The Great Depression
Unit VIB
AP U.S. History
Fundamental Question
► Analyze
how the Great Depression changed
America’s political and economical
structures.
Past Major American Depressions
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Panic of 1807
 MAJOR CAUSE: Embargo Act of 1807
Panic of 1819
 MAJOR CAUSES: End of War of 1812 and First Bank of U.S. not rechartered
 MAJOR LEGACY: Second Bank of U.S. chartered, first example of business cycle
contraction
Panic of 1837
 MAJOR CAUSES: Second Bank of U.S. not rechartered and Specie Circular
Panic of 1873
 MAJOR CAUSES: Land and railroad speculation
Panic of 1893
 MAJOR CAUSES: Railroad speculation and Sherman Silver Purchase Act
 MAJOR LEGACY: J.P. Morgan bailed out government with $65 million in gold bullion
Panic of 1907
 MAJOR CAUSES: Stock market speculation and bank runs
 MAJOR LEGACY: Led to Federal Reserve System
Depression of 1920-1921
 MAJOR CAUSES: War economy to peace economy, influx of laborers, overproduction in
agricultural sector
Republican Policies
► Limited
regulation and little to no
government intervention
 Banks and corporations increased questionable
or corrupt financial tactics
► Revenue
acts cutting corporate and upperclass taxes
► High tariffs promoting industries and
manufacturing
 Hurt agricultural sector and foreign markets
A “Boom” Economy
Mass Consumerism
 Industrial production increased with influx of consumer products along with
heavy industrial production
 Production and innovation led to profits and relative wage increases
 Installment plans heightened the American consumerism as Americans
purchased goods on credit increasing their debts
► Income Distribution
 Despite profits and production, the socioeconomic gap widened further than
ever before
 5% wealthy class owned 33% of income
 Top 1% owned over 35% of the nation’s wealth
 Bottom 20% owned 4% of the nation’s wealth
► Agricultural Sector
 Farmers suffered from overproduction especially after WWI
 Overproduction of cash crops resulted in surpluses and lower prices
 Increased farming resulted in poor environmental conditions
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The Stock Market in late 1920s
► The
nation’s bull market of the 1920s led to
increasing financial action on the stock markets
► The stock market became a “get-rich-quick”
scheme since prosperity was so rampant and
significant leading to speculation
► Much like consumers did with installment plans,
buyers (banks, brokers, corporates, consumers)
bought stocks on credit called buying on margin
► Overproduction in all sectors and foreign
competition made investors uneasy and started
pulling out of the market by selling shares
The Crash of 1929
► Despite
the booming economy and bull market,
companies reported profits below market speculation
► The response led to a selling run on Thursday,
October 24 and stock prices fell
► Banks bought stocks to offset and stabilize prices on
Friday
► Unfortunately, a wave of selling occurred on Monday
and continued on Tuesday
► On Tuesday, October 29, 1929 the bottom hit and
investors lost millions in minutes
► The stock market prices continued to drop further
afterwards
Foreign Involvement in the
Depression
► Dawes
Plan
► Germany’s Reparations
 Germany’s consistent loan borrowing for WWI
reparations led to hyperinflation
► European
War Debts
 Great Britain and France, among others, owed much to
the United States
► American
Calls In Its Loans
 Once the economy hit bottom, U.S. banks and creditors
called in loans from Europe to counter the market crash
 Since U.S. cut off loans, Europe unable to pay off debts
 Depression spread throughout North America, Europe,
parts of Asia, and South America
Hoover and the Republicans
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“Given the chance to go forward with the policies of the last eight years, we shall soon with the help of God, be in
sight of the day when poverty will be banished from this nation.” - Inauguration, March 4, 1929
“There is no cause to worry. The high tide of prosperity will continue.” Sec. Of Treasury Andrew Mellon, Sept. 1929
“While the crash only took place six months ago, I am convinced we have now passed the worst and with continued
unity of effort we shall rapidly recover.” Pres. Hoover, May 1, 1930
“The worst is over without a doubt.” Sec. Of Labor James Davis, June 29, 1930
Hoover’s Economic Philosophy
 Federal government regulates, it does not intervene
 Promote voluntarism, restraint, and self-reliance
 Economy will improve itself based on supply and demand and consumers and producers
 Urged Americans to avoid wage cuts and layoffs, avoid strikes, increase charitable contributions
Hawley-Smoot Tariff (1930)
 Historical increase in tariff rates to protect domestic industries
 Foreign nations enacted high tariff rates on U.S. goods
 EPIC FAIL and increased effects of Depression
Federal Farm Board
 Increased power to temporarily hold crop surpluses to curb overproduction
 FAIL
Reconstruction Finance Corporation (RFC)
 Government-backed private corporation to fund large corporations involved in infrastructure and
finances
 FAIL
Depression by Numbers
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Dow Jones Industrial Average
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 1929: 381.17
 1932: 41.22
 The average of stock prices
dropped over 90%
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 1928: 93.8
 1933: 76.3
 Having children and taking care
of families became difficult as
the Depression worsened
Unemployment
 1929: 3.2%
 1933: 24.9%
 Unemployment rates higher in
specific regions, among
different groups
Toledo, OH: 90%
GDP
 1929: $103.6B
 1933: $56.4B
Fertility Rates
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Suicide Rates
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1920-1928: 12.1
1929: 18.1
1930-1940: 15.4
The impact of the crash in 1929
and the depression mentality
affected many Americans from
all classes and races
Hoovervilles
Displaced Americans
set up shanty towns
Came to be known as
“Hoovervilles”
Public Reaction
Hoover and the Republicans were
increasingly blamed for the
worsening conditions
► As desperation increased, more
and more balked at Hoover’s noninterventionist policies and
demanded direct government
action
► Farmers sabotaged crops to drive
up prices but led to violence
 Farm Holiday Association
► Bonus March
 Veterans marched on D.C.
