Exchange.
a) Black Tuesday (October 29th) – prices plummeted because there were no buyers
for stock.
b) Overnight, millionaires lost their fortunes.
c) The stock market crash didn’t cause the depression, but it did shake confidence
in the economy.
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B. Causes of the Depression
1. Too many goods, too few buyers.
a) Overproduction – American farms and factories produced vast amounts of goods
to meet the demand of installment buying.
b) Wages did not rise as much as prices and consumers spent more than they could
really afford.
c) Slowing demand – With growing debt, workers could not afford to buy as many
goods.
d) Factories laid off workers or closed as demand for goods fell.
2. Banks failed when people couldn’t repay their loans.
a) Many banks has leant money to people who bought stocks on margin and couldn’t
repay their loans. Some banks had used depositor’s money to invest in the stock
market as well.
b) As a result, banks couldn’t give depositors their money when they asked for it.
c) Many banks were forced to close.
d) Many people lost their life savings.
3. A Cycle of Disaster
The stock market
crash and bank
failures ruined many
investors.
Many businesses
went bankrupt.
Without investors,
business could no
longer grow and
expand.
Demand for clothes,
cars, and other
products fell.
Production slows.
This caused lay offs
and wage cuts.
Unemployed workers
had little or no
money to spend.
They bought less.
C. Hard Times
1. As the depression spread, unemployment soared.
a) One in every four workers were unemployed by the early 1930s.
b) A New York job agency had 5,000 people a day looking for work; only about 300
would find jobs.
c) Some jobless sold apples and shined shoes on street corners.
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2. Families in Crisis.
a) Marriage and birth rates dropped.
b) Some families split up trying to find work.
c) High school drop out rates increased.
d) Homeless and jobless men, women, and children drifted from town to town
trying to find work.
e) Some “rode the rails.”
f) Some built shacks out of wooden crates and scrap metal.
g) Many felt ashamed to loose their jobs.
3. Worldwide Depression - Of course, America was not alone in the Great Depression; it
struck all the industrialized nations of the world, including Germany, Britain, and
France. During the 1920s, American banks loaned money to European nations.
a) When banks stopped making loans European banks failed.
b) Germany still had huge reparation payments to make to the Allies in the
aftermath of WWI. These reparation payments fueled spiraling inflation in
Germany and crippled that nation's economy. The Allies themselves had borrowed
money from the United States during the war, were unable to pay it all back during
the 1920s, and were now not only broke, but in debt.
D. President Herbert Hoover’s Response
1. At first, the President opposed government relief programs.
a) relief – giving help to the needy.
b) Hoover felt the government should not be involved in ending the business crisis.
c) He felt the government would become to powerful.
d) Hoover urged businesses to keep people employed.
e) He called on private charities to help Americans in need.
2. Private Relief.
a) Churches and groups such as the YMCA fed the hungry at soup kitchens.
b) Leaders of ethnic groups helped organize their own relief organizations.
c) The numbers of needy soon overwhelmed the private charities.
3. As the depression grew worse, Hoover realized that the government had to step in.
a) Hoover set up public works programs, projects built by the government for
public use.
b) The government hired workers to build schools, courthouses, dams, and
highways.
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c) Workers could use their wages to buy goods. It was hoped this would cause
business to expand and lead to an economic recovery.
4. Hoover also approved the Reconstruction Finance Corporation, or RFC.
a) The RFC loaned money to banks, railroads, and insurance companies to keep them
in business.
5. Hoover did more to reverse the depression than any other president before him during
an economic panic. Still his efforts had little effect.
a) Many accused Hoover of doing “too little, too late.”
b) Hoovervilles – shacks where homeless lived.
E. The Bonus Army
1. Congress had voted to give veterans of WW I a bonus, or sum of money, to be paid in
1945.
a) The senate rejected a bill to pay the bonus early.
b) "The Bonus Expeditionary Force." - In 1932, 20,000 jobless veterans marched
to Washington and set up a tent city, vowing to stay until they got their money. C)
c) President Hoover overreacted and sent in the army (led by future war heroes
Douglas MacArthur and Dwight D. Eisenhower) to break up this peaceful
demonstration.
d) Using cavalry, tanks, machine guns, and tear gas, MacArthur moved into the
camp and burnt it to the ground.
e) As a result, Hoover lost what little American support he had left
"Bonus Army" WWI Veterans protesting unpaid pensions
Copyright 1997 State Historical Society of Wisconsin
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II.
