1929 Crash, Great Depression and New Deal

THE GREAT DEPRESSION 1929

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THE ROARING TWENTIES• A NEW WOMAN: the

most familiar symbol is probably the flapper: a young woman with bobbed hair and short skirts who drank, smoked and said what might be termed “unladylike” things, in addition to being more sexually “free” than previous generations. PROHIBITION: The 18th

Amendment to the Constitution banned the manufacture and sale of alcohol with more than 0,5%. This made the liquor trade illegal and controlled by organized crimes figures such as Alfonso Capone.

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THE ROARING TWENTIESBIRTH OF MASS CULTURE: many had extra money to spend, and they spent it on consumer goods such as clothes and home appliances like electric refrigerators. In particular, they bought radios. The first commercial radio was in 1920; three years later there were more than 500 stations. By 1929, there were radios in more than 12 million households. People also went to the movies:, three-quarters of the American population visited a movie theater every week. But the most importan product was the car. By 1929 there was one car out five americans.

JAZZ AGE: Cars also gave young people the freedom to go where they pleased and do what they wanted. What many young people wanted to do was dance. Jazz bands played at dance halls.

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AGRICULTURAL CRISIS During World War I European

demand for American crops increased.

• After the war demand decreased.

As a result, there was a overproduction and a decline in the food prices. Farmers obtained less incomes. As the American economy

was becoming increasingly mechanized and industrialized, there was not a need for half of the population to work on farms. 4

HERBERT HOOVER WINS 1928 ELECTION

Republican Herbert Hoover won in the 1928 election

Hoover emphasized years of prosperity under previous Republican administrations

• Hoover won an overwhelming victory

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THE STOCK MARKET By 1929, many Americans

invested their savings in the Stock Market

The Stock Market had become the symbol of a prosperous American economy

The Dow Jones Industrial Average Index is a measure based on the price of 30 large firms

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STOCK PRICES RISE THROUGH THE 1920s

Through most of the 1920s, stock prices rose steadily

• The Dow almost doubled its value in five years (19224-1929).

By 1929, 4 million Americans owned stocks.

New York Stock Exchange

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Dow Jones Index 1926-39

SHARES SPECULATION• SPECULATION: Too many Americans

were engaged in speculation – buying shares & bonds hoping for a quick profit.

• MARGIN: Americans were buying “on margin” – paying a small percentage of a share’s price and borrowing the rest of the value.

• DEFAULT: in case of default (non-payment) the only guarantee was the value of the shares. 8

OCTOBER 1929 CRASH In September the Stock Market

had some unusual up & down movements.

On October 24, the market took a plunge . . .the worst was yet to come

• On October 29, known as Black Tuesday, the market crash.

16.4 million shares were sold that day( Stock Market collapsed and prices went down).

People who had bought on margin (credit) were stuck with huge debts.

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THE GREAT DEPRESSIONThe Stock Market crash

signaled the beginning of the Great Depression

The Great Depression is generally defined as the period from 1929 – 1940 in which the economy declined and unemployment skyrocketed

The crash alone did not cause the Great Depression, but made things worse.

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FINANCIAL COLLAPSEAfter the crash, many

Americans panicked and withdrew their money from banks

Banks had invested in the Stock Market and lost money.

In 1929, 600 banks failBy 1933, 11,000 of the

25,000 banks nationwide had collapsed.

Bankruptcy 1929, Los Angeles

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UNEMPLOYMENT INCREASEDBetween 1928-1932, the

U.S. Gross Domestic Product (GDP), the total output of goods and services, fell nearly 50% from $104 billion to $59 billion

90,000 businesses went bankrupt

• Unemployment increased from 3% in 1929 to 25% in 1933

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CRASH EFFECTS IN THE ECONOMY.Impact on Europe

• As a consequence of World War I, European economies were indebted. They had borrowed a great deal of money from American banks that the banks now wanted back.

• With U.S. buying less goods, foreign businesses were less able to export their products and were forced to lay off workers.

• Governments tried to protect themselves by passing high tariffs (protectionism), making foreign goods expensive.

Impact on Business• The crash crushed

businesses, because banks couldn’t lend money.

• Consumers also cut their spending on everything but essentials, and companies were forced to lay off workers when demand decreased.

• Unemployed workers had even less money to make purchases.

• In the year after the crash, American wages dropped by $4 billion and nearly 3 million people lost their jobs. 15

HAWLEY-SMOOT TARIFF

The U.S. was not the only country affected by the Great Depression.

In 1930, Congress passed the toughest tariff in U.S. history called the Hawley- Smoot Tariff.

It was meant to protect U.S. industry but had the opposite effect.

Other countries approved their own tariffs and soon world trade fell 40%

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HOOVER STRUGGLES WITH THE DEPRESSION

After the stock market crash, President Hoover tried to reassure Americans

He said, “Any lack of confidence in the economic future . . . Is foolish”

He recommended business as usual.