demanding early payments
 Federal troops sent in to break
up Hooverville
 Public backlash on Hoover
increased due to perceived
apathy by Hoover
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Depression through Pictures
Election of 1932
It was obvious that the Republican Party would lose the Presidency and Congressional
majority due to the Depression
► Republicans nominated Hoover
► Democrats nominated Franklin Delano Roosevelt
 Campaign promise of a “new deal” and help for the “forgotten man”
 Repeal Prohibition
 Cut government spending and provide direct assistance for unemployed rather than
businesses
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Election of 1932
Legacy of Election of 1932
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Realignment election
leading to the Fifth Party
System
Twentieth Amendment
(lame-duck amendment)
FDR expanded
intervention and influence
of the executive branch
Eleanor Roosevelt
exemplified First Lady as
more than just a hostess
Keynesian Economics
► Before
the New Deal, the American economy
followed classical economics based on supply and
demand, laissez-faire, limited to no government
intervention
► Keynes believed classical economists and Say’s
Law to be flawed; focus on the short-run
 “In the long-run we are all dead.”
► Keynesian
economics requires strong fiscal policy
(government spending/deficit spending) and
monetary policy (the Fed increasing or decreasing
the money supply)
FDR’s Message of Hope
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Calming the nation
 “… the only thing we have
to fear is fear itself.”
 Fireside chats
FDR’s Three R’s: Relief,
Recovery, Reform
Brain Trust
 Capable advisers ordered
to experiment, be
pragmatic
 “Do something.”
First Hundred Days and First New Deal
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Congressional passage of FDR’s programs
 Bank holiday on March 6, 1933 and Emergency Banking Relief Act
► Closed banks and reopen those sufficient
 Federal Deposit Insurance Corporation (FDIC)
► Insured deposits if a bank fails
 Home Owners Loan Corporation (HOLC)
► Refinancing for homes
 Farm Credit Administration
► Low-interest loans and mortgages for farmers
 Federal Emergency Relief Administration (FERA) - Hoover
► Federal grants to local and state relief programs
 Public Works Administration (PWA)
► Federal funds for local and state infrastructure projects through private corporations
 Civil Works Administration (CWA)
► Federal-sponsored construction projects
 Civilian Conservation Corps (CCC)
► Federal program for young men to perform unskilled labor in rural areas
 Tennessee Valley Authority (TVA)
► Government corporation for regional development
 Agricultural Adjustment Administration (AAA)
► Federal subsidies for reduced crop production
► UNCONSTITUTIONAL – United States v. Butler
 National Industry Recovery Act (NIRA)
► Establish wage and price controls between businesses and unions; cease enforcing
anti-trust laws
► National Recovery Administration (NRA) as enforcement
► UNCONSTITUTIONAL – Schechter v. United States
 Gold standard abandoned
► Believed gold standard prevented Fed from expanding money supply
 Securities and Exchange Commission (SEC)
► Coded and regulated stock market
 Federal Housing Administration (FHA)
► Insured bank loans for construction and repair projects
The Second New Deal
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Resettlement Administration/Farm Security Administration
 Resettled poor farmers; economic and educational programs for farmers
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Works Progress Administration/Works Projects Administration (WPA)
 National labor project for infrastructure and humanities
 National Youth Administration (NYA)
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Wagner Act/National Labor Relations Board
 Right to unions and collective bargaining and enforce against unfair business
practices
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Rural Electrification Administration (REA)
 Government-sponsored program to develop rural utilities through private-public
partnerships
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Revenue Act of 1935
 Increased tax rates on wealthy, capital gains, gifts
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Social Security Act
 Tax on employee income to be used for retired persons, disabled, dependents,
unemployed
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Fair Labor Standards Act
 Established national minimum wage
 Maximum 40 hour workweek and overtime
 Child labor under 16
Election of 1936
► FDR
rallied against big business and
continue New Deal programs
► New Deal Coalition by FDR
 Democrats, Solid South, farmers, populists,
progressive intellectuals, minorities, labor
unions, urban leaders
► Easily
defeats Alfred Landon (R), Governor
