THE GREAT DEPRESSION AND

THE NEW DEAL

Unit 2: Chapters 12-13 Notes

PROSPERITY?

The 1920’s were dominated by the Republican Party, who tended to allow the economy to prosper on its own without government intervention

It worked:• Consumption of American goods increased• Gross national product increased• Stock market went up to all time highs

The Election of 1928 brought much of the same- America was in no hurry for change

Republican Candidate Herbert Hoover was easily elected President

PROSPERITY?

PROSPERITY?

The American farmer did not enjoy the same prosperity as other Americans during the “Roaring” 20’s

To meet demand during WWI, farmers had worked more land, grown more crops, and invested in mechanized equipment to meet the government’s needs

PROSPERITY?

After the war:• Demand for farm

goods decreased sharply

• Supply was still increasing and farmers couldn’t sell their surplus product

• As a result, farmers couldn’t pay off the debts they owed the banks

Farmers did not have the money or the time to purchase many consumer goods during the 1920s

Many lived on credit- borrowing month-to-month

PROSPERITY?

CAUSES OF THE GREAT DEPRESSION

There is no one single cause of the Great Depression- it was a combination of several major factors:

• Struggles of the American Farmers• Uneven Distribution of Wealth• Credit• Stock Market Crash• Collapse of the Banks• Rising Unemployment• International Trade Issues• Global Economic Issues

CAUSES OF THE GREAT DEPRESSION

Uneven Distribution of Wealth:• Wages for factory workers increased, but so did

productivity• Corporate profits rose 65%- wages only increased

8%• The top 1% of the population earned the same as the

bottom 42%• Why does this matter?

• The top 1% buys consumer goods, but not enough to make up for what the poorer weren’t buying

• The rich couldn’t buy enough goods to make up for overproduction

Credit• In the 1920’s, 80% of

radios and 60% of cars were bought on credit

• Stock was bought on credit- investors were investing money that they did not have!

• Allowed Americans to live beyond their means…

CAUSES OF THE GREAT DEPRESSION

CAUSES OF THE GREAT DEPRESSION

Stock Market Crash• Many investors were

putting money into stock speculation (prices not based in reality)

• As stock prices dropped, investors got nervous and pulled their money out

• October 29, 1929 (Black Tuesday) 16 million shares were sold and the market crashed

CAUSES OF THE GREAT DEPRESSION

Collapse of the banks:• The Fed had discouraged lending in 1929- so when

the market crashed, people went to the banks to get the hard money that they had left

• As people took their money out of the banks, the banks ran out of money and closed!• 1929- 641 banks failed• 1930- 1350 banks failed• 1931- 1700 banks failed

Rising Unemployment:• To survive, businesses

closed factories, laid-off workers, and maintained prices of their surplus goods

• Problem: as workers were laid-off they couldn’t buy consumer goods, which led to more factories cutting back, which led to more workers laid-off…

CAUSES OF THE GREAT DEPRESSION

CAUSES OF THE GREAT DEPRESSION

International Trade Issues:• To help protect American goods, Congress passed

the Hawley-Smoot Tariff on foreign goods• Foreign goods couldn’t compete with American

goods- so other countries did the same thing to American goods!

• As a result, foreign trade came to a halt worldwide

CAUSES OF THE GREAT DEPRESSION

Global Economic Issues• Germany owed Britain and France $33 billion from

WWI, but needed money from the US to pay it• France and England owed war debt to the US- which

they used Germany’s reparation money to pay it• When the US economy collapsed, Germany could no

longer pay reparations, thus Britain and France could no longer pay the US

• As a result, the Depression spread around the world

Unemployment:• Between 1921-1929, annual

average unemployment was never higher than 3.7%

• By 1933, it was 24.9% (50% for African Americans)

• Those who did keep their jobs found shorter hours, lower wages

• No movement up the social order; instead went from unemployed to unemployable

L IFE DUR IN G THE GREAT DEPR ESSIO N

L IFE DUR IN G THE GREAT DEPR ESSIO N

Hoovervilles:• As people lost their

homes, they slept anywhere they could find shelter

• Makeshift shantytowns popped up on public land

• People covered themselves in Hoover blankets (newspaper)

L IFE DUR IN G THE GREAT DEPR ESSIO N

Rural Life:• Prices continued to fall after the Depression started• Wheat:

• 1919- $2.16/bushel• 1932- $0.38/bushel

• Cotton:• 1919- 35 cents/lb• 1932- 6.52 cents/lb

The Dust Bowl:• Severe drought,

combined with new, aggressive farming methods created disastrous conditions in the Great Plains during the 1930s

• Dust storms rose upwards of 8,000 feet and moved as fast as 100 mph

L IFE DUR IN G THE GREAT DEPR ESSIO N

L IFE DUR IN G THE GREAT DEPR ESSIO N

Refugees from the Dust Bowl regions were known as “Okies”

Many went to California in search for opportunities that weren’t actually there

Others went to cities of the Northeast or Midwest, increasing the population of states with large cities

Effect on the family:• Men who lost their jobs often

felt like they betrayed their families• Some rode the rails and

went from town to town searching for work

• Some sank into depression and left their families

• Women stopped having children because they couldn’t support a larger family

• Children dropped out of school, looked for work, or ran away

L IFE DUR IN G THE GREAT DEPR ESSIO N