THE GREAT DEPRESSIONChapters 17 & 18

Learning Targets

• I will be able to…• Explain the causes of the Great Depression• Explain the impact the Great Depression had on the

average American• Identify the changing role of government• Describe the goals of the New Deal

I. The Business cycle• 4 phases

• Recession, Depression, Recovery & Prosperity• Looks at economic factors: production, employment, profits,

income, investment

Recession- when factors are falling

Depression- when factors are at lowest

Recovery- when factors are rising

Prosperity- good times, factors are at highest point

Background• 1920’s prosperity & good times• People have jobs & are hopeful• Overproduction/Technology- an increase in goods-

consumers did not earn enough to purchase products• Installment plan- (Credit Card) put a small amount

down- then pay off the rest over time. This meant more Americans could not afford to buy other goods

• Many new investors in stock market no regards to a companies earnings and profit- engaging in speculation.

What Led to the Great Crash• Stock Market

• System of buying and selling shares (stocks) of companies• Bull Market 10% of households owned stock by 1929

• Buying on Margin• Small cash down payment, 10%

• Speculation• Took risks, betting the market would continue to rise

• The Great Crash• Late 1929: running out of new customers, investors sold their

holdings and prices of stock began to drop• Black Tuesday: October 29th, stocks lost $10 to $15 billion in value• Not the major cause of the Depression

Causes of the Depression• 1. The Great Crash

• Late 1929: running out of new customers, investors sold their holdings and prices of stock began to drop

• Black Tuesday: October 29th, stocks lost $10 to $15 billion in value• Not the major cause of the Depression, 4 other causes• Stock market crash led to bank failures

• Lent money to speculators and invested depositors’ money in the stock market

• Cut back on the loans they gave out recession in the economy• Bank runs: depositors take all of their money out of their bank

account• 1929-1931: 3,000 banks were forced to close

Causes of the Depression• 2. Overproduction & low demand

• Layoff in employees• Chain reaction in the rest of the economy

• 3. Low wages reduce consumers buying power• 4. High tariffs

• Caused foreign companies to buy fewer products from U.S. companies

• 5. Failure to raise interest rates• Allowed for risky speculation and led to unemployment

Review of Causes• Stock Market Crash• Overproduction & Low Demand• Low wages reduce consumers buying power (uneven

distribution of wealth)• High Tariffs• Low Interest Rates (easy credit)

Impact of the Depression• Depression worsened during Hoover’s presidency• 9,000 banks failed by 1933 • More than 12 million Americans were unemployed by

1933, 25%• Bread lines and soup kitchens• Foreclosures and evictions led to shantytowns

• New homeless people put up shacks on unused or public lands• Called “Hoovervilles” to place blame on the president

• Hobos• Homeless and unemployed wander around the country mostly by

sneaking onto freight trains

Impact of the Depression

• Dust Bowl• Drop in crop prices caused

many farmers to stop cultivating lands

• 1932: drought struck the Great Plains, soil turned to dust with resulting dust storms

• Many had to give up their farms and migrated west

• “Okies” and others lived in roadside camps and remained homeless in CA

Impact of the DepressionWhat do you think is going on in this photo?

Impact of the DepressionWho do you think these people are?

Impact of the DepressionWhat do you think these men are doing?

Photo Activity: Farmer & Sons and Migrant Mother

Hoover’s Response• Public Works

• Government financed building projects to make up for lost jobs• Paying was a problem: didn’t want to raise taxes or run a budget

deficit (spending more money than taken in by taxes)• Feared deficit spending would hurt an economic recovery

• Pumping Money Into the Economy• Reconstruction Finance Corporation (RFC): make loans to banks,

railroads, and agricultural institutions• Failed to give loans with sufficient amounts

• Emergency Relief and Construction Act: $1.5 billion to public works and $300 million to states; couldn’t reverse the collapse

Hoover’s Response• Angry Americans

• Hunger marches in Washington D.C.• Farmers revolt

• 1 million farms foreclosed on between 1930 and 1934• Began destroying crops to raise their prices

• Bonus Marchers• WWI bonus for American soldiers to be given out in 1945• March of veterans to Washington D.C. to receive their bonuses early• Stayed in Hoovervilles while petitioning lawmakers and then to buildings• Hoover used military force to remove the veterans from the city

• Lingering Depression & Images of Bonus Marchers defined public perception of Hoover

Ultimately, Hoover…

• Didn’t think the government should provide direct relief to the people

• Believed the Depression could be cured by individual initiative

Roosevelt’s Response• Came into office willing to try new ideas and experiment,

with no concrete agenda• Hundred Days

• Congress passed 15 major acts during this time (First New Deal)

• Sought advice from many different advisers in different fields of expertise• 3 different groups of advisers: all had progressive ideas w/ a belief

in some sort of government intervention

• Fireside Chats: FDR addressed the nation by radio and explained his goals

Roosevelt’s Response: First New Deal

• First New Deal• Variety of programs instituted to help reverse the economic crisis• 3 Goals: Relief, Recovery, Reform

• Fixing the Banks and the Stock Market• Securities and Exchange Commission

• Managing Farms and Industry• Agricultural Adjustment Administration, National Industrial

Recovery Act

• Debt Relief• Direct help to people with their debts• Home Owners’ Loan Corporation (HOLC)

Roosevelt’s Response: First New Deal

• Spending and Relief Programs• Civilian Conservation Corps, Public Works Administration

• Challenges to the New Deal• Economy showed a slight improvement two years after the New

Deal• Criticized by the left and the right

• Used deficit spending to pay for the New Deal

• FDR: worried by failure of rapid economic recovery from the New Deal

Roosevelt’s Response: Second New Deal

• Hoped to speed up recovery, provide economic security to all, and help w/ his reelection

• Works Progress Administration• Relief to increase employment; highways, parks, buildings, airports• Put many people to work

• Rise of Industrial Unions• Sit Down Strikes: stopped working, but refused to leave the factory

• Social Security Act• Provide some security for the elderly and unemployed workers• One of the most important pieces of legislation in U.S. history

• National Housing Act of 1937

The New Deal Coalition• White South, farmers, laborers, African Americans, new

immigrants, ethnic minorities, women, progressives, intellectuals

• Black Cabinet• Court Packing

• Supreme Court didn’t support many of the new deal programs• FDR sent a bill to Congress to increase the number of Supreme

Court justices • Didn’t pass, helped New Deal programs, hurt FDR’s reputation

• Expanding role of government and President• Duty of the government to protect the American people• Larger role of the president