of Kansas
Election of 1936
Federal government
used posters, songs,
advertisements,
literature to promote
and support FDR’s
New Deal programs
among the American
public
The Dust Bowl (1930-1936)
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After decades of improper farming
techniques, overgrazing, and soil
erosion the environmental impact
finally caught up to the Great Plains
region
Coupled with increasing cultivation
due to desperate farmers and
overproduction
Plains grasses necessary to retain soil
moisture died off and a severe
drought hit in 1934
Dry soil, as a result, was lifted up by
windstorms and caused massive
clouds of dust to sweep across the
region
Black Sunday - April 14, 1935
The Dust Bowl furthered the plight of
Midwest farmers during the
Depression
Dust Turns Day Into Night
New Deal Reactions
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Majority of Americans approved
of FDR’s programs
Business leaders and
corporations called him traitor
or fascist or communist
Boondoggles
American Liberty League
Father Charles Coughlin
 Radio broadcasts attacking
FDR; pro-fascist and antiSemitic remarks
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Huey Long – “Kingfish”
 Share the Wealth
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$5000 for every family by
taxing the wealthy
FDR vs. Supreme Court
► Supreme
Court reversed several New Deal
programs
► Justice Reorganization Bill
 Appoint new justices for every justice over 70
►6
additional justices
 Court-packing
 Most of Congress defeated bill
► Compared
FDR to fascists in Europe
Unions Strengthened
► AFL
strengthened by union-backed New
Deal legislation
► Congress of Industrial Organizations (CIO)
 Organize unskilled laborers in major industries
► Strikes
 Auto industry recognized United Auto Workers
due to sit-down strikes
 Republic Steel violent strike helped recognize
CIO
Final Years of New Deal
Roosevelt Recession (1937-1938)
 SSA cut consumer spending
 National debt and government spending
► Reductions of New Deal programs
 Coalition of Republicans and conservative Democrats blocked more New
Deal legislations
 Cutbacks in WPA and other programs
 Limited federal support proved the economy was unable to stand on its
own
► Midterm 1938 Election
 Americans voted more Republicans back into office
 Hatch Act of 1939
► Limited politicians and campaign contributions
► People who received federal assistance could not use money for
campaign contributions
 New Deal essentially dies by 1939
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Women and Depression
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Men left their families in
search of work or worked
more than one job
Limited income and
absence of fathers placed
intense pressures on
mothers
Female labor force
increased for female-based
jobs
Wages remained low
compared to men
Suffered backlash as a
competitive workforce
Minorities and the Depression
Blacks
 Suffered extreme poverty compared to other groups due to racism and
worsening conditions
 Limited opportunities for relief and work projects
 FDR did little to secure Solid South
► Natives
 Indian Reorganization Act (1934)
► Repeal of Dawes Act (1887) eliminating assimilation programs, return
of native sovereignty, preservation of native cultures
► Immigrants
 Immigration was reduced by restrictive policies of 1920s
 Suffered discrimination and prejudice with worsening economic conditions
 Mexican Repatriation
► With farming jobs limited, white Americans migrated west and policies
established to push out Mexican immigrants
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The Depression as a Theme
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Federal One of the WPA
 Federal Writers’ Project
► Employed authors and writers to account oral histories and most pronounced the social
realism of the Depression
 Federal Theatre Project
► Playwrights and actors hired to promote optimistic themes and entertain poor citizens
► Negro Theatre Project established programs in major cities and provided opportunities for
blacks
 Federal Music Project
► Employed out-of-work musicians and promoted musical education throughout the nation
 Federal Art Project
► Employed artists for public paintings and murals
► Hired Jackson Pollock, a famous abstract artist
 Historical Records Survey
John Steinbeck
 Of Mice and Men, The Grapes of Wrath
Recreation and Escapism
 To escape the harsh realities of the Depression, more and more people distracted themselves with
recreational and leisure activities
 Movies provided realistic portrayals and screwball comedies that attracted crowds
 WPA projects built or repaired recreational and athletic buildings and fields; established athletic and
recreational education programs
 Sports and theaters sought innovations through technology or rule changes