The Great Depression and the New Deal
1. ROOTS OF THE GREAT DEPRESSION
In 1929, the Dow Jones average had reached an all time high. The
Dow Jones Average is the average of stock prices within the industry.
tracking and watching stocks became almost a sport of the 1920’s.
Wednesday, October 23rd—the Dow Jones dropped 21 points and
many investors became worried. The following day many investors
began to sell—losing money. During this period both business leaders
and political leaders were telling people not to worry. October 23,
1929 was called Black Thursday. On October 28, 1929, stock prices
dropped again. On Tuesday, October 29, 1929, over 16 million
shares of stock was sold. The stock market collapsed and the Great
Depression started. There were overall losses of $30 billion dollars.
The economy was in a business cycle in which it would grow and
then contract. The Great Depression lasted from 1929 to 1941.
I. What were the causes of the Great Depression?
A. The Stock Market crashed on October 29, 1929. Investors sold
16 million shares of stock which made prices plunge. By the end
of 1929, stock losses exceeded the total cost of the United States’
involvement during World War I. The Gross National Product
(GNP) fell from $103 billion in 1929 to $56 billion in 1933.
1. Uneven distribution of wealth—Between 1923 and 1929
disposable income of the wealthiest 1% increased by 63%
while the income of the poorest 93% decreased by 4%.
If workers had received better wages the depression would
have been less severe.
2. Massive stock market speculation—buying and selling
To make a quick profit.
3. Excessive use of credit-Individual debt caused by
installment buying in the 1920’s. Americans bought more
than they could pay for.
4. Overproduction-During the 1920’s, Americans who could
afford expensive products (cars, houses, refrigerators) had
already bought them earlier in the decade; surpluses piled up
late in the 1920’s.
Great Depression, page 2
I. What were the causes of the Great Depression?
5. A weak farm economy
6. Global economic problems
7. Lack of government regulation of businesses
8. Buying on Margin—purchasing stock with borrowed
money a person could buy stock by putting 10% up of the
price and borrow the remainder of the price of the stock.
B. The Effects of the Great Depression
1. Effects upon Society
A. 25% of the workforce were unemployed.
B. Wages were as low as 10 cents per hour.
C. Black workers were often the first fired.
D. Women could be hired for less than men which caused
the percentage of women employed to increase.
E. Many individuals took to selling apples on the street.
2. Effects on Cities
A. City governments tried to provide relief through agencies
Like the Red Cross and Salvation Army.
B. Breadlines were common.
C. Shantytowns developed outside cities called
Hoovervilles.
D. Poverty and crime spreads in the United States.
3. Effects upon Farming
A. Farmers had more than they could sell—people could
not afford their crops. As a result, farm prices fell.
B. Farmers were forced to let crops rot and slaughter
livestock they could not afford to feed.
C. They could not afford their mortgages on their farms and
banks started foreclosure on their property.
D. Neighbors would help each other out by bidding low on
Land and tools (an $800 farm sold for $1.90).
4. Effects on Families
A. Families moved together.
B. Divorce rates rose.
C. Young people waited to get married and start families.
D. Women made their own bread, soap, sewed their own
Great Depression, page 3
B. The Effects of the Great Depression
4. Effects on Families
clothes out of flour sacks, etc.
E. Many families would rent out a room in their home to
boarders in order to raise money.
5. Effects on the Economy
A. The Gross National Product fell from $103 billion in
1929 to $56 billion in 1933. The GNP is all of the goods
and services produced in a year.
B. 20% of banks went bankrupt and closed their doors.
Over 5000 banks closed. The collapse on one bank in
New York wiped out over $180 million in savings and
affected more than 400,000 investors. Banks were
hurt by making risky loans. As a result, many families
lost their savings.
C. Investors and businesses lose millions of dollars.
D. Production is drastically cut, plants closed and
unemployment rose.
E. The World’s economy was hurt. In Germany
Hitler took advantage of the depressed economy
to come to power.
II. Hoover’s Policies during the Depression
A. Hoover did not feel that it was the government’s responsibility
To provide relief during the Great Depression.
B. Hoover met with top business leaders and encouraged them to
to keep production and wages up.
