1920's  Good economic times  Tues. Oct. 29th, 1929 – › NYC Stock market crashed › depression that would last until 1942

 Invest in cos. by purchasing stocks › expect a profit  Booming 1920's economy, › $ were plentiful › banks were quick to make loans to investors  BUYING ON MARGIN › Investors only paid 10% of stock's actual value at time of purchase › balance paid at a later date

STOCK SPECULATION  Buy and sell stocks quickly  Make a quick buck  stock value increased › (Ex: G.E stock $130  $396/share)  Quick turnover didn't aid cos. › needed long term investments to pay bills  Unscrupulous traders › buy and sell shares to inflate stock value  False sense of security/confidence in the American market

Oct  investors’ confidence dropped  market collapse  Panic Selling  Everyone sell at once  bottom fell out of market  many bankruptcies as banks called in loans  Even though a tiny minority traded stocks  they possessed vast wealth  crash had a ripple effect on the economy

Poor Americans  Mass consumption already low  Poor could afford to buy little  Unemployment rose  No gov't assistance at first  Economic Cycle  productivity cut back  further unemp.  purchasing power declined again  reduced productivity yet again Unemployment Purchasing Power Productivity

 1920's › U.S. Eco. was based on Economic Cycle  Production of goods › demand had to be there › resulted in high employment and a healthy economy  Overproduction › productive capacity doubled › technological innovation › no new jobs were added › more consumer goods but not enough people to buy them

Uneven Distribution of Wealth  0.1% at top owned as much as bottom 42% of American families  42% below poverty line  Middle Class › 58% above the poverty line › not wealthy › had jobs from industrialization & consumerization › lost jobs when productivity declined  Low savings › cut back on purchases  Decline in consumption

President Hoover  Govt shouldn’t play active role  VOLUNTARY NON - COERCIVE COOPERATION › bankers/business › gave tax breaks in return for private sector economic investment  Organized some private relief agencies for the unemployed  HOOVER MORATORIUM › put a temporary stop to European WWI debt & reparations payments › Euro. countries were to purchase American goods instead to stimulate American economy

Early 1931  These measures appeared successful, but then  TARIFF WARS › Smoot Hawley  high tariff to protect U.S. industry  hoped to stimulate purchasing of U.S. goods  fatal error...  Congress didn’t understand we’d become › GLOBAL ECONOMY  In retaliation › other countries passed high tariffs › no foreign markets purchased American goods › U.S. productivity decreased again

1931 Continued  Soviets flooded world market with cheap wheat › 1/2 U.S. price › attempt to get money to pay Austrian banks  price was too low so couldn't  BANKERS’ PANIC  Austrian banks borrowed from German banks › appealed to the BANK OF INT'L SETTLEMENT › Austrian and German banks went bankrupt  German banks had borrowed from Americans, › U.S. banks began to go bankrupt › wiped out thousands of Americans’ life savings

IIncreasingly unpopular PPersuaded Congress to establish ›R›RECONSTRUCTION FINANCE CORPORATION ppower to make emergency loans to banks ttoo little too late… WWouldn't allow programs of direct gov'tal aid to individuals ›d›didn't want to erode sense of "RUGGED INDIVIDUALISM"

Isolated Protest Movements  Dairy farmers › frustrated w/low price of milk › refuse to sell (dump it)  WW1 veterans › pensions discontinued by congress › march on Washington = BONUS MARCH (by BONUS ARMY ) › reached Washington  set up shantytowns = HOOVERVILLES  food scraps = HOOVER-MEALS  hitchhiking journeys = HOOVER RIDES  After one year › forcibly dispersed by the Army

1932 ELECTION  1 out of 4 unemployed…  Nat'l income › 50% of 1929  Hoover nominated › no hope  FRANKLIN DELANO ROOSEVELT › Dem - N.Y. Gov. › Won by landslide

