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Great Depression. Lecture 6: Great Depression Introduction – Student Outcomes 7. Compare and contrast the causes and impact of American economic growth.

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Presentation on theme: "Great Depression. Lecture 6: Great Depression Introduction – Student Outcomes 7. Compare and contrast the causes and impact of American economic growth."— Presentation transcript:

1 Great Depression

2 Lecture 6: Great Depression Introduction – Student Outcomes 7. Compare and contrast the causes and impact of American economic growth and recessions, especially focusing on the 1929 Great Depression and the 2007 recession.

3 Lecture 6: Great Depression Introduction A.International Causes B.Domestic Causes* C.FDR and the New Deal: Success and Failures

4 Lecture 6: Great Depression Introduction On October 21, 1929 President Hoover declared: “We gain constantly in better standards of living, more stability of employment... and decreased suffering.” On October 29th, Black Tuesday, the stock market crashed with investors losing 13% of the value of their investmentsBlack Tuesday While there were many indicators that the economy was beginning to falter before the crash, the prolonged economic crisis caused many Americans to lose confidence in the economy and in some cases their government

5 Lecture 6: Great Depression Introduction

6 Lecture 6: Great Depression Introduction

7 Today, 6.1% Lecture 6: Great Depression Introduction

8 Lecture 6: Great Depression Introduction The price of stocks had increased much more rapidly than production had increased American confidence in business collapsed Congressional investigations revealed massive irregularities Banks knowingly had sold worthless bonds Some Wall Street leaders sold their portfolios of stocks while advising their clients to keep theirs Richard Whitney, president of the New York Stock Exchange, was convicted of stealing funds from his customers, including a fund to aid widows and children

9 Lecture 6: Great Depression Introduction

10 Lecture 6: Great Depression Introduction Those who still had a job saw their wages and hours fall In 1929 U.S. Steel had 225,000 full-time employees In 1932 U.S. Steel production was only 12 percent of capacity but it had no full-time employees Hungry Americans stood in bread lines waiting for food Millions of Americans lost their homes and moved in the villages of shacks called HoovervillesHoovervilles

11 Lecture 6: Great Depression Introduction Hooverville, Puget Sound, Washington

12 Lecture 6: Great Depression Introduction Many Americans moved back to the country hoping to be able to grow their own foods but the rural areas were already poor and offered little relief Many Americans blamed themselves for their economic misfortunes whiles others protested The protests were unorganized because unions and socialist organizations had been severely weakened during the Twenties

13 Lecture 6: Great Depression Introduction One of the most publicized protests was Bonus Army of army veterans who demanded that they now be paid the bonus they had been promised to receive in 1945Bonus Army In 1932 the veterans camped in Washington, D.C. Led by General Douglas McArthur, the U.S. army forcefully closed the encampments of the veteransDouglas McArthur

14 Lecture 6: Great Depression Introduction Veterans’ Camp Washington, D.C., 1932

15 Lecture 6: Great Depression Introduction Another group protesting the government’s response to the economic crisis was the Farmers Holiday Association which blocked roads in the Midwest to prevent food from reaching the marketsFarmers Holiday Association The best organized group of protesters was the Communist Party Many Americans believed that the country was on the verge of a revolution Hoover was so concerned with the threat of violent protests that he refused the growing demand to reduce government spending by cutting the size of the army

16 Lecture 6: Great Depression Introduction Hoover opposed having the government provide any form of relief: The Government should not support the people.... Federal aid... Weakens the sturdiness of our national character. Some of Hoover’s measures, such as the Hawley- Smoot Tariff which increased tariffs, made the Depression worse because it reduced international tradeHawley- Smoot Tariff In 1932 Hoover pushed through a tax increase to balance the federal budget but at the cost of reducing consumer spending

17 Lecture 6: Great Depression Introduction With the economy not recovering, in 1932 Hoover took some actions to help the economic recovery: Established the Reconstruction Finance Corporation to loan money to banks, railroads, and other businessReconstruction Finance Corporation Created the Federal Home Loan Bank System to charter and supervise Savings & Loans to help homeowners threatened with foreclosureFederal Home Loan Bank Hoover reluctantly agreed to a program of public works which funded the San Francisco Bay Bridge and Boulder (Hoover) Dam

