The Great Depression (1929-1940)

The Great Depression (1929-1940)

• Economies go through good and bad periods, repeating themselves
• These economic ups and downs are referred to as the business cycle
• A depression includes business failures, high unemployment, and falling prices
• The Great Depression represents the worst economic period in U.S. history

Causes of the Great Depression

• The 1920s had rapid economic expansion with new products being made and sold
• By the end of the 1920s, consumers could not afford new products
• Manufacturers produced more goods than they could sell

Speculation

• Stocks soared in value with people buying stocks hoping to "get rich quick"
• Speculation caused stock prices to rise each day because of Wall Street investments
• Stock prices tripled by 1929

Buying on Margin

• Stocks could be purchased with a 10% down payment called buying on margin in the 1920s
• The remaining stock price was financed by a loan from a stock broker or bank
• Purchasers were responsible for the whole price if the stock price fell
• It became impossible to pay off borrowed money if stock prices declined
• People invested in real estate hoping to get rich quick

Shaky Banking Methods

• Banks operate by loaning money to businesses from depositors, and pay interest to depositors
• Some banks invested depositors' money in unsound investments
• The government did not regulate the banking system or the stock market
• The economy became very shaky because people bought more than they could afford

Tariffs on International Trade

• Tariffs (taxes on imported goods) were passed, making foreign goods more expensive
• Foreign nations retaliated with tariffs on American-made goods
• It became harder for U.S. businesses to sell their products to other nations
• World trade shrinking contributed to the Great Depression

The Stock Market Crash

• The stock market began to decline on Black Thursday, October 24th
• Bankers attempted to stop the decline by purchasing stocks, which only delayed the drop
• The stock market crashed on Black Tuesday, October 29, 1929
• People could not pay back loans and frantically sold stocks, driving prices down

Effects of the Stock Market Crash

• Banks that made bad loans on risky stocks began losing money.
• People panicked, withdrawing money, worsening conditions for banks
• Many bank runs forced banks to close their doors
• People who deposited money in closed banks, lost their money
• The Stock Market Crash worsened the Great Depression

Further Effects of the Stock Market Crash

• More businesses started closing
• People lost their jobs, homes, and farms
• The demand for goods decreased causing businesses to fail and people to go broke

Effects of the Great Depression

• People started to feel worthless
• Soup kitchens and bread lines formed nation-wide
• Churches and charities tried to feed the hungry
• Hundreds of thousands lived on the streets with no safety nets, like unemployment insurance

The Dust Bowl

• Since the 1870s, the Great Plains had been plowed by farmers to grow crops
• The Great Plains region was hit by a severe drought in the early 1930s
• The Great Plains stretches from Texas to North Dakota
• The ground cover that held soil in place was gone, and winds blew the land away

Effects of the Dust Bowl

• Farmers packed up belongings to head west to California for work
• These migrants became known as "Okies" because many came from Oklahoma
• This mass migration was similar to the Great Migration and miners moving to the West

Documenting the Dust Bowl

• John Steinbeck wrote "The Grapes of Wrath," describing Okies becoming migrant workers in California
• Dorthea Lange photographed the effect of the Dust Bowl and Great Depression on Americans

Primary & Secondary Sources of Information

• Primary sources provide information about an event from someone who witnessed it first-hand
• Primary sources include pictures, diaries, maps and newspaper articles from the time of the event
• Secondary sources retell information without first-hand experience of the event
• A secondary source includes history books and information from someone else

Mexican Repatriation

• The Immigration Acts of the 1920s limited European immigration, but not for Mexico
• As long as they passed a medical exam, literacy tests, and paid a small fee, Mexican immigrants were allowed to enter the U.S.A
• Most Mexicans left due to the Mexican Revolution, seeking jobs in the U.S.A working hard-labor positions

Mexican Repatriation cont.

• Jobs became harder to find during the Great Depression, with white American farmers going after jobs held by immigrants
• Roughly 500,000 Mexicans immigrated in the 1920s, but only 33,000 were allowed in during the 1930s

Mexican Repatriation cont.

• Prejudice and discrimination increased with the competition for work
• Pres. Hoover signed the 'Mexican Repatriation Act' in the 1930s and forced roughly 500,000 Mexican-Americans to return to Mexico

Pres. Hoover's Philosophy

• The government did not give direct relief during the Great Depression's early years
• Pres. Herbert Hoover did not want the government involved during rising unemployment
• Hoover supported a laissez-faire economy (no government involvement)
• Hoover believed government intervention would reduce the incentive to work and undermine 'rugged individualism'

Pres. Hoover's Efforts

• Hoover cut taxes, created a federal agency to buy excess farm crops, and increased federal spending on public works like the Hoover Dam
• Hoover also established the 'Reconstruction Finance Corp,' giving emergency loans to banks and businesses
• Hoover hoped money would 'trickle down' to the people

More Problems for Hoover

• Hoovervilles-Shantytowns sprang up as a sign of disrespect
• Over 100,000 businesses failed and 25% of the population was out of work
• Hoover stuck to 'rugged individualism', but was nearing the end of his political life

