The Great Depression Begins The Roaring 20s Come Crashing Down

Roaring 20s False Growth= Overproduction 1920s Consumer Economy: Based on productivity/purchasing power/employment cycle Between 1924-1927 U.S. production doubled… but due to technological innovation No new jobs added More goods available…but lacks demand = Overproduction

Roaring 20s False Growth = Unequal Distribution of Wealth Unequal Distr. of Wealth 1% owns as much as bottom 42% of American families (sound familiar?) 42% below poverty line Small middle class Low savings…cut back on purchases Further hurts econ. But this is all a thing of the past, right?...Not so fast… Robert Reich in which he argued that income inequality is the defining issue for the United States—Reich states that 95% of economic gains went to the top 1% net worth (HNWI) since 2009 when the recovery allegedly started. Daily Show: Unequal Distribution of Wealth

Unequal Distribution of Wealth Today  according to research by UC-Berkeley professor Emmanuel Saez http://www.pewresearch.org/fact-tank/2014/01/07/5-facts-about-economic-inequality/ Top 10% of nation, possess 50.5% of nation’s income U.S. income inequality is the highest it’s been since 1928.  In 1982, the highest-earning 1% of families received 10.8% of all pretax income, while the bottom 90% received 64.7% 2012, the top 1% received 22.5% of pretax income, while the bottom 90%’s share had fallen to 49.6%.

So Why Does All This Matter? What was the impact of income inequality on the economy?

Entering a Depression Activity Unequal distr. of wealth Not enough $ being spent…why? Chronic surpluses Layoffs/plant closings Even fewer goods purchased More layoffs People can’t pay back credit Bank failures Bank runs (only small % get their $) Fewer goods purchased etc…

Overview: Causes of the Depression Slowing Economy Uneq. Distr. Wealth→ Overproduction →layoffs Institutional Causes Corruption in Stock Market…Leads to Stock Crash Buying on Margin/Speculation Stock Crash (Black Tuesday)…Leads to Banking Collapse Banks lost on stock investments/bad loans Banks Collapse…People Lose Life Savings→ Panic Banking Panic → Bank Runs → More Bank Closures More people lose $ → Less $ to Spend→ ↑ unemployment

Causes: Weakness in the Stock Market…Buying on Margin Public invests in comp. by purchasing stocks…in return…expect a profit Booming 1920s economy… money plentiful…banks quick to make loans to investors Buying on Margin Investors only had to pay 10% of stock’s actual value at time of purchase…balance paid at later date (buying stocks on credit!) When stocks drop…Margin Calls…investors struggle to pay back loans

Causes: Weaknesses in the Stock Market…Speculation Stock Speculation Led to artificially inflated stock prices; rise in stocks was not based on profits/earning reports… People buy and sell stocks (artificially raising stock price) to make a quick $ B/c of all this buying/selling stock value increased (i.e. GE stock $130→$396/share) Quick turnover doesn’t aid comp…need long term investments Unscrupulous Traders Buy and sell share intentionally to inflate a comp. stock value Gave false confidence in US market

The Market Crashes Oct. 1929: Running out of investors (uneq. Distr. Of wealth) Today: Top 5% own 82% of individual stocks Investors confidence dropped→ market collapse Black Tuesday: Oct. 29, 1929 Panic Selling (16.4 million shares sold!) All try to sell at once…bottom falls out Brokers make “margin calls” Many bankruptcies as banks call in loans Recognized as “start” of Depression Minority of people (10%) traded stocks, but they possessed vast wealth → crash has ripple effect on the economy

Black Tuesday—Oct. 29, 1929 The Stock Market Crashes NYC Stock Market crash worsened the depression…which would last until 1942

“Anyone who bought stocks in mid-1929 and held onto them saw most of his or her adult life pass by before getting back to even.” Black Monday",[12] more investors decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 38 points, or 13%. The next day, "Black Tuesday", October 29, 1929, about 16 million shares were traded, and the Dow lost an additional 30 points.[13][14][15] The volume on stocks traded on October 29, 1929 was "...a record that was not broken for nearly 40 years, in 1968".[14] Author Richard M. Salsman wrote that "on October 29—amid rumors that U.S. President Herbert Hoover would not veto the pending Hawley-Smoot Tariff bill—stock prices crashed even further"

