The Great Depression

http://www.youtube.com/watch?v=JDcR-ZS5fyw

UNEQUAL DISTRIBUTION

OF WEALTH OVER PRODUCTION

HIGH TARIFFS AND WAR

DEBTS

CAUSES OFTHE GREAT

DEPRESSION

AGRICULTURE

INDUSTRY

MONETARY POLICY

STOCK MARKET CRASH AND

FINANCIAL PANIC

Historians disagree as to the causes of the Great Depression. Most scholars would include:

• Lack of Diversification– Prosperity of 1920s had been based largely

upon certain industries (automobiles and construction) that were starting to decline

• Construction fell from $11 billion to $9 billion from 1926 to 1929

– Newer emerging industries (petroleum, chemicals, plastics, consumer) had not developed enough to combat decline of others

• Misdistribution of Wealth– Vast majority of wealth

and increase in income in upper 1%

– Half of families lived at or below minimum subsistence level

Chart showing wages of unskilled workers. Notice how little the wages changed during the supposed prosperity

of the 1920’s.

• Overproduction of goods and food products and decline in purchasing power – Extra manufactured goods

mean cause layoffs, which make the recession more severe

– Newer technology helped caused massive increases in farm production, causing vast decreases in prices of crops

Agricultural product

1912-1913 1932-1933

Corn (per bushel) 0.56 0.20Wheat (per bushel) 0.88 0.41Oats (per bushel) 0.34 0.17Butter (per lb) 0.21 0.13Butterfat (per lb) 0.25 0.16Wool (per lb) 0.24 0.10Hogs (per cwt) 7.50 3.80Milk (per cwt) 1.79 0.90

Table shows the sharp decline in the prices of various products from American farms

• Consumer debt and the credit culture– Buying on credit

throughout 1920s caused great expansion of debt

– Farmers were deeply in debt from farm crisis in the 1920s

• International trade and debt structure– Debt structure from World War I disrupted

world economy• Allies struggled to pay back United States since

Germany/Austria also unable to pay• US made new loans to Allies to pay older debts,

furthering debt cycle– Fordney-McCumber Act in 1922 put high

tariffs on industrial goods• Other countries used retaliatory tariffs• Decrease in foreign demand for US goods

• Stock Market Crash– Sept. 1929 stock prices

had peaked, rising over 40% since May 1928

– On Oct. 21 and 23, 1929 thousands of stocks were sold, which caused stock prices to fall

– Black Tuesday: Oct. 29, 1929 the bottom drops out of the market

• Stocks lost $10-15 billion dollars that day

• The crash brought an end to the prosperous 1920’s

• Speculation and the margin• Speculation-buying stocks at great risks hoping for

prices to rise• Many banks invested unwisely in the stock market• Margin-investors purchase stocks by only making

small initial payment and taking out loans for the rest

– Margin call-banks could call in loans at anytime forcing quick sales of stocks and often inability to pay

– http://www.youtube.com/watch?v=DXFAf-V9Qpk&safety_mode=true&persist_safety_mode=1

• Stock Market Crash– Many of causes already in existence, but acts

as catalyst for further chain of events

• Poor banking practices and policies – Over 9000 banks go bankrupt or close their

doors to avoid bankruptcy between 1930 and 1933

• Money in the bank was not guaranteed and many experience runs on the bank that help force closures

• Banks unable to loan more money due to losses from loans to speculators

– Federal Reserve• Federal Reserve before Depression keeps interest

rates very low which encourages more speculation• After Depression starts, Federal Reserve raises

interest rates making it harder to pay

• Collapse of American economy– Gross national product declines from $104

billion in 1929 to $76.4 billion in 1932– Capital investment decreased from $16.2

billion in 1929 to around $350 million in 1933– Consumer price index declined 25%– Gross farm income dropped from $12 to $5

billion

Vast unemployment

– Unemployment statistics• Roughly 25% of workforce was unemployed• 1/3 of workers experienced cuts in wages or hours• Unemployment averages 20% for 1930s

• Conditions for unemployed– Unemployment viewed as

personal failure, shame, and challenge to masculinity

– State and local relief agencies unable to serve vast numbers

– Charities attempt to support, but struggle

– Nearly 2 million take to the roads and rails

Conditions for minorities and women• Often excluded from relief programs• Racist hiring practices in the South lead to 50%

African-American unemployment– Many blacks move north, but economic conditions

little better• Hispanics in west displaced from jobs, many

deported and given little access to relief or services in the Southwest

• Chinese and Japanese in West are displaced and attempt assimilation efforts

• Many women discouraged from working if married, but female employment actually increases by 20%– Jobs held by women were less effected and men

often less interested in the positions

Farming Crisis and the Dust Bowl

– Farmers already struggling and 1/3 lost land– Drought known as the “Dust Bowl” began in the Great

Plains in 1930 from Texas to the Dakotas• Sweeping winds carried soil away or buried beneath dust• Grasshoppers destroyed many remaining crops• Many abandoned farming to move to California in search of

jobs (the Okies)– Okies portrayed in Grapes of Wrath

– Malnutrition and hunger become increasing problems due to financial and farm crises

– http://www.history.com/shows/america-the-story-of-us/videos/the-hoover-dam#america-black-blizzard

States Affected by Dust

Politics of Hoover• Hoover was elected in

1928 after overseeing growth of economy as Secretary of Commerce– Believed US economy

was strong and could recover, initially without much government aid

• Hoover opposed deficit spending, fearing it would make the economy recover more slowly

• Hoover also opposed direct relief (money) going from the federal government to the impoverished

• http://www.history.com/shows/america-the-story-of-us/videos/the-hoover-dam#the-hoover-dam

"I do not believe that the power and duty of

the General Government ought to be extended to the relief of individual suffering. . . . The lesson should be

constantly enforced that though the people

support the Government the

Government should not support the people."

