The Great Depression &New Deal

The Great Depression

Causes of the Great Depression

● Overproduction/Underconsumption○ Led to mass unemployment.

● High Tariffs○ High tariffs protected American markets, but restricted trade.○ The Smoot-Hawley Tariff led to cut in U.S. trade by half.

● Stock Market/Banking Practices○ Speculation led to an overvalued stock market.○ Credit was over-extended and citizens borrowed more than

they could afford to pay back.

Stock Market Crash

● On October 29, 1929, the stock market crashed. ● Prices went lower as everyone competed to sell and no

one was willing to buy.● $30 billion dollars disappeared in three weeks.

Effects of Stock Market Crash

● Businesses could not raise money by selling stock.○ Businesses began closing their doors and

unemployment increased.● People who lost money in the crash could not pay back

loans.○ Led to systemic bank failures.

President Hoover’s Response

● Hoover was advised not to interfere with the economy.● Once taking action, Hoover:

○ asked business leaders not to layoff workers.○ cut taxes.○ increased federal spending on public works projects.

● Hoover rejected direct aid to the unemployed and needy.

President Hoover’s Response

● Reconstruction Finance Corporation (RFC)○ Voluntary action by local government and charities

was not effective.○ The RFC gave emergency loans to banks and

businesses.○ The amount loaned by the RFC was not enough to fix

the decline in corporate spending.

The New Deal

The New Deal

● President Franklin D. Roosevelt’s (FDR) plan to fix the economy was called the “New Deal.”

● It established that the government was responsible for the well-being of the economy and protection of Americans from extreme economic problems.

● “Relief, Recovery, Reform.”

Fixing the Banking Crisis

● Bank Holiday○ The “Bank Holiday” closed all banks and allowed

them to reopen after the government declared them financially stable.

○ The government helped unstable banks with emergency money.

Fixing the Banking Crisis

● Federal Deposit Insurance Corporation (FDIC)○ Insured deposits in banks to give people confidence that

they would not lose all of their savings if a bank failed.● Securities and Exchange Commission (SEC)

○ Federal agency to oversee the operations of the stock market.

○ Tasked with preventing fraud and to ensure investors were not mislead.

Unemployment Relief

● Civilian Conservation Corps (CCC)○ Gave outdoor jobs to young men planting trees and

draining swamps.● Public Works Administration and Civil Works

Administration○ Built public facilities like highways, bridges,

hospitals, airports, and courthouses.

Unemployment Relief

● Tennessee Valley Authority (TVA)○ Built and maintained dams that controlled floods

produced hydroelectricity, and manufactured fertilizers.

○ The TVA brought greater prosperity to impoverished regions of the South.

Tennessee Valley Authority

Recovery Efforts

● National Recovery Administration (NRA)○ Increased collaboration among businesses in the

same industry.○ The goal was to increase prices and reduce wasteful

competition by encouraging businesses to collaborate by setting standard prices and limits to production.

Recovery Efforts

● Agricultural Adjustment Acts (1933 and 1938)○ Intended to promote the recovery of farmers.○ The AAA limited production to limit production in

order to obtain a rise in crop prices.○ The government paid farmers to plant fewer crops

and kill excess livestock.

The Second New Deal

● Works Progress Administration (WPA)○ Increased employment by creating nine million jobs

through new public works projects to build public schools, courthouses, roads and bridges.

○ The WPA encouraged creative arts by hiring artists, architects, writers, and musicians.

The Second New Deal

● Social Security Act (1935)○ Most important law passed by the New Deal. The

law provides a “safety net” to fall back on if unemployed.

○ Provided unemployment insurance, retirement benefits, and assistance to the disabled.

Social Security Act

The Second New Deal

● National Labor Relations Act (1935)○ The “Wagner Act” gave workers the right to form

unions, to bargain collectively, and submit grievances to the National Labor Relations Board.

○ This was an effort to increase wages, purchasing power among workers, and create fair working conditions.

Sit-Down Strike (1936)

● Sit-down strikes are where workers occupy the factory and prevent the owners from using it.

● General Motors automobile workers held a sit-down strike in Flint, Michigan.

● The government refused to help General Motors breakup the strike.

● As a result, General Motors agree to recognize the auto workers’ union.

Sit-Down Strike

FDR’s Court Packing Plan

● The Supreme Court ruled the National Recovery Act and the Agricultural Adjustment Act unconstitutional.

● President Roosevelt was worried the Supreme Court may overrule all of the New Deal.

● FDR wanted to appoint a new Justice for each justice who did not retire at age 70. He would have been able to add six new Justices.

● The plan was widely criticized. Congress rejected the proposal.

FDR’s Court Packing Plan

End of the New Deal

● As a result of the “Court Packing” Plan, the South refused to back additional New Deal efforts.

● The economy was recovering in 1936 and government spending was reduced. This led to worsening economic conditions. As a result, FDR resumed government spending.

● The New Deal never restored normal employment levels. This only happened as the U.S. prepared for World War II.

Long-Term Effects of the New Deal

● Reduced unemployment.● Completed valuable public works projects.● Created a safety net with social security and insuring

bank deposits.● Increased the power of organized labor.● Established the federal government should oversee the

economy and protect citizens from economic disaster.

Long-Term Effects of the New Deal