FDR and the New Deal
A. A Powerful Partnership
1. Franklin Delano Roosevelt came from a wealthy, well connected family in New York.
He married his cousin (distant) Eleanor Roosevelt, a niece of Teddy Roosevelt.
a) Together they made a powerful partnership.
b) In 1921, FDR was struck with polio and his legs were paralyzed.
c) Eventually he was able to walk with braces and crutches.
2. In 1928 he was elected governor of New York.
a) In 1932, he ran as the Democratic candidate against Herbert Hoover (R).
B. Promising a “New Deal”
1. FDR didn’t spell out his program in detail but made it clear that the government would
help the people.
a) He promised to help the jobless, poor framers, and the elderly.
b) He defeated a very unpopular Herbert Hoover by a landslide.
c) Democrats also gained seats in Congress.
2. FDR issued a call to action and sought advice on how to end the depression.
a) Brain Trust – a number of college professors who were expert on economic
issues.
b) Francis Perkins, a social worker, was appointed Secretary of Labor. She was
the first women to ever hold a cabinet position.
C. The Hundred Days
1. Restoring Faith in Banks
a) On his 2nd day in office he declared a bank holiday, closing every bank in the
country for 8 days.
b) Emergency Banking Relief Act – only those banks with enough funds to meet
depositor’ demands could reopen.
2. A week after taking office, President Roosevelt spoke to Americans by radio. He
explained under the new law it was safer to keep your money in a reopened bank than it
was under your mattress.
a) The radio broadcast worked. Depositors returned their money to banks, and the
banking system grew stronger.
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b) Fireside Chats – FDR gave 30 radio speeches while in office.
3. Between March 9th and June 16, 1933, Congress passed 15 major new laws. This period
was called the Hundred Days.
a) Together, all of these programs made up the New Deal.
4. The New Deal had 3 main goals:
a) relief for the unemployed
b) plans for recovery
c) reforms to prevent another depression
D. Relief for the Unemployed – When FDR took office, 13 million Americans were
unemployed.
1. Civilian Conservation Corps (CCC) –hired unemployed single men between the ages of
18 and 25 (1$ a day).
a) Planted trees, built bridges, worked on flood control projects, and developed
new parks.
2. Federal Emergency Relief Administration (FERA) – gave federal money to state and
local relief agencies
a) The agencies distributed money to the unemployed.
3. Works Progress Administration (WPA) – Set up in 1935 by the Emergency Relief
Appropriations Act.
a) Put the jobless to work building hospitals, schools, parks, playgrounds, and
airports.
b) Also hired writers, actors, photographers, and composers.
E. Programs to Promote Recovery
1. To help industry, New Dealers drew up plans to control production, stabilize prices, and
keep workers on the job.
a) National Industrial Recovery Act (NIRA) – Each industry would set up codes
(rules) for production, wages, prices, and working conditions.
b) National Recovery Administration was set up to enforce codes. Companies that
followed NRA codes stamped a blue eagle on their products.
c) Many companies ignored codes. Small companies felt they favored big
businesses.
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2. Public Works Administration (PWA) – Promoted recovery by hiring workers for
thousands of projects.
a) Built Dams, schools, 2 aircraft carriers, and a deep water port in Brownsville,
Texas.
3. Programs for farmers – Overproduction remained the main problem, keeping farm
prices low.
a) Agricultural Adjustment Act (AAA) – the government paid farmers not to grow
certain crops, to plow surplus crops under the soil, and to dispose of surplus cows
and pigs.
b) Rural Electrification Administration (REA) – loaned government money to
expand electric lines to rural areas.
4. Perhaps the most daring program of the Hundred Days was the Tennessee Valley
Authority (TVA). It set out to remake the Tennessee River Valley, which suffered from
terrible floods. The farmland was poor and more than half of the population was on relief.
a) It called for 49 dams in 7 states, and deepened river canals for shipping.
b) The dams also produced cheap hydroelectric power.
c) Planted new forests, developed fertilizers, and improved farmland.
d) Also set up schools and health centers.
