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APUSH Lesson 24 (Part 1: The Coming of A Great Depression)
I. The Great Crash
A. Stock Market Boom
1. Stocks increased over 45% from May 1928 to Sept. 1929
2. Dow Jones Ave. doubled over the same period
3. Trading shares nearly doubled over this period
4. Wide spread speculation created easy credit
[define what a speculator did (i.e. buying on margin)
B. The Fall of the Bull Market
1. decline in stock prices all throughout Oct. 1929
2. J P Morgan tried to engineer a bail out by buying up stock
3. Black Tuesday. Oct. 29 the bottom fell out of the market
4. 16 million shares of stock were traded and index dropped 43
points [the market remained deeply depressed for more than 4
years and did not fully recover for more than a decade.]
II Causes of the Depression
A. Lack of diversification [prosperity had depended largely on
construction and automobile industries. At the time of the crash,
emerging industries such as petroleum, chemicals, and plastics had
not developed enough to compensate for decline in other sectors.]
B. Maldistribution of wealth
[or purchasing power. At home demand was not keeping up with
supply because profits going to workers [wages] were too small to
create an adequate market for the goods being produced. This led
to large inventories
C. Credit Structure was weak as many farmers were deeply in debt
D. Declining exports in international trade
[again manufacturers had expanded production in anticipation of
high demand. Building new factories had been cheap because
interest rates had been incredibly low. But now businesses would
have to cut back on production and let workers go in order to
survive.]
E. Unstable International debt structure
[On the one hand, some European nations were producing the
goods that Europeans were buying so that pinched American
companies. At the same time, some European nations (Germany &
Austria) were limping along under the sanctions imposed on them
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after WWI (reparations) and they were unable to purchase much of
anything.]
III. The Continuation of the Depression
A. Over 9,000 banks collapsed and depositors lost over $2.5 billion
B. Money supply fell by more than 1/3 from 1930 – 1933
C. Declining purchasing power causes deflation [This sounds good at
first, but it also means that wages are going down.]
D. Manufacturers cut back on employment
E. Federal Reserve Board refused to take decisive action
F. The GNP declined 25% in three year
G. Unemployment averaged around 20% throughout 1930’s
[To put that in perspective, the national rate of unemployment is
currently around 10%.
IV. Hoover’s failure to Stop the Depression
[Interesting that in August 1928, prior to his election, Hoover proclaimed,
“We in America are nearer to the final triumph over poverty than ever before
in the history of any land. The poorhouse is vanishing from among us.”
Unlike Calvin Coolidge who sensed that the nation was in for harder times,
Harding’s words signaled great optimism. His actions, however told a
different story. He got out of the stock market at the ideal time.]
A. The Wrong Philosophy for the Wrong Time
1. Wanted to foster cooperation between Gov and Business
2. “Our first objective must be to provide security from poverty
and want . . .”
3. “Every time we find solutions outside of government . . .
we have preserved our sense of real government.”
B. Hoover does take action
[Dispute between Hoover and Andrew Mellon, his treasury
secretary. Mellon wanted Hoover to liquidate farmers, real
estate, stocks, and “purge the rottenness from the economy”. In
other words, let the depression rip so that unsound businesses
will be bankrupted and the healthy ones will survive. However,
Hoover knew that this would cause wages to go down and he
firmly believed that maintaining wages at existing levels was
essential to contain and overcome depressions. He chose to cut
taxes and increased government spending. In retrospect, he
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probably should have also raised interest rates significantly
before the crash occurred.]
1. Approval the Boulder Dam (Hoover Dam) project on
Colorado River in 1929
-provides electricity and flood control for Colorado River
-arranged for water usage rights for states in region
-financed dam through profits from electricity sales
2. Backs Associative arrangements like Federal Farm Board
and National Credit Corporation
3. Signed Federal Home Loan Bank Act – 1931
-sought to reform banking
-provided mortgage relief for farmers and homeowners
4. Reconstruction Finance Corporation (RFC) – 1932
-authorized up to $2 billion for emergency financing of
banks and corporations [think current TARP money]
-hope was that it would trickle down to common man
-many saw it as a hand out to the rich
[In 1932, Hoover had no choice but to do a 180 degree turn and
propose an increase in taxes to balance the budget. The 1932
Revenue Act saw the greatest taxation increase in US history in
peacetime, with the rate on high incomes jumping from a
quarter to 63%. This made nonsense of Hoover’s earlier tax
cuts, but by this time Hoover was not in a position to pursue a
coherent policy. His name also became synonymous with the
suffering of the depression – “Hoover Blankets, Hoovervilles,
Hoover wagons” etc.]