Banking Collapse The fall of the Banks Stock Collapse… Banks had loaned billions to investors/speculators &… Invested bank customers $ in stock market Stock Collapse… Investors unable to pay back loans…Bank investments falter Banks lose their customers money they had invested in stocks Banks cut back on loans Less Investment

Bank Runs Banks on verge of collapse… Bank Runs Deposits not insured…thus if bank collapses… …People lose all their money…leads to Bank Runs Bank Runs Customers make run to banks to withdraw deposits…crushes banks Only a fraction of people get their money out…rest lose their $ 10% banks go under

Impact on the Poor Mass consumption already low…even lower after bank collapses Unemployment ↑ No govt. asst. at first B/c purchasing power ↓… productivity cut back… further unemployment Vicious Economic Cycle… Unemployment Purchasing Power Productivity

Dust Bowl (1930-1936) What factors caused Agricultural Depression? Overproduction; Drying up of foreign markets; cheap crops from other countries driving prices down Dust Bowl Where: Great Plains (1930-1936) Causes? Severe drought, poor farming methods led to rapid soil erosion… Period of severe dust storms causing major agricultural and ecological damage in U.S. Millions of acres of farmland = useless 100s of thousands lose their homes (Okies) Many Migrate to California Travel farm to farm picking fruit/crops at starvation wages John Steinbeck: The Grapes of Wrath

Lawrence Svobida was a Kansas wheat farmer who saw his life’s work destroyed in the 1930s. “When I knew that my crop was irrevocably [forever] gone I experienced a deathly feeling which, I hope, can affect a man only once in a lifetime. My dreams and ambitions . . . and my shattered ideals seemed gone forever. The very desire to make a success of my life was gone, the spirit and urge to strive were dead within me. Fate had dealt me a cruel blow above which I felt utterly unable to rise.”

2.5 million people left the Great Plains

Causes of the Depression Thesis Activity Step 1: Preview the reading on the causes of the Great Depression Step 2: Write a thesis statement in response to the following prompt: To what extent did the economic prosperity of the 1920s, disguise serious economic problems? To what extent was the Stock Market Crash in 1929 responsible for the start of the Great Depression?

Photo Analysis Prompts What’s one common theme you can identify between the photos you viewed? Which photos stood out to you the most and why? What was the setting of the photos? What’s one question you have after viewing the photos? What’s one question you’d like to ask the individuals in the photos? What can you assume about the Great Depression from the photos you observed?

Entrance Card/Exit Slip Write a thesis statement for the following prompt: Should the 1920s be considered a period of economic prosperity or one in which the economic growth was based on false hopes? Step 1: Decide which position you are going to take. Step 2: Make an outline listing arguments you will use to support your position Step 3: Write your thesis statement

Hoover’s Response …Or Lack Thereof

Election of 1928: “Calm before the Storm” Al Smith (D) v. Herbert Hoover (R) Alfred E. Smith Catholic Advocated Social Legislation Repeal of Prohibition Herbert Hoover Head of Food Administration (WWI) Sec. of Commerce (Coolidge) Hoover’s Views on Government 1922 publ. American Individualism Condemns government regulation (Laissez-Faire)

Hoover Elected: 1928 "We in America today are nearer to the triumph over poverty than ever before in the history of any land...We have yet reached the goal, but given a chance to go forward with the policies of the last eight years, we shall soon with the help of God be in sight of the day when poverty will be banished from this nation." Herbert Hoover 1928

The Depression Hits… 12 million unemployed (25%) Hobos Rise 50% in Chicago Hobos Rise Millions lose savings GNP decreases 33% Prices decrease 40% Rural: reduce meals, kids shoeless 30,000 businesses close (1932); Mass bank failures

Stats of the Great Depression Fertility Rates (per 100,000 women aged 15-44) in 1928: 93.8 in 1929: 89.3 in 1930: 89.2 in 1931: 84.6 in 1932: 81.7 in 1933: 76.3 in 1934: 78.5 in 1935: 77.2 in 1936: 75.8 in 1937: 77.1 in 1938: 79.1 in 1939: 77.6 in 1940: 79.9 in 1941: 83.4 in 1942: 91.5 in 1943: 94.3 Average divorce rate, (per 1,000 people) 1920-1929: 1.6 1930-33: 1.4 1934-39: 1.8 1940-46: 2.8 1947-64: 2.5 Average rate of death by suicide (per 100,000 population) 1920-1928: 12.1 1929: 18.1 1930-1940: 15.4

Opener: Identify 3 causes of the Great Depression, as well as explain how each caused the economy to sink into a depression.

