THE GREAT DEPRESSION AND THE NEW DEAL

Chapter 26

Economy Appears Healthy

As Hoover takes office, the economy looks to be in fine shape

By 1929, stock values hit 87 billion

In realty the economy is headed toward disaster

Uneven Prosperity Rich got richer, poor got

poorer Top 1% (24,000) of the

population incomes rose by 75%

70% of the population made less then 2,500 a year (minimum amount for a decent standard of living) Profits should have been

used to increase wages

Buying on Credit

People bought radios, refrigerators, and other new products they could not afford

Installment plans made expensive items look irresistible

There was a huge increase in personal debt 80% of people had no savings

Playing the Stock Market People began (speculating)

playing the stock market Many bought on margin-

Purchase a stock for only a fraction of its price (10%) and borrow the rest

Brokers charged a HIGH interest rates and could demand repayment at any time

Too many Goods, too little Demand

Productivity increased 43%, wages only by 11% Warehouses held piles of surpluses

Overproduction caused some industries to slow in the late 1920’s Over production led to layoffs Housing market slows to a stand still

Hardships of Farmers and Workers

Prices of wheat, cotton, and other farm goods plummeted making it hard for farmers to repay loans they took out during WWI McNary-Haugen Bill (price-supports) is vetoed by

Coolidge Dustbowl hits Midwest farmers in the 30’s

compound

Stock Market Crashes 1929• Dow Jones Industrial Average was the

most widely used barometer of the health of economy

• Investors start to pull/sell stock sending out a panic among rest of the investors – Black Thursday (10/24)– Black Tuesday (10/29)

• Overall losses is 30 billion dollars– Example-GE was $400 a share and

dropped to $283• 1/2 of all banks close due to

bankruptcy!• Will be a severe economic decline that

will last from 1929 until WWII throughout the world

Explain how these indicators from the great depression RELATE to each other and show the severity of the economic downturn during the

1930’s.

Social Effect on the Great Depression

Strain on Society• Hoover claims, “no one has starved”• Hardship affected all classes but middle class was hit the hardest • Thousands of young homeless, jobless (25%)• Children quit high school to support families• Women and African Americans are discriminated against for taking

jobs!!

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?

Are you sure Hoover?

End of Hoover

• Hoover initially sought solution through voluntary action, private charity

• Eventually aided farmers with Farm Board to buy surpluses and bankers with loans through Reconstruction Finance Corporation

• Bonus Army & General MacArthur • Resisted Democratic efforts to give direct aid to the

unemployed– Perceived as indifferent to human suffering

FDR captures urban/farmer vote

The Hundred Days

• FDR inaugural inspired with the term “nothing to fear, but fear itself”

• Banking system saved from collapse

• Fifteen major laws provided relief– Tennessee Valley Authority

was the most ambitious one

• New Deal aimed to reform and restore, not nationalize, the economy

Roosevelt Recovery/Relief/Reform

• Roosevelt and Recovery 1933-1934– Formulate codes for industry, labor, and agriculture

• NRA, Wagner Act, AAA, etc…

• Roosevelt and Relief 1935-1936– Put people back to work

• TVA, CCC, WPA, etc…

• Roosevelt and Reform 1933-1936– Focus on immediate problems in banking and finance

• FDIC, SEC, FCC, etc…

– By 1935 FDR started shift to a economic reform “broker state” to end historical inequities in American life

• SSA, Wagner Act, NLRB, etc…

Did the New Deal Work?

The New Deal and American Life

• New Deal’s limitations– Depression not ended– Economic system not fundamentally altered – Little done for those without political clout

• Achievements– Social Security, the Wagner Act, Security Exchange

Act, etc… – Political realignment of the 1930s