The Great Depression: Revision Notes

The USA and the Roaring Twenties

- USA benefitted from the First World War when it sold weapons and other resources to the allied countries, receiving minimal losses (the majority of which affected merchant shipping in the Atlantic). American companies were later accused of ‘blood business’

- Despite a brief post war recession (due to improving European economies) - average unemployment never rose above 3.7%.

- Wages rose 14% 1920-9, and GNP rose from 73bil$ in 1920 to 104$bil in 1929.- Car ownership rapidly increased, by 1929 more than 80 million tickets sold weekly for

the cinema, and Americans watched sport in increasing numbers.

Reasons for Prosperity

- Republican President Coolidge (1923-8) pursued a free market with minimal government intervention (laissez faire economics). He believed in trickle down economics. In the 1920s industrial expansion led to more job opportunities.

- High tariffs such as the 1922 Fordney-Mccumber act made it cheaper for US citizens to buy domestic goods. In retaliation European countries also raised tariffs.

- There were tax reductions, for example industrialists paid $3.5bil less tax 1922-3. Nonetheless there was a government surplus, 1927 $607 mil. Govt aimed to reduce national debt.

- Fewer regulations on industry. Theodore Roosevelt had added regulation in the early 1900s and forced monopolies to break up. In the 1920s Coolidge reduced the power of organisations such as the Federal Trade Commission, leading to an increase in activities such as price fixing, and child labour in the southern states.

- Coolidge avoided intervention abroad. For example border disputes with Mexico were solved by diplomacy. The only occupied territories were Nicaragua and Haiti.

Technological Advances

- The car industry grew considerably in the 1920s, by 1929 there were 23mil cars in the US, 7% of workers were in the industry, and it paid 9% of wages. This also increased the desire for rubber.

- Henry Ford pioneered mass production from 1908 (of the Ford Model T). This spread to other industries, and by 1925 the Ford Factory produced a car every 25 seconds. Supply increasingly outstripped demand.

- 1921 Federal Highway Act had given responsibility for road building to the government. By 1929 they were making 10,000 miles a year. Improved infrastructure helped industry, truck registrations tripling in the 1920s.

- Electrical consumer goods also sold in much larger quantities, such as vacuum cleaners and washing machines. For the first time such goods were affordable for the masses.

New Business Methods

- Huge new corporations such as the rubber company Firestone developed. By 1929 the largest 200 corporations possessed 20% of the nation’s wealth. Due to mergers in manufacturing and mining companies many new trusts/holding companies were developed, essentially monopolising industries. For example Samuel Insull created a monopoly in the electrical supply

- This allowed them to form cartels fixing prices. It acted against the interests of small business and in the interests of the government.

Advertising and Sales

- By 1928 there were 17,000 cinemas in the USA. This both led to a huge growth in the film industry and also in commercials shown as part of the features.- By 1929 there were 618 radio stations in the USA, most were run by NBC and CBS. Again this led to a growth in commercials.- Oversupply led to a constant need to boost demand. Hence advertising boomed.

Easy Credit

- Massive consumer boom boosted by easy credit. By 1929 $7 bil worth of goods bought on credit. Included 75% of cars and half of major household appliances.

- Few checks on reliability of those credit being given to.

Advantageous Foreign Markets

- US companies developed extensive interests abroad in raw materials. EG United Fruit Company in Costa Rica, and Oil in Canada.

- First Soviet 5 year plan dependent on US tractors (25% of all foreign investment 1928 from USA) despite fact US did not recognise USSR as a country.

- Private investment from US in foreign countries rose from $7bil in 1919 to $17.2 bil in 1930.

- National debt shrank in the 1920s from $24bil to $16bil.

Key Questions

Why was the USA prosperous in the 1920s?

The Wall Street Crash and the causes of the Great Depression

The Wall Street Crash

- Oct 1929 Stock Market crashed. Dropped by 68 points in two days.- In Oct lost $30 bil in a market of $100 bil. Equivalent to US spending in WW1. - However many experts thought the losses were only temporary. Not necessarily

main cause of Great Depression.

Economic Problems - Unequal Distribution of Wealth

- Income distributed unevenly throughout the country. Incomes in far east/west about $900/yr. In rural south more like $200.

- Women had very few career opportunities. Only 2 women among 435 delegates in US house of representatives. 700,000 women were domestic servants. Legislation did little to help women, despite 1921 Sheppard Towner Act which had funded healthcare for pregnant women.