C. He met with labor leaders and encouraged them not to go on
strike.
D. Hoover funded $800 million in federal projects to provide jobs and
stimulate businesses, i.e. Hoover Dam. His efforts were not
enough.
E. He encouraged the passing of the Agricultural Marketing Act.
This allowed the government to buy surplus wheat, cotton, corn,
etc. The government could store the items and sell them when the
price rose. This was a costly program for the government and had
little impact on the economy.
Great Depression, page 4
II. Hoover’s Policies during the Depression
F. The Hawley-Smoot Tariff was passed in 1930. This was one
of the worst economic decisions that Hoover made during his
presidency. This tariff raised income taxes from 31% to 49%.
Hoover believed that higher tariffs would protect American
businesses. The effect of this tariff is that it caused the
depression to spread throughout the world.
G. Debt moratorium
H. The Federal Farm Board was created in 1929. This expanded
powers to help subsidize farm prices and helped farmers to store
grain and cotton.
I. Hoover started the Reconstruction Finance Corporation. This
helped faltering railroads, banks, life insurance companies and
financial institutions. He tried to stabilize key businesses.
J. The Farm Holiday Association was started to reverse production
and stop grain from reaching the markets. The idea was if there
were less grain, the demand would rise and so would the cost.
K. The Bonus March occurred during Hoover’s presidency. In 1932,
thousands of unemployed World War I veterans went to
Washington D.C. asking for their promised bonus that was to be
paid in 1945. The veterans camped out on the steps of the capitol.
Congress failed to pass a bill to give their bonus early and Hoover
decided to send General MacArthur with tanks and tear gas to clear
the lawn.
L. Hoover was very unpopular. He said that, “No one was
actually starving during the great Depression.” This statement
angered Americans who were hungry and broke. He also
commented that many Americans were more profitable selling
apples on the street. In an interview with reporters, he fed
his dog red meat. Hoovervilles, Hooverblankets, Hooverflags
and other terms were named after the President because Americans
blamed him for their misery.
M. In the Election of 1932, the Republicans nominated Herbert
Hoover to run again for the presidency. The democrats named
the New York governor, Franklin D. Roosevelt. Roosevelt
promised Americans a “New Deal” and he defeated Hoover in
1932.
Great Depression, page 5
II. Hoover’s Policies during the Depression
N. The 1930’s were also plagued by dust storms. The Dust Bowl
was a terrible drought that hit the US during the 1930’s. It
was accompanied by strong winds which blew the dry topsoil out
east. Farmers lost their crops and moved to California to find
jobs. These farmers who left Oklahoma to find jobs in California
were called Okies. Hoover had to deal with several devastating
events during his presidency.
III. Discontentment and Discrimination during the Depression
A. The Bonus Army
1. World War I veterans had been promised a bonus to be
Paid during the 1940’s for their service in the war.
2. Many World War I veterans were homeless and demanded
their bonus early.
3. 10,000 veterans and their families marched on Washington
D.C. in 1932. The were marching in support of a Bonus
Bill that was in debate in Congress. The bill was defeated.
4. The Bonus Army did not leave the capitol, they stayed and
camped out in defiance.
5. In a clash, 2 veterans and 2 policemen were killed.
6. Hoover asked Douglas MacArthur to remove the veterans
from DC. MacArthur removed them by using tanks, tear
gas and machine guns.
7. The newspapers reported this incident and Hoover was blamed.
B. The Scottsboro Case
1. Nine black teenage boys were arrested after being charged with
raping two white girls on a train. There was no hard evidence.
2. The case was an example of discrimination that existed during
the 1930’s.
3. They were convicted because their word did not hold up in
court against the white girl’s word.
4. Eventually the charges were dropped and the boys were
released from jail.
The New Deal, page 6
IV. Franklin D. Roosevelt becomes the U.S. President after the election
of 1932. He promises Americans a “New Deal.” On March 4, 1933,
Franklin Roosevelt is sworn into office.
