The Great Depression and New Deal

1928-1941

Unit 8- Boom to Bust

The 1920’s were a time of superficial prosperityBusinesses were doing wellWages were increasingPeople bought all kinds of “luxury” items

Cars, toasters, washers, vacuums, sewing machines

People thought the good times would continue forever and bought fancy items on credit or with installment plans, assuming they would just pay it later.

The Good Times

As the 1920s advanced, economic prosperity slowed, but few noticed

1. Industries were in trouble Railroads, lumbering and mining

industries were no longer making profits Companies had to start laying people off People without jobs do not have money to

spend, which hurts other businesses People were also laid off because a lot of

companies began using machines to do the work

Trouble Ahead

2. Farmers were in Debt

During WWI, farmers produced a lot and sold a lot of crops.

After WWI farmers should have slowed production, but they didn’t and were unable to sell all their crops.

Farmers needed money and took out loans

Many farmers never repaid their loans which caused rural banks to fail

Many farms were foreclosed on

3. Consumers had less money to spend

As businesses failed, wages were cut and people could not spend money on “extra” items.

Since nobody was buying, more businesses failed, causing more unemployment, which caused even less money to be spent in stores.

4. Living on credit

People were living above their meansPeople could not afford to buy items out right so

they paid for them on credit and assumed they would pay it back later.

Credit CardsInstallment Plans -paying off the total cost in

monthly paymentsBuying Stocks on the Margin- many wanted to

invest in the stock market, but could not afford to pay the full amount of the stock so they borrowed from a broker (took out a loan to pay for it)

Many couldn’t pay back the full amount of their loans or were so strapped for cash they couldn’t spend money on other items, which hurt other businesses, causing more people to become unemployed.

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5. Uneven distribution of wealth

Rich got richer, poor got poorer

Most earned less than $2,500 a year

Had no savingsRelied on credit

1928- Hoover wins the electionLittle focus on the economyPeople think the good times will continue

People believed investing in the stock market was the key to richesDow Jones Industrial Average was high (Bull

Market)People began engaging in Speculation

Buy low, sell highMake quick moneyMany didn’t realize the risk, thought the

market would continue to increase

Herbert Hoover Takes Over

Black TuesdayBy early September 1929 many began to

question the strength of the marketPeople began selling their stocks

Black Tuesday- October 29, 1929Confidence in the market collapsedPeople began selling their stocks for

pennies16 million stocks sold

Could not pay back their loansCaused banks to close, by November

investors had lost 30 billion dollars

How did the stock market crash help cause the Great Depression?

Stop and Think!

1929-1940- time period where the economy plummeted and unemployment rose

Banks FailedPeople panicked and went to their banks demanding

their moneyMany banks invested the money in the stock market

and did not have the money to give backMany lost their entire life savingsThe government did not insure bank accountsBy 1933-11,000 of 25,000 banks failed

Businesses FailedThe Gross National Product (total output of goods) was

cut from 104 billion to 59 billion90,000 businesses failed

Unemployment RoseFrom 3% to 25%

The Great Depression Begins

The Depression Spread throughout the worldEuropean nations were still trying to

recover from WWIMany nations relied on the U.S. for loansMany also relied on the U.S. to buy

goodsU.S. passed the Hawley Smoot Tariff Act

Highest protective tariffs in U.S. History

Designed to protect American farmers and businesses

It failed-It stopped Europeans from buying

American goodsIncreased unemploymentencouraged other nations to pass

similar tariffs

The Depression in CitiesMany lost their homes, jobsHomelessness increasedShanty towns (“Hoovervilles”) emerged-

little towns consisting of shacksSoup kitchensBread linesThere was no direct relief for families

Cash payment or food provided by the government

African-Americans and minorities were hit even harder

Hardships and Suffering

The Depression in Rural AreasFarms were foreclosed on

The Dust BowlDrought struck in the 1930sFor decades farmers in the Midwest broke up

farmland, removing the protective grass covering, exposing dirtLeaving a lot of land unusableWhen the drought struck and winds picked up dust

became unbearableHardest hit was Kansas, Oklahoma, Texas, New Mexico,

and ColoradoMany abandoned their farms and moved to California

Hardships and Suffering

http://www.history.com/topics/1930s/videos#america-black-blizzard

• Write a letter or diary entry explaining what life was like during the Stock Market Crash and/or Great Depression.

