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Chapter 14: The Great Depression Begins
Unit 3 The Great Depression
...The Great Depression and New Deal
 Essential Question: How did the US and other countries respond to the rise of
capitalism, economic collapse and the development of social welfare programs?

Standards 9-12 2.4: Analyze the major political, economic, and social
developments that occurred between WWI and WWII.
o 9-12 1.2: Resources: Interpret and evaluate documents (primary and
secondary sources, fact, fiction or opinion) to enhance the
understanding of social studies content.
o 9-12 1.4: Research Process: Use media (oral, written, websites,
computer simulations, multimedia) to access, record, and analyze, and
communicate information relating to social studies.
Focus Questions:
1. What economic changes of the 1920s led to the Stock Market Crash and the Great
Depression?
2. How did American's lives change following the economic shift from the 1920's to
the Great Depression?
3. How did Herbert Hoover and Franklin D. Roosevelt approach the problems of the
Great Depression differently?
4. How did the New Deal's legacy impact the United States government, economy,
and society?
I Can Statements:
1. I can compare and contrast living standards and conditions within urban and
rural communities from the 1920s to the 1930s.
2. I can compare and contrast different approaches between Herbert Hoover and
Franklin D. Roosevelt.
3. I can classify and evaluate the social, economic, and political causes that
resulted in the event of Black Tuesday and the Great Depression.
4. I can recognize and evaluate New Deal programs that are still in effect today.
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Chapter 14: The Great Depression Begins
Section 1: The Nation’s Sick Economy
I.
Economic Troubles on the Horizon
A. Key industries, such as railroads, textiles, and steel barely made a
profit
1. Railroads lost money b/c of new forms of transportation (auto
industry)
2. Coal mining received competition from hydroelectric power, fuel
oil, and natural gas
3. Construction of new houses (a major economic indicator,
even today) started to drop, which affects many jobs (lumber,
construction jobs, furniture, etc.)
B. After WW I, demand for American grains dropped as Europe recovered
cutting grain prices by more than 40% (1919 wheat = $2.16, 1922 wheat
= less than a dollar)
1. Farmers continued boosting production in hopes of selling
more to make up for the low prices, which further reduced
prices
a. B/w 1919 and 1921 annual farm income dropped from $10
billion to just over $4 billion
2. Banks foreclosed on the farms in order to pay off the debt owed
to them
a. As farmers defaulted on their loans, rural banks closed
3. McNary-Haugen Bill: federal price supports for key products
such as wheat, corn, cotton, and tobacco (today could be
compared to farm subsidies)
a. Gov’t would buy surplus crops at a guaranteed price and
sell them, at a later date, on the world market
b. Unfortunately, farmers kept planting more to take advantage of
the program, causing the gov’t to run out of money for the
program and storage for the crops
C. Americans were buying less b/c of rising prices, stagnant wages, a large
income gap, production expanded faster than wages, and buying of credit
programs were overused
1. Buying of credit: an arrangement in which consumers agreed to
buy now and pay later for purchases (installment plan)
a. Businesses encouraged Americans to pile up debt (compares to
no interest and/or payments for certain # of years)
2. B/w 1920 and 1929 the income of the wealthiest 1% of the
population rose by 75%, compared with a 9% increase for
Americans as a whole
a. More than 70% of the nation’s families earned less than $2500
per year, then considered the minimum amount needed for a
decent standard of living
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II.
b. The average man or woman bought a new outfit once a year
Hoover Takes the Nation
A. Herbert Hoover was the Secretary of Commerce under the Harding
and Coolidge administrations
1. Hoover was able to use the success of his predecessors, since
1920, to ensure a victory in 1928 (Harding, Coolidge, Hoover)
a. Hoover declared, “We in America are nearer to the final
triumph over poverty than ever before.”
2. Alfred E. Smith, the Democrat hopeful, was a career politician
who served as governor of N.Y. for four terms
a. He had ties to the corrupt Tammany Hall in N.Y. City
b. Enjoyed being in the spotlight
3. After the stock market crashed Babe Ruth was asked how he felt
about his salary being higher than the president in 1930 ($80,000
annually)
a. Ruth responded, “Well I had a better year than he did!”
