Presentation on theme: "Chapter 30: The Causes of the Great Depression"— Presentation transcript:
1 Chapter 30: The Causes of the Great Depression What caused the most severe economic crisis in American history?
2 Black TuesdayOctober 29, 1929The U.S. Stock Market lost 90% of its value.When the stock market crashed, it triggered the economic collapse
3 The Causes of the Great Depression A Speculative Boom Leads to a Spectacular CrashA “bull market” versus a “bear market”A rise in stock prices versus a drop in stock pricesThe 1920’s could be characterized as a bull marketThe ability to buy on margin$ buys $10, worth of stockPrice goes up, sell the stock, pay the broker, the rest is profitIF the price goes up…Speculation – a risky investment to get rich quickStock prices were not accurately reflecting the real value of the companies
4 The Causes of the Great Depression A Banking Crisis Wipes Out People’s SavingsWhere do you think the money was coming from that brokers were lending?Bank runs fueled the panicBanks were not safe anymore
6 The Causes of the Great Depression Overproduction Puts Too Many Goods in StoresAssembly line and mass production increases output with decreasing demandNot enough consumers to buy all the productsA widening Wealth Gap Leads to Rising DebtProfits for business owners did NOT lead to increasing wagesAn estimated 40% of Americans lived in povertyHigh Tariffs Hurt Foreign SalesLimited U.S. market and now a limited international market
8 The Causes of the Great Depression Farmers Were the First to Experience the Pain of UnderconsumptionWhen the war ended, their markets disappearedFarmers lost everything as banks seized their property for payment of debts
10 As industry declined, companies laid off workers. Workers who lost their jobs could not pay their debt and reduced consumption.Industries produced less since people were buying less.
11 Government Actions Make a Bad Situation Worse The Role of the Fed (The Federal Reserve)Manages the nation’s money supplyDiscount Rate = the rate of interest the Fed charges banks to borrow moneyLow interest rates make borrowing easy (the story throughout the 1920’s)1931 the Fed raises the discount rate, raising interest, decreasing the money in circulation, depriving businesses of the capital they neededThe Hawley-Smoot tariff sets record high rates to protect American industry but destroys international tradeFarmers and businesses lose overseas marketsThe Great Depression was a global event
13 Chapter 31: The Response to the Economic Collapse How did the federal government respond to the economic collapse that began in 1929?
14 The Story of the Bonus Army May, 1932: veterans flocked to Washington D.C. for payment of a bonus due in 1945 (they needed the money now)By summer, 12,000 WWI vets were therePresident Herbert Hoover believed in self-reliance, rugged individualism and hard work, not handoutsHe ignored the veterans at first then with tear gas, tanks and armed soldiers, he cleared out the Bonus ArmyThe nation was stunned
17 How To Respond: Three Perspectives The Conservative Response: Let the economy stabilizeMaintain the status quoOpposed to large scale government interferenceThe economy will stabilize if left aloneIt is all part of the business cycleAny government intervention should only be at the local level
19 How To Respond: Three Perspectives The Liberal Response: The government must helpGovernment is needed to protect individuals from dangerous working conditions, monopolies, unsafe food or economic catastrophe/hardshipsCalled for the funding of public works = government funded construction projectsNew taxes to raise money for social welfareThe government needs to take an active role in the capitalist system to help by working closely with businesses
22 How To Respond: Three Perspectives The Radical Response: Capitalism must goRadicals desire sweeping social, political or economic change (could be through democratic means or via revolution)Communism would allow government planners to distribute wealth according to people’s needsThe working class would rise up against the “greedy capitalists”
23 Hoover’s Conservative Response Local communities, churches and private charities could take care of their ownHoovervilles were on the riseA liberal response was needed when his conservative response was failingRFC to issue government loans to banks, railroads and other big businessesA “trickle down” theory
24 The Election of 1932 Hoover (R) vs. Franklin D. Roosevelt (D) FDR promised America a “New Deal”New Deal—relief for needy, economic recovery, financial reformWith “Brain Trust,” FDR formulates policies to alleviate problems
25 The 100 Days Passes over 15 major New Deal laws Emergency Banking Relief Act permits Treasury Dept. to inspect banks and decide which are insolvent, sound, or need loansPublic confidence in banks revivedFederal Securities Act—companies must give all information on stocksSecurities and Exchange Commission created to regulate stock marketFDR gets law allowing production of some alcoholic beverages21st Amendment repeals prohibition by end of 1933Tennessee Valley Authority creates jobs renovating, building dams
26 The 100 Days NIRA establishes codes of fair practice for industries Creates National Recovery Administration (NRA)NRA sets standards, prices, limits productionCreates the Public Works AdministrationFederal Emergency Relief Administration—aid to states to provide direct relief to the needyThe Agricultural Adjustment Act sets prices on farm crops while trying to reduce overproductionCCC provides jobs for 250,000 single men years old working in forests, parks, etc
28 Chapter 32: The Human Impact of the Great Depression How did ordinary Americans endure the hardships of the Great Depression?