C. Gassing the Bonus Army
1. 15,000 WW I vets march on Washington, DC in 1932
2. Patman Bill debated in Congress to give vets to
give them money ($500 per soldier) promised in 1945
3. Bill failed and Hoover ordered vets to leave
4. set up make-shift housing called “Hoovervilles”
5. Army ordered to move the vets out
-resulted in the gassing of 1,000 vets
-lead by General MacArthur
-became last straw in Hoover’s demise
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APUSH Lesson 24 (Part 2: FDR and the New Deal - Government Assistance
or Socialism?)
FDR and The New Deal: Government Assistance or Socialism?
I.
The First 100 Days
A. First Inaugural - “Nothing to fear but fear itself”
1. Instill a spirit of confidence
2. Action and action now
3. Ask for emergency powers as if being invaded by an enemy
4. Becomes known as The New Deal
[He compared himself to a quarterback who would call the next play only after the
present one had been run, he made no pretense of working from a fixed design. Instead he
announced that his objectives would be relief, reform and recovery – the three R’s. He
pursued them with a bewildering cluster of programs that left no doubt of the
government’s concern for the plight of its citizens and of the administration’s activism.
Whereas Hoover had reluctantly taken action. Roosevelt embraced government
action! Facing a sea of human misery, untroubled by ideological inhibitions against
federal aid to the needy, the Roosevelt administration swiftly instituted public works jobs,
mortgage relief legislation, farm price supports, and federal insurance for bank deposits –
programs aimed directly at the plight of the individual who had been hit one way or
another by the Depression.]
B. The Bank Holiday (March 9 – March 12, 1933)
1. In 1933 banks had only $6 billion in cash of $41 billion deposits
2. part of Emergency Banking Relief Act
3. started by using “fireside chats” by radio
4. Infused Banks with government money
5. Closed the worst of the banks
6. By end of week, ¾ of banks back in business
7. set up Federal Deposit Insurance Corporation (FDIC)
- prevented banks from speculating with people’s money
- insured up to $5,000 of individual deposits
[That amount is now $250,000 per account!]
C. The Alphabet Soup of Assistance Programs
1. AAA – encouraged farmers to get rid of excess crops and animals to
raise the price of their goods (reimbursed with money for their efforts)
[benefits and subsidies for rural America. Rural electrification and soil
conservation were largely successful attempts to enhance the quality of
life on the land although the subsidies for not growing food were highly
controversial. In the guise of fighting the Depression, the New Deal had
put the federal government into agriculture on a vast scale and a
permanent basis.]
2. NRA – The National Recovery Administration - required industries to
cooperate on codes of prices and trade practices. When a code was
approved by the president, it became law.
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[NRA regulations, purposely mislabeled “codes of fair competition”
actually stifled competition and in many instances sanctioned such cartel
practices as production quotas, allocation of marketing territories, and
price-fixing.
3. PWA – helped provide jobs for the masses of unemployed through
major construction plans like dams roads and bridges.
4. CCC – provided jobs for young people though helping to plant forests
and battle forest fires.
5. TVA – government took over a dam and two plants to help provide
cheap electricity and flood control for seven different states in the
Tennessee Valley
[Relief: Note – HOOVER had foreseen the benefit of programs like these.
Hoover Dam project combined PWA & TVA ideas but came before them.
ROOSEVELT fretted constantly about the cost of the programs listed
above, and, while accepting them as a necessity, he never allowed them to
be expanded sufficiently to provide jobs for the majority of the
unemployed. The TVA was a resounding success that was nonetheless
never duplicated in other .]