18 Lecture 6: Great Depression Introduction San Francisco Bay Bridge

19 Lecture 6: Great Depression Introduction Hoover Dam, Boulder Canyon Dam

20 Lecture 6: Great Depression Introduction – Election of 1932 In the Election of 1932 Hoover was again the candidate of the Republican PartyElection of 1932 The Democrats nominated Franklin D Roosevelt, the popular governor of New YorkFranklin D Roosevelt Roosevelt promised Americans a New Deal while criticizing Hoover for his excessive spending The Democrats also promised to end Prohibition With many Americans blaming Hoover for the Depression, Roosevelt easily won Roosevelt was the first Democrat to win both the popular and electoral college votes since 1852

21 Lecture 6: Great Depression Introduction – Election of 1932 Franklin D RooseveltHerbert Hoover

22 Lecture 6: Great Depression A. International Causes

23 Lecture 6: Great Depression A. International Causes The International Causes of the Great Depression can be traced to the Great War, World War I In many aspects the world never recovered from the great shock of World War I While much of the physical destruction of the war was repaired quickly the complex prewar economy never completely recovered Before the war a complex web of specialized production had developed The war interrupted the traditional exchanges of raw materials for manufactured goods and capital

24 Lecture 6: Great Depression A. International Causes The war destroyed many of the invisible sources of income for many of the European nations – income from overseas investments and merchant marines The large economic structures of nations such as Austria, Germany, and Russia were badly disrupted Britain and France had little hope of recovering their prewar loans but the United States expected the Europeans to repay their wartime loans The Allies’ solution to their debt problem was to collect reparations from Germany – but this merely focused the problem on the fragile German economy

25 Lecture 6: Great Depression A. International Causes There were problems in agriculture caused by expansion of world agriculture production to meet the needs of the war but with the return of European production there was an oversupply Finally, the focus on war production reduced the creation of the capital goods necessary for new and efficient production One consequence of these economic dislocations was a high rate of unemployment both in industry and farming

26 Lecture 6: Great Depression A. International Causes Young men who had served in the war found it particularly difficult because they lacked the skills and experiences necessary for employment Many of these disgruntled young men would turn to paramilitary groups such as the Freikorps for meaning and purpose in their lives – proto-NazisFreikorps The European unemployment problem was exacerbated by the immigration policies of the United States which sharply limited the number of immigrates – The Emergency Quota Act of 1921Emergency Quota Act of 1921 The second problem facing many Europeans, particularly the middle class, was inflation

27 Lecture 6: Great Depression A. International Causes Freikorps

28 Lecture 6: Great Depression A. International Causes Wartime shortages and decisions to increase the money supply led to a rapid rise in prices – this devalued assets such as bonds, savings, insurance, and real estate In effect, the middle class paid for the war through the hidden tax of inflation Particularly in Germany, inflation would reach an extraordinary level as the government printed money to pay for the goods required to pay reparations owed to the Allies

29 Lecture 6: Great Depression A. International Causes Many business would borrow money to expand their business with the belief that the debts would be paid with deflated money The postwar inflation not only destroyed the resources of the middle class but also its sense of confidence and security The economic policies of the great powers were based on a belief that prosperity would return when the prewar economic institutions were reestablished

30 Lecture 6: Great Depression A. International Causes Children playing with German currency

31 Lecture 6: Great Depression A. International Causes Wilson’s Fourteen Points called for the removal of all economic barriersFourteen Points While a number of economic conferences were held to reestablish economic unity, no national government was willing to sacrifice its immediate benefits from tariffs, debts, or reparations The American Dawes Plan (1925) modified the German method for paying reparations but also encouraged American banks to loan money to GermanyDawes Plan

32 Lecture 6: Great Depression A. International Causes Much of the money loaned to Germany was used to pay reparations Finally, the money from the reparations would be used by the Allies to repay their American loans The Dawes Plan provided a sense of confidence that was necessary for economic expansion By the late 1920’s it appeared that Europe had economically recovered with production surpassing that of 1913 American immigration policy also intensified the economic problems of eastern Europe

33 Lecture 6: Great Depression A. International Causes

34 Lecture 6: Great Depression A. International Causes Another factor was the growth of cartels to reduce costs and increase prices The growth of trade unions reduced wage flexibility and sometimes hindered the introduction of new technologies and efficiencies So long as credit from America flowed into Europe it was possible to mask the fundamental weaknesses of the economy When the American stock mark crashed in October, 1929 the availability of large loans to Europe ceased

35 Lecture 6: Great Depression A. International Causes Drastic deflation now struck the U.S. Without funds from America, Europe quickly experienced a banking crisis By 1931 even the Bank of England was closed Without access to money, many individuals reduced the spending To maintain sales, producers and retailers cut prices and production The cuts in production led to cuts in employment which continued the downward spiral

