Presentation on theme: "How the Party Ended. Problem areas prior to the crash Weaknesses in agriculture. Weaknesses in traditional manufacturing. Concentration of wealth Over-extension."— Presentation transcript:
Problem areas prior to the crash Weaknesses in agriculture. Weaknesses in traditional manufacturing. Concentration of wealth Over-extension of consumer credit. Speculative mentality. Unstable domestic financial situation. Unstable international financial situation.
Agriculture Tremendous expansion during World War I. Government subsidies to encourage production. War ends... Subsidies withdrawn European production increases Agricultural sector had over-expanded.
Market price for wheat per bushel: 1919: $2.25 1929: $1.03 1932: $.39
Weaknesses in traditional manufacturing Electricity competes with coal. Synthetic materials compete with cotton. Poor management. Great increases in production.
Weaknesses in traditional manufacturing Business consolidation. –1929: 200 largest companies control 50% of all corporate wealth. Concentration of wealth... –Wages went up, but not in "real" terms.
Concentration of wealth Wealth of top 1% = bottom 42% 71% (120 million) < $2,500 per year 12 million < $1,200 per year
How do you move inventory ?? Advertising Consumer credit "Dollar down, dollar a week."
The Stock Market Banks invested significant $$$ in stock. More individuals were investing than ever before. 1920s a long "Bull Market." You "couldn’t loose." Could buy on margin of 10% Note: No significant controls on the market or financial institutions..
Buying on margin... 10% down payment required at time of purchase. If stock price falls below a set price: "Margin Call“ The stock holder must pay off the debt. Works great as long as the market continues up.
Unstable domestic financial situation Consolidation of banking 1% of U.S. banks controlled 46% of resources No controls on what banks could invest in. No such thing as a "guaranteed deposit."
Unstable international $$ situation Germany Allies US $$
"The New Deal" Addresses: – Relief – Recovery – Reform No plan - do what works.
Roosevelt's most important quality: His ability to consider any idea.
"Keynesian Economics" John Meynard Keynes "pump priming" Increased government spending will stimulate the economy. (Roosevelt probably didn’t understand Keynes.)
Traditional View of the New Deal 1st New Deal, "The First Hundred Days" - 2nd New Deal 3rd New Deal, "Synthesis New Deal"
1st New Deal (early 1933) Objective: restore confidence. Bank "holidays" The "Alphabet Agencies" CCC - Civilian Conservation Corps AAA - Agricultural Adjustment Act TVA - Tennessee Valley Authority NIRA - National Industrial Recovery Act PWA - Public Works Administration –large-scale public works
2nd New Deal (1935) Focus shift toward reform –FDR seeks to address public discontent –Becomes less cooperative with business WPA - Work Progress Administration – Smaller-scale public works projects Social Security Act National Labor Relations Act (Wagner Act)
3rd New Deal 1937 - National Housing Act 1938 - Agricultural Adjustment Act 1938 - Fair Labor Standard Act Established –minimum wage = 40¢ / hour –maximum workweek = 40 hours (in businesses in interstate commerce)
Opposition to FDR... Traditional Republicans Father Coughlin Huey Long The Supreme Court - "Court Packing " scheme