The great depression

what was it?

• “For most Americans, at most times in American history, the economy has provided real opportunity for real individual success.

But what would you do if the economy suddenly stopped providing that opportunity? If it no longer seemed to matter how hard you worked, how smart you were, how responsibly you took care of your money? If the system just stopped working, seemingly dooming you to a life of poverty through no fault of your own?

Would you blame yourself?

Would you work harder, striving to prosper, against all odds, within the failing system?

Or would you try to change the system itself? And if so, what would you try to change it into?”1

1. Shmoop Editorial Team, "The Great Depression, "Shmoop University, Inc., 11 November

2008, http://www.shmoop.com/great-depression/ (accessed November 28, 2010)

How Could This Happen?By the test you will be able to answer:

• Why did the stock market crash?

• Why was the economy so bad for so long?

• How did it affect people?

• How did the government try to stop it?

• Did it work?

• What made the economy get better again?

• Could this happen again? Are we headed to another Depression?

Could another depression happen?

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Unemployment now

Unemployment:

•Topped out at 25%1933

• Around 10% looking for work

• Around 17% totalNow

Stock market

• Stock: A small piece of a company that is bought

and sold

• Stock market: A place where stocks and bonds

are “traded” (bought and sold)

• Goal is to buy the stock, hold on to it for a time,

and sell it for more than you paid

Risks of the Market

• Stocks go up and down

Stock price

of Apple this

year

iPad

announced

iPads go

on sale

Holiday

shopping

season

Short-term

investors

selling

September 1929:Greatest Crash in history

Causes

1. Speculation: Buying stock with the plan to sell it again quickly when the market rises

2. Buying on margin: Borrowing money to buy stocks

Example: I make a down payment of $5 for a $50 share, you promise to pay back the rest when you sell the stock I can buy $1,000 worth of stock for only

$100. If stock crashes, I still owe $900

causes

3. Using too much credit: Booming economy, advertising, easy loans and installment plans made people borrow more than they could pay back

4. Overproduction: Too much stuff to sell, no one to buy it

5. Unequal distribution of wealth: Rich people got richer but workers’ wages didn’t rise, so they couldn’t buy the stuff being made

causes

6. Government policies: No regulation of the stock

market

7. Problems in European economy impacted the

U.S.

8. Weak farm economy: production too high, prices

too low, debt too much

But most of all..

• Overconfidence: Investors felt like if they bought

stocks they couldn’t lose.

They were wrong.

Beginnings of the Depression

• Stock market crash triggered chain of events

• Bank failures: Over 9,000 banks closed or went bankrupt 1930-1933

• Shrank the money supply and led to deflation

• Low prices mean low profits

• Production drops

• People are laid off

• 53% people are “underemployed”

1919-1933

Industrial Production

Relief?

• No welfare system to help with food, rent,

clothing, medical care, etc.

• Families turned to state-and-local relief systems

and charity organizations

• Agencies not set up to deal with it—only “fringes”

of society, extremely poor

• Many went without help

• Some die of starvation

Hoover’s response

• 1st tried to restore confidence

• Voluntary cooperation: Hoover

invited business, labor and

agricultural leaders to White House.

Wanted them to cooperate for recovery. No

striking and no laying off or cutting production

• Didn’t work

Hoover’s philosophy

• "I do not believe that the power and duty of the

General Government ought to be extended to the relief of individual suffering. . . .

The lesson should be constantly enforced that

though the people support the Government the

Government should not support the people."

(1930)

Self reliance or government aid?

• Hoover’s ideas about self-reliance shaped his

policies on rebuilding the economy and providing

relief

• Felt that charities and religious organization

should provide relief on voluntary basis

• He tried to stimulate the economy with public

construction projects, but they were not enough

Help for farmers

• Agricultural Marketing Act (1929): first major

government program to help maintain crop prices

• Hawley-Smoot Tariff (1930): Tariff on 75

imported farm products gave protection to

American farmers (later backfired)

Hoover loses support

• Public approval very low; Democrats win many

Congressional seats in 1930 midterm elections

• Americans blame Hoover for the crisis

• Name shantytowns where unemployed live

“Hoovervilles”

International economic collapse

• Spring of 1931: Europeans banks start failing

without U.S. lending them money

• Pushed American economy even lower

RFC

• Reconstruction and Finance Corporation (1932):

Federal program to provide loans to troubled

banks, railroads and other business. First to

operate on a large scale

• Still not enough

Bonus Army, 1932

• Or “Bonus Expeditionary

Force”

• 200,000 WWI veterans

• Demand early payment

of the $1,000 bonus

promised to them

• Marched on Washington,

camped out and refused to leave

Hoover calls in troops

• Hoover calls in Gen. McArthur to lead calvary, an

infantry regiment and 6 tanks to descend on their

camps

• Forcibly removes men, breaks up protest

• Last straw for public support of Hoover

• No way he’ll win the next election

The New Deal

• FDR (Franklin Delano Roosevelt)

elected by a landslide in 1932

• People wanted change from

Hoover’s laissez-faire policies

New deal philosophy

• Experiment to find solutions

• 3 R’s: Relief for the unemployed

Recovery for businesses

Reform of economic institutions

(regulations)

First 100 days

• 100 day session

• Passed every bill FDR proposed

• More laws than any Congress in history

• Bank holiday

• Ended prohibition

Fireside chats

• Radio broadcasts explaining the recovery policies

directly to the people

First new deal 1933- 1935

• Focused on relief for unemployed

• Turned federal government into an employer

New Deal Programs

• Civilian Conservation Corps: Employed young men

to work on federal land

• Tennessee Valley Authority: Hired men to build

dams for irrigation and cheap electricity

• Works Progress Association: Hired men to build

schools, parks, bridges, roads, etc. Also hired

artists and many others to keep them employed

Promoting confidence

Health and sanitation

Arts and culture

Travel and tourism

Educational programs

Community activities

Federal writers project

Citizenship education

Social values

Social values

Direct assistance

• Social Security Act: monthly payments to elderly,

disabled and dependent children. Also

unemployment insurance

• Shift in thinking about the role of government

Critics of the new deal

• Liberals: not enough help for the poor, helped

businesses too much

• Conservatives: gave government too much power,

bordered on communism, didn’t want deficit

spending

opponents

• Father Charles Coughlin: wanted to inflate

currency and nationalize all banks

• Dr. Francis Townsend (Townsend Plan): 2% of

federal sales tax pay for $200/month for retired

people

• Huey Long: Senator from Louisiana, give everyone

a large monthly income by heavily taxing the rich;

radical

Prairie grass roots

Grow 8 to 15 feet deep

Tractors + Dry land=dust

Dust storms

“Okies” migrated to California

Premature aging