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1930’s Crash, Depression, and New Deal
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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
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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
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Why did the Stock Market crash?
How many people traded on the stock exchange?
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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
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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
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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
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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
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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.
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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)
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What was FDR’s plan for recovery?
The New Deal
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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
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The New Deal How did the New Deal fix the stock market?
Security Exchange Commission practice of buying on margin was regulated
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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
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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)
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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
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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
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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
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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
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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
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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
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