A. Why was a New Deal needed?
1. The Great Depression had worsened.
2. The American banking system was near collapse.
3. Millions of people were jobless.
4. Many businesses were bankrupt.
B. Roosevelt tried to reassure the nation.
1. In his inaugural address FDR said, “the only thing we have to
fear is fear itself:…. (He meant things would only get worse
if people continued to panic. He encouraged people to take a
deep breath and realize that we would survive the depression.
2. During his first week in office, he declared a bank holiday. All
banks across the United States were closed. Only banks that
were stable and financially sound reopened. Other banks
would undergo some changes before they could reopen.
3. He met with the press on a weekly basis and kept them
Informed of what he was doing for the people. The reporters
appreciated the meetings and were more likely to report about
his actions in a favorable light.
4. His philosophy guided America during the depression. He
believed, “Take a method and try it, if it fails, try another, but
above all try something.” The philosophy is seen in the
hundreds of New Deal agencies he created. Hoover’s
philosophy was more like “take a method and try it, if it fails,
oh well, at least I tried.”
5. FDR held numerous fireside chats during his 12 plus years in
office. The fireside chats were radio addresses where he would
explain what he was doing to help them. He would talk to the
American people on “their level”. It was important that they
understood and trusted him. He used the radio to achieve this
goal.
C. What were the goals of the New Deal?
Relief, Recovery and Reform. Franklin D. Roosevelt wanted to
Provide relief to the people who were poor, hungry and
unemployed. FDR wanted to reform the economic institutions in
the United States and try to recover businesses that were failing.
New Deal, page 7
D. Franklin D. Roosevelt called Congress into a special session
immediately after he was sworn into the office of the Presidency.
He asked Congress to pass the Bank Holiday, repeal Prohibition,
and to establish numerous ABC agencies that would attack
unemployment in America. The Bank Holiday was March 3,
1933. The Bank Holiday allowed the federal government to
inspect the financial institutions for stability. When the banks
reopened, the American people knew that they were stable. FDR
knew that repealing Prohibition (18th Amendment) could be a
money making venture for the government. The government
could place a tax on the sell of alcohol and generate funds.
E. On March 12, 1933 Franklin Roosevelt went on radio and discuss
the banking institutions and the economy. His radio broadcast
became a common thing and they were called the Fireside Chats.
F. Within the first 100 days in office, FDR had created dozens of
agencies that provided jobs and other forms of relief for the
American people. These alphabet agencies provided relief,
recovery, and reform during the depression. Some worked and
some did not.
G. The New Deal included financial RECOVERY programs.
1. The Emergency Banking Relief Act was passed and it
allowed the federal government to examine financial
institutions and banks.
2. The Federal Depository Insurance Corporation or
FDIC guaranteed bank deposits up to $5,000.00. Many
people had lost money that they placed in banks when they
closed. To make sure that this did not happen again, the
FDIC was created. It still exists today and insures up to
$100,000 per account.
3. The Home Owners Loan Corporation (HOLC) provided
refinancing of small home loans to avoid foreclosure.
Many homeowners had a difficult time paying their
mortgage payments. The HOLC gave home owners money
to make sure that they did not lose their homes. It was a
program that worker, over 1 million families kept their
their homes because of the HOLC.
New Deal, page 8
G. The New Deal included financial RECOVERY programs.
4. The Farm Credit Administration gave low interest farm
loans and mortgages to farmers to help them avoid
foreclosures. Many farmers were losing their farms, they
could not pay their taxes and needed better seeds and
equipment. The FCA gave farmers money to pay off their
farms and their taxes. It also helped them buy better
supplies.
H. The First New Deal was made up of programs that provided
RELIEF to the unemployed.
1. The Federal Emergency Relief Act (FERA) offered
federal grants to state and local governments to
operate soup kitchens and offer help to the homeless.
Some areas were hit harder by the depression than others;
They had more factories close, etc. FERA gave these areas
money to deal with unemployment and to provide other
forms of aid. The program had limited success. The
programs spent over $3billion and it simply was not
enough.
2. The Public Works Administration (PWA) allotted
Federal dollars to state and local governments for building
roads, dams, bridges, schools etc. This provided thousands
of jobs to the unemployed. This was a very successful
agency.