Hoover was not quick to react to the depression

"It is not the function of the government to relieve individuals of their responsibilities to their neighbours, or to relieve private institutions of their responsibilities to the public."

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"Prosperity is just around the corner“, Herbert Hoover, 1932.

The Great Depression brought homelessness and hunger to millions.

Across the country, people lost their jobs, and their homes

Some built makeshifts shacks out of scrap material

These shantytowns were called Hoovervilles in reference to the president of USA.

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Seattle

New York

SOUP KITCHENS

One of the common features of urban areas during the era were soup kitchens and bread lines

Soup kitchens and bread lines offered free or low-cost food for people 19

RURAL LIFE DURING THE DEPRESSION

While the Depression was difficult for everyone, farmers did have one advantage; they could grow food for their families

Thousands of farmers, however, lost their land. Many turned to tenant farming because of their debts with the banks.Between 1929-1932 almost half million

farmers lost their land 20

THE DUST BOWLA severe drought

affected the Great Plains in the early 1930s

Wind scattered the topsoil. The resulting dust traveled hundreds of miles.

One storm in 1934 picked up millions of tons of dust from the Plains an carried it to the East Coast

Kansas Farmer, 1933

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Dust storm approaching Stratford, Texas, 1934 22

Storm approaching Elkhart, Kansas in 1937

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Dust buried cars and wagons in South Dakota in 1936

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Boy covers his mouth to avoid dust, 1935

• Many farmers migrated to California and other Pacific Coast states, mostly to California. 25

Kansas, Oklahoma, Texas, New Mexico, and Colorado were the hardest hit regions during the Dust Bowl

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FRANKLIN D. ROOSEVELT- 1932

Franklin grew up in a wealthy and influential New York family. He was tutored at home and traveled the world with his family during his childhood. He graduated from Harvard in 1904. Roosevelt became active in politics in 1910 when he was elected to the New York State Senate and, later, the Assistant Secretary of the Navy. However, his career stopped for a while in 1921 when he became sick with polio. Although he survived, he nearly lost the use of his legs. For the rest of his life he could only walk a few short steps by himself.

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FRANKLIN ROOSEVELT HUNDRED FRANKLIN ROOSEVELT HUNDRED DAYS. DAYS.

Took office in March 1933 Said that economic recovery was possible Promised that the government would help

A New President

• Roosevelt called special session of Congress that became known as the Hundred DaysHundred Days.

• President and Congress worked togetherPresident and Congress worked together to create new programs to battle the Depression and aid economic recovery.

• These programs became known as the New DealNew Deal.

The Hundred Days

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Banking CrisisBanking Crisis• Temporarily closed all the Temporarily closed all the

nation’s banksnation’s banks to stop panic and large-scale withdrawals: 4 days Bank Holidays. After these 4 days , banks were reorganized and closed those who were insolvent.

• Passed the Emergency Emergency Banking Act: Banking Act: within two weeks, americans redeposited half of the money that had left banks months before. Government created a de facto 100% deposit insurance.

• Glass-Steagall Act created Glass-Steagall Act created the FDIC: the FDIC: limited commercial banks activities. Separated commercial and investment banks activities.

Hundred DaysHundred Days• Critical period of Critical period of

government activitygovernment activity• Roosevelt pushed Roosevelt pushed

Congress to put most of Congress to put most of his New Deal into his New Deal into practice.practice.

• The New Deal promised The New Deal promised relief, recovery and relief, recovery and reformsreforms..

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End Prohibition. Alcohol was legal again …. And consumers paid taxes.

Restoring ConfidenceRestoring ConfidenceRoosevelt worked to restore confidence in American restore confidence in American

banks.banks.

– Ordered all banks to temporarily close

– Emergency Banking Relief ActEmergency Banking Relief Act was quickly passed .

– Government inspected financesGovernment inspected finances of a bank before it was allowed to reopen.

Plan was announced in Roosevelt’s first fireside chatRoosevelt’s first fireside chat.

– Radio addressRadio address in which he spoke directly to the American people

– Gave many chats over the course of his administration

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New Deal ProgramsNew Deal ProgramsCivil Works AdministrationCivil Works Administration– employed 4 million Americans on building hospitals, schools, highways, bridges, parks, etc. Also gave work to artists, writers, theater directors and musicians

Social Security ActSocial Security Act, which guaranteed pensions to million of Americans, set up a system of unemployment insurance and the federal government would help care for dependent children and the disabled

Tennessee Valley AuthorityTennessee Valley Authority– hired people to build dams and generators, controlled flooding and bring cheap electricity and jobs to Tennessee River Valley

Farm Credit AdministrationFarm Credit Administration– helped farmers refinance mortgages so they could keep their farms

Agricultural Adjustment ActAgricultural Adjustment Act– stabilized agricultural prices- Helped farmers by paying them not to grow crops and leave their fields fallow in order to end surpleses and boost prices.

