1. The Great Depression
What caused the most severe economic crisis in American history?
How did presidential administrations react?

2. Black Tuesday
October 29, 1929
The U.S. Stock Market lost 90% of its value.
The stock market crashes triggering the economic collapse

3. The Causes of the Great Depression
A Speculative Boom Leads to a Spectacular Crash
A “bull market” versus a “bear market”
A rise in stock prices versus a drop in stock prices
The 1920’s could be characterized as a bull market
The ability to buy on margin
$ buys $10, worth of stock
Price goes up, sell the stock, pay the broker, the rest is profit
IF the price goes up…
Speculation – a risky investment to get rich quick
Stock 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 Savings
Where do you think the money was coming from that brokers were lending?
Bank runs fueled the panic
Banks were not safe anymore

5. The Causes of the Great Depression
Overproduction Puts Too Many Goods in Stores
Assembly line and mass production increases output with decreasing demand
Not enough consumers to buy all the products
A Widening Wealth Gap Leads to Rising Debt
Profits for business owners did NOT lead to increasing wages
An estimated 40% of Americans lived in poverty
Credit allowed Americans to make up for this uneven distribution of wealth in the ‘20s (we were buying things we really couldn’t afford)
High Tariffs Hurt Foreign Sales

6. The Causes of the Great Depression
Farmers Were the First to Experience the Pain of Underconsumption (Overproduction?)
When the war ended, their markets disappeared
Farmers lost everything as banks seized their property for payment of debts

7. Government Actions Make a Bad Situation Worse
The Role of the Fed
The Federal Reserve (Fed) manages the nation’s money supply (this is called monetary policy)
Discount Rate = the rate of interest the Fed charges banks to borrow money
Low 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 needed
The Hawley-Smoot tariff sets record high rates to protect American industry but destroys international trade
Farmers and businesses lose overseas markets
The Great Depression was a global event

9. The Story of the Bonus Army
In 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 in the capital
President Herbert Hoover believed in self-reliance, rugged individualism and hard work, not handouts
He ignored the veterans at first then with tear gas, tanks and armed soldiers, he cleared out the Bonus Army
The nation was stunned

10. How To Respond: Three Perspectives
The Conservative Response: Let the economy stabilize
Maintain the status quo
Opposed to large scale government interference
The economy will stabilize if left alone
It is all part of the business cycle
Any government intervention should only be at the local level

11. How To Respond: Three Perspectives
The Liberal Response: The government must help
Government is needed to protect individuals from dangerous working conditions, monopolies or unsafe food
Called for the funding of public works = government funded construction projects
New taxes to raise money for social welfare (or allow deficit spending)
Government needs to take an active role in the capitalist system to help by working with business

12. How To Respond: Three Perspectives
The Radical Response: Capitalism must go
Radicals 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 needs
The working class would rise up against the “greedy capitalists”

13. Hoover’s Conservative Response
Local communities, churches and private charities could take care of their own
Hoovervilles were on the rise
The conservative response was failing
Reconstruction Finance Corp. to issue gov’t loans to banks, RRs and other big businesses
A “trickle down” theory (too little, too late)

15. 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 reform
With his “Brain Trust,” FDR formulates policies to alleviate problems

16. The 100 Days (The “First New Deal”)
This nation asks for action and action now FDR (first inaugural)
Passes over 15 major New Deal laws like…
Emergency Banking Relief Act (after a “bank holiday”) permits Treasury Dept. to inspect banks and decide which are insolvent, sound, or need loans
By the end of 1933, Prohibition is repealed by the 21st Amendment (liquor taxes can go the government…not organized crime)

17. Shoring up the Financial Sector Shoring up Free Enterprise
Shoring up Society
FERA to provide state and communities with funds to help the jobless
PWA creates jobs through heavy construction projects
Shoring up the Financial Sector
FDIC, SEC
Shoring up Free Enterprise
NIRA creates the NRA
An increase in government regulation and economic planning
Helps business with price controls to limit competition
Unions get minimum wages and collective bargaining
The unemployed get more public works projects

