The Great Depression
Impact of WWI on the US
“War is the health of the State”
- Randolph Bourne
• Boosts economy
• Boosts public around nation
• War shapes social climate
Review
• Homestead Acts
• Consumerism on credit
• WWI Reparations
Homestead Acts
• Selling the Plains
– Enlarging Homestead Act of 1909
• 320 acres for “Dry Land Farming”
–Stock Raising Homestead Act of 1916
• 640 acres for public land ranching
• No water, cows over graze
• Mechanized farming, tilling
Consumers on Credit
• Production -> consumer demands
• Heavy industry -> what people want
• WWI boosts worker wages =
disposable income
• women vote = women consumers
• More urban households
• Pay by installments over the phone
Wealth Inequality
• 40% of population lived in poverty
• Wealthiest 36,000 had an income of poorest
12 million
• Wealthiest 5% control over 50% of wealth
• By 1929 credit takes place of wages
• Debt is = to GDP (Gross Domestic Product)
• Production exceeds consumption
• Overstock & Financial speculation
Hoover: WWI “The Great
Humanitarian”
Known as the “most able man”
Sends food to Europe when there would have
been starvation on the front line
“Savior of Europe”
US Food Administration
“Food will win the war”
Volunteerism & Compliance of Patriotism
Presidential Election of 1928 "Hoover
the Great Humanitarian"
Economic Crash
• Black Tuesday October 29, 1929
• Bank Runs and Closure
• Uneven Distribution of Wealth
• Hawley-Smoot Tariff
Domestic Problems
Environmental Collapse
The Dust Bowl
Dust Bowl
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100 Million acres ruined
Land value decreased 30%
Dust traveled from Oklahoma to Chicago
Affected rain and snow in New England
Left 500,000 homeless
– 200,000 to California (Okies)
• Dust Bowl Exodus (1930-35)
– Largest mass migration in American History
Poor Farmers
• Bull Weevil
– A cotton killer
– Cotton yields fell 50% by 1920s
– Annual losses = $10-30 million
• George Washington Carver
– Scientist who design peanuts
The Fall of the Farm
• Wheat prices fell nearly 300% 1919-1929
• ½ Million farms fail
• Rural Bank Collapse (1925-32)
• 11,000 of 25,000 fail BEFORE stock market crash
• 1927 Flood
– Swells Memphis down to Mississippi
• River over 60 miles across
• 246 Die, 700,000 people displaced
Florida Land Boom
• Buy up land
• Hurricanes 1926 and 28
• Environmental disasters
Black Tuesday, 24 Oct 1929
• New York Stock Exchange
– Speculation and short term gains
– Over production, under consumption
– Government kept interest rate artificially low
• Run on the banks
– People want to draw money at once
– No lending and businesses fail
• US Steel (1st Billion dollar corporation)
– By summer 1932 mills operated at 12%
– Stock declined 75%
– Unemployment at 40%
Hoover Responds
• Secretary of Treasury
• Andrew Mellon: Natural “Oscillation” of the market
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Volunteerism: Not the gov. job to help
$500 mill in loans to agriculture
$700 mill to public works
The Reconstruction Finance Corporation (RFC)
– Backstopped rural bank who are not part Federal
Reserve
Hawley-Smoot Tariff Act 1930
• Bipartisan, but mostly Republican
• Raises tariffs to the highest in history
– to boost American consumption of American
goods
• Results in a collapse of world trade
– Europe reacts and raises their tariffs
Hoover Dam 1931
• 21,000 workers aided in construction
Shortfalls
• Idea that too much interference
would eliminate self government and
work ethic
• No federal unemployment benefits
• No bank deposit insurance
• No regulation of finance markets
• Interview process for food benefits
Reactions
1937 Seattle Hooverville
Margaret Bourke-White
Economic Theory
• John M. Keynes
– Government must take action
– Capitalism must be saved from itself
• Chicago/Friedman/Hayek
– Cycles in Capitalist economy “ups and downs”
– Gov. cannot interfere with private property
– “Keynesianism destroys individualism/democracy”
The Bonus March 1932
Election of 1932
• Franklin Delano Roosevelt (FDR)
New Deal Coalition
• Whites in the South- Jim Crow (D) (Congress)
• Poor farmers
• Urban laborers- second generations
immigrants from Southern and Eastern Europe
• Urban African Americans
• Working class women
• Elderly
• Progressive Republicans/Civil Rights Activists
• The Left (socialists/communists/trade unions)
Franklin Delano Roosevelt
• Wealthy family from NY
• Nephew of Teddy
• Skated by in private schools (Columbia &
Harvard)
• Governor of NY
• Married relative, Eleanor
FDR cont.