National Industrial Recovery ActNational Industrial Recovery Act– passed with support from Frances Perkins, the nation’s first female Cabinet member, give the workers the right to unionize and collective bargaining (higher wages and better work conditions). 31

Reformation: A New Deal.

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Roosevelt used to say "try something, if it doesn't work try something else." He and his brain trust recognized, at least, that they must try to do something.

These attempts at least gave Americans the hope that something was being done.

Roosevelt's basic philosophy of Keynesian economics manifested itself in what became known as the three "R's" of relief, recovery and reform.

The programs created to meet these goals generated jobs and more importantly, hope.

New Deal Labor ProgramsNew Deal Labor Programs National Industrial Recovery ActNational Industrial Recovery Act passed in 1933.

– Required minimum wageminimum wage and allowed collective bargaining– Declared unconstitutionalunconstitutional by Supreme Court in 1935

National Labor Relations Act, or the Wagner ActWagner Act– Allowed workers to join labor unionsAllowed workers to join labor unions– Established the National Labor Relations BoardNational Labor Relations Board to oversee union

activities Congress of Industrial OrganizationsCongress of Industrial Organizations

– Organized workers into unions based on industryindustry, not skill level– Allowed African Americans, Hispanics, women, and immigrantsAfrican Americans, Hispanics, women, and immigrants

as members– Led a sit-down strikesit-down strike against General Motors in which they

stayed in the factories so that they could not be replaced by new workers

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1936 ELECTIONS

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Roosevelt was reelected in 1936 by a huge margin.Supreme Court issued a series of rulings declaring

several New Deal programs unconstitutional.Roosevelt responded by proposing a plan for

reorganizing federal judiciary.– Drew harsh criticism from Congress and public

– Critics charged that Roosevelt was trying to change the balance of power defined in the U.S. Constitution.

– Congress rejected the bill.

The Supreme Court did not overturn any more New Deal legislation.

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WORLDWIDE EFFECTS.

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Great Britain trade fell by half (1929-1933), industry production fell by a third. At the depht of the depression there were 3.5 million unemployed and many more had only part-time employment.

GREAT BRITAIN.

Around 200 men marched from Jarrow to London over 26 days, carrying a petition to the British government requesting the re-establishment of industry in the town following the closure in 1934 of its main employer, Palmer's shipyard

Australia's extreme dependence on agricultural and industrial exports meant it was one of the hardest-hit countries in the Western world.

Unemployment reached a record high of almost 32% in 1932.

After 1932, an increase in wool and meat prices led to a gradual recovery

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AUSTRALIA.

People were forced into all sorts of tricks and expediencies to survive, all sorts of shabby and humiliating compromises. In thousands of homes fathers deserted the family and became itinerant workers, or perhaps took to drink. Grown sons sat in the kitchen day after day, playing cards, studying the horses (betting on horse racing) and trying to scrounge enough for a three penny bet, or engaged in petty crime, mothers cohabited with male boarders who were in work and who might support the family, daughters attempted some amateur prostitution and children were in trouble with the police.

• Harshly impacted by both the global economic crisis and the Dust Bowl.

• Canadian industrial production had fallen to only 58% of the 1929 level by 1932, the second lowest level in the world after the United States

• Total national income fell to 55% of the 1929 level, again worse than any nation apart from the United States.

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CANADÁ.

Ontario, Canada

Farms in the west such as this one were devastated not only by erosion but also by droughts and plagues of insects (Saskatchewan).

ASIA

• The Great Depression in East Asia

was of minor impact. Asian trade

was dominated by european colonial

powers.

• The Japanese economy shrank by

8% 1929–31

• The invasion of Manchuria in

September 1931 provided Japan

with raw materials and energy.

• The Japanese economy was able to

recover by 1932 and continued to

grow. 40

FRANCE The Depression began to affect

France from about 1931

France's relatively high degree of

self-sufficiency meant the

damage was considerably less

than in nations like Germany.

Though, unemployment was high

enough to lead to rioting and the

rise of the socialist Popular

Front.

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Leon Blum, 1936, first socialist to take office.

GERMANY. Germany's Weimar Republic was

hit hard by the depression, as American loans to help rebuild the German economy stopped.

Unemployment soared, especially in larger cities, and the political system was even more influenced by extremism (communists and nazis).

Hitler's Nazi Party came to power in January 1933.

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World War II: US factories flooded with orders

of weapons and ammunition. Unemployment decreases and

production increase Depression ends completely by

the time the USA entered the war in 1941

END TO ECONOMIC DEPRESSION

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