18. To promote economic development
To help farmers
AAA to reduce production and raise prices
To promote economic development
TVA to “electrify” the Tennessee Valley and provide flood and erosion control
To help homeowners
Home Owners’ Loan Corp. to help meet mortgage payments
FHA to insure loans
To help the “forgotten man”
CCC for jobs

19. The Country in Economic Distress
Unemployment
From almost 1 in 7 businesses failed
1929: 3.1% unemployment / 1933: 25%
The unemployed had little to spend, businesses lost customers, so they closed = increasing unemployment
Farms lost half their value
Foreclosure (lose the farm, the $, the home, the livelihood)
Tenant farmers and sharecroppers in the South fared even worse
Mississippi annual income fell from $ in 1929 to $ in 1933

20. Financial Stress Affects Families
Financial stress leads to psychological stress as adults lose their jobs, status, authority and self-respect
Marriage and birth rates declined
Divorce rates declined
Couldn’t afford to live separately
Couldn’t afford the legal fees
Families lost their homes = eviction
Teenagers left home in search of work

21. Financial Stress Affects Families
Estimated that 1 in 5 New York children were malnourished and a lack of proper nutrition made people vulnerable to disease
Couldn’t afford medical care
Soup kitchens and breadlines multiplied

22. Like the Joads in the Steinbeck novel, The Grapes of Wrath, families head to California to escape the Dust Bowl

23. While droughts continued in the West, floods plagued the East and indicated a need for federal action

24. Struggling to Get By 80,000 drop out of college between 1932 – 1933
Took 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 pay
Charitable giving did increase
Even Al Capone financed a soup kitchen
Public assistance though, was running out

25. The New Deal and Its Legacy
How did the expansion of government during the New Deal affect the nation?

26. New Deal Critics From the Right (conservatives)
Too radical, too much, unconstitutional
From the Left (liberals)
Not enough action, not enough help
Dr. Francis Townsend proposes a $ monthly payment for everyone over the age of 60
Charles Coughlin (a “radio” priest) claims FDR has out-Hoovered Hoover and wasn’t doing enough
Huey Long, a Louisiana senator, launches a “Share our Wealth” campaign for guaranteed jobs and guaranteed incomes

27. The Second New Deal Beginning in 1935: more legislation
When is the next election going to occur?
WPA hires musicians, writers, artists, construction workers
Eventually the WPA hires 7% of the American workforce

28. 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 favor
Bad idea, much public anger over the scheme

29. …And Even More Wagner Act (National Labor Relations Act)
The Bill of Rights for organized labor
Union membership climbs to 28% of the total labor force
Social Security
Retirement and disability

31. The Impact(s) of the New Deal
A good deal for workers
Secured the right to form unions
Secured the right to bargain collectively
A mixed deal for women
The influence of FDR’s wife Eleanor was huge
An unprecedented number of female workers were hired by FDR’s administration
Not all women fared well as society was slow to change
A disappointing deal for African-Americans
Oppression didn’t change
Even New Deal agencies practiced segregation

32. The Impact(s) of the New Deal
A better deal for American Indians
Commissioner of Indian Affairs, John Collier, reversed some harmful policies of previous administrations
A New Deal Coalition for Democrats
Women + minorities + industrial workers + immigrants + southern whites + city dwellers

33. The Impact of the New Deal
Relief
Millions of Americans enjoyed some form of help.
Direct relief or jobs that provided a steady paycheck
Programs such as Social Security and unemployment insurance became a fixture of government.
Recovery
Not as successful at economic recovery
Unemployment remained high.
Some critics argued that Roosevelt needed the support of big business.
Other critics said that the New Deal didn’t spend enough money.
Reform
More successful and long-lasting
FDIC restored public confidence in the nation’s banks.
SEC restored public confidence in stock markets.
New Deal left thousands of roadways, bridges, dams, public buildings, and works of art.

34. The foundation for the modern welfare state (government responsibility) was laid and deficit spending by the government becomes the norm