The The GreatGreat Depression and New Depression and New

DealDeal

Living It Up in the old’ U.S.A.: The Living It Up in the old’ U.S.A.: The 1920’s1920’s

The years between the end of World War One and the Great Depression (1919-1929) are often referred to as the “Roaring 20’s”

This title comes from the idea that for almost a decade, the U.S. economy grew at rate that seemed unstoppable.

American was growing into the modern nation we would recognize today as the standard of living for most Americans increased dramatically.

Billions of dollars were being created by our trade with Europe, who being completely destroyed after World War One, relied on a constant stream of American goods and products.

The effect on the U.S. economy was trickle down. The standards of living of millions of Americans increased and a new “ middle class” developed.

For the first time in U.S. history, middle-class For the first time in U.S. history, middle-class Americans had Americans had disposabledisposable income which they spent and income which they spent and spent!spent!

New New technologiestechnologies, designed to make life easier and less , designed to make life easier and less dreary became to “must have” items for most American dreary became to “must have” items for most American families:families:

A home in the “suburbs”; new A home in the “suburbs”; new automobileautomobile; radios; ; radios; refrigerators; refrigerators; washingwashing machines; machines; telephonestelephones

HOWEVER---much of this economic prosperity was HOWEVER---much of this economic prosperity was built on a “house of built on a “house of cardscards”—”—

Much of the Much of the moneymoney being spent by being spent by EuropeansEuropeans on on American goods was supplied by the American goods was supplied by the U.S.U.S. in the form of in the form of loansloans

Many of the items bought by American consumers were Many of the items bought by American consumers were purchased on either “purchased on either “creditcredit” or “” or “installmentinstallment” plans.” plans.

Americans looked rich---but really didn’t own a lot!Americans looked rich---but really didn’t own a lot!

Living It Up in the old’ U.S.A.: The Living It Up in the old’ U.S.A.: The 1920’s1920’s

The End of the Party: 1929The End of the Party: 1929 The The Stock Market Crash Stock Market Crash of 1929 would of 1929 would

shatter the illusion of American shatter the illusion of American prosperity.prosperity.

It would also sink an already weakened It would also sink an already weakened EuropeanEuropean economy into a deeper economy into a deeper despair.despair.

From New York, a tidal wave of From New York, a tidal wave of economic failure would literally grip the economic failure would literally grip the world---It would be known as the:world---It would be known as the:

GREATGREAT DEPRESSION DEPRESSION

The World Wide Great DepressionThe World Wide Great Depression In In SeptemberSeptember of 1929, the United States of 1929, the United States

Stock Market (known as the Dow Jones) Stock Market (known as the Dow Jones) suddenly faltered and with little warning suddenly faltered and with little warning crashed.crashed.

For much of the 1920’s, the For much of the 1920’s, the strengthstrength of of the Stock Market had rested in the the Stock Market had rested in the practice of investors buying “on practice of investors buying “on marginmargin”.”.

Buying “on margin” allowed investors to Buying “on margin” allowed investors to purchase purchase stockstock with a little real money with a little real money down and the rest funded by a down and the rest funded by a loanloan from from a a bankbank..

The World Wide Great DepressionThe World Wide Great Depression This system works and investors and banks This system works and investors and banks

both make money on their investments as long both make money on their investments as long as the Stock Market continues to as the Stock Market continues to rise. rise. ((OVERSPECULATIONOVERSPECULATION))

ButBut, if the market falls, the investor loses , if the market falls, the investor loses moneymoney and is unable to pay back the and is unable to pay back the bankbank for for his loan.his loan.

In September of 1929, the Stock Market did In September of 1929, the Stock Market did exactly that---it crashed and crashed hard!exactly that---it crashed and crashed hard!

MillionsMillions of investors were suddenly of investors were suddenly bankruptbankrupt and unable to pay back their loans.and unable to pay back their loans.