(1930)

Policies of Hoover to end the Depression

• Initially tried to downplay public fear• Volunteerism: Got industries to pledge to

keep factories open and not cut wages, but ultimately fails– Initially able to use business connections– Promises were broken by 1931 due to

economic collapse

• Use and rejection of public works projects– Encouraged state and local governments to

use public works projects to create jobs– Initially proposed $423 million increase in

federal spending on public works– Abandons when economy worsens in order to

keep the budget balanced– Proposes tax increase in 1932 to help

government avoid debt

• Agricultural Marketing Act– Created federally

sponsored Farm Board to make loans to marketing cooperatives or corporations to buy surpluses

– Hawley-Smoot Tariff of 1930 increased tariffs on 75 farm products to attempt to protect farmers

• Reconstruction Finance Corporation, established in 1932– Made to provide federal loans to troubled

banks, railroads, and other businesses• Loans generally only given to those with large

collateral– Budgeted $1.5 billion for public works

• Did not spend much of budgeted amounts and only really invested in projects that would eventually pay for themselves (toll bridges, public housing)

Backlash Against Hoover

• Decline in popularity– Democrats gain control of House in 1930– Shanty towns established outside cities

become known as Hoovervilles– Hoover only passes larger measures after

economy experiences large drop in 1931– http://www.youtube.com/watch?v=sfylLnHjcu0

Family

US Hooverville

Well, Everything Helps (1930 or 1931)

Herb Block, Chicago Daily News

Library of Congress

As the Depression tightened its hold on American life, avid angler President Herbert Hoover cast about for ways to improve the economy. He sometimes took working vacations at his fishing camp on the Rapidan River (now in Shenandoah National Park) with members of Congress and his administration.

• Hunger Marches– Organized by American Communist Party to

demand increased taxation of rich to feed poor

• Revolts by farmers– Farmers had large mortgages to pay for land

and equipment and had farms foreclosed– Farmers destroy crops in attempt to raise

prices

Bonus Marchers• US government in 1924 had

promised WWI veterans a bonus to be paid in 1945

• Bill was in Congress to allow early payment due to the depression

• More than 20,000 veterans march on Washington forming the “Bonus Army”, vowing to stay in Hooverville camps in Washington until the law was passed

• Senate votes down the bill and many return home

• Hoover ordered the camps to be cleared by police and two veterans die after resisting

• Sends in US Army to clear out camps, with tanks sent down Pennsylvania Avenue and the tent city burnt to the ground

• Acts as perhaps final blow to Hoover’s public image

• http://www.youtube.com/watch?v=dWvCCxOUsM8&safety_mode=true&persist_safety_mode=1

Election of 1932• Hoover ran for reelection from

the Republican Party• Franklin Delano Roosevelt,

governor of New York, runs for the Democrats– FDR popular for use of

government funds in NY to help people and for struggle against polio

– Emphasizes economic issues in the campaign

– Promises a “New Deal” for the American people, but gives few specifics for plan

Hoover in 1928

• Roosevelt wins in a landslide (472-59)– Democrats won majorities in both houses of

Congress

The “Interregnum” or Lame Duck period

• FDR had to wait until March 4, 1933 to take office• Hoover attempts to get FDR to promise traditional

economic practices, FDR refuses• Banking collapse worsens in February 1933

– Hoover asks FDR to make promises against adjusting currency, heavy borrowing, or increase in debt, FDR refuses

• FDR survives assassination attempt in Miami on February 15, 1933 by Giuseppe Zangara, who accidentally kills the mayor of Chicago during the shooting

• FDR inaugurated on March 4, 1933

• 20th Amendment: Ratified on January 23, 1933– Newly elected

presidents take office on January 20 instead of March 4

– Congress starts their terms on January 3

"Brother, Can You Spare a Dime," Lyrics by Yip Harburg, music by Jay Gorney (1931)

They used to tell me I was building a dream, and so I followed the mob, When there was earth to plow, or guns to bear, I was always there right on the job. They used to tell me I was building a dream, with peace and glory ahead, Why should I be standing in line, just waiting for bread?

Once I built a railroad, I made it run, made it race against time. Once I built a railroad; now it's done. Brother, can you spare a dime? Once I built a tower, up to the sun, brick, and rivet, and lime; Once I built a tower, now it's done. Brother, can you spare a dime?

Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum!

Say, don't you remember, they called me Al; it was Al all the time. Why don't you remember, I'm your pal? Buddy, can you spare a dime?

Once in khaki suits, gee we looked swell, Full of that Yankee Doodly Dum, Half a million boots went slogging through Hell, And I was the kid with the drum!

Say, don't you remember, they called me Al; it was Al all the time. Say, don't you remember, I'm your pal? Buddy, can you spare a dime?