The Second 100 Days
A. Extending the New Deal
1. The Works Program Administration
-massive works program designed to give people meaningful jobs
- helped artist and writers find work
-pumped more than $10 million into economy
2. The Wagner Act (1935) – gave unions the right to organize
[established procedures by which unions could win recognition from
management; prohibited certain anti-union practices by employers, and set
up a strong, permanent bureaucracy (the National Labor Relations Board)
to provide continuing enforcement. For workers at the lowest, usually nonunionized levels of American business, the Fair Labor Standards Act of
1938 established nationwide wage and hour standards, prohibited child
labor, and provided strict rules for the employment of teenagers.]
3. The Social Securities Act (1935)
-gave pensions to workers covered
-came from employers and employees
-given back at age 65
[This Act, like many of the most permanent and successful items of the
New Deal reform agenda was not specifically directed at the Depressioncreated problems but had some of the appearance of relief acts. It
established a national system of old-age insurance and committed the
federal government to extensive subsidies for state welfare programs. The
act marked a revolution in federal responsibility for the welfare of the
needy. It quickly became politically unassailable, and over the next
generation its coverage and benefits grew steadily.]
4. funds also for dependent mothers and their children
B. Conservative and Liberal Critics
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1. American Liberty League – “foster the right to work earn save and
acquire property.”
[Financed primarily by the wealth DuPont family. They supported
conservative congressional candidates of both parties in election of
1934 with little success]
2. Dr. Francis Townsend
- government to provide a pension of $200 every month
- citizens over 60
-spend the entire amount each month
-require more than half the national budget
[more than 3 million older Americans joined Townsend Clubs to
promote this plan]
3. Father Charles Coughlin
-Catholic priest who communicated by radio
-first supported FRR but began complaining about bankers
- argued they had to be removed from high positions
-later became racist and church officials ordered him to stop
4. Huey “Kingfish” Long
-Governor and Senator from Louisiana
-motto “Share Our Wealth”
-appealed to farmers and workers
-tax the wealthy to give money to the poor
[called for the confiscation of all fortunes over 5 million dollars
and a 100% tax on annual incomes over one million. With the
money, the government would provide subsidies so that every
family would have a “homestead” of house, care, and furnishings
worth at least $5,000, a minimum annual income of $2,000, and
free college education for those who wanted it. His slogan was
“every man a king”]
-dynamic speaker with large following
-later assassinated before he became a major threat
III. Had Government gone too far?
A. NRA declared unconstitutional
1. Schechter vs. US – court case involving a small company in violation of
the poultry code
2. court rules in favor of Schechter
3. NRA codes struck down because gives too much power to executive
[The Supreme Court dredged up a seldom-invoked sanction against
excessive delegation of legislative authority by the Congress and reverted
to a hyper-restrictive interpretation of the government’s authority to
regulate interstate commerce.
The NRA failed for a host of reasons, some of them conceptual and some
political. It failed to address what now appears to have been the central
malady of the Depression, the liquidation of consumer spending power; in
fact, its price-fixing approach actually made that problem worse. It was
not sufficiently coordinated with the work relief programs, which could
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have injected much more money into the economy had they been managed
less cautiously. It collapsed to some extent of its own weight as its frenetic
head, Hugh Johnson, traveled about the country attempting to organize
every mom and pop enterprise in sight and wildly overpromising what his
agency could accomplish.
Economically, politically, and constitutionally, the NRA had reached a
dead end-and so had the idea of central management of the economy.]
B. AAA later struck down because it usurped state and local government power
C. Packing the Court
1. FDR feared some his other measures might fail
2. Came up with idea that you should add one additional judge for every
judge over 70
3. This would extend the court to 15
4. Even supporters felt this went too far and the suggestion eventually died
[FDR argued (somewhat dishonestly) that he was simply trying to
invigorate an excessively aged court. And he ran squarely up against
popular reverence for the judicial system and the constitutional concept of
separation of powers. Although the Senate killed the bill, FDR claimed to
have lost the battle but won the war when two “swing justices – Charles
Evans Hughes and Owen Roberts began to vote with the liberal bloc and
support New Deal legislation. Still, the court-packing scheme hurt FDR’s
reputation.]