1. 1930’s Crash, Depression, and New Deal

2. What were the 1920’s like? What happened Oct. 29, 1929?
1920's had been a period of good economic times
Tues. Oct. 29th, NYC Stock market crashed, causing a depression that would last until 1942

3. The stock market involves RISK.
Why were investors so willing to loan money to people?
Borrowing money to buy stock is called what?
The stock market:
the public invests in corporations by purchasing stocks; in return for this they expect a profit (but risk a loss)
In the booming 1920's economy, money was plentiful, so banks were quick to make loans to investors
Investors only had to pay for 10% of the stock's actual value at time of purchase
this was known as BUYING ON MARGIN, and the balance was paid at a later date

4. Why did the Stock Market crash?
How many people traded on the stock exchange?

5. Despite the Age of Prosperity...
How was the average person affected by the stock market crash?
mass consumption was already low (poor could afford to buy little)
unemployment rose  no gov't assistance at first
since people could not buy, productivity was cut back = further unemployment
So, with additional unemployment  purchasing power declined again  reduced productivity yet again

6. Herbert Hoover
What did Hoover believe about government regulation of business?
How did Hoover respond to the Depression?
What was his policy toward helping the poor and unemployed?
He persuaded bankers/business to follow his policy - giving tax breaks in return for private sector economic investment
Hoover also organized some private relief agencies for the unemployed
He worked out a system with European powers that owed U.S. money as a result of WWI debts = put a temporary stop to war debt & reparations payments
Euro. countries were to purchase American goods instead to stimulate American economy

7. How did this work out for him?
Hawley Smoot tariff?
What happened to unemployment?
What happened to Hoover?
Democrats in Congress passed a high tariff (SMOOT HAWLEY) to protect U.S. industry (hoped to stimulate purchasing of U.S. goods)
this turned out to be a fatal error...
Congress did not understand that the world had become a GLOBAL ECONOMY
in retaliation other countries passed high tariffs and no foreign markets purchased American goods, so U.S. productivity decreased again

8. People Respond to the Economy
How did people protest Hoover’s policies?
What did unemployed/homeless people do?
What did veterans do?
people were frustrated - isolated protest movements
EX: Dairy farmers frustrated w/low price of milk refuse to sell (dump it)
EX: WW1 veterans (pensions discontinued by congress) march on Washington = BONUS MARCH (by BONUS ARMY)
they reached Washington by 1931, set up shantytowns = HOOVERVILLES (food scraps = HOOVER-MEALS, hitchhiking journeys = HOOVER RIDES)
after one year they were forcibly dispersed by the Army

9. The Dust Bowl Where did the Dust Bowl hit hardest?
What caused the Dust Bowl?
How did people respond to the Dust Bowl?
What famous book was written about this?
In 1931 a severe drought hit the southern plains (Kansas, Oklahoma, Texas)
Dust from over-plowed and over-grazed land kicks up into “black blizzards”
Several dry years in a row made it impossible to farm and the dust storms were harmful to people’s health
Many farmers and families packed up and moved west looking for work (Okies)
Described in John Steinbeck’s Grapes of Wrath
The drought didn’t end until 1939.

11. 1932 ELECTION Who won the 1932 election? Why?
1 out of 4 citizens was unemployed…
national income was 50% of what it had been in 1929
Republicans nominated Hoover
Winner by a landslide = FRANKLIN DELANO ROOSEVELT (Dem - N.Y. governor)

12. What was FDR’s plan for recovery?
The New Deal

13. The New Deal How did the New Deal fix the banks? Bank Holiday
FDR’s new program to fight the Depression
It changed completely the way the gov't functions
the first phase of the New Deal dealt exclusively w/ economic reform - unlike Hoover, FDR believed gov't legislation/ involvement was crucial to stimulate the economy

14. The New Deal How did the New Deal fix the stock market?
Security Exchange Commission
practice of buying on margin was regulated

15. How did the New Deal fix unemployment?
ALPHABET SOUP
fair labor codes established - wages, no child labor, shortened work hours
business people challenged the NRA, claiming it was communist

16. Alphabet Soup
NATIONAL INDUSTRIAL RECOVERY ACT (NIRA) and NATIONAL RECOVERY ADMIN (NRA) – regulated labor (pro-worker)
TENNESSEE VALLEY AUTHORITY (TVA) - used to promote hydroelectric power, control flooding (nationalization v. privatization)

19. Alphabet Soup
AGRUCULTURAL ADJUSTMENT ACT (AAA) – passed to aid formers
Set subsidies – government payments to not produce (help supply and demand)
its objective was to restore farmers' purchasing power and to restore the family farm - AAA had farmers cut back on crop production by paying them equivalent SUBSIDIES (paid not to produce) - bad side:
food production down when millions were starving
Black sharecroppers were hurt: white landowners paid not to farm so they got rid of Black tenant formers
in 1935, AAA was declared unconstitutional by courts (too much control over individual states), so it was revised and introduced as new legislation
EX: Food Stamp Act of gave away surplus food to poor, also guaranteed (small) farmers a market

20. Alphabet Soup
CIVILIAN CONSERVATION CORPS (CCC) – employed young men in conservation, construction, etc.
set to establish work for young men (18-25) in areas of reforestation, soil conservation, flood control, road construction
UNEMPLOYMENT - still a major problem
FDR like Hoover was wary of gov't handouts - he wanted people to earn their keep so gov't agencies were created to temporarily address the unemployment problem
- also took them out of urban labor markets - but Blacks not permitted to enroll

21. SOCIAL REFORM
National Labor Relations Board outlawed anti-union practices and legalized strikes
NEW DEAL - after 1935, with immediate economic relief & reform addressed, New Deal turned to Social Welfare

22. New Deal Social Reform
Social Security Act – created unemployment insurance and old age pensions
(1935)- feared by opponents as "creeping socialism"- this act typifies the WELFARE STATE - unemployment insurance, old age pensions
Problem: it took some $ out of circulation (payroll deductions) at a time when purchasing power was already low

23. ELECTION OF 1936 FDR won easily
this victory gave FDR a mandate (feeling of justification) to continue his New Deal policies
first objective: to reorganize the Supreme Court - they disallowed some New Deal legislation
FDR wanted # of judges changed from 9 15 (to "pack the court") - great opposition, so FDR withdrew this proposal
Eventually judges retired & FDR got to appoint new ones  ones who approved all New Deal legislation

24. IMPACT OF THE NEW DEAL
a revolution in American culture and politics- more gov't involvement but within the context of traditional U.S. democracy (not socialist…)
New Deal helped in stimulating the U.S. economy, but only WWII would solve any lingering problems  unemployed found jobs in weapons factories and the military
New Deal saw expansion of U.S. gov't in :
social reform
welfare state - after this point the U.S. gov't was expected to play a role in any economic crisis