36 Lecture 6: Great Depression A. International Causes Bank of England Closed

37 Lecture 6: Great Depression A. International Causes The question facing each nation was whether to seek individual national solutions or cooperate internationally Ultimately the individual approach would prevail The effort to remove the weight of war reparations and debt failed At the 1931 Lausanne Conference the European nations agreed to a 95 percent cancellation of reparations if the U.S. cancelled the war debtsLausanne Conference Although the U.S. rejected the Lausanne settlement, the European cancelled reparation payments and all but Great Britain and Finland stopped paying war debts

38 Lecture 6: Great Depression A. International Causes To some degree the debt relief was too late – the damage to the economic system had already been done Attempts to remove trade barriers also failed because the United States refused to stabilize currency exchange rates Most countries refused to lower tariffs and hurt local industries The focus on national solutions encouraged the development of autarchy – national economic self- sufficiencyautarchy

39 Lecture 6: Great Depression A. International Causes Industrial nations encouraged agricultural production Agricultural nations attempted to industrialized Autarchy violated the principle of division of labor and efficient use of capital Alternatives to democratic capitalism would emerge A popular alternative to liberal democracy was Fascism – in its simplistic form, Fascism is a rejection of the Enlightenment’s view of man in favor of the Romantic view Fascism

40 Lecture 6: Great Depression A. International Causes For Fascism man was guided not by reason but by emotion and intuition – to struggle, conquer and dominate Fascist condemned individualism and ambition as selfish and anti-social - individual satisfaction came from being part of a race, nation, or political party To be successful, the group required strong leaders with the courage to act boldly Fascism appealed to the masses because it promised a certainty of their social status and assurance of comradeship – it addressed the needs of individuals increasingly alienated by modern society

41 Lecture 6: Great Depression A. International Causes Variations of Fascism would develop in many countries including Italy, Japan, and Spain In Japan, Shintoism and worship of the Emperor played the role of the Volk in GermanyShintoism In Italy, Benito Mussolini would emerge as the strong leader who would return Italy to the glory of the Roman EmpireBenito Mussolini

42 Lecture 6: Great Depression A. International Causes Another alternative to democratic capitalism was socialism/communism which was founded on the Enlightenment ideal that all men are created equal The first successful communist revolution was the Bolshevik Revolution in Russia in 1917 The leader of the Bolsheviks, Vladimir Lenin, was forced to compromise the promise of universal brotherhood in favor of “socialism in one country” Under the leadership of Joseph Stalin, Soviet Russia offered an attractive alternative to the failing democracies

43 Lecture 6: Great Depression B. Domestic Causes

44 Lecture 6: Great Depression B. Domestic Causes Two domestic causes for the Great Depression were the growing inequality of wealth and a lack of financial institutions to prevent excessive speculation There were early signs that the unequal distribution of wealth was causing a loss of purchasing power for most Americans: The sale of autos and other consumer goods stagnated as early as 1926 Incomes for farmers were falling The real estate bubbles in Florida and California burst leaving people unable to pay their mortgages and causing banks to fail

45 Lecture 6: Great Depression B. Domestic Causes As Europe recovered from the effects of the war the demand for American manufacturing and farm products decreased The price of stocks increased much more rapidly than the production of goods because money was invested in the stock market rather than in factories and businesses When American banks began to fail there were no financial institutions available to stop the panic

46 Lecture 6: Great Depression B. Domestic Causes

47 Lecture 6: Great Depression B. Domestic Causes The Great Depression was the product of many powerful forces that came together to spread fear and economic ruin: the economic disruptions caused by World War I; growing inequality of wealth and falling purchasing power; excessive speculation and a lack of institutions to regulate America’s financial institutions

48 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

49 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures With traditional laissez faire capitalism discredited, Roosevelt looked for an alternative to the Right’s Fascism and the Left’s Communism Roosevelt hoped his New Deal would be able to reconcile democracy, individual liberty, and economic planning In reality, Roosevelt had no blue print for ending the Depression but rather an open-minded pragmatism

50 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt’s first goal was to reassure the American people In his inaugural address, Roosevelt assured Americans that the “only thing we have to fear is fear itself” – VideoVideo The most immediate crisis for Roosevelt and the nation was the banking system where panicked depositors were demanding their money from banks with insufficient reserves and many states had suspended banking

