Ch. 22: The Great Depression Begins

Section 1: The Nation’s Sick Economy

Economic Troubles  1920s- superficial prosperity

Industries  Key industries barely make profit  Railroads, textiles, steel  Mining/lumber  Decreased demand  Housing starts decrease

Farmers  Suffered the most  High price/demand during war  Decreased after  Oversaturate the market  Can’t pay loans = banks fail  Price supports

Consumers  Late 1920s- Americans buying less  Rising prices  Stagnant wages  Income distribution  credit

Credit  Living beyond their means  Interest  Easily available

Income  1920s- Rich richer, poor poorer  Top 1%’s income rose 75%  All Americans- rose 9%  +70% families under minimum standard of living  Most can’t afford new products

Herbert Hoover  Election of 1928  Secretary of Commerce under last 2 POTUS  “Republicans led nation to prosperity of 20s”

Stock Market  most confident about economy  More people invest in stocks  Dow Jones Industrial Average  Speculation  Quick profit, ignore risks  Buying on margin  Down payment on stock, borrow the rest

Federal Reserve  Concerned about stock practices  Make harder to offer margin loans  Corporations provide cash for loans

Stock Market Crashes  September stock prices peak and fall  Investors lose confidence  Sell stocks, get out  October 24- market takes plunge

Black Tuesday  October 29  Bottom fell out  Sell before prices lower  16.4 million shares sold in 1 day  People stuck with huge debt; some lost savings  By Nov.- lost $30 billion

Financial Collapse  Stock market crash beginning of Great Depression  : economy plummets, unemployment skyrockets

Banks  People took money out of banks  Banks invested some money in stocks  banks close  By ,000 of 25,000 banks fail  Millions lost savings

Businesses  : GDP from $104 billion to $59 billion  90,000 businesses go bankrupt  Millions lose job  Unemployment from 3% to 25%

Worldwide  Europe also suffered  Less trade between U.S./Europe  Hawley-Smoot Tariff  Meant to help American farmers/manufacturers  Made things worse  World trade falls +40%

Causes of the Great Depression  Tariffs and war debt reduced trade  Farming crisis  Availability of easy credit  Unequal distribution of income

Section 2: Hardship and Suffering  Americans lose jobs and homes  Shantytowns  Hoovervilles  Soup kitchens and bread lines

Dust Bowl  Early 1930s- drought  Great Plains  Thousands follow Route 66 to California  Okies

Direct Relief

Social/Psychological Effects  : suicide rate rose +30%  3x as many mental patients  Sacrifice  Penny pinching

Ch. 23 Roosevelt and The New Deal

 Election of 1932 showed a lot about what Americans wanted  Republicans re-nominated Hoover  Many Americans blamed him for doing too little  Democrats nominated Franklin Delano Roosevelt (FDR)

 Cabinet was known as the “brain trust”  Plan to alleviate problems of the great depression was known as the New Deal  Phrase was coined from a campaign speech in which Roosevelt promised the American people “a new deal for the American people”

 The new deal focused on three main areas  1. relief for the needy  2. economic recovery  3. financial reform

Hundred days deal  The hundred days  March 9- June 16, 1933  Passed more than 15 major pieces of New Deal legislation  Significantly increased the gov’s role in the nations economy

 Roosevelts first step was to carry out banking and financial reforms  In his second day of office he declared a bank holiday to prevent any further withdrawals  Emergency banking relief act- government checked the stability of banks and determined whether a bank could stay open

Fireside chats  Roosevelt addressed the people through radio messages nearly once a week  Meant to inform the American population of public issues, explaining clearly the New Deal Measures.  Explained why the nations welfare depended on public support of the government and banking system, also explained the banking system to Americans.

Regulating banking and finance  Glass Steagall Act- established insurance of up to $5,000 on people’s savings  Federal Securities Act- made corporations provide complete information on all stock offerings and made them liable for false information  Securities and Exchange Commission (SEC)- tried to prevent people from “rigging” the stock market for their own profit

Helping the people in need  Agricultural Adjustment Act (AAA)- sought to raise crop prices by lowering production  Paid farmers and crop growers to not grow their products  Tennessee Valley Act (TVA)- renovated five existing dams and constructed 20 new ones. This created thousands of jobs  Civilian conservation corps (CCC)- put men ages to work building roads, developing parks, planting trees, and other odd jobs

 National Industrial Recovery Act (NIRA)- Provided states with money to create jobs chiefly in the construction of schools, and other community buildings  When those programs failed to make a sufficient dent in the unemployment Roosevelt established the Civil Works Administration  CWA- provided 4 million jobs in the winter of alone. The CWA built 40,000 schools and paid the salaries of 50,000 teachers as well as building over a million miles of roads.