B. By 1929, some economists warned about the weaknesses in the economy,
but most Americans were blinded by the overall prosperity of the
economy
1. The Dow Jones Industrial Average: the most widely used
barometer of the stock market’s health
a. The average consists of 30 of the largest and most widely held
public companies in the United States
b. Ex: Wal-mart, Coca Cola, McDonalds, Microsoft, JPMoragan
Chase and Co, etc.
2. Throughout the 1920s, the Dow reached all-time highs during its
bull market: a period of rising stock prices
a. It seemed as if anyone could make money in the stock market
whether the individual understood the markets or not
b. By 1929 4 million (3%) Americans owned stock in the market
3. Stock speculation: stocks and bonds or quickly bought and sold
hoping to make a quick profit while ignoring the risks presented
by the market
a. Today, we call this day-trading
b. Speculative buying is OK as long as demand for that
stock(s) is high
c. Rapid buying and selling also inflates the price of stock
(stock sold for more than it’s worth)
4. Buying on Margin: paying a small percentage of a stock’s price
as a down payment and borrowing the rest
a. Individuals only needed 10% of their own money and
could borrow 90% of the rest
b. If the investor loses money on their investment, it would be
difficult to pay back the 90% they borrowed
5. The gov’t encouraged spending by making easy money
available (loans, etc.), maintained low interest rates, chose
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III.
IV.
not to regulate business dealings and/or mergers (FTC was
not encouraged to do its job)
The Stock Market Crashes
A. Black Thursday: October 24, 1929
1. Those with large investments suddenly began selling their shares
2. Investors grew scared and prices plunged (too much stock
flooded the market)
B. Black Tuesday: October 29, 1929
1. Prices sank to a shocking low and investors dumped over 16
million shares on the market
2. Brokers quickly demanded cash from borrowers to cover loans
a. Investors sold shares at huge losses and were wiped out
b. Value of stock was cut in half and $30 billion was lost
Financial Collapse
A. The stock market crash started the Great Depression: the period from
1929 to 1940 in which the economy plummeted and unemployment
skyrocketed
1. Gross National Product: the total value of all goods and
services produced in a given year = $104 billion (1929)
a. GNP fell below $56 billion in 1933
b. Income for Americans fell by half
2. Auto and steal industries barely held on
a. Factories and mines stood idle and other companies shut
down (jobs lost)
3. Soviet Union was so short of money they sold 21 paintings worth
$7 million to the U.S.
B. Many people panicked and tried to withdraw their money from banks
1. In 1929 600 banks closed, and by 1933, 11,000 of the nation’s
25,000 banks had failed
a. The gov’t didn’t protect or insure bank deposits, so million
of people lost their savings (not FDIC insured)