• You can portray yourself as a child, banker, mother, the President, etc.

• ¾’s-1 page; turn in when you are finished

Writing Activity

Hoover tried to reassure Americans that the nation’s economy was sound.

Believed government’s role was to encourage and facilitate cooperation not control it

Americans values individualism therefore Hoover opposed any form of federal welfare or direct relief.Felt it would weaken peoples self-respect

His answer to the problem was to let individuals, charities and local organizations pitch in and help.

Hoover’s Approach

Why was Hoover reluctant to help people during the Depression?

Stop and Think!

Franklin Delano RooseveltDemocrat, elected in the election

of 1932Between the time of election and

the time he took office, FDR worked to pick advisers known as the “Brain Trust”.

I. President Franklin D. Roosevelt, along with his wife Eleanor, wanted to restore the nation’s hope and build confidence.A. New Deal- the relief, recovery, and reform program that changed the role of the government to a more active participant in solving problems.B. Roosevelt rallied a frightened nation in which one in four workers was unemployed.

http://www.history.com/topics/1930s/videos#fdr-a-voice-of-hope

Relief: bring immediate help to those who need it

Recovery: “pump-priming” temporary programs to restart the flow of consumer demand

Reform: permanent programs to avoid situations causing contractions and insurance for citizens against economic disaster

http://www.history.com/topics/great-depression/videos#the-new-deal-how-does-it-affect-us-today

The 3 R’s

- Focused on relief, recovery, creation of jobs, and stimulating the economy.

1. Banks- first step to restore nation’s confidence Emergency Banking Act- authorized the

government inspect the financial health of banks (closed until passed inspection)

Federal Deposit Insurance Corporation (FDIC)- insured all bank deposits (up to $5,000)

Roosevelt also decreased the value of the U.S. currency by taking it off the gold standard.

First Hundred Days (March-June 1933)

- The Supreme Court struck down some of FDR’s programs, demanding for the creation of the Second New Deal.

Included more social welfare benefits, stricter controls over business, stronger support for labor unions, and higher taxes on the rich.

The Second New Deal (Second Hundred Days)

Computer labResearch agencies in the chart and answer

the following:

1. What did it do?2. Which R?3. Is it still around today?

New Deal Alphabet Agencies

- FDR was reelected in 1936; however, he encountered much criticism over his programs.

FDR tried to “pack” the Supreme Court by asking Congress if he could appoint six new justices to replace the existing justices that were over the age of 70.

FDR’s intention was to appoint justices who supported his programs and ideas. (Congress did not allow this to happen)

Court Packing

Fireside Chats- A series of thirty evening radio

speeches broadcasted to the American people reassuring them that the nation was going to recover.

- -President Franklin D. Roosevelt did this between 1933 and 1944.

- -Sometimes beginning his talks with "Good evening, friends", Roosevelt urged listeners to have faith in the banks and to support his New Deal measures.

- -The "fireside chats" were considered enormously successful and attracted more listeners than the most popular radio shows.

- - Roosevelt continued his broadcasts into the 1940s, as Americans turned their attention to World War II.

http://www.history.com/topics/great-depression/speeches#fdrs-fireside-chat-on-dust-bowl

In 1938, FDR scaled back on the New Deal policies and unemployment rose again.

Production and unemployment wouldn’t match pre-1929 levels until the U.S. entered WWII and industries began production of war materials.

However, the New Deal did provide short-term relief to many.

End of the Great Depression?

People now looked to the government for help in times of need.Government is responsible for social welfare

Thousands of federal jobs were created to maintain new agencies.

Government became active in settling labor disputes.

Greatly regulated business- 40 hour work week, minimum wage, etc.

Ushered in an era of increased taxes paid by citizens

http://www.history.com/topics/great-depression/videos#hoover-dam-true-giant

http://www.history.com/topics/great-depression/videos#tennessee-valley-authority---natures-power-harnessed

Long Term Impact