Great Depression
The Beginning
Great Depression
• The United States economy seemed very
strong by 1922, only four years after World
War I, but by the beginning of the 1930s, the
United States was in a deep economic
depression.
• Why do you think this happened?
• As the worry of war decreased, people began
buying many products.
Great Depression
• For example, demand for home appliances
increased, and many Americans bought such
products on credit.
• In addition, overseas orders for American
products increased as war-ravaged countries
purchased goods from the United States
because their own factory systems were
destroyed.
Great Depression
• Factories in the United States went into full
production to meet this increased postwar
demand, both domestic and foreign.
• As war-torn countries rebuilt their factories,
they began cutting their orders to American
factories, which in turn contributed to
American factories’ laying off workers or
shutting down when their inventories stopped
selling.
Great Depression
• A long period of rising stock prices is known as a
bull market
• Many investors bought stocks on margin, making
small cash down payments (borrowed money)
• Margin call, a demand by the broker for the
investor to repay the loan immediately
• Speculation, bet on the market climbing and
selling whatever stock they could to make money
Buying on Margin
Stock
Investor’s
initial cost
Investor 1
10
Shares
$7.50
Investor 2
50
Shares
Investor 3
100
Shares
Amount Broker Must
Borrow
$212.50
$75.00
Shares are being sold at $5.00 each. Initially, the investor owes 15%.
Roots of the Great Depression
• Efficient machinery led to overproduction
• Uneven distribution of wealth added to the
country’s problems. (5% of households earned
30% of the county’s income)
• Low consumption added to economic
problems
• As sales decreased, workers were laid off,
resulting in a chain reaction
Roots of the Great Depression
• Installment plan, paying a little at a time, left little
money to purchase other goods
• Hawley-Smoot Tariff intensified the Depression
by raising the tax on imports
• Americans purchased less from abroad, in return
foreign corporations did not buy American
exports.
• Federal reserve lowered interest rates instead of
raising them, encouraging banks to make risky
loans and business thinking economy was
growing
Causes of the Great Depression
• Over speculation in the stock market
• Over borrowing (investments made with
borrowed money)
• Over production in factories and farms
• Uneven distribution of wealth
• Failure by the Federal Reserve to monitor
banks
• High protective tariffs
Causes of the Depression
• Overproduction and low demand leads to
employee layoffs
• Low wages reduce consumer buying power
• High tariffs restrict foreign demand for
American goods (Hawley-Smoot Tariff)
• Unemployment reduces buying power further
Causes of Depression
• Hawley-Smoot Tariff: A
high import tariff that is
considered the most
destructive tariff in
American history.
Depression
• Black Tuesday, October 29, 1929, stock prices fell
drastically (stocks lost $10-$15 billion in value)
• This stock market crash did not cause the
depression, but it weakened the nation’s banks
• Because the government did not insure bank
deposits, customers lost their money.
• $30 billion was lost, (roughly equal to the total
wages earned by Americans in 1929), as stock
prices had dropped by over 1/3.
THE 1929 CRASH
• October 29, Black
Tuesday, the
bottom fell out
• 16 million shares
were sold.
• Prices plummeted
• $30 billion was lost
Bank Closings
• Banks had invested
in the Stock
Market and lost
money
• By 1933 – 11,000
of the 25,000
banks nationwide
had collapsed
Bank run 1929, Los Angeles
Effects of the Great Depression
• Unemployment: By
1933, 1 out of every 3
American workers were
unemployed. Bread
lines / Soup Kitchens
created to feed the
poor
The Impact of The Great Depression
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Unemployment increased
Homelessness increased
Workers became more militant
Farmers lost their farms
Workers migrated in search of jobs
The Depression Worsens
• Bread lines – people waited for free food
• Soup kitchens – private charities gave a free
meal to the poor
• Many homeless built shacks in shantytowns,
which they referred to as “Hoovervilles”
because they blamed the president who had
been inaugurated in March 1929.
• As crop prices fell, many farmers left their
fields uncultivated
Hoovervilles
Hoover Flags
Hoover Blankets
Hoovervilles
Hoovervilles
Hoovervilles
Hoovervilles
Unemployment Lines
Unemployment Lines
Bread Lines
Bread Lines
Bread Lines
Soup Kitchens
Soup Kitchens
Soup Kitchens
THE DUST BOWL
• A severe drought gripped
the Great Plains in the
early 1930s
• Wind scattered the
topsoil, exposing sand
and grit
• The resulting dust
traveled hundreds of
miles
Kansas Farmer, 1933
The Depression Worsens
• A drought in the Great Plains, beginning in
1932, caused the region to become a “Dust
Bowl”
• Farmers lost their farms and many families
moved to California hoping to find a better life
• To escape these hardships Americans turned
to movies and radio programs
• These shows contained stories of triumph
over adversity and visions of a better life
Dust storm approaching Stratford, Texas - 1934
Dust buried cars and wagons in South Dakota
in 1936
Coping with the Depression
• Movies and Radio:
allowed people to
temporarily forget the
problems that they
faced.
