GREAT DEPRESSION GREAT DEPRESSION AND THE NEW DEALAND THE NEW DEAL

Hard Times in the 1930’sHard Times in the 1930’s

What What waswas the Great the Great Depression?Depression?

The The worst economic crisis of the centuryworst economic crisis of the century Over 13 million people unemployed Over 13 million people unemployed That’s That’s 35 % unemployment35 % unemployment / 50% for African- / 50% for African-

Americans and LatinosAmericans and Latinos A A crisis in the banking industrycrisis in the banking industry ““Dust bowl” as a result of drought and poor Dust bowl” as a result of drought and poor

farming practicesfarming practices Farmers lost cropsFarmers lost crops Many people lost their homesMany people lost their homes A A social and psychological crisissocial and psychological crisis

Three areas of problemsThree areas of problems

Consumer spending:Credit

Banking industry:Reckless practices

Farming Sector: Dust Bowl

overproduction

normal business cycle

Great Depression Great Depression Business cycleBusiness cycle

Business cycle since the Business cycle since the Great Depression: healthierGreat Depression: healthier

What caused the Great What caused the Great Depression?Depression?

Unequal distribution of wealthUnequal distribution of wealth Stock market crashStock market crash of 1929 of 1929 Industrial Industrial overproductionoverproduction – farmers and – farmers and

businesses were producing more goods than businesses were producing more goods than could be bought and used. could be bought and used.

Easy creditEasy credit Banks had made unwise loansBanks had made unwise loans Banks lent too much moneyBanks lent too much money People could not pay back their loansPeople could not pay back their loans

Causes of 2008 Causes of 2008 “Recession” “Recession”

DeregulationDeregulation of banking industry leads to of banking industry leads to reckless home lending practicesreckless home lending practices (ARM (ARM loans) and to loans) and to inflated home valuesinflated home values

Homeowners used Homeowners used equityequity in homes to take in homes to take out loans (used houses as ATM machines)out loans (used houses as ATM machines)

Stagnant (low wage growth) wagesStagnant (low wage growth) wages Easy creditEasy credit Jobs continuing to move overseasJobs continuing to move overseas Unequal distribution of wealth Unequal distribution of wealth

EFFECTSEFFECTS

Great Depression 2008 “recession” Great Depression 2008 “recession”

Stock market crashStock market crash Bank failures Bank failures Loss of people’s moneyLoss of people’s money Widespread unemployment Widespread unemployment

over 25% over 25% 50% foreclosure rate on 50% foreclosure rate on

existing mortgagesexisting mortgages Homelessness Homelessness divorce rate divorce rate

““Hoovervilles” Hoovervilles”

Rise of movie industryRise of movie industry

Housing market collapse Housing market collapse

foreclosure rates : foreclosure rates : CA, NV, AZCA, NV, AZ

unemploymentunemployment

Rise of tent cities Rise of tent cities Banks / investment firms Banks / investment firms

bailed out before the bailed out before the American peopleAmerican people

Budget cuts Budget cuts Tightening of credit Tightening of credit

Presidential leadershipPresidential leadership Early Depression era 2008 Early Depression era 2008

Hoover (R) Hoover (R) 1929 – 19331929 – 1933 ““Rugged Individualism”Rugged Individualism” Private charity Private charity Some loans to help Some loans to help

business create jobsbusiness create jobs RFC – Reconstruction RFC – Reconstruction

Finance Corporation Finance Corporation

Bush (R) Bush (R) 2001 – 20092001 – 2009 Bank bailoutsBank bailouts $250,000 amount $250,000 amount

of money insured in bank of money insured in bank accountsaccounts

food stamps food stamps

Presidential leadershipPresidential leadership

FDR FDR 1933- 19441933- 1944 Relief, recovery, Relief, recovery,

reform reform Government created Government created

jobsjobs: New Deal – : New Deal – specific individual specific individual programsprograms

““Alphabet agencies” :Alphabet agencies” : CCC, WPA, etcCCC, WPA, etcDealt with Dealt with long-long-

lasting reform-lasting reform- Social Security, FDICSocial Security, FDIC

Obama Obama 2009 -2009 - Relief, only some weak Relief, only some weak

reform/ recovery effortsreform/ recovery efforts ARRA – American ARRA – American

Recovery and Recovery and Reinvestment ActReinvestment Act

Provides extended Provides extended benefits for unemployed benefits for unemployed plus funds states can plus funds states can apply for “shovel –ready apply for “shovel –ready projects.” projects.”

Short –term relief, Short –term relief, hope hope that private industry that private industry will create jobs, but will create jobs, but that is not happeningthat is not happening

Presidential leadership Presidential leadership

FDR AND THE NEW DEAL

1933- 1942

FDR + New Deal FDR + New Deal continuedcontinued

Presidential leadership Presidential leadership 2008 - 2008 - ARRAARRA

ARRA in Kentucky

Causes: Unequal Causes: Unequal Distribution of WealthDistribution of Wealth

No middle classNo middle classHowever, because of the However, because of the

availability of credit, people availability of credit, people are “buying” goodsare “buying” goods

Buying Buying on crediton credit creates creates a a false demandfalse demand for for productsproducts

Buying on credit created Buying on credit created false demandfalse demand

What happens to demand when people have reached their credit limit?

