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Chapter 24The Great Depression and the New Deal, 1929-1939Black Thursday and the Onset of the DepressionFrom 1925-1929: Market value goes from $27 billion to $87 billionSpeculators lending up to 75% on marginIncome-tax cuts increased the amount of money that could be speculatedFederal Reserve tried to curb this by raising interest rates- didnt workSpeculators were willing to pay 20% to by more stockOct. 24, 1929- Black ThursdayOct. 29, 1929- 16 million stocks changed handsHoover says the economy is sound and prosperousBy Nov. the value of stocks is at $30 billionCausesAg. Sector remained depressedIndustrial sectors increased productivity did not generate equivalent wagesReduced consumer spending power40% of the lowest received only about 12% of national incomeOverproductionImportant industrial sectors (rail, steel, textiles, and mining) lagged technologically and could not attract investmentsFeds tight money policiesGlobal issues: Impact GDP drops from $104 b. to $59 b.Farm prices fall by 60%By 1933 5,500 banks closeUnemployment stood at 25% (13 million workers)Hoovers ResponseEarly effort based on localism and private initiativeHe advised municipal govts to create public works projectsSet up Emergency Committee for Employment to set up voluntary relief effortsPersuaded larger banks to set up National Credit Corporation to help smaller banks make loansUnsuccessful programs led to the Republicans losing the midterms (lose the House and 8 seats in the Senate)He calls for a tax increase and the biggies announce wage cuts1932 sets up the Reconstruction Finance Corporation (RFC)Loans to major economic institutions and then grants to state and local govts for job creating public worksSome ideas never make it Moratorium on war reparations and war debt paymentsMounting Discontent and ProtestHoovervilles, Hoover Blankets, Hoover ValleySuicide rates climb nearly 30%Farm foreclosures1931- midwestern farmers organize the Farmers Holiday AssociationDairy Farmers dump milk1932- Bonus March10,000 vets descend on Washington to demand immediate payment of veterans bonusesCongress refuses and 2,000 camp outU.S. Army (1,000) commanded by MacArthur drive them outAmerican fiction- The 42nd Parallel; Young LoniganThe Election of 1932Democrats appeal to urban voters call for an end to ProhibitionAppeal to farmers with support for aid programsAnd to fiscal conservatives with demands for a balanced budget and cuts to federal spendingFDR from New YorkDemocrats have a clean sweepThe New Deal Takes ShapeIndustrial recoveryThrough business-govt cooperation and pump-primingAgricultural recoveryThrough crop reductionShort-term emergency reliefFunneled through state and local agenciesRoosevelt and His CircleThe only thing we have to fear is fear itself.His circle of advisors rejected laissez-faire ideasKey peopleEleanorSec. of Labor Frances PerkinsInterior Sec. Harold IckesTreasury Sec. Henry MorgenthauSecretary of Agriculture Henry WallaceThe Hundred Days1st- tackle the banking crisisBank holiday- four daysEmergency Banking ActHealthy banks can reopen; procedures were put in place to manage failed banks; increased govt oversight; and banks had to separate savings deposits from investment fundsFederal Deposit Insurance CorporationInsured deposits up to $5,0002nd reliefHome Owners Loan CorporationCity dwellers refinance mortgagesFarm Credit AdministrationProvided loans to rural AmericansCivilian Conservation CorpsEmployed jobless youth in reforestation, park maintenance, and erosion controlFederal Emergency Relief Act$500 million to state and local relief agenciesHarry Hopkins heads this

Cutting production was the key to raising agricultural pricesSouthern cotton farmers plowed under much of their crops; midwestern farmers slaughtered 6 million piglets and pregnant sows (PR nightmare)Agricultural Adjustment Act (1933)Farmers receive subsidies in return for cutting production (a tax on grain mills and other food processors passed on to consumers) paid for thisThe AAA is set up to monitorNational Industrial Recovery ActAppropriates $3.3. billion for heavy-duty govt works projectsSec. of Interior Harold Ickes heads thisIt is run by the Public Works Administration (PWA)The law also set up the National Recovery AdministrationBrought businesses together to draft codes of fair competitionSet production limitsPrescribed wages and working conditionsForbade price cutting and unfair competitive practicesAim was to promote recovery by breaking the cycle of wage cuts, falling prices, and layoffsSymbol of business-government collaborationIt banned child labor and affirmed workers right to organize unions and to bargain collectivelyReconstruction Finance CorporationSpillover from the Hoover eraLet billions to banks, insurance companies and new business ventures (probusiness)Federal Securities Act (regulatory)Corporations must inform the Federal Trade Commission on all stock offerings and made executive liable for any misrepresentationSet up the Securities and Exchange CommissionTennessee Valley Authority