b. One N.Y.C. bank closure wiped out$180 million in savings
by over 400,000 depositors
2. About 90,000 businesses went bankrupt
a. This included the auto and railroad industries, which were
the driving forces behind the economy
3. Unemployment jumped from 3% in 1929 to 25% in 1933
a. Those that retained their jobs faced pay cuts and reduced
hours
b. Today, a high unemployment rate would be anything close
to 5% or greater
4. Joseph P. Kennedy, the father of future President John F.
Kennedy, made his fortune by pulling out of the market right
before the market collapsed
a. He was involved in, what today is know as, insider trading
(Martha Stuart went to jail for insider trading)
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5. Insider trading: is the trading of a corporation's stock or other
securities (e.g. bonds or stock options) by corporate insiders such
as officers, directors, or holders of more than ten percent of the
firm's shares
a. All insider trades must be reported in the United States
b. Illegal insider trading in the US requires the participation
(perhaps indirectly) of a corporate insider or other person
who is violating his fiduciary duty or misappropriating
private information, and trading on it or secretly relaying it
C. Much of Europe had suffered throughout the 1920s
1. European countries were still trying to recover from WW I
and the debt they incurred from fighting in WW I
2. Germany was expected to pay war reparations to all the
countries that fought against it during WW I
a. 3 marks = $1 prior to the end of WW I
b. 1 trillion marks = $1 after WW I
3. Hawley-Smoot Tariff Act (1930): established the highest
protective tariff in U.S. history
a. It was designed to protect U.S. farmers and businesses from
foreign competition
b. Reducing the flow of foreign goods into America, also
reduced the ability of foreign countries to acquire American
currency, which reduced their ability to purchase American
products (countries also responded by raising their own
tariffs)
D. Causes of the Great Depression:
1. Tariffs and war debt policies that cut down the foreign market for
American goods
2. A crisis in the farm sector
3. The availability of easy credit
4. An unequal distribution of income
5. Overproduction of consumer goods
6. Decreased demand for consumer goods
7. Gov’t commitment to low interest rates
8. Buying on credit (installment plan)
Section 2: Hardship and Suffering During the Depression
I.
The Depression Devastates People’s Lives
A. As individuals lost their jobs, the eventually lost their homes
1. Shantytowns/Hoovervilles: little towns consisting of shacks
made from cardboard, old wood scraps, etc
a. Some slept in sewer pipes or rapped themselves in
newspapers to stay warm
2. Local aid and charity was the main form of aid to those in
need
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a. Soup Kitchens: offered free or low-cost food (many churches
have soup kitchens
b. Breadlines: lines of people waiting to receive food provided
by charitable organizations or public agencies
c. Mutualistas: formed by Mexican American communities to
help local residents
d. Rent parties: large social gatherings that charged an admission
to gather rent money
e. Chinese Americans: set out open barrels of rice people could
take from without asking
3. African Americans were some of the lowest paid individuals
a. Twenty-four African Americans died by lynching in 1933 b/c
of discrimination and job competition
b. Black firemen on the railroads in Mississippi were being
shot b/c white workers wanted their jobs
c. Hilton Butler, a writer for the New Republic, wrote
“Mississippi in its own primitive way had begun dealing
with the unemployment problem…Dead men not only tell
no tales but create vacancies.”
4. Latinos-mainly Mexicans and Mexican Americans living in
the Southwest (farm laborers)
a. In the 1930s 500,000 Mexican and Mexican Americans
relocated to Mexico and/or were deported by the gov’t
b. Local authorities went so far as to pay Mexican migrants to
leave the U.S.
B. Communists and socialists believed capitalism caused the Depression
(Scottsboro Boys)
1. Exposed racial injustice in an all-white jury in Scottsboro,
Alabama
a. Sentenced eight blacks, ages 17 – 21, to death for raping
two white girls hitching a ride on a train
b. Mass demonstrations occurred in an effort to overturn the
conviction and money was raised to provide legal defense
2. Conviction overturned twice:
a. In 1932, conviction overturned b/c of inadequate legal
representation
b. In 1935, no African Americans were on the jury (5 were retried
and convicted)
3. In 1950, four of the defendants were paroled and one escaped to
Michigan
a. Michigan’s governor refused to return the escapee to Alabama
C. B/w 1929 and 1932, about 400,000 farms were lost through
foreclosures
1. A farm with a $800 mortgage was sold for $1.90, and farmers
would give very low bids on machinery
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II.
a. After the auction the local farmer that bought the farm
would give it back to the family)
2. Farmers left their crops in the fields to rot and slaughtered
their own cattle b/c their was no demand for their products
(couldn’t afford the basic staple foods/products)
D. Tractors and plows were used to break up the land, removing the
thick protective prairie grasses
1. The land was exhausted by overproduction and lost productivity
a. Topsoil from the drought stricken Dakotas down through Texas
was blown all the way to the East Coast
2. Dust Bowl: the areas hardest hit by the drought
a. Many packed up their belongings and headed to the West Coast
following the famous Route 66 to California
b. Okies: term originally referred to Oklahomans but came to be
used negatively for all migrants
Effects on the American Family
A. Many men could not cope with the idea that they couldn’t support their
families
1. Hoboes: more than 300,000 transients that wandered the
countryside just simply trying to survive (mostly men)
a. There was no such thing as direct relief: cash payments or
food provided by the government to the poor (some cities and
charities offered some hope)
b. New York City gave weekly payments of $2.39 per family
(today that would equal $35.85 a week per family)
B. Many women canned food, sewed clothing, made soap, carefully
managed household budgets, etc.
