Great Depression and
the New Deal
Goals
• Understand the causes of the Great
Depression
• Understand FDR’s personality and
leadership style
• Understand the New Deal
• Evaluate the effectiveness of the New
Deal
Business Cycles
• Prosperity
• Recession
• Depression
• Recovery
Prosperity
• Great output of goods
• Extensive factory expansion
• High prices and profits
• Easy bank credit
• Full employment
• Good wages
• General feeling of optimism
Recession
• A decline in the demand for goods
• Decreased production
• Falling prices and profits
• Calling in of bank loans
• Decreasing employment
• Falling wages
• General feeling of caution and worry
Depression
• Low production
• Low prices
• Little or no profits
• Widespread business failures
• Few bank loans
• Heavy unemployment
• Low wages
• General feeling of pessimism
Recovery
• Increasing production
• Rising prices and
profits
• Extension of bank
loans
• Increasing employment
• Rising wages
• General feeling of
hopefulness
Major Depressions in
American History
• 1873
• 1893
• 1929
Depression of 1873
• Overexpansion of railroads and industry
• Granting of unsound bank loans
• Insufficient farm purchasing power because of low
agricultural prices
• Economic distress in Europe
• Failure of a leading banking house
Depression of 1893
• Overexpansion of railroads and industry
• Low agricultural prices
• Fear of the stability of currency
Depression of 1929
• Industry overexpanded its
production facilities
• Consumers lacked sufficient
income to purchase the total
output of industry.
• Bankers made unsound
loans which led to bank
failures which wiped out the
savings of many people
Depression of 1929
• Get rich speculators bid up
the price of real estate and
stocks to unrealistic levels
• International trade declined
because WWI hurt Europe’s
economy and had lessend
Europe’s ability to purchase
goods.
• Stock market crash of 1929
Difference between 1929 and
1873 and 1893
• US no longer had the frontier with its economic
opportunities
• Economy was primarily industrial
• Depression was worldwide
Responses to
Depression
• Republicans: Volunteerism and Rugged Individualism
"It is not the function of the government to relieve
individuals of their responsibilities to their neighbours, or
to relieve private institutions of their responsibilities to the
public."
- Hoover
• Member of a wealthy New
York landowning family
FDR
• Groton, Harvard,
Columbia Law
• 1921 struck with polio.
• 1928 elected Governor of
New York
• Personal warmth, great
self confidence, politician,
great orator, zest for life.
Election of 1932
• Republicans nominated Herbert Hoover
• Democrats nominated FDR
• FDR won easily.
• He set out to create his New Deal.
FDR’s New Deal
• Concern with the Forgotten Man
• Use of the Brain Trust
• Disregard of Laissez Faire
• Pragmatic Approach
• Relief Recovery Reform
• Growth of Federal Power
Forgotten Man
• FDR offered to help
the average citizen
or the man at the
bottom of economic
pyramid.
Brain Trust
• FDR sought the help of college professors to hear
varied ideas on how to improve the country. He
listened to the various ideas and then planned the next
moves for the country.
Disregard of LaissezFaire
• FDR committed the government to a more important
role in the economy. The government started to
regulate the economy.
Pragmatic Approach
• “The only thing we have to fear is fear itself.”
• He believed in trial end error.
• Government couldn’t sit around it needed to act.
Three R’s
• Relief- to assist distressed persons through
direct money payments, jobs and mortgage
loans
• Recovery- to lift the nation out of the
depression through aid to the farmers,
businessmen and workers
• Reform- to eliminate abuses in the economy
and to prevent future depressions through
protection of bank depositors, investors,
consumers, the aged and the unemployed
Growth of Federal
Power
• Government greatly expands its role in society
• See all the New Deal agencies.
FDR’s strong leadership
• Bank Holiday
• Hundred Days
• Press Conferences
• Fireside chats
Bank Holiday
• Immediately upon taking office FDR closed all banks
by declaring a bank holiday.
• He called Congress into special session and quickly
obtained legislation to allow Treasury officials to
examine banks and reopen those that were solvent.
This action greatly restored the public’s confidence in
banks.
Hundred Days
• During the first three months of offcie FDR proposed
many new laws, and secured passage of a large
majority of them.
Press Conferences
• FDR held frequent press conferences to present his
ideas and give confidence to the public.
Fireside Chats
• “Listen my friends”.
• He used these radio addresses to gain the trust and
confidence of the American people.
Successes of the New
Deal
• Restored courage and optimism to the people and
improved the economic status of most Americans
• Provided work relief which enabled the unemployed to
retain self-respect and enriched the nation with roads,
parks, public buildings and dams
Successes of the New
Deal
• Increased government spending which offset the
declines in private spending
• Reduced unemployment by 5 million and treated the
unemployed humanely
• Regulated capitalism
• Expanded federal power over our economic system yet
maintained democratic methods and personal
freedoms
Failures of the New
Deal
• Failed to gain the confidence of the business
community
• Wasted money on valueless projects
• Unbalanced the budget and increased national debt
through deficit spending
• Failed to eliminate unemployment
• Interfered with free enterprise and it passed
unconstitutional laws
• Increased the number of federal employees.