5. The TVA sparked a furious debate.
a) Critics- government had no right to take away business from private companies
(power companies) in the region.
b) Supporters – the government could use resources to help private enterprise.
c) The program did transform the region into a prosperous and productive area.
F. Reforms for the Long Term
1. FDR asked Congress to pass laws regulating the stock market and reforming the
banking system.
a) Truth-in-Securities Act – designed to end the wild stock market speculation
that led to the stock market crash.
b) Federal Deposit Insurance Agency (FDIC)– The FDIC insures savings accounts
(up to $100,000) in banks approved by the government.
2. Later New Deal laws strengthened government regulation.
a) Laws regulated gas and electric companies.
A new law extended the Pure Food and Drug Act of 1906.
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III. Reaction to the New Deal
A. Critics – Some argues the government should do more, others less.
1. As the depression lingered, critics multiplied.
a) Huey Long (Kingfish) – Senator from Louisiana who championed the poor. His motto
“share our wealth” called for heavy taxes on the rich. He wanted to use tax money
to provide every family with a house, car, and annual income.
b) Francis Townsend – A California doctor who wanted everyone over the age of 60 to
get a $200 a month pension. People receiving a pension would have to retire, creating a
job for someone else.
c) Liberty League – a conservative group, complained that the New Deal interfered
too much with business and people’s lives.
B. FDR and the Supreme Court
1. In 1935, members of the Supreme Court began to attack the New Deal.
a) Ruled the National Recovery Act was unconstitutional saying it gave too much power
to the President and the federal government.
b) A year later it struck down the Agricultural Adjustment Act and went on to
overturn nine other New Deal Programs.”
2. FDR is re-elected in 1936.
a) He wanted to increase the number of Supreme Court justices from 9 to 15,
allowing him to appoint justices who would support his programs.
b) Both supporters and critics saw this as a threat to separation of powers.
c) Roosevelt withdrew his proposal.
3. Roosevelt got the majority he wanted in a different way.
a) One justice changed his views ad another retired. FDR chose a replacement that
supported his programs.
C. Labor Reforms
1. FDR pushed for programs to help workers.
a) The National Labor Relations Act (Wagner Act 1935)) – protected American
workers from unfair management practice, such as firing a worker if they joined a
union. It also guaranteed collective bargaining.
b) Collective Bargaining – the process in which a union representing a group of
workers negotiates a contract.
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c) Union membership grew from 3 million to 9 million in the 1930s.
2. Labor Struggles
a) Some employers still tried to stop workers from joining unions.
b) Workers at a Goodyear Tire Factory staged a sit-down strike, stopping all
machines and refusing to leave the factory until Goodyear recognized their union.
c) Workers at other factories used sit down strikes until the Supreme Court
outlawed them in 1939.
3. Help for non-union workers.
a) The Fair Labor Standards Act of 1938 – set a minimum wage at 40 cents an hour.
b) Also set maximum work hours, 44 a week, in a number of industries.
c) Banned children under the age of 16 from worker in certain industries.
D. Social Security – FDR wanted to help the elderly.
1. In 1935 Congress passed the Social Security Act. The new law had three parts.
a) It set up a system of pensions for older people. Payments from employers and
employees supported the system.
b) Unemployment Insurance – people who lost their jobs received small payments until
they found work again.
c) Gave money to states to support dependent children and people with disabilities.
E. The New Deal: Good or Bad?
1. The federal government grew in size and power. It took on new jobs, such as helping
the needy to ensuring the economy prospered.
a) It increased the power of the government.
b) It led to deficit spending, spending more money than the government was
collecting in taxes. It meant a large increase in our national debt.
c) Business leaders complained it made unions too powerful.
d) Critics pointed out that it was not bringing about an economic recovery.
2. Supporters argued that the government must meet the needs of the people.
a) In time, Americans came to except the expanded role of government.