1. Many women also worked outside the home (paid less), but
eventually they were resented since many men could not find
work
a. Some cities refused to hire married women as
schoolteachers
b. Some thought women were not suffering b/c vast
numbers of women were not roaming the streets for
jobs and food compared to men
2. Bronx Slave Market: women who stood on street corners trying
to obtain work as maids
a. The % of women in the work force actually increased in the
1930s, but the # of African Americans employed decreased
b. Greater competition from whites and blacks
3. The divorce rate increases during the Great Depression
a. The extended family became much more important
b. Family, friends, and relatives lived with each other b/c of
financial issues
C. Children suffered immensely during the Great Depression
1. Child-welfare programs were slashed by cities and states
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a. Rise in malnutrition and diet-related diseases
2. Falling tax revenues caused the school year to be shortened
a. By 1933, 2,600 schools shut down forcing 300,000
students out of school (worked instead in sweatshop
conditions)
3. Teenage boys and some girls (“Hoover’s tourists”) hopped
aboard trains searching for work and adventure
a. These travelers were not welcomed aboard trains b/c they
didn’t pay (many beaten and/or killed)
D. B/w 1928 and 1932, the suicide rate rose more than 30% and three
times more people were admitted to state mental hospitals when
compared to normal times
1. Adults stopped going to doctors and/or dentists
2. Young people gave up on trying to afford college, get married,
and/or having children
3. For some, achieving/maintaining financial security became
an obsession for them the rest of their lives
4. Communities and families bonded as everyone struggled to
survive the Great Depression
III.
Popular Culture in The Thirties: An Escape From Their Struggles
A. The sound explosion
1. Talking pictures replaced silent films
a. Gangster films were popular, which portrayed men beating the odds
2. Movie cartoons brightened the 1930s
a. Walt Disney’s Mickey Mouse and Donald Duck
3. Radio was popular because it provided free entertainment
a. Lone Ranger, Orphan Annie, and the Shadow
B. Literature in The Early 1930s
1. Magazines and comic books offered cheap entertainment
a. Readers Digest was the most popular
2. Novels also offered an escape from reality
a. James Hilton’s Lost Horizon (1933): describes a traveler finding a
perfect world in the mountains of Tibet
3. William Faulkner: tragically portrayed small-town life in a fictional town
a. Won Nobel Prize for literature (1949) and two Pulitzer prizes (1955
and 1963)
Section 3: Hoover Struggles with the Depression
I.
Hoover tries to Reassure the Nation
A. After the stock market crashed Herbert Hoover commented that,
“Any lack of confidence in the economic future…is foolish.”
1. Americans believed depressions were a normal part of the
business cycle
a. Many experts believed when there is a slump the
economy will inevitably fix itself
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B.
C.
D.
E.