51 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt first step was to declare a banking holiday Roosevelt then called a special session of Congress which passed the Emergency Banking Act to provide funds to the threatened banksEmergency Banking Act Soon the Banking Act of 1933 (Glass-Steagall Act) was enacted which attempted to control speculation by separating commercial from investment banking and established the Federal Deposit Insurance Corporation to insure the banking accounts of individualsBanking Act of 1933Federal Deposit Insurance Corporation

52 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Carter Glass and Henry Steagall

53 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt’s banking reforms were so successful that in 1936 no bank in the nation failed – between 1929 and ,000 banks failed To increase the money supply and stimulated economic growth Roosevelt also took the country off the Gold StandardGold Standard In the first hundred days of Roosevelt’s administration a large number of emergency measures were passed, including those dealing with banking

54 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt relied on his “Brain Trust” of intellectuals and social workers to develop his New Deal program: Frances Perkins, Secretary of Labor Frances Perkins Harry Hopkins, head of New York state’s relief work Harry Hopkins Harold Ickes, Secretary of the Interior and former advisor to Theodore Roosevelt Harold Ickes Louis Brandeis, former political advisor to Woodrow Wilson, now advised Roosevelt Louis Brandeis

55 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The first challenge the “Brain Trust” faced was whether or not to recommend breaking up big business or to rely upon government regulation The advocates for increased government regulation of business won the debate by arguing that large business was inevitable and even had advantages, the advocates for increased government regulation would eventually carry the day The centerpiece of the program to regulate industry was the National Industry Recovery Act (1933) and its National Recovery AdministrationNational Industry Recovery Act

56 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The goal of the NRA was to limit cutthroat competition between businesses by establishing codes for output, prices, and working conditions – limiting competition To win labor’s support for the NRA the legislation also recognized the right of workers to organize The NRA repudiated the idea of the unregulated business competition and “open shops” The NRA would fail to end the Depression in large measure because there not enough staff to monitor the 750 industrial codes or to enforce labor’s right to organize

57 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

58 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Another provision of the National Industrial Recovery Act was the Public Works Administration which provided $3.3 million for the construction of public facilities including schools and highwaysPublic Works Administration Although fearful of providing direct support for the unemployed, Roosevelt supported the continued use of the Federal Emergency Relief Administration to fund agencies supporting the poorFederal Emergency Relief Administration One of the programs funded by the FERA was the Civil Works Administration which for a short time employed more than 4 million Americans Civil Works Administration

59 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

60 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The CWA was soon abolished because of the growing public concern that the government was creating a class of American dependent upon the government Roosevelt preferred what today would be called infrastructure projects to provide relief and stimulate the economy Using the FERA Roosevelt created the Civilian Conservation Corps (CCC) in 1933 to employ young men to preserve national forests, build flood control, and improve the national parksCivilian Conservation Corps

61 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Civilian Conservation Corp

62 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Perhaps the most ambitious attempt at government planning was the Tennessee Valley Authority created in 1933Tennessee Valley Authority The TVA built a series of dams to prevent flooding and deforestation along the Tennessee River Many of these dams also generated electricity which competed with private electrical suppliers This was the first effort at regional economic planning and government competition with private enterprise

63 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

64 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt also introduced planning to address the agriculture crisis with the passage of the Agricultural Adjustment Act in 1933 Rather than relying upon the free market, the AAA called for the establishment of production quotas and to pay farmers not to plant crops Because many crops had already been planted with the legislation was passed, many crops and animals were destroyed to meet the production quotas At a time when many were facing starvation, the destruction of food created popular outrage and anger towards the Roosevelt Administration

65 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The AAA program did succeed in raising farm prices and incomes Most of the AAA benefits went to the owners of the land, not the tenant and share croppers – encouraged the development of agribusiness Many evicted farmers migrated to the West Coast to find work More than 1 million farmers, such as those in John Steinbeck’s The Grapes of Wrath migrated out of the MidwestJohn SteinbeckThe Grapes of Wrath

66 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

67 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The most destructive disaster in agricultural was the Great Dust BowlGreat Dust Bowl A combination of drought and mechanized farming that destroyed the top soil led the formation of great dust storms which destroyed crops and killed live stock Video

68 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

69 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

70 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

71 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Homeownership had emerged to be part of the American Dream but Depression put the ownership of a home out of the reach of many Americans The poet, Walt Whitman, wrote: “A man is not a whole and complete man unless he owns a house and the ground it stands on” To help Americans in danger of losing their homes Roosevelt created the Home Owners Loan Corporation (1933) to help homeowners in default on their mortgagesHome Owners Loan Corporation