Remember that banks have made some unwise loans as well.

Industrial Overproduction = too many Industrial Overproduction = too many products and not enough buyersproducts and not enough buyers

WAGES NOT KEEPING UP WITH WAGES NOT KEEPING UP WITH INFLATION INFLATION

SUPPLY GREATER THAN DEMANDSUPPLY GREATER THAN DEMAND

Chain reactionChain reaction

Fewer goods are sold.

Demanddrops.

In order to stay in businesscompanies cut

wages

People lose theirconfidence &

start saving their money

Demanddrops even

further.

Companies are forced to cut costs

by laying people off

Even more peopleLose their confidenceAnd spend less money

People lose their jobs.

The Spiral Of

Depression

Stock Market CrashStock Market Crash

Many stocks Many stocks purchased purchased

Stock prices fellStock prices fell Huge sums of money Huge sums of money

lostlost

Thursday, October 24, 1929

BlackBlack TuesdayTuesday

Black TuesdayBlack Tuesday

Five days before the actual crash, (known as “Black Tuesday” or Five days before the actual crash, (known as “Black Tuesday” or the “Big Crash”) there was a major sell-off of stocks due those the “Big Crash”) there was a major sell-off of stocks due those falling prices. As the prices continued to fall, panic struck causing falling prices. As the prices continued to fall, panic struck causing even more calls to pour in to sell stocks. The brokers demanded even more calls to pour in to sell stocks. The brokers demanded cash to cover their loans and when the investors couldn't come up cash to cover their loans and when the investors couldn't come up with the extra money, they had to sell their stocks leaving them at with the extra money, they had to sell their stocks leaving them at a loss of money. The dumping of so many stocks on the market a loss of money. The dumping of so many stocks on the market jolted investors’ confidence and caused prices to plunge. The jolted investors’ confidence and caused prices to plunge. The plunge in those prices was wiping out the savings of millions of plunge in those prices was wiping out the savings of millions of Americans who had invested in the stocks. The Dow had lost over Americans who had invested in the stocks. The Dow had lost over 500 points making the stock market finally crash on October 29, 500 points making the stock market finally crash on October 29, 1929. Prices sank to a shocking new low as investors dumped 1929. Prices sank to a shocking new low as investors dumped over $16 million shares of stock on the market leaving over $16 million shares of stock on the market leaving shareholders at a loss of some $30 billion. Then by November shareholders at a loss of some $30 billion. Then by November 13th, the prices had hit rock bottom. With all of this money loss 13th, the prices had hit rock bottom. With all of this money loss and panic, it was sure to cause more problems for the people in and panic, it was sure to cause more problems for the people in the future that was soon to come. the future that was soon to come.

““Migrant Mother”: The Face Migrant Mother”: The Face of the Great Depression of the Great Depression

The ResultsThe Results Bank FailuresBank Failures

The Results:The Results:UnemploymentUnemployment

UnemploymentUnemployment

DustbowlDustbowl

A traveler noticed a nice new hat by the side of the road, and he stopped to pick it up. Under the hat was a man, buried up to his neck in the dust! As he dug the poor fellow out, the traveler asked if he wanted a ride into town. "No, I'll get there myself," the man replied, "I'm on a horse." (Excerpt from THE DUST BOWL by Tricia Andryszewski, p. 33.)

Poor farming practices + Poor farming practices + drought = drought = DustbowlDustbowl

Dust clouds + high winds Dust clouds + high winds = terrifying experience= terrifying experience

What areas were affected What areas were affected by the Dust Bowl? by the Dust Bowl?

OKIESOKIES: Refugees from the : Refugees from the Dust Bowl. They usually Dust Bowl. They usually

went to Californiawent to California

The Results: HARD TIMESThe Results: HARD TIMES

Loss of homesLoss of homes ““HoovervillesHoovervilles””

Here were all these people living in old rusted-out car bodies. ... One family ... [was] living in a piano box. This wasn't just a little section, this was maybe 10 feet wide and 10 feet long. People living in whatever theycould junk together. ..."

The Results: Soup kitchensThe Results: Soup kitchens

The results: The results: People on “ relief ” People on “ relief ”

The results: The results: Social UnrestSocial Unrest: Fear : Fear of a Socialist Revolutionof a Socialist Revolution

The ResultsThe Results: Social : Social unrest and labor activityunrest and labor activity

DepressionDepression

DepressionDepression

DepressionDepression

Did everyone suffer Did everyone suffer during the Great during the Great Depression?Depression?

Two Presidents respond to the Depression:Two Presidents respond to the Depression: One fails and the other One fails and the other changes the role of changes the role of government forever!government forever!