3. The Civilian Conservation Corps employed young men
ages 18-25 jobs outdoor fighting fires, restocking lakes
with fish, restoring battle fields, cleaning up cemeteries, etc.
Many of the jobs were on federal land. These men were
given housing and food allowing them to send a large
portion of their salary to their families. It was a combination
of boot camp and the boy scouts. These men were given
$30 a month and they had to send $25 back to their families.
This agency was one of the most successful.
4. The Tennessee Valley Authority (TVA) promoted regional
development and public planning in the nation’s poorest
region. The TVA built dams, operated electric power
plants, manufactured fertilize, and worked with flooding
New Deal, page 9
H. The First New Deal was made up of programs that provided
RELIEF to the unemployed.
4. and erosion. This was a very successful program that still
exists today in parts of MS, AL, TN. KT, NC and GA.
I. The First New Deal was made up of industrial RECOVERY
programs.
1. The National Recovery Administration (NRA) guaranteed
reasonable profits for businesses and fair wages for labor.
The NRA helped to set wages, hours, levels of production
and industrial prices. Many businesses were required to
pay a minimum wage or limit the number of hours they
required a worker to work. The NRA established the
minimum wage and limited the hours. It was declared
unconstitutional by the Supreme Court because they said the
federal government could not force the employer to pay a
minimum wage. The Supreme Court case declaring the
NRA unconstitutional was Schecter v. USA.
2. The Agricultural Adjustment Administration (AAA)
Encouraged farmers to reduce production. The AAA
offered government subsidies for every acre the plowed
under. Farmers were producing to much and it was
causing prices to fall. Farmers were paid not to farm 1/4th to
½ of their farm land. In 1935, the Supreme Court also ruled
that this agency unconstitutional. The court stated that we
could not force farmers not to farm their own land.
J. Other New Deal Programs
1. The Civil Works Administration (CWA) provided
jobs for the unemployed. The CWA worked on
construction projects.
2. The Securities and Exchange Commission (SEC) was
a federal agency that regulated the stock market and limited
speculation.
3. The Federal Housing Administration (FHA) promoted the
construction industry. The FHA insured bank loans on new
houses and old houses. In other words, these were
government loans that were insured to follow the repayment
guidelines over an extended period.
The New Deal, page 10
K. The Second New Deal
1. The Works Progress Administration (WPA) provided
thousands on jobs from 1935 to 1940. The federal
government hired workers to build roads, bridges, public
buildings, etc. Artist were employed painting and
decorating new buildings. Unemployed historians were
hired as government researchers. Teachers were hired as
government workers, etc.
2. The National Youth Administration (NYA) offered
part-time jobs to America’s youth. These jobs were
given to high-school and college students until they found
a job in the private sector.
3. The Resettlement Administration granted loans to share
croppers and tenant farmers.
L. The New Deal was full of REFORM programs.
1. The National Labor Relations Act or Wagner Act was
passed in 1935. The Wagner Act gave workers the right
to join a union and collectively bargain. This outlawed
unfair business practices. A National Labor Relations
Board was created to enforce the laws.
2. The Rural Electrification Act (REA) was started to bring
water systems and electricity to rural areas.
3. The Revenue Act of 1935 placed an income tax upon the
wealthy and on gifts that were passed from a parent to a
child, such as stock.
4. The Social Security Act was passed in 1935. This created
a federal insurance program that paid people over 65 who
were disabled or children whose parents were deceased.
Many of the elderly people lost their money in banks that
closed. Handicapped people also needed help. These
groups were unable to find assistance through the New Deal.
The SSA addressed their needs by providing a monthly
income to people over 65, handicapped people of all ages,
and people who lost their jobs and could not find another
form of employment. It was very successful; it still exists
today even though it is in danger of drying up.
The New Deal, page 11
V. The New Deal drew criticism.
1. The critics of the New Deal said:
(1) that it focused to much on the needs of businesses,
(2) it failed to address the needs of women,
(3) it failed to address needs of minorities, and
(4) it did not address the needs of the elderly.