72 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures In 1934 Federal Housing Administration was created to insure home loans that met standards for construction and credit worthiness – FHA guidelines are still the foundation for most home loansFederal Housing Administration The government guarantee of home loans was another break with the free market tradition Because of the FHA and later the Veteran’s Administration, millions of Americans had an opportunity to fulfill the American Dream

73 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures With the Depression weakening the nation’s faith in business, workers saw an opportunity to increase the influence of labor unions In addition, the decline of European immigration removed the stigma that unions were un-American The NIRA contained a provision granting labor the right to organize but the NIRA was ruled unconstitutional In 1935 the Roosevelt administration passed the Wagner Act which restored the right of labor to unionize and bargain collectively Wagner Act

74 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Union leaders began to argue that despite apparent political freedom, industrial despotism and income equality were barriers preventing most Americans from achieving the American Dream The Organizing Committee of the Steel Workers declared: “We are free Americans. We shall exercise our inalienable rights to organize into a great industrial union.” 1934 saw a dramatic increase in labor strikes but with only limited success

75 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The growing unrest of workers would challenge the American Federation of Labor’s emphasis on the skilled trades such as electricians and plumbers American Federation of Labor Labor leaders such as John L. Lewis called for the creation of industrial unions such as auto workers or minersJohn L. Lewis When the AFL leadership met in 1935 it rejected Lewis’ call for the inclusion of industrial unions As a result, many labor leaders left the AFL to form a new organization, the Congress of Industrial OrganizationsCongress of Industrial Organizations

76 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Lewis argued that workers deserved “economic freedom and industrial democracy” – a share in the wealth produced by the workers’ labor and a voice in their working conditions To challenge business’ use of strike breakers, the industrial unions devise the sit-down strike, where the union workers remained in the plant to prevent strike breakers from taking their places in the factory In late 1936 the auto workers seized the GM plant in Cleveland and by February, 1937, GM’s management was forced to negotiate with the union

77 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

78 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The CIO was particularly effective in lobbying the government to protect the rights of labor The CIO argued that the real cause of the Depression was under consumption and the role of unions, working with government, was to create consumer demand by raising wages and redistributing wealth Is this argument relevant today?

79 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Numerous other reforms were passed in Roosevelt’s first term: The Twenty-first Amendment (1933) repealed prohibitionTwenty-first Amendment The Federal Communication Commission (1934) was established to regulate the broadcast airways and telephone serviceFederal Communication Commission The Securities and Exchange Commission (1934) was created to regulate the stock and bond marketsSecurities and Exchange Commission

80 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The New Deal was soon challenged by the Supreme Court In the Schecter Poultry (1935) case the found the NIRA unlawful for two reasons:Schecter Poultry Congress did not have the authority to delegate to the president its legislative powers to establish the industry codes The Federal Government did not have the authority to regulate businesses not involved in interstate commerce

81 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures In the Butler case (1936), like the Schecter Poultry case, the Supreme Court ruled that the AAA was invalid because did not have the authority regulate local economic activity – taxation and farm subsidiesButler The New Deal was also challenged by political movements calling for more radical solutions to the Depression In California, Upton Sinclair the muckraking journalist, won the Democratic nomination for governor and called for the state government to use idle factories and lands to employ the workers – End Poverty in California (EPIC)Upton Sinclair

82 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Sinclair lost a bitter election as his opponents labeled him a communist and argued that California would be overrun by the unemployed, such as those described in the Grapes of Wrath A more radical threat to the New Deal came from Senator Huey Long of Louisiana whose “Share Our Wealth” program called for confiscating the money of the richest Americans and distributing it to the poor by guaranteeing every American a jobHuey Long Long appealed to patriotism, calling for a “red, white, and blue job every man.”

83 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Long was considering running for president as a third party candidate when he was assassinated in 1935 Another popular critic was the popular Father Charles Coughlin whose weekly radio broadcasts attracted millions of listeners as he attacked greedy bankers and capitalists, and called for government ownership of key industries Charles Coughlin Later, Coughlin’s popularity declined as his message turned more Fascist and anti-Semitic

84 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures In the 1934 Congressional Election the Democrats won an even larger majority With the support of his Democratic Congress, Roosevelt launched his Second New Deal to address the challenges of labor and the radicals The Second New Deal called for a shift in priorities from emergency relief to providing economic security for all Americans – protecting Americans from unemployment and poverty

