the great depression and the new deal - iroquoiscsd.org · the great depression and the new deal...
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The Great Depression and the New Deal
The Causes and Consequences of America’s most significant economic downturn
Mr. Sean McAtee Iroquois High School
Elma, New York
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The 1920s had been a period of prosperity - good economic times
Black Tuesday - Oct. 29, 1929 - Crash of the NY Stock Exchange
Caused panic - and an economic depression that would last until
World War II
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Financial Collapse
Bank run 1929, Los Angeles
• After the stock market crash, many Americans panicked and withdrew their money from banks
• Banks had invested in the stock market - and lost money in the crash
• Banks did not always have enough cash on-hand to give meet their obligations - causing them to fail (go bankrupt)
• In 1929 - 600 banks failed
• By 1933 - 11,000 of the 25,000 banks in the U.S. had collapsed
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GNP Drops, Unemployment SoarsBetween 1928-1932, the U.S.
Gross National Product (GNP) - the total output of the
nation’s goods and services - fell nearly 50%
90,000 businesses went bankrupt
Unemployment increased 3% in 1929
to 25% in 1932
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Causes of the Great DepressionWeakness in the Overall Economy
overproduction, underconsumption
Excessive Buying on CreditEfforts to pay-off loans leads to
underconsumption
Weak Corporate StructureLack of competition in many businesses
Weak Banking SystemBanks were not required to hold
adequate reserves ($)
Unequal Distribution of wealthBig gap between “the rich” and common
people; Farmers continue to struggle
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Causes of the Great DepressionInadequate Government Policy: Little regulation of markets, excessive speculation. Tax policy favors wealthy, lax enforcement of anti-trust laws
Weak International Economy: WW I had caused depression in Europe. Tariffs hurt international trade.
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The Dust Bowl
Kansas Farmer, 1933
A severe drought began in the Great Plains in the early 1930s
Wind scattered topsoil, exposing sand and grit. The dust often
traveled hundreds of miles
One storm in 1934 picked up millions of tons of dust, and carried it to the
East Coast.
These hard times began in 1931 and lasted until 1939
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Dust storm approaching Stratford, Texas - 1934
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Storm approaching Elkhart, Kansas in 1937
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Smoot - Hawley Tariff (1930)
Representative Willis C. Hawley (left) and Senator Reed Smoot
Put in place the highest tariff rate in American history.
GOAL - Protect American businesses from foreign competition
U.S. exports to Europe fell from $2.3 billion in 1929 to $784 million in 1932.
U.S. imports from Europe declined from $1.3 billion in 1929 to $390 million in 1932
European nations respond by enacting high tariffs as well - reduced
trade for all nations.
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Hoover’s Response to the DepressionBelieved the economy would “Fix Itself”
Economic policy = laissez faire
Organized private relief agencies Hoover did not believe that the
government should provide direct relief to people in need
Encouraged Americans to buy American-made products
Goal - stimulate the economy
Reconstruction Finance Corporation (1932)Loans to businesses
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Hooverʼs Trickle-Down Solution
RFC $ to businesses
make more goods
Hire more workers
People earn $ to buy goods
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Americans React to Hoover
Hooverville - Seattle, WA.
Hoover was very unpopular with the American people
Hoover did not support giving direct aid to individuals — Rugged Individualism
Slums were the homeless lived — “Hoovervilles”
Many felt that Hoover cared more about the wealthy / business owners than the
“common” people
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FDR Elected President 1932Roosevelt defeated Herbert Hoover
FDR promised government action to help
end the Depression . . . . A ‘new deal” between the American people and the
federal government
Goals of the New DealRelief (help those with needs)Recovery (fix the economy)
Reform (to prevent another crash)
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Franklin D. Roosevelt at Harvard, 1903 - Senior Year
Franklin D. Roosevelt, 1889 Age 7
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Served as Assistant Secretary of the Navy during World War I
Candidate for vice president (Democratic Party) - 1920
James Blaine was the Democratic candidate for president
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Diagnosed with Polio 1921 (age 39)
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The Warm Springs Institute for Rehabilitation Warm Springs, Georgia
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How else may polio have impacted FDR?