2. Critics argued that the New Deal gave the government to
much power. The critics of the New Deal were conservative
politicians, mostly republicans. The conservatives also disagreed
with the government borrowing money to finance these new ABC
agencies. They argued that the government should not be
operating in the deficit. They said that the government should be
required to operate in a balanced budget. The American Liberty
League and the Anti-New Deal Organization were two groups that
Started around the opposition of the New Deal.
3. Many demagogues sprang up across the United States. They are
charismatic speakers. Father Charles Coughlin, a Catholic
priest, was a critic who used his radio show to oppose the New
Deal. He had over 30 million listeners and was very
influential. Coughlin was anti-semetic and blamed the Jews
for the depression. Many Jews were bankers and maintained their
money throughout the depression. At first he was a supporter of
FDR and said “Roosevelt or Ruin”. He later became upset with
FDR and opposed him through the radio each week. He said
that the New Deal was an “evil conspiracy” and that it was
a form of fascism. The Catholic Church ordered Coughlin to
stop his attacks. Senator Huey Long previous governor from
Louisiana during the 1930’s proposed a redistribution of wealth.
He wanted a “Share our Wealth Program” which would provide
every family with a minimum $2,500.00 a year income. He
proposed heavier taxation on the wealthy to generate this annual
income. The government would act as Robin Hood—steal from
the rich to give to the poor. His plan was never enacted.
4. The Supreme Court of the United States was a major critic of the
New Deal. In 1935, the National Recovery Act and the
Agricultural Adjustment Act were struck down as unconstitutional
Programs. Franklin D. Roosevelt did not appoint any supreme
New Deal, page 12
V. The New Deal drew criticism.
4. court justices during his first term. FDR proposed the Court
Packing Bill that would allow the President to appoint or add a
Justice for every Supreme Court member over the age of 70.5
Years that did not retire. FDR wanted to add 6 liberals and this
outraged both Democrats and Republicans. FDR argued that
justices over the age of 70 were not competent enough to remain
on the Supreme Court and that they should be replaced. This
Court Packing Bill would bring the total of justices to 15 and FDR
knew that his programs would not be struck down. This plan was
not passed. In 1937, 7 of his programs were struck down as
being unconstitutional. The Wagner Act was one fatality.
VI. Last-Phase of the New Deal
1. 1933-1937 the economy showed signs of improvement. Many
believed that the improvement was a result of:
A. government intervention,
B. FDR’s ABC programs and agencies,
C. taxes, and
D. Keynesian economics which argued that deficit spending
Was acceptable in difficult times.
VII. Depression and New Deal facts
1. Dorthea Lange was a famous photographer during the Great
Depression.
2. Eleanor Roosevelt campaigned for women during FDR’s terms as
President. She also pushed for minority rights.
3. Mary McLeod Bethune was the first woman appointed to a
Federal agency. She was the head of the Federal Council of Negro
Affairs.
4. A. Phillip Randolph was the head of the Railroad Porter Union.
He threatened to march on Washington for African American
pquality. There was a push for civil rights during FDR’s terms as
President.
5. FDR was elected in 1932 and died in 1945. He was elected as
President 4 terms. He served 3 terms and started his 4th. During
his 4th term he died and his Vice President of a few months took
Over the Presidency, Harry S. Truman. After FDR died, the 22nd
New Deal, page 13
VII. Depression and New Deal facts
5. Amendment was passed stating that a US President can serve
only 2 terms or 10 years.
6. The United States entered World War II in 1941 and the
depression ended.
VIII. The Causes and Effects of the Great Depression
1. Causes of the New Deal
A. Great depression worsened.
B. The banking system in the United States almost
collapsed.
C. Millions of people were unemployed.
D. Many businesses went bankrupt and closed their
doors.
E. FDR became the president and started vast
experimentation.
2. Effects of the New Deal
A. Congress passed many New Deal programs that
offered the American people relief, recovery and reform.
B. The Supreme Court struck down many of FDR’s programs.
C. Unions grew more powerful.
D. Social Security was established.
E. The role of the US government in the economy increased.
F. The American started relying on the American government
more.
IX. John Steinbeck wrote The Grapes of Wrath, a novel which told the
story of an okie family who travels to California. Dorthea Lange
was a photographer who photographed the depression era.