85 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The New Deal’s programs of planning economic activity were abandoned in favor of programs aimed at redistributing wealth and increasing consumer demand Taking a page from the radicals, Congress in 1935 passed a new tax on the wealthy and corporate profits The Rural Electrification Administration was created 1935 to bring electricity to the 80 percent of farms without it and to stimulate demand for electrical appliancesRural Electrification Administration

86 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

87 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures A new agency, the Works Progress Administration, was created in 1935 to replace the earlier public relief efforts with work reliefWorks Progress Administration In 1935 it spent $4.9 billion dollars (6.7 percent of the GDP) not only on infrastructure projects but also employed thousands of artists and white-collar workers: The Federal Arts Project sponsored public art works and murals – more than 200,000Federal Arts Project The Federal Theater Project funded plays such as Sinclair Lewis’ It Can’t Happen HereFederal Theater Project The Federal Music Project funded orchestras and choral groupsFederal Music Project

88 Glen Ellyn, Illinois Post Office Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

89 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

90 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

91 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The most significant measure of the Second New Deal was the Social Security Act of 1935Social Security Act of 1935 Many of the programs contained in the Social Security Act had been proposed earlier by Progressive thinkers In fact, many European countries had already some aspects of Social Security such as unemployment insurance What was new was that the Federal Government was ensuring that some social groups would permanently be entitled to benefits – the beginning of today’s many entitlement programs

92 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

93 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The Social Security system that emerged was a uniquely American hybrid of national and local funding, control, and eligibility standards Roosevelt rejected paying for the system with general tax dollars but instead called for it to be funded by employers and workers Roosevelt believed that workers paying such taxes would have “a legal, moral, and political right” to collect their benefits such as old age pensions

94 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Old Age pension benefits are an example of a nationally administered benefit Unemployment benefits were administered by the states which retain considerable control over the level benefits Aid to Dependent Children was funded by the states, with eligibility and benefits varying widely The Social Security safety net was not extended to all Americans – those without political influence Domestic and farm workers were excluded – denying benefits to many unmarried women and non-whites

95 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The passage of Social Security meant the end of traditional laissez-faire economics with the government now assuring many Americans a living wage and protection from economic and personal misfortunes To win support for his new liberalism Roosevelt appealed to traditional American values Roosevelt became a master at using the radio and his fireside chats to promote his New Deal as necessary for the preservation of individual liberty – VideoVideo Today?

96 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

97 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt’s opponents also attempted to frame their agendas around the issue of personal liberty In 1934 the American Liberty League was formed by conservative businessmen who charged that the New Deal was fiscally reckless and government regulations undermined American freedomAmerican Liberty League Another business group, the U.S. Chamber of Commerce accused Roosevelt of attempting to “Sovietize” AmericaU.S. Chamber of Commerce

98 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures In the Election of 1936 the Republicans attempted to defeat Roosevelt by nominating Alfred Landon, a Theodore Roosevelt ProgressiveElection of 1936Alfred Landon Landon attacked Roosevelt for creating a welfare state that threatened individual liberty The election set the stage for what continues to be a national debate over ending the welfare state and returning to the free market economy In 1936 the nation spoke with one voice - Roosevelt easily won the election with 60 percent of the popular vote and the largest electoral college victory in American history (except for Washington’s)

99 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

100 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt victory was the product of a new Democratic Party coalition of Protestant farmers, urban Catholic and Jewish ethnic groups, industrial workers, and middle class homeowners In his inaugural address, Roosevelt admitted that the Depression still hung over the nation: “I see one-third of a nation ill-house, ill-clad, and ill-nourished.” Note Roosevelt’s continued argument that material conditions are necessary for true personal liberty

101 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Believing that he had a received a popular mandate to end the Depression through a program of entitlements and business regulation, Roosevelt set out to remove the Supreme Court as an obstacle by asking Congress in 1937 to increase the number of Supreme Court Justices – “court packing” Congress and the public reacted with outrage to Roosevelt’s “court packing” and he suffered a rare political defeat However, the Supreme Court began to show a willingness to accept the New Deal

102 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The Court now upheld state minimum wage laws The Court also rejected challenges to the new Social Security law and the Wagner Act In other cases the Court reaffirmed the government’s authority to regulate aspects of economic life including wages, child labor, and agricultural production Chief Justice Charles Hughes even pointed out that “freedom of contract” was not in the Constitution and that individual liberty required “the protection of laws against the evils which menace the health, safety, morals, and welfare of the people.”