As a consequence, thousands of banks were As a consequence, thousands of banks were unable to unable to collectcollect their loans---which caused a their loans---which caused a panicpanic throughout the U.S. throughout the U.S.

Tens of thousands of regular bank Tens of thousands of regular bank customers “customers “rushedrushed” their banks demanding ” their banks demanding their their savingssavings

The The moneymoney was not there! The was not there! The banksbanks had had loaned it to loaned it to investorsinvestors and they had lost it! and they had lost it!

Millions of people in the U.S. were suddenly Millions of people in the U.S. were suddenly and without warning and without warning BROKEBROKE..

Home owners couldn’t pay their Home owners couldn’t pay their mortgagesmortgages; ; farmers couldn’t pay their loans; businesses farmers couldn’t pay their loans; businesses couldn’t pay their couldn’t pay their salariessalaries; millions became ; millions became homelesshomeless and out of work---- and out of work----

IT WAS THE MOST SERIOUS ECONOMIC IT WAS THE MOST SERIOUS ECONOMIC CRISIS OUR NATION HAS EVER FACED!CRISIS OUR NATION HAS EVER FACED!

The World Wide Great The World Wide Great DepressionDepression

The Great DepressionThe Great DepressionSome stats paint the bleak picture:Some stats paint the bleak picture: By 1933—By 1933—11,00011,000 of the nations of the nations 25,00025,000 banks had banks had

failed.failed. Almost 90,000 businesses went Almost 90,000 businesses went bankruptbankrupt Between 1929 and 1932 our Between 1929 and 1932 our GNPGNP went from 104 went from 104

billion to 59 billionbillion to 59 billion Unemployment Unemployment wentwent from 3% in 1929 to 25% in 1933 from 3% in 1929 to 25% in 1933

(13 million workers)—(13 million workers)—11 out of every out of every 44 persons lost persons lost their job!their job!

Two questions remain:Two questions remain:1.What effect does this have on the American public?1.What effect does this have on the American public?2. What will be the government’s response to this 2. What will be the government’s response to this

crisis?crisis?

Effects of the Great DepressionEffects of the Great Depression

The social and cultural effects were far-reaching.The social and cultural effects were far-reaching. Adults and children who survived the Great Adults and children who survived the Great

Depression would bear the physical and Depression would bear the physical and psychologicalpsychological scars of it for the rest of their lives. scars of it for the rest of their lives.

AmericaAmerica itself would be forever changed be the itself would be forever changed be the experience.experience.

The lingering effects of that experience can still The lingering effects of that experience can still be found within woven in the fabric of our nation be found within woven in the fabric of our nation today.today.

Why? What did experience really do?Why? What did experience really do?

The Depression Strikes HardThe Depression Strikes Hard As people lost their jobs, they were As people lost their jobs, they were evictedevicted

from their from their homeshomes. . Across the cities and across the countryside, Across the cities and across the countryside,

the the homelessnesshomelessness rate skyrocketed. rate skyrocketed. By 1932 almost 400,000 By 1932 almost 400,000 farmsfarms had been had been

foreclosedforeclosed upon. upon. The homeless often gathered together in large The homeless often gathered together in large

bands, setting up “bands, setting up “shantytownsshantytowns”—little towns ”—little towns of shacks set up of the outskirts of cities or of shacks set up of the outskirts of cities or town. town. SurvivalSurvival became the focus of each day. became the focus of each day.

The stresses of homelessness and joblessness The stresses of homelessness and joblessness took a horrific toll on the American families. took a horrific toll on the American families.

Families often Families often brokebroke apart under the strain of apart under the strain of finding work to simply finding work to simply feedfeed their families. their families.

Many Many menmen often left their families, often left their families, traveling great distances to find traveling great distances to find workwork. . Often they never returned.Often they never returned.

Some were unable to deal with the Some were unable to deal with the “shame” of not supporting their “shame” of not supporting their families.families.

Some turned to the life of the “ Some turned to the life of the “ hobohobo”---”---transient, wandering men living transient, wandering men living outdoors and traveling by “outdoors and traveling by “hitchinghitching” ” rides on rides on trainstrains..