President Hoover’s Initial Response Against Government Intervention Opposed federal aid to unemployed State/City Government should provide aid Calls on private agencies/charity to help poor/unemployed Bread Lines/Soup Kitchens Provide funds to feed livestock; not people though Opposes deficit spending Encourage private business to maintain investment Wanted a balanced budget Depression worsens…forced to act Public Works Projects Reconstruction Finance Corp. Pro-Business Hoover fails to understand how important spending had become

Shantytowns: “Hoovervilles”

Finding Escape in Film Average Weekly Movie Attendance in 1927: 57 million in 1930: 90 million in 1931: 80 million in 1932: 60 million in 1933: 50 million

Radio & Comics

Global Depression Worsens: Tariff Wars (1931) Smoot Hawley Act Highest level tariff in US History Impact? Fatal error...world had become a GLOBAL ECONOMY Foreign Reprisals U.S. productivity decreased again

Global Economy 1931, the Soviets flooded the world market with cheap wheat Need $ to pay back loans to Austrian Banks…can’t meet payments Austrian banks had borrowed from German banks Austrian banks and loaning German banks therefore were forced into bankruptcy German banks had borrowed from Americans U.S. banks began to go bankrupt Wiping out life savings of thousands of Americans Soviet Wheat ½ price of American

AMERICANS REACT TO HOOVER Hoover increasingly unpopular Out of Touch… Relief…Too Little, Too Late NCC, Reconstruction Finance Act, Federal Home Loan Act, Some Public Works (Hoover Dam) Bonus March Begins on D.C.

Frustration Fuels Protest Bonus Army March WWI Vets march on Washington demanding early payment of the cash bonuses due to them in 1945. Estimated 15,000-20,000 vets Vets set up HOOVERVILLES Shantytowns Set up Hoover Meals Food scraps After one year Bonus Marchers forcibly dispersed by the Army (MacArthur/Eisenhower)…What impact did this have on public’s view of Hoover?

Political Cartoon 1 What is symbolism of the squirrel and why is it a “wise economist?” What has happened to the man? What does that mean for him? What point is the cartoonist trying to make?

Political Cartoon 2 What is “it” and why should America “Blame it on Hoover?”  Who might the people that are pointing at Hoover be and why did the cartoonist pick them? What point is the cartoonist trying to make?

Political Cartoon 3 Who are the two people in the cartoon? What do all the items on the desk symbolize? What point is the cartoonist trying to make? What evidence from our class discussions supports the author’s interpretation of political response to the Great Depression?

Franklin D. Roosevelt The New Deal

Election of 1932 Hoover (R) Roosevelt (D) Opposes direct federal public assistance Rugged Indidvidualism State/Local Asst./Charity Public Works Pro-Business (RFC) Roosevelt (D) Governor of New York Promise New Deal Broaden role of Govt. Govt. has duty to help its people in need Public Works Projects Direct Relief, Reform

1932 Election Results Results Hoover (R) v. Roosevelt (D) Popular Vote: 57% Electoral college: 89% Hoover (R) v. Roosevelt (D) Hoover…No Hope Roosevelt…Landslide Victory

FDR’s Inaugural Address http://www.c-spanvideo.org/program/FRoo Inaugural Address Analysis

The New Deal The New Deal: Revolutionary: Changes Way Govt. Functions Roosevelt’s plan/programs to solve the econ. Problems of the Depression 1933-1939 (though many programs still exist today) Revolutionary: Changes Way Govt. Functions Estbl. idea that government should play an active role ensuring the well-being of its citizens Relief, Recovery, Reform Relief: Immediate Aid/Assistance (unem.) Recovery: Long Term Growth for the Nation to Pull Out of Depression Reform: Changes to Economy/Govt. to Ensure It Doesn’t Happen Again