103 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Concerned with the large federal expenditures for relief, Roosevelt in 1937 reduced farm subsidies and WPA relief work The rapid decline in government spending and a fall in business investment led to a dramatic increase in unemployment, jumping back to 20 percent by the end of 1937 Following the advice of John Maynard Keynes, the New Deal now shifted from an emphasis on redistributing wealth to public spending as the major tool ending the DepressionJohn Maynard Keynes

104 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Popular enthusiasm for the New Deal was beginning to wane in 1938 Southern Democrats had supported the New Deal when it allowed local control of relief efforts and the continued discrimination against Blacks When the New Deals turned to national programs and entitlements many Southern Democrats feared that the federal government would promote unionization and upset the regions racial foundations

105 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The power of Southern Democrats in Congress was amplified by the reduction of Black voting which resulted in the Southern Democratic leadership being repeatedly reelected Because committee chairmanships were based on seniority, the Southern Democrats gained control of powerful congressional committees In 1938 Roosevelt tried to reduce the power of the Southern Democratic leadership by calling for the election of more liberal Southern Democrats to congress

106 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Roosevelt not only failed to defeat the Southern Democratic leadership but he left them bitter and alienated Frustrated liberals turned away from Roosevelt and founded in 1938 the Southern Conference for Human Welfare to work for unionization, unemployment relief and racial justice in the SouthSouthern Conference for Human Welfare In the North the middle class lost their enthusiasm for the New Deal because of the “court packing” scheme and growing union militancy

107 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures By 1938 the New Deal was drawing to an end The new coalition of conservative Republicans and Southern Democrats had created a political stalemate The coming war in Europe led Roosevelt to increasingly focus on foreign rather than domestics affairs

108 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The impact of the New Deal on America’s women and diverse ethnic groups is probably best described as mixed For women, the New Deal increased their visibility in politics and a few talented women such as Frances Perkins (Secretary of Labor) participated in the Roosevelt administration Frances Perkins The most prominent woman of the New Deal was the President’s wife, Eleanor Roosevelt, who transformed the role of first lady from a position with no formal responsibilities to one with great political influenceEleanor Roosevelt

109 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

110 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Eleanor Roosevelt was active in many areas: Travelled widely to speak on public issues Wrote a regular newspaper column Worked to expand the New Deal in civil rights, labor legislation, and work relief

111 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Eleanor Roosevelt with Tuskegee Airman

112 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Despite the political visibility of women such as Eleanor Roosevelt, the status of women generally declined The Depression hit men harder than women because men tended to work in well paid industrial jobs while women worked in low paying clerical and service jobs As a result there was widespread pressure to have women remove themselves from the work place The Economy Act of 1933 prohibited married couples from working in the federal government

113 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Many private employers refused to hired married women Even the CIO promoted the idea that women should be supported by men: “The working wife whose husband is employed should be barred from industry” The Social Security program excluded domestic workers – mostly women

114 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Like women, Black leaders found leadership positions with the government and support from key leaders of the New Deal such as Harold Ickes and more importantly, Eleanor Roosevelt Mary McLeod Bethune, a prominent Black educator, served as a special advisor for minority affairs Mary McLeod Bethune Eleanor Roosevelt resigned from the Daughters of the American Revolution when they refused to let Marian Anderson perform a concert at Constitution Hall Marian Anderson

115 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Marian Anderson, Constitution Hall

116 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures During the Depression Blacks found themselves in the position of “last hired and first fired” The unemployment rate for Blacks was twice that of Whites Even those who retained their jobs now faced competition from Whites for their traditional jobs such waiters and porters Blacks found themselves excluded from many of the benefits of the New Deal such as Social Security which excluded farm workers, share croppers and tenant farmers

117 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The New Deal did bring an historic shift in the voting patterns of Blacks in the North and West Previously, Blacks had voted as a firm block for the Republicans, the party of Lincoln Although Blacks were a key part of the Democratic coalition, they received few benefits from the New Deal because Roosevelt would not alienate the conservative Southern Democrats in Congress On the other hand, while Blacks disproportionally participated in welfare programs such as Aid to Dependent Children they were stigmatized for receiving welfare

118 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The Native-American experience with the New Deal was also mixed The Indian Reorganization Act of 1934 empowered Native-Americans to manage their own affairs, except where specifically limited by national laws, but it also divided the Indian lands into small individuals plotsIndian Reorganization Act of 1934 The views of the Native-Americans continued to be ignored The Navajos protesting Federal efforts to end soil erosion by limited their herds of livestock

119 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures In another case the construction of the Grand Coulee Dam flooded thousands of acres of lands used by the Indians but the Federal Government refused to compensate them or provide any irrigation water for their useGrand Coulee Dam