Failures and Controversies Plague the Early New DealNRAPersonality of Hugh JohnsonCorporate America chafed under the regulationCode violations increased; small businesses complain; bogged down in trivial codesDeclared unconstitutional in 1935President did not have that regulatory powerIt regulated commerce within statesAAA1933-37: farm income increased by 50%But it didnt help farm laborers or migrantsCrop reduction payments hurt southern tenants and sharecroppers when growers remove acreage (banking subsidy checks)

Then the Dust BowlOkies (3.5 million flee the Great Plains)

1. What did the Federal Securities set up to regulate Wall Street?2. How much did the FDIC cover when it was established?3. Who was the head of the PWA?

Harry Hopkins convinced Roosevelt to support direct federal relief programsCivil Works Administration (CWA)More than a billion dollars on short-term work projects (late 1933-34 over winter)It was abolished in springFDR did not want to create and underclass living on welfare payments

Federal agencies were competing for federal dollarsIckes and the PWA competed with Hopkins and the CWAIckes was honest and checked every detail; Hopkins wanted to pay people to shovel dirt, rake leaves, and collect litter1934-1935: Challenges from Right and LeftIn 1934 national income rose about 25% above 1933 levels2,000 strikes took place that year from many different occupations all over America (many Communist led)Business leaders (joined by Al Smith) formed the anti-New Deal American Liberty LeagueHowever, FDR did remain popularSocialists and Communists claimed he didnt go far enoughWaiting for LeftyCharles CoughlinDetroit priest calls for the nationalization of banksFrances TownsendCalifornia physician called for all retired to receive $200 per month (required to spend it in 30 days); stimulates the economy and encourages retirementHuey LongGov. and Senator from Louisiana whose Share the Wealth ProgramCap personal fortunes at $50 million each equivalent to about $600 million today (later reduced to $5 - $8 million, or $60 - $96 million today)Limit annual income to one million dollars each (about $12 million today)Limit inheritances to five million dollars each (about $60 million today)Guarantee every family an annual income of $2,000 (or one-third the national average)Free college education and vocational trainingOld-age pensions for all persons over 60Veterans benefits and healthcareA 30 hour work week A four week vacation for every workerGreater regulation of commodity production toThe New Deal Changes Course, 1935-1936The veer left during the Second New DealFDR begins to criticize the wealthy and the business classSix intitiavesExpand public worksAssistance to the rural poorSupport for organized laborBenefits for retired workers and other needy groupsTougher business regulationHeavier taxes on the well-to-doExpanding Federal ReliefEmergency Relief Appropriation Act (1935) - $5 billionWorks Progress Administration (Hopkins in charge)Assistance directly to individuals but providing work, not handoutsLasted 8 yrs. employed 8 million; pumped $11 billion into the economy; constructed/improved thousands of roads, bridges, schools, post offices, etc.

Federal Writers Project; Federal Music Project; Federal Theater Project; Federal Arts ProjectPublic Works Administration (Ickes)$4 billion over its life span; 34,000 projects

Aiding Migrants, Supporting Unions, Regulating Business, Taxing the WealthyThe Resettlement Administration (1935) loans to help tenant farmers buy land or move Rural Electrification Administration (1935) low-interest loans to utility companies and farmers cooperatives to extend electricity to rural AmericaAAA declared unconstitutionalSoil Conservation Act paid farmers to plant grasses and legumes

NIRA is ruled unconstitutional (including the section protecting union members rights)The Wagner Act (National Labor Relations Act)Guaranteed collective-bargaining rightsPermitted closed shopsOutlawed blacklistingCreated the NLRB to supervise shop elections and labor-law violationsBanking ActStrengthened Federal Reserve BoardPublic Utilities ActRestricted gas and electric companies to one geographic areaSteeper taxes during 1935Wealth Tax Act increases taxes to a maximum of 75% on incomes above $5 million

The Social Security Act of 1935; End of the Second New Deal

1936 Roosevelt Landslide and the New Democratic CoalitionFDR carried the 12 largest statesNew coalitionFarmersUnion membersNorthern blacksWomen

FDR is a friend of laborNorthern blacks- that debt was paid in full.However, Negroes Ruined AgainFDR didnt want to turn southerners away from supportBut Roosevelt did have a black cabinetMary McLeod Bethune as director of minority affairs of the National Youth AdministrationRoosevelt Supreme Court issued antidiscrimination rulingsCourting of female voters