2. Keynesian economics: an economic theory which advocates
government intervention, or demand-side management of the
economy, to achieve full employment and stable prices
b. Supporters of Keynesian economics belief the gov’t should
take an active role in smoothening out the bumps in the
business cycle
Hoover believed one of the gov’ts chief functions was to foster
cooperation b/w competing groups and interests in society
1. Hoover and Americans also valued Rugged Individualism: the
idea that people should succeed through their own efforts
a. This is the idea America was founded upon (equality was not
promoted until the Depression hit)
b. Hoover was opposed to any form of federal welfare, or
direct relief to the needy (local efforts should dominate)
2. Committee for Unemployment Relief: assist state and local
relief efforts
a. Walter Gifford had no idea about the # of unemployed
when asked about the numbers while addressing a
Congressional Committee (urged people to give to
charities)
Hoover called together key leaders in the fields of business, banking, and
labor
1. Urged them to collaborate on ways to solve the economic
crisis and not do anything that could worsen the situation
a. Asked employers not to cut wages or lay off workers, and
asked labor leaders not to demand higher wages or go on strike
(also created organizations to help private charities)
2. None of these moderate efforts had any impact
When Hoover served as secretary of commerce, one of his earliest
proposed initiatives was the construction of a dam on the Colorado
River
1. The Boulder Dam’s/Hoover Dam’s construction would be
recouped from the sale of the electric power the dam would
generate
a. The $700 million public works project was approved by
Congress in 1928 and was authorized in the fall of 1929 by
Hoover
b. The dam produced electricity, provided flood control, and
served as a water supply (allowed California’s agricultural
industry to flourish today)
c. Without the dam, it’s doubtful that Las Angeles and Las Vegas
would be the size it is today
In the 1930 congressional election, the Democrats took advantage of the
anti-Hoover sentiments to win more seats in Congress
1. The Republicans lost control of the House of Representatives
and retained control of the Senate by only one vote
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II.
III.
2. Out of protest, some farmers burned their crops, dumped their
milk on the highway, declared a “farm holiday”, blocked roads
to prevent food from reaching the markets, hoping the food
shortage would cause a jump in prices
3. Shantytowns were referred to as “Hoovervilles”, which served
as a direct insult to President Hoover
a. The newspapers the poor rapped themselves in to stay warm
were referred to as “Hoover blankets”
b. Empty pockets hanging out were referred to as “Hoover flags”
Hoover Takes Action
A. Hoover believed the Boulder Dam/Hoover Dam was a model for how
the federal gov’t could encourage cooperation and aid in resolving the
Depression
1. Federal Farm Board (farm cooperatives): intended to raise
crop prices by helping members buy crops and keep them off the
market temporarily until prices rose
2. National Credit Corporation: loaned money to smaller banks ,
which helped stave of bankruptcy
B. With a presidential election nearing, Hoover pressed Congress to pass a
series of measures
1. Federal Home Loan Bank Act (1932): lowered interest rates
for homeowners and allowed farmers to refinance their farm
loans and avoid foreclosure
2. Glass-Steagall Banking Act (Hoover was out of office):
separated investment from commercial banking and would,
hopefully, prevent another crash
3. Reconstruction Finance Corporation (1932): authorized up to
$2 billion for emergency financing of banks, life insurance
companies, railroads, and other large businesses
a. Hoover believe the money would “trickle down” to the
average citizen through job growth and higher wages
Gassing the Bonus Army
A. In 1932 the Bonus Expeditionary Force/Bonus Army (10,000) arrived
in D.C. to promote the Patman Bill/Bonus Bill the was being debated
by Congress
1. Patman Bill/Bonus Bill: authorized the gov’t to pay a bonus to
WW I veterans who had not been compensated adequately for
their wartime service
a. The bonus was approved by Congress in 1924 and was to be
paid out in 1945, but Congressman Wright Patman felt it
should be paid immediately ($500 per soldier)
2. Hoover thought the Bonus Marchers were communists and
persons with criminal records rather than real veterans
a. Hoover opposed the legislation, but respected the marchers’
right to assemble (even provided marchers with food and
supplies)
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b. June 17, 1932 Congress rejected the bill and Hoover asked the
Bonus Marchers to leave (2,000 decided not to budge)
3. On July 28, 1932 Hoover sent 1,000 soldiers under the
command of General Douglas MacArthur and his aide,
Major Dwight D. Eisenhower to remove the veterans w/o
hopefully using force
a. The infantry gassed 1,000 people killing an 11-month old baby,
blinding a 8-year old boy, and shot and injured many more
b. When Hoovers presidential opponent, Democrat F.D.R. heard
about the Bonus Army fiasco he commented, “Well…this
will elect me.”
B. During the election of 1932, not only did, Democrat, F.D.R. win the
presidency, but Democrats also took control of Congress as a whole
1. FDR promised everyone a “New Deal”