Hoover fails to respond Hoover fails to respond effectively to the effectively to the DepressionDepression

““rugged individualism”rugged individualism” Thought government Thought government

relief would be bad for relief would be bad for people’s characterpeople’s character

VoluntaryVoluntary associations associations CharityCharity Failed to recognize how Failed to recognize how

big the economic crisis big the economic crisis waswas

FDR FDR and the and the New DealNew Deal increase the size increase the size of the federal government and bring it of the federal government and bring it

into our lives into our lives

Worldwide Worldwide Depression leads Depression leads to social and political unrestto social and political unrest

And the rise of dictators And the rise of dictators in Europe and Japanin Europe and Japan

But many in the US are But many in the US are burying their heads in the burying their heads in the sand….. AMERICA FIRST!sand….. AMERICA FIRST!

America First movement..America First movement..

1933 – 1933 – FDRFDR TAKES OVER – TAKES OVER –AND JUST IN TIMEAND JUST IN TIME

The New Yorker Magazine’s The New Yorker Magazine’s view of the inauguration!view of the inauguration!

Election of 1932Election of 1932

FDRFDR: The nation’s only : The nation’s only 4 term4 term President. Served through the President. Served through the Great Depression and WW IIGreat Depression and WW II

Families on ReliefFamilies on Relief

““The only thing we have The only thing we have to fear …..to fear ….. is fear itself”is fear itself”

“Our greatest primary task is to put people to work”

Franklin Delano Roosevelt

FDR: “This generation of FDR: “This generation of Americans has a rendezvous Americans has a rendezvous with destiny”with destiny”

FDR inspires FDR inspires confidence confidence

A New President A New President and a New Dealand a New Deal

I NEVER FORGET I NEVER FORGET THAT I LIVE IN A THAT I LIVE IN A HOUSE OWNED BY HOUSE OWNED BY ALL THE ALL THE AMERICAN PEOPLE AMERICAN PEOPLE AND I HAVE BEEN AND I HAVE BEEN GIVEN THEIR GIVEN THEIR TRUST.” TRUST.”

FDRFDR

Reversing the Spiral of Reversing the Spiral of DepressionDepression

Government Spending $

Alphabet Agencies

More Jobs

More Spending

Demand for goods increases

More goods have to be produced

More people withJobs = more pay $

More Spending

Demand for goods increases

More goods have to be produced

More Jobs

More Pay = More Taxes

Cycle of

Prosperity!

Democrats called this Process

‘Pump Priming’

FDR’s FDR’s New DealNew Deal: : Relief, recovery, reformRelief, recovery, reform

Relief for the needyRelief for the needy Jobs providedJobs provided Banking, Business and government reformedBanking, Business and government reformed

FDR gets to workFDR gets to work: : The First 100 daysThe First 100 days

Emergency BankingEmergency Banking ActAct

Bank “holidays”: Bank “holidays”: banks are ordered banks are ordered closed on certain closed on certain daysdays

Glass – Steagall ActGlass – Steagall Act creates creates FDICFDIC: : Federal Deposit Federal Deposit InsuranceInsurance

The Alphabet AgenciesThe Alphabet Agencies

FDR’s New DealFDR’s New Deal: Government : Government grows and takes over parts of the grows and takes over parts of the economyeconomy

AAA – Agricultural Adjustment ActAAA – Agricultural Adjustment Act CCC – Civilian Conservation CorpsCCC – Civilian Conservation Corps NRA – National Recovery ActNRA – National Recovery Act WPA – Works Project AdministrationWPA – Works Project Administration PWA – Public Works AdministrationPWA – Public Works Administration SSA – Social Security AdministrationSSA – Social Security Administration REA – Rural Electrification AdministrationREA – Rural Electrification Administration TVA – Tennessee Valley Authority TVA – Tennessee Valley Authority

Fireside ChatFireside Chat: May 7, : May 7, 19331933

AAAAAA

CCCCCC: Employed young men : Employed young men for outdoor work. Units for outdoor work. Units

were racially segregated were racially segregated

WPA – Works Project WPA – Works Project AdministrationAdministration

The WPA put artists to The WPA put artists to workwork

WPAWPA

Dorothea Lange documents Dorothea Lange documents the Depression for the the Depression for the FSAFSA

Her most famous photo: Her most famous photo: Migrant MotherMigrant Mother

(and how a photo –and a photographer- (and how a photo –and a photographer-

can lie)can lie)

Dorothea Lange documents Dorothea Lange documents Japanese internmentJapanese internment 1942 1942

Court – packing schemeCourt – packing scheme: FDR : FDR

declares war on the Supreme Courtdeclares war on the Supreme Court

FDR’S SURPRISE MOVE TO ADD MORE JUSTICES TO THE SUPREME COURT DIDN’T WORK BUT SCARED IT INTO PASSING HIS

NEW DEAL LEGISLATION

HomeworkHomework: A New Deal : A New Deal for the Artsfor the Arts

A NEW DEAL FOR THE ARTS WEBSITEA NEW DEAL FOR THE ARTS WEBSITE

Problems and Criticisms Problems and Criticisms of the New Dealof the New Deal

Some programs were Some programs were wastefulwasteful Charges of Charges of socialismsocialism At first, the U.S. Supreme Court struck At first, the U.S. Supreme Court struck

down some of FDR’s New Deal programsdown some of FDR’s New Deal programs FDR responds to this threat to his New FDR responds to this threat to his New

Deal with the Deal with the court- packing schemecourt- packing scheme