• Stories tended to focus
on people overcoming
hardships to achieve
success.
• Snow White, Wizard of
Oz
The Depression Worsens
• Movies like The Wizard of Oz, Gone with the
Wind, and Snow White became popular
• Books were written about the depression, the
most famous was The Grapes of Wrath by
John Steinbeck.
• It was about an Oklahoma family fleeing the
Dust Bowl to find a new life in California.
Headlines of 1932
• U.S STEEL LAYS OFF ANOTHER 10,000
• GENERAL MOTORS STOCK DOWN FROM $500 A
SHARE TO $10 A SHARE
• CHICAGO TEACHERS FEED 11,000 HUNGRY CHILDREN
• IOWA CORN WAY DOWN IN PRICE
• KENTUCKY COAL MINERS FOUND LIVING ON
DANDELIONS
• 110 CHILDREN IN N.Y.C. DIE FROM MALNUTRITION
Some Interesting statistics
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National Income:
1929--$81 billion
1932--$41 billion
Business Failures: 1929-32--85,000
Banks: 1929-32 - 9,000 failures and 9,000,000 accounts
wiped out
Per capita income:
1929 -- $681
1932 -- $495
Weekly income of a stenographer:
1929 -- $45
1932 -- $16
Promoting Recovery
• Public Works – government-financed building
projects
• Hoover increased public works and asked the
nation’s mayors and governors to do the same
• Hoover tried to persuade the Federal Reserve to
put more currency into circulation, but they
refused
• He set up the NCC (National Credit Corporation)
creating a pool of money to rescue the banks, it
was not enough to help
Promoting Recovery
• He set up the Reconstruction Finance
Corporation to make loans to banks, railroads,
and agricultural institutions, but the economy
continued to decline
• He opposed the federal government’s
participation in relief – money that went
directly to very poor families
• He felt that was the responsibility of state and
local governments
TOO LITTLE TOO LATE
• public works projects
• Reconstruction Finance
Corporation – created
to strengthen banks and
businesses through
government loans
Hoover’s flurry of activity
came too late to save the
economy or his job
• prosperity would
“trickle down” to the
average citizen
The New Deal
• Franklin D. Roosevelt
• elected in 1932
• “the only thing we have to fear
is……”
• Eleanor Roosevelt: Supporter of
the little person
• Radio talks with America:
“Fireside Chats”
FDR
• created a program of relief and reform
called the New Deal
• Federal $ was granted to states to
provide the needy w/clothes, food,
shelter
• Public works programs hired people to
construct public buildings, roads, and
other projects
Franklin Delano Roosevelt
• “The only thing we have to fear is fear itself.”
• What did Roosevelt mean by this statement?
Roosevelt’s Approach to Solving the
Problems of the Great Depression
• Relief: Programs such as the Works Progress
Administration (WPA) provided direct
payment to workers.
• Recovery: Programs such as the Agricultural
Adjustment Administration (AAA) were
developed to bring the nation out of the
Depression over time. The Tennessee Valley
Authority (TVA) was also established.
Roosevelt’s Approach to Solving the
Problem of the Great Depression
• Reform: Programs such as the Federal Deposit
Insurance Corporation (FDIC) were developed
to prevent similar problems in the future.
• The Social Security Act provided retirement
protection.
• http://www.history.com/videos/the-newdeal#the-new-deal
Roosevelt’s Hundred Days
• President FDR sent many bills to Congress
• Congress passed 15 major acts to help the
economy, these programs made up the First New
Deal
• The Securities and Exchange Commission (SEC)
was created to regulate the stock market and
prevent fraud
• The Glass-Steagall Act prohibited commercial
banks from speculating on the stock market. It
created the Federal Deposit Insurance
Corporation (FDIC)
Managing Farms and Industry
• The FDIC provided government insurance for
bank deposits up to a certain amount. It covered
peoples savings in the banks from loss
• Agricultural Adjustment Administration (AAA)
helped some farmers but mostly just the large
commercial farmers who raised one crop
• The National Industrial Recovery Act suspended
antitrust laws
• PWA – broke down long standing racial barriers in
the construction trades. (Public Works
Administration)
Spending and Relief Programs
• The Civilian Conservation Corps (CCC) gave
unemployed men aged 18 to 25 the opportunity
to work with the national forestry service
• They planted trees, fought fires, and built
reservoirs.
• The most important aspect of Roosevelt’s New
Deal was the change in the spirit of the American
people. Their faith in America was restored.
Social Security Act
• The Social Security Act provided security for
the elderly, unemployed workers, and other
needy people
• It provided welfare payments to needy
people, including those with disabilities and
poor families with young dependent children
• It provided a monthly retirement benefit for
people when they stopped working at age 65
Long-Term impact of New Deal
• The long term impact of Roosevelt's New Deal
was an increased role of the federal government.
• Federal government grew larger and gained more
power which we are still dealing with today.
• He used the government to try to solve economic
problems which stemmed from the government
interference in the free market system in past
administrations. (Ex: T.R., Taft, and Wilson)