The First New Deal: The Hundred Days Period in which Roosevelt guided thru congress 15 major bills which, together, formed the basis of the First New Deal…began addressing cause/effect of Depression Specific Actions: National Bank Holiday; Glass Steagall Act; FDIC Securities and Exchange Commission HOLC AAA CWA; CCC; PWA FERA

Fireside Chats

RADIO BROADCAST Fireside Chats An American family sits around the radio listening to President Roosevelt answer his critics in his first fireside chat. “There is an element in . . . our financial system more important than currency [money], more important than gold, and that is the confidence of the people. Confidence and courage are the essentials of success in carrying out our plan. You people must have faith; you must not be stampeded by rumors or guesses. Let us unite in banishing [driving away] fear. We have provided the machinery to restore our financial system; it is up to you to support and make it work. It is your problem no less than it is mine. Together we cannot fail.” According to Roosevelt, how should the American people help the government deal with the banking crisis?

Step 1: Banking Crisis 1st Step: What were the problems w/ the banks? Bank Holiday Banks Closed…Why? Govt. Inspections…Banks allowed to open when “healthy” Restores Confidence=People Redeposit $/Banks Invest Glass Steagall Act and FDIC (1933 Banking Act) Separates Investment and Commercial Banking Repealed in 1999…Partial Cause of Current Recession FDIC: Government Insures Bank Deposits W/in 4 days of Bank Holiday…people deposit ½ money had withdrawn into banks Government promises to back banks w/ unlimited amount money (increase supply)

Step 2: Stock Market Reform What were the problems with the Stock Market? Securities & Exchange Commission Police the Stock Market Restrict Buying on Margin Monitors productivity reports/fraud on market Dropped the ball in lead up to 2007…Bernie Madoff

Step 3: Put More $ in Circulation US Off the Gold Standard: Increase $ in Circulation Must turn gold in to Fed Inflation: Cause dollar value to lower Keynesian Economics Inflation Gives Government Spending Power Wages and Prices Increases

Step 4: Direct Government Intervention NIRA and NRA Form Industry Codes Hours; prices; production limits; set up minimum wages Recognize Unions Permit Collective Bargaining Restore Competition Liberty League NIRA Challenged as Communist Supreme Ct. Overturns NIRA in Schechter Poultry v. U.S.…Executive Branch overreached its leg. Power.

Step 4: Direct Government Relief Home Owners Loan Corporation Aid for Unemployed Civilian Conservation Corps (CCC) Infrastructure Projects, Forestry, Flood Control African Americans Excluded Fed. Emergency Relief Admin. (FERA) Gave states $ to provide relief/public works projects Works Progress Administration (WPA) Takes over for FERA; 8 million jobs National Youth Administration (NYA) Work & Education for youth (16-24) Financial Aid Created 10-12 million jobs, but unemployment still 6 million

WPA

Step 4: Direct Government Intervention Tennessee Valley Authority Used to Promote hydroelectric power…7 states Control Flooding River Navigation Lowers Costs….Nationalized

Step 4: Direct Government Intervention Agricultural Adjustment Act Subsidies: Farmers paid not to produce Negatives A.A. farmers disprop. Hurt Food production down when millions starving Declared Unconstitutional (1935) Food Stamp Act of 1939 Gave away surplus food to poor Guaranteed small farmers a market

Step 5: Social Reform National Labor Relations Act (Wagner Act) Legitimized Unions, Strikes, Collective Bargaining Negotiate as group for wages and better conditions Outlawed blacklists and anti-union activities Social Security Act Retirement, Survivors, and Disability Insurance Unemployment Insurance Medicare (Health insurance for elderly) Provides cash grants to states for Medicaid Children’s Health Insurance Program Fair Labor Standards Act Minimum Wage 44 hr. work week; Overtime Child Labor Laws

Criticisms of New Deal Criticism on the Left Huey Long New Deal didn’t go far enough Want greater involvement to address uneq. distr. of wealth Huey Long Champion of the Poor Share Our Wealth Society Call for Mass Redistribution of wealth Francis Townshend Intro. idea of creating Social Security Father Coughlin Called for nationalizing the banking system Conservative Criticisms Opposition from Wealth Industrialists…Why? Criticized by some as “Socialism” NIRA Social Security Tennessee Valley Auth. Wagner Act Too much regulation of business Growing federal govt. at expense of states’ rights Deficit Spending causing growing debt