120 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Grand Coulee Dam

121 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures One group that without question suffered during the Depression were Mexican-Americans and immigrant farm workers During the Depression demand for their labor plunged and more than 400,000 immigrants returned to Mexico In many cases local American authorities encouraged Mexican immigrants and their families to leave, including 200,000 children who were born in the U.S. and therefore were citizens

122 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

123 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Those who remained to work the fields toiled in grim working conditions while the land owners received the benefits of the New Deal When the farm workers tried to organized they were brutally suppressed because agricultural work was exempted from the Wagner Act In addition, agricultural workers were not covered by Social Security

124 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

125 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures One group that gained influenced during the Depression was the American Communist Party which was an obscure organization deeply divided at the timeAmerican Communist Party During the 1930’s the Communist Party would grow to more than 100,000 members and became the champion of the idea that the Depression was caused by the greed of capitalism Also contributing to the popularity of the Communist Party was its active support for industrial unions and support of civil rights, particularly for Blacks

126 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Finally, Stalin’s call in 1934 for a Popular Front to combat Fascism made it more feasible for the leadership of national communist parties to cooperate with socialists and New DealersPopular Front During the Popular Front the Communists abandoned their call for revolution and instead focused on social change Ironically, the Communist Party in many plays played a leading role in the empowerment of labor and supporting the efforts for greater civil rights, particularly for Blacks – introducing pluralism into the American liberal ideology

127 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Many American scientists, many artist and intellectuals, were fellow travelers with communists with its emphasis on the importance of the “common man” Some examples of the new focus on the common man: In photography, Dorothea Lange captured the resiliency of the common manDorothea Lange Films such as Mr. Smith Goes to Washington celebrated populist figures who challenged and defeated the corruption of business and government – see also the Wizard of OzMr. Smith Goes to Washington

128 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

129 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures

130 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures The Popular Front promoted the idea of ethnic and racial inclusion Referring to the CIO, organizer Rose Pesotta declared:Rose Pesotta “We are the only Americans who take them [Mexican Americans] into our organizations as equals” It was the leadership of the Popular Front that eventually made the case of the Scottsboro Boys a focus of international attentionScottsboro Boys In 1931 nine young Black men were arrested and convicted for the rape of two white women

131 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Despite the weakness of the evidence against the Scottsboro Boys, including the two accusers recanting the charges, the men were tried and convicted three times Some of the men would eventually served thirteen years in prison

132 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Scottsboro Boys

133 Lecture 6: Great Depression C. FDR and the New Deal: Success and Failures Influenced by the Popular Front, many American intellectuals broadened the meaning of being an American to include not just middle class Anglo- Saxons but also Blacks, immigrants, and the working class Martha Graham’s modern dance emphasized American folk tradition and multi-ethnic heritage Martha Graham Earl Robinson celebrated American diversity in his popular Ballad for Americans Earl RobinsonBallad for Americans

134 Lecture 6: Great Depression Conclusions When evaluating the New Deal it is necessary to balance its failures and successes There was no over arching plan for dealing with the Depression which resulted in the New Deal passing through different phases Economic cooperation Redistribution of wealth Economic regulation As a result, the policies of the New Deal brought about only a very limited economic recovery

135 Lecture 6: Great Depression Conclusions Recovery was more of a product of the need for the government to undertake a massive spending program to prepare for World War II than New Deal Policies The welfare system that emerged was modest in scope and cost compared to other modern industrialized nations The issue of racial equality for the most part was left unaddressed and even sacrificed to win the support of Southern Democrats for the New Deal

136 HooverCooperation Wealth Redistribution Business Regulation War in EuropeWorld War II Lecture 6: Great Depression Conclusions

137 Lecture 6: Great Depression Conclusions However, modern liberalism emerged from this crisis: The role of the federal government in the nation’s economic life dramatically expanded The government assumed the role of an independent mediator/arbitrator in the relations between workers and industry The government assumed the role of a safety net, although with some holes and admissions The government transformed the physical and cultural environment through public works projects

138 Lecture 6: Great Depression Conclusions The New Deal restored the faith of many in American Democracy It created new political coalitions with many Blacks abandoning Lincoln’s Republican party in favor of the Democrats The foundation for a new liberalism based upon the progressive belief in a socially constructive state was merged with a respect for civil liberties and cultural pluralism

139 Lecture 6: Great Depression Conclusions What role should the American Government play in the achievement of the American Dream? Should it include health care?


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