Promoting fair practices  The NIRA also established codes of fair practice for individual industries. It created the National Recovery administration (NRA)  The NRA set the prices for many products and established standards  The goal of the NRA was to promote economic recovery by stopping the trend of wage cuts, falling prices, and layoffs.

 Home Owners Loan Corporation(HOLC)- provided government loans to homeowners who faced foreclosure because they couldn’t meet their loan payments.  Created the Federal Housing Administration(FHA)- still in effect today

New deal under attack  By the end of the Hundreds Days millions of Americans had benefitted from the New Deal programs.  Roosevelt had agreed to a policy of deficit spending  The New Deal did not end the Great Depression and opposition grew among some parts of the population

 Conservatives argued that the New Deal policies such as the (AAA) and the (NIRA) gave the federal government too much control over agriculture and industry.  Many believed The New Deal interfered with the workings of a free-market

The Supreme Court Reacts  1935 – the supreme court decided that the NIRA was unconstitutional, they claimed it gave legislative powers to the executive branch  1936 – the supreme court struck down the (AAA) stating that agriculture was a local matter that should be regulated by the states rather than by the federal government.

 “court packing bill” – would enable FDR to appoint 6 new supreme court justices  Despite the uproar FDR was able to appoint 7 new justices after an elderly justice retired and the democrats controlled the court.

Liberty League  strong conservatives banded together to create an organization called the American Liberty League  Opposed the New Deal and believed it violated the rights of individuals and property.  The three toughest critics were, Charles Coughlin, Dr. Francis Townsend, and Huey Long.

 The most serious challenge came from Huey Long, a senator from Louisiana.  Wanted presidency himself, proposed “Share our wealth” program where he promised everyone something.

The Second New Deal  By 1935 the Roosevelt administration was looking for ways to build off of the first hundred days programs.  The economy had improved in his first two years but unemployment remained high and production still lagged behind the levels of the 1920’s

 Despite this the New Deal enjoyed widespread popularity  Roosevelt then introduced the second new deal or the Second Hundreds Days  This second burst of activity focused on relief for farmers and workers

Eleanor Roosevelt  Eleanor was a social reformer who combined her humanitarian impulses with great political skill.  Traveled the country observing conditions and reminding the president of the suffering country  Urged him to appoint women to gov positions

Helping farmers  In the mid 1930’s 2/5 of farmers were mortgaged and thousands of farmers lost their homes  Soil Conservation and Domestic Allotment Act- paid farmers for cutting production of soil-depleting crops and rewarded them for practicing good soil conservation methods. (replaced AAA)  Resettlement Administration- provided monetary loans to small farmers to buy land.

 Works Progress Administration- harry Hopkins, former chief of the Federal Emergency Relief Administration  WPA set out to create as many jobs as possible as fast as possible  Between it spent $11 billion to give jobs to more than 8 million workers, most of them unskilled.

 National Youth Administration- objective was to provide education, jobs, counseling, and recreation for youth.  NYA provided student aid to high school, college, and graduates, in exchange students worked in part time positions at their schools.

Improving labor and other reforms  National Labor Relations Act (Wagner act) – reestablished the NIRA provision of collective bargaining. The gov protected the right of workers to join unions  Also prohibited unfair labor practices  Setup the creation of the National Labor Relations Board (NLRB)  Fair Labor Standards Act

Social security  Social Security Act- created by Frances Perkins, most important achievement of the New Deal  Three major parts  1. Old age insurance for retirees 65+ and their spouses  2. unemployment compensation system  3. aid to families with dependent children and people with disabilities.

 Second new deal also included laws to promote rural electrification and to regulate public utilities.  By 1935 only 12.6% of American farmers had electricity  Roosevelt established the Rural Electrification Administration (REA) -financed and worked with electrical cooperatives to bring electricity to rural areas. By % of America’s farms had electricity. By % had electricity