New Deal Under Attack The Supreme Court & the New Deal Court Strikes Down NIRA/NRA Schechter Poultry Company v. U.S. (1935) Court argued had given Executive branch too much legislative authority… Court Strikes Down the AAA U.S. v. Butler (1936) Ruled Fed. Govt. was impeding upon States’ authority Considering cases on Social Security and Wagner Act NIRA Business Codes: set prices, established minimum wages, limited factories to two shifts a day, shortened worker hours with goal of opening more job opportunities Guarantee right to form unions

Roosevelt and Court Packing Scheme Election of 1836: FDR wins in Landslide Mandate to continue New Deal Goal 1: Reorganize the Supreme Court; add judges…Why? Sup. Ct. had just ruled New Deal programs unconstitutional …worries about fate of others Court Packing: Pres. would get to appoint. add.’l justice for every justice 70 or older Potential Result: court would’ve ↑9→15 justices Political Mistake: Checked by Congress Congress blocking Court packing: Checks & Balances

1937 Recession 1937, Econ. reaching pre-Dep. Levels Calls to cut govt. spending Concern w/ debt Triggers Recession FDR authorizes funds for WPA/PWA Keynesian Economics What accounted for rapid drop in unemployment b/n 1940-1942?

Growing International Concerns 1939: FDR proposes no new domestic Reforms Election of 1940 Breaks tradition: seeks 3rd term Big issue: WWII…allies (G.B.) embroiled v. Nazi Germany FDR Wins in 1940

Impact of the New Deal 2,500 hospitals, 45,000 schools, 13,000 parks/ playgrounds, 7,800 bridges, 800,000 miles of roads, 1,000 airfields, employed 50,000 teachers New Deal stimulated the economy…but only WWII would solve any lingering issues Changed role of federal government: good or bad? Social Security FDIC & SEC TVA Financial Aid to Students Min. Wage/40 hr. week Protection for unions/collective bargaining Farm Subsidies Keynesian Economics Deficit Spending

Minorities in the Depression “Last Hired, First Fired” Excluded from some public works programs Disproportionately hurt by AAA programs Harlem decimated as funding stopped flowing to black communities

Minorities & the Impact of the New Deal WPA records accounts of former slaves Party Demographic Shift: Northern African Amer., farmers, immigrants, women, progressives, and intellectuals make up the New Democratic Party First woman, Frances Perkins, and Africans Americans appt. to Cabinet positions “Black Cabinet” Mary McCleod Bethune Bethune-Cookman College Advisor to FDR

Selected New Deal Programs Program Purpose Emergency Banking Relief Act Gave the executive branch the right to regulate banks Farm Credit Act (FCA) Refinanced loans to keep farmers from losing their land Civilian Conservation Corps (CCC) Created jobs for single, unemployed young men Agricultural Adjustment Act (AAA) Paid farmers to grow less (declared unconstitutional) Tennessee Valley Authority (TVA) Built dams and power plants in the Tennessee Valley Federal Deposit Insurance Corporation (FDIC) Guaranteed deposits in individual bank accounts National Industrial Recovery Act (NIRA) Established fair competition laws (declared unconstitutional) Civil Works Administration (CWA) Provided jobs for the unemployed Works Progress Administration (WPA) Created jobs in construction, research, and the arts National Youth Administration (NYA) Provided part-time jobs to students National Labor Relations Act (Wagner Act) Recognized unions’ right to bargain collectively Social Security Act Provided government aid to the retired and unemployed

Main Ideas of Great Depression 1. The U.S. stock market crashed in 1929. 2. The economy collapsed after the stock market crash. 3. Many Americans were dissatisfied with Hoover’s reaction to economic conditions. 4. Roosevelt defeated Hoover in the election of 1932. 5. Congress approved many new programs during the Hundred Days. 6. Critics expressed concerns about the New Deal. 7. New Deal programs continued through Roosevelt’s first term in what became known as the Second New Deal. 8. Roosevelt clashed with the Supreme Court over the New Deal. 9. Parts of the Great Plains came to be known as the Dust Bowl as severe drought destroyed farms there. 10. Families all over the United States faced hard times. 11. Depression-era culture helped lift people’s spirits. 12. The New Deal had lasting effects on American society.