Chapter 12 The Great Depression

Law of Supply and Demand Capitalism -Private ownership of business -Anyone can own a business -No government ownership of business Capital -What you sell to make money -Whatever product your business makes/sells/provides to people Law of Supply and Demand -If you have a lot of something, prices are low -If you have little of something, prices are high Free Enterprise -You may run your business any way you like as long as you don’t break the law -Also called Free Market Economy

Economy from good to bad -During 1920’s U.S. economy was at all time high -Herbert Hoover wins election of 1928 -Most Americans thought good times would continue -Most felt that stock market was a symbol of how well the U.S. was doing economically -In 1925, stocks were worth $27 Billion -In 1929, $87 Billion -Wages rose 40% in 1920’s -Unemployment was under 4%

Welfare Capitalism -Business owners found a way to meet workers demands without using the unions -Helped to weaken unions -They provided paid vacations, health plans, English classes, & other benefits requested by workers -Tried to show people they didn’t need unions

Danger Signs -Although some made money in stock market, mostly the rich got richer. -Huge businesses dominated industry -200 corporations controlled 49% of American economy -Small # of families held most of the wealth [0.1%] -Most Americans didn’t have savings accounts [80%] -Another problem was the huge amount of personal debt -More and more people using credit on goods they could not afford.

Stock Market Problems Begin -Problems with the way the stock market used to run also caused economic problems 1. Speculation -Buying high risk stocks hoping to make a quick profit or a high profit 2. Buying on Margin -Buying a stock with little down and borrowing the rest from the broker

Changes in U.S. Society -A major change came to the U.S. skyline -Empire State Building is started in 1930 -Cost $41 million -Opens in 1931 as largest building in the world -Today largest building is Burj Khalifa Tower in Dubai, UAE -Begins American’s love of skyscrapers

Empire State Building

Burj Khalifa Tower

Hoover’s Problems Continue -Hoover believed problems would fix themselves -Tried to get business to keep wages high [voluntary] -Passed the Hawley-Smoot Tariff -Creates the highest tariff in history -Makes economy worse -Creates the Reconstruction Finance Corporation -Group to help banks -Does little

Section 2 Domino Theory -The U.S. economy begins to fail for many reasons. -1st is the Domino Theory -Factories begin to lay off workers -These workers have less money to spend -B/c people were spending less, stores were ordering less -B/c stores were ordering less, factories produced less -B/c factories produced less, they needed less workers -Factories start to lay off more workers -The newly laid off workers now have less money to spend and process begins again

Stock Market Crash -In 1929, stocks are at an all time high -Dow Jones Industrial Avg. was at all time high -Avg. of stock prices for major U.S. companies -381 for 1929 -Many people felt it was time to cash in and gain huge profits. -Dow Jones and stock prices began to fall rapidly -Oct. 24, 1929 was called Black Thursday -$3 billion lost in one day -Americans raced to get out of stock market -No regulations on selling or stoppage of sales -Oct. 29, 1929 was called Black Tuesday -16.4 million shares of stock were sold in one day -Dow Jones fell from 381 to 198.7 -$30 Billion lost -At first, only the 4 million investors in the stock market were affected by the crash

Great Depression -Crash ultimately begins the Great Depression -Severe economic fall from 1929-1941 -Caused huge # of Americans to lose everything from jobs to homes. -Many took their own lives. -Most were left with nothing but clothes on their backs -Depression begins to affect every aspect of American life -Hundreds of factories close -Thousands lose their jobs -No welfare, unemployment, or Social Security -By 1932, 12 million are unemployed -1/4 of the workforce -Those still lucky to have jobs had their wages cut

-U.S. Gross National Product was cut in half -Total value of goods and services a country produces -In 1929, GNP was $103 Billion -In 1933, GNP was $56 Billion -5500 banks were forced to close -9 million savings accounts disappeared -Begins to affect other countries and force them into their own depressions. -Biggest were Germany, France, and England

The Effects -People at every economic level were affected -Hardest hit were those at the bottom of the economic scale -Homelessness was at an all time high -Most lived in small homeless areas called Hoovervilles -Areas where homeless lived -Named for President Hoover -Most blamed him for the Depression --Depression also affected minorities -Racism and discrimination rose dramatically -Many forced from their jobs and replaced by whites -56% of blacks were unemployed -Hispanics and Asian Americans were also forced out of their jobs -Thousands were deported, even those born in the U.S.

Dust Bowl Farmers took an even bigger hit when a severe drought hit the Midwest -9 million acres of land became known as the Dust Bowl -750,000 families were forced to sell their farms -Others had them repossessed by bank -Hardest hit were farms in Kansas and Oklahoma -Many moved to California to begin again

Dust Bowl Range

Dust Bowl Farm in Kansas

Dust Storm in Oklahoma

Americans Helping Others -As bad as the Depression was, Americans worked to help each other -Protested rent increases -Helped farmers re-buy their land -Political groups also worked to help Americans -Most Americans had faith that govt. would help them -Others felt govt. needed changes -Gave support to the Communist and Socialist parties

Bonus Army Incident -Final straw was the Bonus Army Incident -1932 -WWI vets march on D.C. -Wanted bonus for fighting in WWI that was due to be paid in 1945 -Govt. said no, they had to wait until 1945 -Led to violence -Hoover sends in Army under Gen. Douglas MacArthur to remove protestors -Many are injured seriously

Bonus Army Camps

21st Amendment -One political change was the 21st Amendment -Repeals 18th -Lasted 14 years -Makes alcohol legal -Passed in Feb. 1933 -Only 8 states keep a ban on alcohol Mississippi finally removes ban in 1966 -Helped stimulate economy by rehiring workers

The Change of America -Famous Americans’ lives also changed in 1930’s Al Capone convicted of tax evasion [1931] Babe Ruth retires [1935] Henry Ford becomes hated by workers Lindbergh’s baby is kidnapped and killed Calvin Coolidge dies [1933]

1932 Election -Another major change came with the 1932 election -2 candidates were Herbert Hoover [Republican] Franklin Delano Roosevelt [Democrat] -FDR wins by 7 million votes -Wanted to bring major changes to U.S. -Created a plan called The New Deal -Plan would change U.S. forever and bring U.S. out of Depression

Hoover vs. FDR