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Franklin Roosevelt and the New Deal
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Franklin Roosevelt and the New Deal
Bank Holiday Announced - March 6, 1933
• Less than 36 hours after taking presidential oath, FDR orders that all banks in U.S. be shut down so that they can be inspected by the government
• Banks that are “healthy” will be allowed to re-open - Emergency Banking Act 1933
• FDR gave first “Fireside Chat” to explain what had been done, and why the banks were now safe
When banks re-opened, people once again deposited their money. Confidence in the banks had been restored!
New Deal - government action to end the Great Depression
Step 1 - Fix the Banks
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Franklin Roosevelt and the New DealSecurities Act (May 27, 1933)
“Truth in Securities Law” - Companies offering stock for sale must
provide investors with information about the company (EX - finances)
http://mises.ca/wp-content/uploads/2014/03/new-deal.jpg
U.S. goes off the gold standard (June 5, 1933)
Goal - have more money in circulation so that people will have money to buy
things
First 100 Days - 15 Major Programs“Alphabet Soup” - wide variety of
programs created to improve America’s economy
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Name of Program Summary
Federal Deposit Insurance Corporation
(FDIC)
Reform1933
Insures Bank deposits up to $100,000
Agricultural Adjustment Administration
(AAA)
Recovery1933
Farmers paid not to grow certain crops.
Ruled Unconstitutional
Civilian Conservation Corps(CCC)
Recovery, Relief1933
Provides jobs to young men who will carry out
environmental conservationactivities (ie: build parks)
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Public Works Administration(PWA)
1933Relief
Ports, Schools, Airports
National Industrial Recovery Act(NIRA / NRA)
1933Reform
Set prices, wages, hours, etc in various industries
Ruled Unconstitutional
Tennessee Valley Authority(TVA)
1933 Built Dams to prevent flooding and produce electrical power in
Southeast
Federal Housing Administration
(FHA)
1934 Insure mortgages
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The New Deal - More ProgramsThe Wagner Act (1935)
• Guaranteed labor unions the right to form• Created National Labor Relations Board
Social Security Act (1935)• Benefits for retired workers• Unemployment insurance• Benefits for victims of industrial accidents• Aid for dependent mothers and children
Fair Labor Standards Act (1938)• Set minimum wage (25 cents), maximum
hours (44) per week and time and-a-half for working overtime
• Banned child labor in interstate commerce
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Supreme Court Rules Against New Deal Programs
Schecter [Poultry Corp.] v. U.S. (1935)• The NRA (National Recovery Administration)
was declared unconstitutional• Federal government has the power to regulate
interstate commerce [between states], but not commerce within one state.
• NRA “codes” were developed by agents of the Executive Branch. The court ruled that these “codes” were like laws, and therefore were a function reserved for the legislature
U.S. v. Butler (1936)• The AAA (Agricultural Adjustment Admin.)
was declared unconstitutional. Farming is a state issue, not a national issue
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FDR vs. Supreme Court
The Supreme Court was filled with justices opposed to FDR
In time, much of FDR’s New Deal legislation would be
challenged in court
FDR’s opponents felt that FDR, and the Executive Branch, had become too
powerful
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FDR wins Re-Election in 1936
http://images2.dailykos.com/i/user/1638/1936-fdr-poster.jpg
With his easy victory, FDR felt that he had been given a mandate to continue
New Deal policies
Court Packing (Re-organization) Plan• FDR believed that the court was slowing
America’s economic recovery• Wants to increase the number of justices
(to pack the court) from 9 to 15• There was much opposition to this plan,
so FDR withdrew it
In time, sitting justices retired - FDR got to appoint new justices - (total of 8) that
would approve New Deal Legislation!
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The Impact of the New Deal
http://www.isgeschiedenis.nl/wp-content/uploads/oldimages/Roosevelt.jpg
Much more government involvement in the economy
Stronger president, Stronger National Govt.
New Deal programs helped to stimulate the
economy - reduced unemployment and eased people’s fears of the future
World War II “solved” America’s economic problems.
Unemployed found jobs in wartime factories and the military
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FDR wins 3rd Term in 1940
http://media.liveauctiongroup.net/i/4959/7404847_1.jpg?v=8C9EB69D2575EA0
FDR broke with two-term tradition established by George Washington
FDR vs. Wendell Willkie
Both political parties wanted to support England in the war with Nazi
Germany - but wanted neutrality for the U.S.
Both parties approved of [most] of the New Deal and wanted an isolationist
foreign policy
FDR won - and won again in 1944