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IV. Surviving the Great Depression
A. Drought and Dust
1. During much of the 1930s, states from Texas to the Dakotas suffered a severe
drought.
a) Years of overgrazing and plowing by farmers destroyed grass that had held the
soil in place. A drought caused the topsoil to dry out and high winds carried the soil
away.
b) The Dust Bowl – Nickname given to the Great Plains.
c) Dust storms, often called black blizzards, buried farmhouses and forced drivers
to use headlights during daytime.
2. Okies and Arkies
a) Dust storms hurt poor farmers in Oklahoma and Arkansas. Many packed there
bags and headed west.
b) migrant workers – people moving from region to region in search of work.
B. Working Women
1. Women faced special problems during the depression.
a) Employers would hire men first.
b) The federal government refused to hire women if their husbands had a job..
c) Still, millions of women worked in order to support themselves and their families.
C. An Active First Lady
1. Eleanor Roosevelt created a new role for herself as First Lady. Touring the nation, she
acted as the “eyes and ears” of the President.
a) She talked to the unemployed, visited coal mines, and went to the homes of poor
families.
b) She wrote a newspaper column and had a radio program.
c) As a reformer, she spoke out against discrimination and called on Americans to
live up to the goal of equal justice for all.
D. Racial Prejudice
1. African Americans were often the first to lose their jobs.
a) They were often denied public works jobs.
b) Come charities refused to serve them.
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2. Eleanor Roosevelt and others close to the President tried to improve the situation of
African Americans.
a) Thousands of young black men did learn a trade through the CCC.
b) FDR’s Black Cabinet – The President invited black leaders to the White House
to advise him on civil rights issues.
c) civil rights – the rights due all citizens.
3. Mexican American’s Face Discrimination
a) More than 400,000 Mexican s were rounded up and sent back to Mexico. Some
were citizens who had been born in the United States.
4. Asian American Face Discrimination
a) Often refused service in barbershops, restaurants, and other public places.
b) Americans resented Chinese, Japanese, and Filipino workers who competed for
scarce jobs.
c) Repatriation Act 1935 – provided free transportation for Filipinos who agreed
to return to the Philippines and not come back. Many took advantage of the offer.
E. Native Americans and the New Deal
1. In 1924, Congress had granted Native Americans citizenship.
a) Still, they faced discrimination and lived in poverty.
pb) The Indian New Deal – gave Native Americans greater control over their
affairs.
c) Indian Reorganization Act (IRA) (1934) –protected and even expanded the
holdings of Indian reservations.
d) Indian Conservation Work Group – employed Native Americans in programs of
soil erosion control, irrigation, and land development.
e) Indian Arts and Craft Board – promoted the sale of Indian art, it encouraged
Native Americans to create new works.
F. Radios and the Movies
1. Many Americans escaped the hard times of the 1930s by listening to the radio.
a) Comedians such as George Burns and Gracie Allen, classical music programs, and
daytime dramas (soap operas) were very popular.
b) The most famous broadcast: “War of the Worlds,” in which Orson Welles gave
a make believe newscast about invaders from another planet. Thousands of people
panicked.
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2. The Silver Screen – In the 1930’s, moviemakers tried to restore people’s faith in the
Unites States.
a) Movies told stories about happy families.
b) Child actors such as Shirley Temple ad Mickey Rooney were popular.
c) Popular movies included Snow White and the Seven Dwarfs, and The Wizard
of OZ starring Judy Garland
d) The longest, most expensive, and most popular movie of all time was Gone With
the Wind (1939). (Yes folks, if you adjust for inflation GWTW made more money
than Titanic.)
e) GWTW was about hardships in the South during and after the Civil War. It
encourages many Americans that they had overcome hard times before, and could
do so again.
G. Images of Depression Life
1. Creative artists recorded images of depression life.
a) John Steinbeck wrote the Grapes of Wrath which told the heartbreaking story
of the Okies.
b) In Uncle Tom’s Children, Richard Wright described racial violence against
African Americans in the South.
c) In American Gothic, Grant Wood portrayed an Iowa farmer and his daughter.
d) The photographs of Dorothea Lange showed the suffering of Dust Bowl families
American Gothic by Grant Wood
.
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Dorothea Lange (American) 1895- 1965)
Migrant Mother, 1936, Photograph
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