29 The Country in Economic Distress UnemploymentFrom almost 1 in 7 businesses failed1929: 3.1% unemployment / 1933: 25%The unemployed had little to spend, businesses lost customers, so they closed = increasing unemploymentFarms lost half their valueForeclosure (lose the farm, the $, the home, the livelihood)Tenant farmers and sharecroppers in the South fared even worseMississippi annual income fell from $ in 1929 to $ in 1933
30 Financial Stress Affects Families Financial stress leads to psychological stress as adults lose their jobs, status, authority and self-respectMarriage and birth rates declinedDivorce rates declinedCouldn’t afford to live separatelyCouldn’t afford the legal feesFamilies lost their homes = evictionTeenagers left home in search of work
31 Financial Stress Affects Families Hoovervilles spring upEstimated that 1 in 5 New York children were malnourished and a lack of proper nutrition made people vulnerable to diseaseCouldn’t afford medical careSoup kitchens and breadlines multiplied
32 The Dust Bowl: Natural Disasters Intensify the Suffering
33 The drought of 1931 lasted for several years, and millions of people had fled the area by the time it lifted.Agricultural practices in the 1930s left the area vulnerable to droughts creating desertificationOverfarmingIncreased grazingLand once covered with protective grasses was now bare, with no vegetation to hold the soil in place.When wind storms came, they stripped the rich topsoil and blew it hundreds of miles. The dust sometimes flew as far as the Atlantic Coast.Dust mounds choked crops and buried farm equipment, and dust blew into windows and under doors.
34 Like the Joads in the Steinbeck novel, The Grapes of Wrath, families head to California to escape the Dust Bowl
35 While droughts continued in the West, floods plagued the East and indicated a need for federal action
36 Struggling to Get By80,000 students drop out of college between 1932 – 1933Took any jobs available simply to keep a paycheck coming (better than receiving a government handout)Those who were still employed worked fewer hours for less payAmericans responded favorablyCharitable giving increasedEven Al Capone financed a soup kitchenPublic assistance though, was running out
37 Chapter 33: The New Deal and Its Legacy How did the expansion of government during the New Deal affect the nation?
39 The “First” New Deal Shoring up the Financial Sector Emergency Banking Act, FDIC, SECShoring up Free EnterpriseNIRA creates the NRAAn increase in government regulation and economic planningHelps business with price controls to limit competitionUnions get minimum wages and collective bargainingThe unemployed get more public works projects
40 To promote economic development To help farmersAAA to reduce production and raise pricesTo promote economic developmentTVA to “electrify” the Tennessee Valley and provide flood and erosion controlTo help homeownersHome Owners’ Loan Corp. to help meet mortgage paymentsFHA to insure loansTo help the “forgotten man”CCC for jobsFERA for direct relief
41 New Deal Critics From the Right (conservatives) Too radical, too much, unconstitutionalFrom the Left (liberals)Not enough action, not enough helpDr. Francis Townsend proposes a $ monthly payment for everyone over the age of 60Charles Coughlin (a “radio” priest) claims FDR has out-Hoovered Hoover and wasn’t doing enoughHuey Long, a Louisiana senator, launches a “Share our Wealth” campaign for guaranteed jobs and guaranteed incomes
42 The Second New Deal Beginning in 1935: more legislation When is the next election going to occur?WPA hires musicians, writers, artists, construction workersEventually the WPA hires 7% of the American workforce
43 The Supreme Court Attacks the New Deal Strikes down the N.I.R.A.No presidential power to issue “codes of fair competition”Strikes down the A.A.A.“beyond the powers delegated to the federal government”FDR tries to add additional justices to “pack” the Court in his favorBad idea, much public anger over the scheme
44 …And Even More Wagner Act (National Labor Relations Act) The Bill of Rights for organized laborUnion membership climbs to 28% of the total labor forceSocial SecurityRetirement and disability
46 The Impact(s) of the New Deal A good deal for workersSecured the right to form unionsSecured the right to bargain collectivelyA mixed deal for womenThe influence of FDR’s wife Eleanor was hugeAn unprecedented number of female workers were hired by FDR’s administrationNot all women fared well as society was slow to changeA disappointing deal for African-AmericansOppression didn’t changeEven New Deal agencies practiced segregation
47 The Impact(s) of the New Deal A better deal for American IndiansCommissioner of Indian Affairs, John Collier, reversed some harmful policies of previous administrationsA tough deal for Mexican AmericansThe AAA didn’t help migrant Mexican farm workersMexican laborers were not citizens and not entitled to any New Deal reliefA New Deal Coalition for DemocratsWomen + minorities + industrial workers + immigrants + southern whites + city dwellers
48 Foundation for the modern welfare state (government responsibility) and deficit spending becomes the norm