By the mid-1930’s there were an estimated By the mid-1930’s there were an estimated 300,000 300,000 menmen living as hoboes in the U.S. living as hoboes in the U.S.

The Depression Strikes HardThe Depression Strikes Hard

The The DustDust Bowl Bowl Strangely enough, during this severe Strangely enough, during this severe economiceconomic

crisis, the US also suffered a severe crisis, the US also suffered a severe agriculturalagricultural crisis in the crisis in the MidwestMidwest..

Due in large part to both a severe Due in large part to both a severe droughtdrought and and unwise farming techniques, large parts of the unwise farming techniques, large parts of the GreatGreat Plains Plains became known as the became known as the DUST DUST BOWLBOWL..

Gigantic Gigantic windwind-storms blew massive clouds of -storms blew massive clouds of sandsand and grit hundreds of miles and made living and grit hundreds of miles and made living and farming in the Great Plains impossible.and farming in the Great Plains impossible.

Hundreds and thousands of farming families Hundreds and thousands of farming families fled the Midwest and moved in a fled the Midwest and moved in a greatgreat migration towards migration towards CaliforniaCalifornia and the and the PacificPacific Coast States.Coast States.

They became known as “They became known as “OkiesOkies”.”.

Government ResponseGovernment Response With such economic, political, and social With such economic, political, and social

turmoil, most would expect a far-reaching turmoil, most would expect a far-reaching governmentgovernment response. response.

Unfortunately, at first, it did Unfortunately, at first, it did notnot come. come. The president at the beginning of the Great The president at the beginning of the Great

Depression was a man named Herbert Depression was a man named Herbert HooverHoover..

Hoover, a Hoover, a RepublicanRepublican, truly believed that the , truly believed that the economyeconomy---if left alone—would eventually ---if left alone—would eventually correctcorrect itself. itself.

The current suffering of the American people, The current suffering of the American people, he felt, should be attended to by he felt, should be attended to by privateprivate charities—not charities—not governmentgovernment intervention. intervention.

He believed that He believed that DIRECTDIRECT RELIEF from the RELIEF from the government would government would weakenweaken peoples self- peoples self-respectrespect and “moral and “moral fiberfiber”.”.

Hoover’s response Hoover’s response shockedshocked and frustrated and frustrated millions of suffering American families.millions of suffering American families.

As the Depression sore on, Hoover’s As the Depression sore on, Hoover’s administrationadministration eventually began to soften on some of its ideals and eventually began to soften on some of its ideals and offer forms of direct relief to the American people.offer forms of direct relief to the American people.

For many, it was too little, too late.For many, it was too little, too late. Hoover actions towards the “Bonus Army” damaged his Hoover actions towards the “Bonus Army” damaged his

reputation beyond repair in 1932.reputation beyond repair in 1932. This “This “BonusBonus Army” was a group of 20,000 World War Army” was a group of 20,000 World War

One One veterans veterans who “camped” out in Washington, D.C. to who “camped” out in Washington, D.C. to pressure the government to pay their “wartime” bonus pressure the government to pay their “wartime” bonus (about $500 per vet)(about $500 per vet)

Hoover, nervous about having a large group of angry Hoover, nervous about having a large group of angry veterans camped out in D.C.-called out the veterans camped out in D.C.-called out the armyarmy..

On July 28On July 28thth, 1932---1,000 armed troops “disbanded” , 1932---1,000 armed troops “disbanded” the Bonus Army using tear the Bonus Army using tear gasgas and in some cases live and in some cases live ammunitionammunition..

Several people were killed—including a 11 month year Several people were killed—including a 11 month year old baby-old baby-

American were shocked and American were shocked and outragedoutraged---the next ---the next election would be November and the American people election would be November and the American people were ready for a change.were ready for a change.