• Polio- cannot walk
– Onset in 30s
– First president with a disability
• Rehab in Warm Springs, GA (Familiar with
South)
• Radio – Doesn’t have to show himself and
seems strong “Fireside Chats”
The Brain Trust
• Knew his short comings, surrounded himself
with academics
– Henry Wallace
• Secretary of Agriculture
– Rex Tugwell
• Undersecretary of Agriculture
– Francis Perkins
• Secretary of Labor (1st Female in Cabinet)
Look to the streets
• Pushes for change
• Organized movements
First Hundred Days
(The First New Deal) Mar-Jan 1933
• 3 Day Banking Holiday (Shutdown)
• Take nation off of Gold Standard
• Glass-Steagall Banking Act
• Creation of the FDIC & SEC
• Repeal prohibition
• National Recovery Act (NRA) 1933
• FERA, CCC, & CWC (Public Works)
• Balanced budget
• Puts 10 mill people to work
The Second New Deal, Fall 1935
• Expanded job program & $5 mill
emergency relief program
• Provided employment for 8-10 million
• Wagner Act = workers unions
–National Guard will no longer break up
strikes
• National Labor Relations Act
• The CIO (Congress of Industrial
Organization)
– Unskilled workers, assembly line
auto/steel/electric
• Fair Labor Standards Act
– 40hr work week, 8hr day, overtime 1.5x
– Minimum wage
– Abolish child labor
Social Security Act 1933
–Federal care for the elderly, ill,
disabled, out of work, widowed
–Already in GM, FR, GB, SA, SP
–Modest $15 a month unemployed,
$100-200 age
• 58 men, 62 for women
• Allows new workers to replace them
Laws don’t always matter…
• South is an example, reforms not enforced
• Working people push for action = Strikes
• Government to enforce the reform
– Faith in the system
HH vs. FDR
• Who should give direct relief to those suffering?
– HH: States and local gov.
– FDR: Federal gov.
• How do you pay for things?
– HH: Raises taxes (less money for people to spend)
– FDR: Deficit spending (barrow, but minimizes relief $
Criticism
• Democrats
– Federal Government has more power than ever
before, takes away from States’ rights
– Government is deficit spending
• Republicans
– New Deal not going far enough
– Need a redistribution of wealth (tax wealthiest;
help the poorest)
Supreme Court Backlash
• National Recovery Act (NRA) &
Agricultural Adjustment Act (AAA)
struck down as unconstitutional
• FDR worried the entire New Deal was at risk
• Court Packing Plan
– Add justices & within 10 years of work or at age
70 they must retire
– Scares the supreme court
– Wagner Act & Social Security barely escape
– Fear of pro-segregation or anti-civil rights justices
What really got us out of Depression?
"Third New Deal"
• Mobilization of the home front
– GNP double (1939-1943)
– Massive government planning
– Trace unemployment 1942-1943
• Military Keynesianism
– Corporate state of war, Federal spending on military
– Tax wealthiest people at 70-94%
GI Bill
• 16 million veterans
• 1944 GI Bill
– Serviceman’s Readjustment Act
– 90 Days of service
– Not dishonorably discharged
• “Greatest Generation” educated workers
• Home loans: 30 yr low/fixed interest
Who does the New Deal Benefit?
• Excluded African Americans in the South
– To pass legislation had to appease Dems
• Excluded domestic and agricultural workforce , cut
tenant farming jobs
– (farmers & domestic, 65% African Americans)
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Creates middle class
Lays foundation for later civil rights movements
Banks are protected
Congress did not get credit
Native Americans slipped further into poverty