1. THE GREAT DEPRESSION & FDR’S NEW DEAL

2. Causes of the Great Depression
Agricultural Decline
Overproduction  lower prices  inability to repay loans
Drought/Dust Bowl

3. Causes of the Great Depression
Buying on credit– living beyond one’s means
By 1929, Americans racked up more than $6 billion in personal debt — more than double the 1921 level.

4. Causes of the Great Depression
Overproduction– surplus of goods
No ability to continue to buy products due to excessive debt.

5. Causes of the Great Depression
Rising wages masked unequal distribution of wealth
While factory workers’ wages rose 8%, factory output increased by 32%. As a result, worker incomes rose modestly, while rich investor incomes skyrocketed.

6. Causes of the Great Depression
Stock Market Crash
Until September 1929, the stock market continued to rise.
Many people borrowed money to buy stock, assuming prices would continue to go up.
Some economists feared that stocks were over-priced (speculation).

7. Causes of the Great Depression
Stock Market Crash
On October 29th, 1929, the stock market went into a free fall as investors tried to sell at any price.
16 million shares were sold on “Black Tuesday.”
Billions of dollars were lost in a few hours.
Many who bought stocks on margin were wiped out.

8. Causes of the Great Depression
Stock Market Crash
The stock market crash didn’t start the Great Depression by itself. Instead, it quickened the collapse of the U.S. economy.

9. Effects of the Great Depression
The banking system feels the effects of the crash first. People fear that their money will be lost so they run to the bank and attempt to withdraw their funds.
But banks don’t have enough of their money on hand as cash. These bank runs cause banks to fail.

10. Effects of the Great Depression
Business failures
Factories closed, causing worker layoffs.
This lowered demand for goods.
By 1933, the unemployment rate reached 25%.

11. Effects of the Great Depression
Passage of the Hawley-Smoot Tariff
Congress passed the Hawley-Smoot Tariff to protect American manufacturers from foreign competition.
The resulting drop in world trade only made the glut of American factory and farm products harder to sell.
The strategy was a mistake. Other nations retaliated and raised tariffs as well.

12. Effects of the Great Depression
Worldwide Depression

13. Hoover’s Response to the Great Depression
Like most economists of the day, he believed that up and down swings in the economy were a natural part of the business cycle. It was thought that strong businesses would weather storms without the support of the government.
At the start of the economic downturn, Hoover took a hands-off approach.

14. Hoover’s Response to the Great Depression
Hoover saw that he must do something.
Asked businesses to keep wages, employment, and prices at current levels
Called for tax cuts, lower interest rates, and public works
Asked wealthy to donate more money to charity

15. Hoover’s Response to the Great Depression
But volunteerism failed.
Towns and states didn’t have the necessary resources to deal with the depression.
Hoover did not support direct federal aid to individuals.
Hoover put his faith in localism, a policy whereby problems are best solved at the local and state levels.

16. Hoover’s Response to the Great Depression
Congress passed the Reconstruction Finance Corporation
RFC employed trickle-down economics
The RFC gave billions of dollars to banks and large businesses.
Lend to, and invest in, struggling businesses who would hire workers and thus end the depression.
The RFC failed-- businesses did not hire more workers; not enough

17. Hoover’s Response to the Great Depression
One Success of the RFC
Construction of Hoover Dam in Nevada
Increased electricity and farm land in SW.

18. Hoover’s Response to the Great Depression
Bonus Army– marched on Washington demanding pensions
In the summer of 1932, almost 20,000 veterans set up camps and occupied vacant buildings. In July, police tried to evict them and riots erupted.

19. Hoover’s Response to the Great Depression
Bonus Army– disbursed by U.S. Military
The eviction of the Bonus Army doomed Hoover’s bid for re-election.
Americans were ready for new leadership and a greater role for the government in solving problems.
Hoover ordered General Douglas MacArthur to remove the veterans. He used tear gas, cavalry, tanks, and troops with fixed bayonets.
Press photos of troops using excessive force angered the American public.

20. FDR’S NEW DEAL Based on Keynesian Economics John Maynard Keynes
Demand-side economics
Use government spending to prime the pump
Creates demand and generates economic growth

21. FDR’S NEW DEAL Emergency Banking Relief Act Bank Holiday
Reopened stable banks
Took us off the gold standard
(creates inflation)
Glass-Steagall Banking Reform Act
FDIC: Federal Deposit
Insurance Company
Insured deposits

22. FDR’S NEW DEAL Civilian Conservation Corps Priming the Pump
Camps for men years old
Reforestation, flood control, drainage, trails
Sent home pay to families
Criticism: militarized nation’s youth

23. FDR’S NEW DEAL Agricultural Adjustment Act 2nd AAA passed
Creating artificial scarcity
Paid farmers to reduce acreage
Unintended consequences:
Slaughtering of animals
Declared unconstitutional
Increased unemployment initially
2nd AAA passed
Constitutional
Rewarded farmers for planting certain crops
Paid for through government spending– not taxes

24. FDR’S NEW DEAL National Recovery Administration
Industries would accept fair codes of competition
Laborers given rights
Industries spread out employment by reducing hours of each worker
Encouraged Americans to purchase goods from companies who followed these fair codes.
Unconstitutional– can’t regulate businesses not involved in interstate commerce

25. FDR’S NEW DEAL Tennessee Valley Authority
Built dams along tributaries of Tennessee River
Expanded electricity
“Creeping socialism”– govt. setting prices
Constitutional but couldn’t be replicated
Employed African Americans (segregated camps)
Economically revitalizes the South

27. FDR’S NEW DEAL Securities and Exchange Commission
Regulates buying and selling of stocks
Oversees all activities on the Stock Market
Establishes rules for trading stocks
Stabilizes the stock market

28. FDR’S NEW DEAL Works Progress Administration Largest New Deal Program
Construction of public works
Jobs for unemployed white collar workers (dancers, artists)
Highly criticized for “make work” policies

29. FDR’S NEW DEAL Social Security Act Unemployment insurance
Old-age pensions
Taxes: employers and employees
Children can’t care for parents in
urbanized economy
Age 60: Life expectancy

30. FDR’S NEW DEAL Wagner Act National Labor Relations Board
Workers earn right to collectively bargain
Led to establishment of Congress of Industrial Organization
Fair Labor Standards Act
Minimum Wage
Maximum hour work week
Prohibited child labor

31. FDR’S NEW DEAL Net Results: Alphabet Soup
Relief: provide relief from bad situations created by the Depression
Recovery: provide economic growth
Reform: prevent a Depression from occurring again
Some improvement but not until government spending began accelerating.
WWII is what really propels the US out of the Depression

32. FDR’S NEW DEAL Criticism of New Deal:
Charles Coughlin
Dr. Townshend
Huey Long
Too much power to federal government
Supreme Court struck down some provisions
Court-packing scheme by FDR– stopped by Congress

34. FDR’S NEW DEAL Role of Women: African Americans: Native Americans:
Eleanor Roosevelt:
Frances Perkins: 1st female cabinet member
African Americans:
Received some benefits from the New Deal
Advised FDR
FDR couldn’t be as supportive as he wanted–
fear of losing Southern Democrats’ votes
Native Americans:
Indian New Deal
Restored tribal identities
Revoked assimilation policies