- Native Americans culture largely destroyed due to dual system of assimiliation and allotment created in 1887 Dawes Severalty Act. Many lived in squalor and idleness.

- African Americans made up 10% of population, but 85% lived in poorest regions of the USA in south. In the north they lived in ‘ghetto’ areas such as Harlem, where there were 165,000 by 1930 living in squalid overcrowded conditions.

Rural Poverty

- After WW1 price of grain fell by 150%- Prohibition reduced demand for grain, and higher living standards in cities meant less

was consumed.- Technical advantages allowed for higher yields. Farm pop in 1920s fell by 5% but

production rose by 9%.- The growth of large scale agricultural businesses drove farms out of production. They

used mass production and required little labour. This drove many small scale farmers out of business.

- Better technology led to over production. Prices fell below 1914 prices which many farmers considered to the ‘parity’ price at which they would break even.

- Coolidge did little to help farmers. The agricultural credits scheme of 1923 had been designed to give loans to cooperatives but small scale farmers reluctant to take on more debt. 1921 Emergency tariff act and 1922 Fordey McCumber act largely prevented food imports, but also led to other countries using tariffs preventing US exports.

- Up to 66% of farmers operated at a loss. This especially caused poverty amongst tenant farmers and share croppers, many of whom were African Americans.

Industry and Employment

- Older industries such as coal suffered from competition from the newly discovered energy source oil. Cotton suffered from the use of synthetic fibres.

- Railways suffered from road transport (but rail freight did grow by 10% in the decade).

- New industries such as automobile industry focussed on North East and Mid West leading to lack of industry in other areas, especially poor rural south.

- Employment unstable due to fluctuating demand for goods. A 1924 survey found 72% had been unemployed at some point in their lives.

- Labour Unions could do little to help. Membership declined from 4 mil to 3 mil in the 1920s. Many employers used ‘yellow dog’ clauses preventing workers joining a union. Many new industries anti union.

Banking and Get-Rich-Quick Schemes

- Get rich quick schemes flourished in the 1920s. Charles Ponzi led a notorious pyramid scheme for which he was imprisoned in the mid 1920s.

- In Florida there was a land boom 1920-5 and the state pop grew from 968,000 to 1.2 mil. Many paid on credit with a 10% deposit. However demand tailed off in the 1920s, there were no more buyers, and the boom collapsed leaving thousands bankrupt.

- From 1927 to 1929 many invested on the booming stock market (though worth noting only 5% of US pop owned shares in 1929). Many bought for speculation, for example Radio Corp of America rose from 85 to 420 points in 1928. Large firms invested in the market risking the solvency of their companies should the market turn.

- Federal Reserve created 1913 biased towards interests of the major banks it lent money to. In 1920s almost 30,000 local banks majority of whom operated on a local basis, and would not survive a major financial shock. Fed kept interest rates low in 1920s, fuelling an easy credit boom, and leading to low savings.

International Cycle of Debt

- World War One had led to European countries, most notably Germany, having major debts.

- 1922 US Debt Funding Commission had suggested all countries should repay debts by 1947, however many countries could not afford this.

- Tariffs prevented poor European countries exporting manufactured goods to the USA, and much of gold reserves went to USA.

- USA lent money to Germany under Dawes and Young Plan. Scaled down German reparations to other European countries in turn making them poorer.

- There was massive over investment from Wall Street in Germany where $39bil invested after Dawes Plan.

- All this made system of international debt more complicated.

Economic Slowdown

- By late 1920s economy slowing.- Many small businesses faced problems. For every 4 that succeeded in 1920s, 3

failed. For example number of motor companies fell from 108 in 1920 to 44 by 1929.- In construction despite a boom in the early 1920s, by 1926 demand was falling. This

led to higher unemployment in construction related business.- By late 1920s production outstripped demand. Americans had less to spend on

consumer goods, and industries such as the automobile industry overproduced. - All this led to a downward spiral in prices and employment.

Effects of the Wall Street Crash

- Wall Street Crash a financial issues, Great Depression arguably showed broader issues in the US economy.

- Many businesses collapsed. Rockefellers lost over $50 mil trying to prop up the market. Led to a further collapse in the demand for consumer goods, and collapse in demand.

- It became impossible to get credit. No-one was prepared to take the risk.

- It led to the collapse of many banks. There were more than 10,000 bank closures 1929-33 (1921-9 there were 5,000).

Key Questions

What were the causes of the Wall Street Crash?How far was the Wall Street Crash a cause of the Great Depression?

