High gross national product (GNP) – total value of goods and services produced in a given period Low unemployment – satisfied workers Stock market values.

What economic factors and conditions made the American economy appear prosperous in the 1920’s?

High gross national product (GNP) – total value of goods and services produced in a given period

Low unemployment – satisfied workers Stock market values went steadily up -

quadrupled between 1920-1929

What economic factor led to optimsim?

The growth of the GNP This led to reckless spending by the American

people – cars, vacuums, refrigerators, etc. – usually on credit

How did business benefit from welfare capitalism?

Welfare capitalism – various benefits companies provide (like health insurance) to improve worker satisfaction and loyalty

As a result, union membership dropped; worker loyalty and satisfaction grew

How does the stock market work?

People buy stocks, which gives them a share in the ownership of a corporation

If a corporation does well, values of stock typically go up, making stock holders a profit

But, if stock prices go down, shareholders lose money

How did Coolidge and Harding view the relationship between business and government?

Basically, that government should support, not interfere, with business practices

They believed in giving businesses the maximum freedom to profit and succeed

“laissez-faire” – to let alone

How did the rise of the stock market affect American investors?

As stock prices rose, more and more Americans began to invest in the stock market

Number of shares being traded in the U.S. went from 318 million in 1920 to more than 1 billion in 1929

It seemed to good to be true – some believed that everyone could get rich investing in the stock market

What were the basic economic weaknesses in the American economy in the late 1920’s?

Very uneven distribution of wealth – 5% of the workers made 70% of the country’s income; conversely the other 95% made 30% of the country’s income

Easy credit – too easy Too easy to buy stock on margin

In what way was the easy availability of credit both a blessing and a curse?

It was a blessing in that it allowed more Americans to buy more products, which brought on more economic growth

It was a curse when consumers could not pay off their debts, purchases slowed

Warehouses started to be filled with un-purchased goods

What was a margin call?

“buying on margin” – borrowing money to invest in the stock market; a borrower assumed he would pay back the loan with money made from stock prices going up

A margin call was a demand for payment of a margin loan if a stock’s value fell below a certain point

What events led to the stock market’s crash in October 1929?

Sale of consumer goods declined Rumors of a crash spread Fears grew Investors began to sell off stock This began a snowball effect where stock

prices plunged because there were no buyers

How did the big sell-off of stocks begin?

Some investors were nervous and began to sell off stocks

Others soon joined in With no buyers, stock prices plunged

What were the effects of the crash on the economy of the United States and the world?

Banks failed – many had invested stocks themselves, or given loans to stockbrokers to lend investors

Investors lost money Consumers stopped buying Nearly three million Americans lost their jobs Such an impact on the American economy

affected the world economy

What impact did the stock market crash have on individual investors?

Almost all suffered Couldn’t pay off debts – lost all savings

Why were banks affected by the stock market crash?

Depositors panicked and withdrew money – bank runs

Many banks lost money from stocks and also from loans made to stockbrokers

How did the Great Depression develop?

Banks failed Many people lost their saving and their jobs –

no insurance on deposits Many farmers lost their farms

How did people with money in banks end up losing their savings?

When banks failed, depositors lost their savings

Bank deposit insurance did not exist In December 1929 alone almost 350 banks

closed

Bank Runs

What was the human impact of the Great Depression?

People lost jobs and homes Many ended up in shantytowns (Hoovervilles) Others became hoboes People took pride in having jobs and providing

for their families When they couldn’t do that, filled them with

shame or anger

Who provided relief to the poor during the Great Depression?

NOT the federal government in the early 1930’s – there were no federal government programs to help the needy or poor

Local charities, city and state governments provided the aide to the poor, but it wasn’t enough

Depression Photos

How did the Great Depression affect the minds and spirits of Americans?

Many felt that they were failures – that they had failed as individuals

There was also a widespread feeling that America had let its citizens down, and that the government had let them down

Why was the Dust Bowl so devastating?

Long period of drought Farmland was destroyed Farmers that only knew how to farm were

forced to relocate Farming families were completely uprooted

from their way of life

What was the Dust Bowl?

The parts of Oklahoma, Kansas, Colorado, New Mexico, and Texas that were the hardest hit by drought and soil erosion

Dust Bowl Photos

Dust Storm Photos

What caused the Dust Bowl?

The “Great Plowup” – throughout the 1920’s wheat prices fell; to make up for lost income farmers started to look for more and more land to plow up and raise wheat

Much of the land should not have been plowed – drought of the land that had been plowed caused soil erosion

Why do you think people in California were hostile to migrants from the Great Plains?

They were competing for jobs; migrant “Okies” cost native Californians jobs – they would work for next to nothing

To discourage others from coming

Who were John Steinbeck and Woody Guthrie?

Steinbeck was an author; most known for his novel The Grapes of Wrath, which tells the story of the Joads, a family in Oklahoma who lost everything and migrated to California Stereotyped Oklahoma for years

Guthrie was a singer-songwriter who wrote songs about the Dust Bowl and described the disaster’s effects on the people it touched

Who is the “you” and “your” referred to in the song lyrics?

The Great Plains California Californians

Hooverville

How was the associative state supposed to work?

Hoover believed businesses should form voluntary associations to make the economy more fair and efficient

Government specialists would work with them for the betterment of the economy and the public good

How might the construction of the Hoover Dam tested Hoover’s belief in the associative state?

It would take more cooperation between the government and independent companies than had ever been asked before

Such a task had never been face before by a president

What do you think Hoover meant by “rugged individualism”?

A person should rely on himself, not the government, to succeed

A person should take personal responsibility for his success, or failure – to fend for oneself

What actions did Hoover take in response to the Great Depression?

Pushed for loans for farm cooperatives Urged Congress to establish the Reconstruction Finance

Corporation Authorized up to $2 billion in direct govt. loans to banks,

insurance companies, and other institutions Asked Congress to create the Federal Home Loan Bank

Encouraged home building and reduced the number of home foreclosures

Smoot-Hawley Tariff Act – tariff on imported goods, which was a disaster – Europeans responded; trade plunged

How were cooperatives supposed to help farmers?

Cooperatives are organizations that are owned and controlled by its members who work together for a common goal

Idea was that large groups of farmers could buy materials cheaper than an individual farmer could

How did cooperative movements backfire in the face of economic disaster?

In hard times, individuals made decisions based on what was good for them individually

People did not rally to the idea of cooperations

How did the nation respond to Hoover’s efforts?

He came under attack – people believed that he was not compassionate to their problems

Democrats won seats in Congress in 1930 and took over the House of Representatives

Why did Hoover have a problem with credibility?

He continued to make optimistic claims about the economy even as the country slid deeper and deeper into the depression

More and more Americans came to believe that he was “out of touch” with the American people

What were some actions, taken or not taken, that made voters believe Hoover did not care?

Early in the crisis, he talked about the basic economic foundation of the country being sound

Spoke glowingly about the efforts being made to deal with the depression even as things got worse

Questioned his compassion – why was he willing to give billions of dollars to banks and insurance companies, but nothing to individuals?