The Great Depression1. What were the long term

& immediate causes?2. What was the

government’s response?

An Economy in Trouble…• Remember the prosperity of the

“Roaring 20s”– Gov’t easing business legislation– Business boom thanks to auto

industry• Ripple effect

–Installment buying–Buying on margin & the success

of the bull market• Not everyone was prosperous,

however

An Economy in Trouble…(2)• Signs of an economic slow

down–Farmers having a hard time after

WW I• Production high from war demand• Drove prices lower• Hoover established Federal Farm Board–Helped farmers sell goods & stabilize $$–Farmers didn’t ↓ production–Prices stayed ↓

An Economy in Trouble…(3)–Construction was ↓–Heavy machinery sales ↓–Consumer buying ↓–Stock Market nervous

• In 8/1929 investors starting to sell & trend continued

• Investors buying on margin asked to pay broker $ still owed–Caused prices to drop– If investors couldn’t pay, they had to sell

their stock»Caused prices to drop further

An Economy in Trouble…(4)

• The Crash–Tuesday, 10/29/1929

• “Black Tuesday”–NYSE bombarded w/sales

• Prices ↓ because there were no buyers

• Stocks became worthless paper–Economy slid into depression

Causes of the Great Depression…

• Too many goods, too few buyers–Over production by farms & factories

–Wages didn’t rise as much as prices

–Farm families couldn’t participate in the economy

–Factories closed or laid workers off

Causes of the Great Depression…(2)

• Problems in the banking system–Banks loaned $ to investors of the stock market• w/crash, couldn’t repay loans

–Banks couldn’t repay those who had deposited with them• Forced to close

Causes of the Great Depression…(3)

• Cycle of Disaster–After crash, economy ↓

• Caused a domino effect within the economy

• Crash → ruined investors → no investing → no new businesses/or expansion → no loans from banks → business cut production → workers unemployed → spent less → demand ↓ → led to businesses going bankrupt, etc…

Life During the Depression…• Life was hard!• Unemployment ↑

–¼ of working force unemployed• People lost homes, businesses, etc• Families split up

–Fathers & adolescents left to find work

–Children searched garbage dumps for food

Unemployment Line

Homeless Family

Christmas Dinner

Life During the Depression…(2)

• Homeless drifted from town to town looking for work

• Homeless often moved to the edges of towns & set up shacks–“Hoovervilles”–“Shantytown”

• Standard of living ↓

Squatter in Shack

Mother w/ 3 of 7 children

How did the Gov’t respond to the Depression?

• Pres. H. Hoover–Believed gov’t shouldn’t get directly involved w/business

–At first, opposed relief programs• Called on private charities to help the needy–Churches, YMCA, etc.

Private charities

Private charities

Private charities

How did the Gov’t respond to the Depression? (2)

–Eventually set up public works programs• Gov’t hired workers to build schools, courthouses, pave highways

• Workers earned $$–Supposed to use that to purchase

goods which would fuel economy

How did the Gov’t respond to the Depression? (3)

–Reconstruction Finance Corporation (RFC)• Loaned $$ to railroads, banks, & insurance companies–Keep them in business & keep the

employees

–Hoover’s programs had little success—too little, too late• Depression grew worse• Many blamed Hoover

How did the Gov’t respond to the Depression? (4)

• FDR-Franklin Delano Roosevelt–Elected president in 1932–Promise:

• “I pledge myself to a new deal for the American people.”

• Vowed to help the jobless, poor, farmers, and the elderly

–Sought expert help for university professors of economics• The Brain Trust

FDR

How did the Gov’t respond to the Depression? (5)

–1st hundred days in office were busy• Passed many pieces of legislation to help the economy

• Wanted to restore faith in the banking system

• Believed that strong banks were needed to help the economy recover

How did the Gov’t respond to the Depression? (6)

–Passed the Emergency Banking Relief Act while banks had a “holiday” for 8 days• Act provided that only banks w/enough funds to meet their depositors’ demands could reopen—others had to stay closed

• Attempted to restore American’s faith in banks–Fireside chats

How did the Gov’t respond to the Depression? (7)

–Passed new legislation geared towards job relief & economic recovery

–New Deal• 3 main goals:

–Relief for the unemployed–Plans for recovery–Reforms to prevent another

depression• “Alphabet Soup”

How did the Gov’t respond to the Depression? (8)

–Relief for the unemployed• CCC

–Civilian Conservation Corps–Provided jobs to young single men–Planted trees, built bridges & parks–Served a dual purpose

»Employment & conservation

CCC

How did the Gov’t respond to the Depression? (9)

• FERA–Federal Emergency Relief

Administration–Gave federal $$ to state & local

agencies for the unemployed• WPA

–Workers Progress Administration–Jobless built hospitals, schools,

playgrounds, etc.–Also employed artist, writers

muralists

How did the Gov’t respond to the Depression? (10)

–Programs to Promote Recovery• Needed to boost industry & farming in order to have economic recovery

• Planned to control production, stabilize prices, & keep workers on the job

How did the Gov’t respond to the Depression? (11)

• NIRA–National Industrial Recovery Act–Each industry had to write codes for

production, wages, prices, & working conditions

–Created the NRA-Nat’l Recovery Admin»Enforce the new codes written by

the industries

How did the Gov’t respond to the Depression? (12)

• PWA–Public Works Admin.–Promoted recovery for public works

projects»Built ports, schools, etc

–Limited success• AAA

–Agricultural Adjustment Admin–Paid farmers not to grow certain crops–Destroyed surplus food & livestock–Hoped to drive prices ↑

AAA

How did the Gov’t respond to the Depression? (13)

• REA–Rural Electrification Admin–Loaned gov’t $$ to get rural areas

electricity

How did the Gov’t respond to the Depression? (14)

–Reforms for the long term—prevention• Truth in Securities Act

–End wild speculation that led to market crash• Banking Act of 1933

–FDIC-Federal Deposit Insurance Corporation– Insured savings accounts in banks approved

by the gov’t

How did the Gov’t respond to the Depression? (15)

• TVA–Tennessee Valley Authority–Remake the Tennessee River Valley

»Poor area»Destroyed by floods»½ of families receiving relief aid

–Built 40 dams–Hydroelectric power–Deepened river channels–Planted new trees

How did the Gov’t respond to the Depression? (16)

–Labor Reforms• Wagner Act

–Protected American workers from unfair management practices

–Guaranteed right of collective bargaining

–Pro union• Fair Labor Standards Act

–Set minimum wage–Children under 16 couldn’t work

How did the Gov’t respond to the Depression? (17)

–Help for the elderly, jobless, poor• Social Security Act

–Set up a system of pensions for the elderly»Retire, collect payments, spend to

fuel economy–Provided unemployment insurance–Gave states $$ to support dependent

children & people w/disabilities