Government ResponseGovernment Response

FDR and the “New Deal”FDR and the “New Deal” The change came in the The change came in the 19321932 presidential presidential

election. The election. The DemocraticDemocratic party offered a party offered a candidate in the person of Franklin Delano candidate in the person of Franklin Delano RooseveltRoosevelt—a two-term governor of New York.—a two-term governor of New York.

Roosevelt campaigned on the promise of a Roosevelt campaigned on the promise of a ““New DealNew Deal” for the American people.” for the American people.

The New Deal would be a series of The New Deal would be a series of programsprograms set-up, administered, and paid for by the set-up, administered, and paid for by the FederalFederal Government to overcome and end of Government to overcome and end of the suffering of the Great Depression.the suffering of the Great Depression.

Franklin projected optimism and confidence—Franklin projected optimism and confidence—something the American public was looking something the American public was looking for—he won in a landslide capturing 23 for—he won in a landslide capturing 23 million votes.million votes.

The New DealThe New Deal As Franklin came into office in 1933, he As Franklin came into office in 1933, he

told the American public that the only told the American public that the only thing they had to “thing they had to “fearfear” was “” was “fear itselffear itself”.”.

Meaning, with hard work and proper Meaning, with hard work and proper programs, programs, AmericaAmerica could and would could and would emerge from the Great emerge from the Great DepressionDepression stronger than ever.stronger than ever.

His New Deal programs were the blue His New Deal programs were the blue print for recovery.print for recovery.

They focused on three areas:They focused on three areas:1.1. ReliefRelief: give needy American people the : give needy American people the

immediateimmediate financial relief they needed financial relief they needed (food, (food, sheltershelter, clothing, etc.), clothing, etc.)

2.2. RecoveryRecovery: put in place government : put in place government programs to help programs to help businessbusiness and industry and industry get back on track and hiring get back on track and hiring workersworkers

3. 3. ReformReform: change the business practices of : change the business practices of Wall Wall StreetsStreets and the banking system to and the banking system to prevent another stock market crash in the prevent another stock market crash in the future.future.

Certainly the program had its share of Certainly the program had its share of successes and failures—what was successes and failures—what was important however that important however that FDR’sFDR’s administration was willing to experiment administration was willing to experiment and adapt their programs as needed. and adapt their programs as needed.

The American public’s confidence in its The American public’s confidence in its government and financial system began to government and financial system began to SLOWLY recover.SLOWLY recover.

The New DealThe New Deal

Impact of the New DealImpact of the New Deal The New Deal affected American society not only in the The New Deal affected American society not only in the

1930’s but also in the decades that followed.1930’s but also in the decades that followed. Many of the most important New Deal programs that were Many of the most important New Deal programs that were

created in the 1930’s are still part of our society today:created in the 1930’s are still part of our society today:1.1. Federal Deposit Insurance Corporation (Federal Deposit Insurance Corporation (FDICFDIC): safeguards ): safeguards

individual individual depositsdeposits in in banksbanks2.2. SocialSocial Security Administration: Provides a Security Administration: Provides a incomeincome for for

““retiredretired” or ” or disableddisabled Americans over the age of 65 Americans over the age of 653.3. Securities and Exchange Commission (Securities and Exchange Commission (SECSEC): regulates ): regulates

banking and banking and investmentinvestment activities. activities.

But perhaps the most important impact of the New Deal is But perhaps the most important impact of the New Deal is the change that it caused in the change that it caused in HOW HOW Americans viewed the Americans viewed the role of the Federal Government.role of the Federal Government.

The Federal Government was now not the impassive The Federal Government was now not the impassive protectorprotector of of individualindividual rights and “laissez faire” rights and “laissez faire” capitalismcapitalism..

Government was NOW the guardian of citizens’ Government was NOW the guardian of citizens’ WELFAREWELFARE and and SHOULDSHOULD take an take an activeactive role in both the regulation of role in both the regulation of business and the protection of business and the protection of individualindividual rights. This role rights. This role remains the same remains the same todaytoday. .