1. Prosperity, Depression, & The New Deal
American History II - Unit 4
Ms. Brown

2. Review What was the Great Migration?
– mov’t of blacks to northern cities looking for jobs and escaping the Jim Crow South
What did Marcus Garvey encourage blacks in America to do?
Return to Africa, help native people throw off white colonial oppressors, and build independent nations
What was the Harlem Renaissance?
1920s literary and artistic mov’t celebrating African American culture
What were themes expressed by artists and authors in during the Harlem Renaissance?
Pride in African American heritage
Emphasized the trials of being black in a white dominated world

3. 4.5 – Causes of the Great Depression

4. 4 Main Economic Causes of the Great Depression
Decline of key industries
Farming crisis
Overuse of credit
Unequal distribution of wealth

5. Decline of Key Industries
1920s - key industries suffered
railroad and steel industries - rise of newer private forms of transportation
coal mining - competition from new forms of energy (hydroelectric power, fuel oil, and natural gas)
late 1920s - previously booming industries began to decline
automobile - decline in demand and production
lumber - decline in lumber demand = weakening housing market (key indicator of economic health)

6. Farming Crisis 1920s - agriculture industry suffered the most
during WWI - farmers took out loans for land and equipment to produce food for the war effort
post-WWI - demand fell and crop prices declined by over 40%
Farmers boosted production in hopes of selling more → prices fell more.

7. Overuse of Credit End of 1920s - Americans buying less
rising prices
overproduction of goods
stagnant wages
Increasing number of goods bought on credit - consumers agree to buy now and pay later for goods/services
ex: installment plans
increased consumer debt and decreased spending of actual money

8. Unequal Distribution of Wealth
1920s - rich got richer, poor got poorer
>70% of American families made less than $2,500/year
most American families could not fully participate in the economic advances of the 1920s

9. Election of 1928 Republican - Herbert Hoover
Sec of Commerce under Harding and Coolidge
never run for public office
quiet and reserved
had the advantage of being in the prosperous 1920s Republican administrations
Democrat - Alfred E. Smith
4 term NY governor
open and outgoing
31st POTUS = Hoover
Continued “prosperity” with Republicans

10. The Republican-Democrat Shift Begins…
Smith (Democratic candidate) – Irish Catholic  turned off many southern voters who traditionally voted Democratic  some voted Republican
Smith’s campaign “supported” civil rights  some northern blacks aligned with the Democrats
The issue of civil rights will be more pervasive from this point, and ultimately leads to a shift in party beliefs/platforms.

11. Investing in the Stock Market
By 1929, Americans still maintained faith in gaining riches through investing in the stock market - the most visible symbol of a prosperous American economy
Dow Jones Industrial Average - a measure of the stock market’s health based on the stock prices of 30 representative large firms on the NY Stock Exchange
barometer of the stock market’s health

12. Investing in the Stock Market
a stock is a piece of ownership of a company
investors buy stocks and make money when the company makes money
1920s - stock prices rose steadily as businesses prospered → DOW high 381
“bull market” - period of rising stock prices, 3% of Americans owned stocks
rich investors and average Americans hoping to strike it rich

13. Investing in the Stock Market
Problems with investing in the stock market
speculation - buying stocks on the change of a quick profit while ignoring risks
buying on margin - paying a small percentage of the stock’s price as a down payment and borrowing the rest
unrestrained buying and selling + little gov’t regulation/restrictions = market’s upward growth
Rising prices did not reflect companies actual worth → as the value of stocks declined, people who bought on margin couldn’t pay off loans

14. Crash of the Stock Market
Early September prices peaked and quickly fell → confidence in the stock market started to waver, and some investors quickly sold their stocks
October 29, “Black Tuesday” - market dove down, shareholders frantically tried to sell stocks before prices fell further, people who bought stocks on credit were stuck with huge debts, many lost savings
Mid-November investors lost about $30B (how much the US spent in WWI)

15. The Great Depression
the collapse of the stock market signaled the beginning of the Great Depression - period between in which the economy plummeted and unemployment skyrocketed
depression - long-term period of economic decline
recession - a brief period of economic decline

16. Bank and Business Failures
After the crash, many Americans withdrew money from banks, banks didn’t have enough money to pay withdrawals, banks couldn’t pay back loans taken out to invest in the stock market→ collapse of banks
gross national product (nation’s total output of goods) dropped from $104M to $59M
90,000 businesses went bankrupt
25% unemployment, workers faced pay cuts and longer hours

17. Worldwide Implications
The Great Depression affected Europe as they struggled to pay WWI debts.
The US could no longer import European goods and Europeans could not afford to buy US goods  crippled global economy
1930 – Hawley-Smoot Tariff Act – established the highest protective tariff in US history.
Designed to protect US manufacturers and farmers from foreign competition
Opposite effect: Countries passed similar tariffs in return, American goods not sold abroad, increased unemployment due to loss of European market