The Great Depression and the New Deal

The depression of the 1930s lasted longer than any other economic depression in U.S. History. Before it

was over, two presidents – Herbert Hoover and Franklin Roosevelt – would devote 12 years to seeking

the elusive path toward recovery

Causes of the Depression

• Long Term:• 1.) Uneven distribution of wealth - top 5% of richest Americans

received over 33% of all income• 2.) Stock market speculation – people in all classes “played the

stock market”, most people were buying on margin• 3.) Excessive use of credit• 4.) Overproduction of consumer goods• 5.) Weak farm economy• 6.) Government policies – no regulation of business• 7.) Global economic problems – Europe still recovering from WWI

and countries becoming more economically interdependent

Wall Street Crash

• Ever-rising stock prices during 1920s

• In October of 1929 people began selling to pay back loans

• Black Thursday – Oct. 24th there was unprecedented volume of selling

• Black Tuesday – Oct. 29th millions of panicky investors sold their stocks with no one buying

• Stocks continued to drop for several more years

Effects

• The economic decline reached bottom in 1932

• Complete recovery came only with the beginning of another world war in 1939

• Nation’s income declined by 50%

• 20% of banks closed

• 10 million savings accounts wiped out

• 1933 – 25% unemployment

• The power of the federal government increased over the people

Hoover’s Policies

• At first President Herbert Hoover wanted little government involvement in the economy (much like the Republicans before him)

• Government assistance will destroy our work ethic

• Gradually he changed his mind and began to ask Congress to pass legislation – but it was too late for his presidency

Hoover’s Response

• Soon Europe felt the pains of the Depression

• Hawley-Smoot Tariff (1930): high tariff rates to protect our markets from foreign competition

• European countries did the same

• Trade was reduced – economies sank further into the Depression

• Suspension on international debt payments

Too Little, Too Late

Hoover Dam • 1931 – Hoover recognizes more must be done

• Federal Farm Board• Reconstruction Finance

Corporation• Farmers were suffering form

foreclosures and evictions• In 1932 a thousand

unemployed WWI vets marched on Washington, D.C. demanding their war bonus payment (promised them by 1945)

Bonus March

• Thousands more join the march with their families

• Created makeshift camps (shantytown) near the Capitol

• Congress failed to pass the bonus bill

• Police and vets clashed resulting in two dead

• Hoover called in the army to break up the encampment

• Tanks and tear gas used to drive vets out

• Hoover seen as heartless

Election of 1932

• Republicans renominated Hoover

• Democrats choose NY Governor Franklin D. Roosevelt

• FDR pledged a “new deal” for Americans, repeal of Prohibition, end unemployment

• Most Americans want CHANGE – FDR wins!

• Hoover was a “lame duck”• 20th Amendment (1933) new

president inaugurated in Jan. not March

Franklin D. Roosevelt

• Expanded size of the federal government

• Enlarged powers of presidency• Wealthy Roosevelt family (TR

was a distant cousin , wife Eleanor was niece of TR)

• Stricken with polio in 1921• Warm personality, gifted

speaker, people person• Governor of NY before

presidency (like TR)• Wife becomes most active first

lady

New Deal Philosophy

• No detailed plan at first to end the depression, but was willing to experiment with solutions

• Three R’s: Relief, Recovery and Reform

• “I pledge you, I pledge myself, to a new deal for the American people.”

• Group of advisors (Brain Trust) very diverse (Frances Perkins is first woman in a cabinet as Sec. of Labor)

The First Hundred Days

• Congress in hands of Democrats

• 100 day special session passed every request of FDR

• More legislation passed than any other Congress

• Alphabet Soup Agencies – WPA, AAA, CCC, NRA

• Bank Holiday (banks closed)• Repeal of Prohibition• Fireside chats• Using radio to

address Americans

Financial Recovery ProgramsRelief for Unemployed

Emergency Banking Relief Act: govt. examined banks to see if they are sound

Federal Deposit Insurance Corporation (FDIC): guarantees individual bank deposits up to $5,000

Public Works Administration (PWA): building of roads, bridges and dams

Civilican Conservation Corps (CCC): young men employed to work on federal lands

Tennessee Valley Authority (TVA): built dams in Tenn. Valley to control flooding and provide electricity

More of the New Deal

• National Recovery Administration (NRA): attempted to guarantee reasonable profits for business and fair wages/hours for labor

• Later declared illegal by Supreme Court in Schechter v. U.S.)

• Agricultural Adjustment Act (AAA): encouraged farmers to reduce production

• Also declared illegal by Supreme Court

The Second New Deal

• Concentrated on relief and reform

• Works Progress Administration (WPA): Construction of new bridges, roads, airports, and public buildings

• Unemployed artists painted murals

Social Security

• Social Security Act – 1935• Federal insurance program

based upon the automatic collection of taxes from employer’s throughout people’s working careers

• Monthly payments for retired persons over 65 years

• Also under this act was unemployment compensation, for those who lost jobs or were disabled

Election of 1936

• Popularity increases• Solid South, cities, Midwest

farmers, labor unions, and African-Americans=support

• FDR wins again as economy had improved a little, but still very weak

• Critics increasingly attacking the New Deal

• Criticized for not helping minorities, women and the elderly

• Too much for business, not enough for working poor

Demagogues

• Critics said relief programs bordered on socialism/communism

• Anti-New Deal organization: American Liberty League

• Father Charles E. Coughlin: Catholic priest attacks New Deal

• Huey Long: “Kingfish” from LA challenged FDR for Democratic support

The Supreme Court

• Conservative Supreme Court declared AAA and NRA unconstitutional

• FDR proposes a judicial reorganization bill (court packing bill)

• Proposed that the president appoint an additional justice for each current justice over a certain age

• Republican and Democrats are outraged – tampering with checks and balances

• The bill is defeated by Congress

Dust Bowl

• Drought in early 1930s in Great Plains

• Farms turned to dust• Thousands of “Okies” from OK

and surrounding states migrated to California

• John Steinbeck – The Grapes of Wrath (1939)