Franklin Delano Roosevelt "FDR"

• The American public lost faith in Pres. Hoover by 1932
• Franklin Roosevelt (FDR) won the 1932 election in a landslide
• FDR and his "Brain Trust" planned to end the depression and put Americans back to work, calling it the New Deal

"FDR" and the New Deal

• The New Deal marked a change from the laissez-faire attitude the government had previously taken with the economy
• The government was responsible to make sure the economy ran smoothly
• The New Deal increased the government's power and size

FDR a New Style of Leadership

• FDR used the radio to speak through 'fireside chats'
• FDR was disabled at age 39 from polio
• Eleanor, FDR's wife, acted as his 'eyes and ears', traveling the U.S
• Eleanor supported women's rights, the peace effort, and the poor

Women in the Great Depression

• Women experienced the Depression as mothers and homemakers
• Eleanor Roosevelt rallied women with her book "It's Up to the Women"
• Frances Perkins was the first female in the U.S. Cabinet, as Secretary of Labor
• Perkins played a role in helping FDR with New Deal legislation

New Deal Legislation

• FDR reassured the public in his 1932 inaugural address
• FDR's quote was, "we have nothing to fear but fear itself"
• The First Hundred Days of office had Congress passing FDR's new laws
• The New Deal was explained in the Three R's: Relief, Recovery, and Reform
• This legislation became to be known as Alphabet Soup Laws

New Deal Legislation cont.

• Banks had been failing during the 1930s
• Depositors feared banks were unsound.
• FDR closed all banks and put them on a Bank Holiday until new laws could restore faith
• Bank closings soon decreased

New Deal Legislation cont.

• Federal Emergency Relief gave money for emergency relief
• Civilian Conservation Corp gave jobs to young men doing conservation work cleaning parks and planting trees
• Public Works Admin created jobs to build roads, schools, and bridges
• Works Progress Admin created jobs for artists, writers, and musicians
• This legislation became to be known as Alphabet Soup Laws

New Deal Legislation cont.

• FDR wanted to stimulate demand for goods to achieve recovery
• 'Priming the Pump' was FDR's means of of putting money into consumers hands
• FDR hoped to increase consumers spending to increase demand

New Deal Legislation cont.

• The National Recovery Admin set business codes regulating wages, pricing, and practices
• The Agricultural Adjustment Act paid farmers to plant less to increase crop prices
• The Supreme Court ruled both the NRA and AAA were unconstitutional

New Deal Legislation cont.

• Reforms were aimed at fixing the defects in the American economy to prevent future depressions
• Reforms were based on the belief that the government should protect individuals
• This belief increased the power of the national government in the lives of Americans
• Obamacare is an example of this today

New Deal Legislation cont.

• The Federal Deposit Insurance Corp insured banks
• With the FDIC, people would not lose savings in case of bank failure
• The Social Security Act provided a safety net for workers with unemployment insurance, old age pension, or to pay out if they died early

New Deal Legislation cont.

• The Security & Exchange Comm regulated the stock market to prevent fraud
• The Tennessee Valley Authority owned dams to generate electricity
• National Labor Relations Act gave workers right to form unions

Impact of New Deal on Labor

• Union membership grew the most during the 1930s
• FDR wanted to raise wages of labor to fight the Great Depression
• The Norris-LaGuardia Act didn't allow the courts to stop unions from striking
• The National Industrial Recovery Act said workers could form unions
• The Wagner Act helped unionizing by giving unions the right to collective bargaining

Reactions to the New Deal

• The New Deal was generally popular, but FDR did face criticism
• The Liberty League thought FDR was a traitor
• Dr. Francis Townsend wanted to give citizens over 65 an additional $200 a month

Reactions to the New Deal cont.

• Huey Long , 'The Kingfisher', promised families $5,000 a year paid by taxing the rich, but was assassinated
• Father Coughlin distrusted Wall St., was anti-Jewish, and wanted the government to take over the banks

The Supreme Court and the New Deal

• The Supreme Court struck down The National Industrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA)
• The decision “Schechter v. U.S.” stated that Congress could not give the President more constitutional power

FDR's Court-Packing Scheme

• The Supreme Court's decision made FDR fear that other New Deal laws would be seen as unconstitutional
• FDR believed Supreme Court Justices were out of touch with the needs of the nation
• FDR proposed a plan to allow the President a new Supreme Court appointment for each Justice over 70 1/2 years old

FDR's Court-Packing Scheme cont.

• If approved, it would give him the right to appoint six Justices
• FDR's plan was seen as an attempt to upset the traditional separation of powers
• Congress rejected the plan despite FDR's popularity
• The Supreme Court ultimately stopped overruling New Deal legislation

The Impact of the New Deal Reforms

• Power of the federal government increased in New Deal
• The government began taking responsibility for the economy
• The New Deal allowed the government to control citizens' private lives through regulations
• Taxes increased to fund new government programs

New Deal Helps End the Depression

• Spending on the New Deal helped end the Great Depression
• A war was needed to finish the effects of the Great Depression
• When Hitler's aggression increased, the US spent money and joined WWII