 FDR’s program to fight the Depression  Revolution in American society › changed way gov't functions  First phase › eco. reform › FDR believed gov't involvement was crucial  Step 1- BANKING HOLIDAY › banks shut down › subject to gov't inspection › allowed to open when "healthy“ › people's confidence returned › they redeposited, allowing banks to invest in the economy

 Step 2 - stock market reform  Security Exchange Commission › police the NYSE › first chmn. was Joseph P. Kennedy › practice of buying on margin regulated  Step 3 - put more $ in circulation › FDR went off the GOLD STANDARD › gov't could print more $ than Fort Knox gold reserves would allow › wages and prices increased › Inflation  dollar value lower › gave gov't spending power (Keynesian economics)

 National Industrial Recovery Act(NIRA) National Recovery Admin (NRA) › end animosity btwn labor and business › redirected to industrial growth  Fair labor codes › business challenged NRAwages › no child labor › shortened work hours › claimed communist › LIBERTY LEAGUE  Supreme Ct. overturned the NIRA & NRA  fed. gov't was exceeding its authority

TENNESSEE VALLEY AUTHORITY (TVA)  Promote hydroelectric power  Control flooding  Lower rates  Private industry › manufacturing fertilizer › fed. gov't. took ownership  nationalization v. privatization

The Annual Move by Otis Dozier, 1936

Construction of the Dam by William Gropper

AGRUCULTURAL ADJUSTMENT ACT (AAA)  Aid Farmers  restore farmers' purchasing power  restore family farm › farmers cut back on crop production › pay them equivalent SUBSIDIES  Bad side: › food production down when millions starving › white landowners paid not to farm  got rid of Black tenant formers

AAA declared unconstitutional  Too much control over individual states  Revised and introduced as new legislation  Food Stamp Act of 1939 › gave away surplus food to poor › guaranteed (small) farmers a market

UNEMPLOYMENT  Still a major problem  FDR › wary of gov't handouts › wanted people to earn their keep › gov't agencies were created – temporarily  CIVILIAN CONSERVATION CORPS (CCC) › 1933 › establish work for young men (18-25)  soil conservation  flood control  road construction  Blacks not permitted to enroll

Other Agencies  NATIONAL YOUTH ADMIN. (NYA) › jobs for young in urban areas  FED. EMERGENCY RELIEF ACT (FERA) › aimed at older workers  Worked well, but… › unemp. was still at 6 million in 1941 › solution for this would be the ind. boom of WW2

SOCIAL REFORM  after 1935 › New Deal turned to Social Welfare › more legislation  National Labour Relations Act (Wagner Act) › legitimized unions › collective bargaining › collective action (strikes, etc...) › outlawed blacklists & anti-union practices

Social Security Act (1935)  Feared by opponents › "creeping socialism“ › WELFARE STATE › unemployment insurance › old age pensions  Took some $ out of circulation › payroll deductions › purchasing power already low › only covered unemployed  "Soak The Rich" tax

ELECTION OF 1936  FDR won easily › v Repub. Alf Landon - Kansas governor  Victory gave FDR mandate to continue New Deal policies  First objective › reorganize Supreme Court › they disallowed some New Deal legislation  # of judges changed from 9  15 › "pack the court”  Judges retired › FDR appointed new ones › support New Deal

Late 1930's  FDR concerned w/int'l issues  Proposed no new major domestic reforms  ELECTION OF 1940 › FDR broke with tradition › ran a 3rd time  Both parties approved of (most) New Deal legislation  Wanted an isolationist foreign policy  FDR won in 1940 (and again in 1944)

 Third revolution in U.S. culture and politics › more gov't involvement › in context of traditional U.S. democracy (not socialist…)  Helped stimulate economy › only WWII would solve any lingering problems  Expansion of U.S. gov't in : 1) eco. = constant gov't intervention/deficit spending 2) social reform = welfare state - gov't was expected to play a role in any economic crisis  Fundamentally reformed (not transformed) American society…