Hoover and the impact of the Great Depression

The effects of the Great Depression - The Economy

- Unemployment rose from 3.2% in 1929 to 25.2% in 1933. National wage bill in 1932 only 40% of the 1929 figure.

- Unemployment unevenly distributed. In New York 1 mil unemployed, Ohio had 50% unemployed and Toledo 80%.

- 1931 Unemployment of African Americans 4 times higher than whites. Most employment opportunities in Northern cities closed to them.

- Women also hit by unemployment, also in 1930 over 75% of US school authorities refused to employ women as teachers.

- Industrial growth declined to 14.7% in 1932, GNP declining from $203.6 bil to $144.2 bil.

- Credit vanished as the stock market declined. More than 10,000 banks closed 1929-33. People increasingly made transactions in cash.

Social Effects of the Depression

- US has little provision for unemployed. Marriage rate fell from 1.23mil in 1929 to 982,000 in 1932, and suicide rate rose.

- By 1932 more than 2 mil homeless migrant workers (‘Hoboes’). In California they were arrested and put to work in chain gangs.

- Many elderly people did not have pensions and lived in poverty. There was very little provision for relief.

- Many states had to cut services. In 1932-3 schools were closed in Arkansas, and teachers in Chicago went unemployed.

- In 1929 58 farms in every thousand changed hands, many of which were forced sales provoking violence.

- Many suffered from malnutrition in the richest country in the world. In Chicago of 3.8 mil one parent families, only 19,280 received aid.

The Longevity of the Depression

- Hoover blamed foreign countries for the Depression. However Tariffs worsened problems. The US also refused to devalue its currency when many other countries took this step.

- Given that various cartels and trusts dominated the market by 1929 it took a long time to recover when these companies were economically struggling. The economy was much less dynamic than it might have seemed.

- There were few employment opportunities in industry for a sustained period as growth fell. Newer more dynamic industries were hit by overproduction and underconsumption.

- Arguably non-intervention by the government worsened economic trends such as inequality and unemployment.

- The amount of money in circulation 1929-33 fell by 33% due to Federal reserve policies. Monetarist theories (eg espoused by Milton Friedman) argue there is a need to increase the amount of money in circulation via quantitative easing. Equally interest rates rose from 1.5% to 3.5% in 1931 making local banks less willing to borrow from the central bank.

Herbert Hoover and The International Situation

- Hoover elected 1926 expected economy to continue to flourish. He had been secretary of commerce in the 1920s.

- He believed in values of self reliance, ‘American individualism’ (he wrote a book called this published in 1922)/rugged individualism, he was not strictly a believer in laissez faire - there needed to be a balance between the needs of the individuals and the needs of the community.

- He argued the depression was European in origin. The 1931 customs union between Germany and Austria angered Britain and France, and furthered the collapse of the German economy after they demanded loans repaid. The US could not afford to keep lending Europe money.

- Equally arguably European countries leaving the gold standard worsened the crisis. GB was the first to leave in September 1931.This led to others leaving it in Europe, and the US imposing tariff barriers. In the period after GB left the gold standard, 2292 US banks failed, and to stop the US losing gold the Fed raised interest rates.

- The value of global business fell from $36 bil in 1929 to $12 bil in 1932. - This led to European banks defaulting on US debt, foreign investors withdrawing US

assets, and bank runs in the US.- Hoover gradually lost all credibility, slum areas around cities in the North became

known as ‘Hoovervilles’.

Federal Government Actions- Hoover did intervene more than previous presidents. For example he cut his and

other officials’ salaries by 20%. - He had convened a special session of congress in April 1929 (before the Wall Street

Crash) to deal with agriculture. The 1929 Agricultural Marketing Act had created a nine person Federal farm board with $500 mil to buy, store and sell farm surpluses. It acted in 1931-2 to deal with huge surpluses. However, it was blamed for wasting tax- payers money, and encouraging farmers to keep overproducing.

- Ultimately this policy failed because it paid farmers artificially high prices. It also ignored international markets, and how the tariffs inflated prices.

- 1930 Hawley Smoot tariff highest in US history. Average duties of 40% on industr/agricul. Items. Led to Europe abandoning free trade, and did nothing to help farmers with surpluses.

- Hoover promoted voluntarism - notion industries should help wider community. Urged businessmen to keep wages high. However this was against business practice. Set up National Credit Organisation to help failing banks survive, it had $500 mil donated by major financial organisations but had only spend $10mil by end of 1931 despite banks continuing to fail. It gradually faded away, the money unspent.

- Hoover set up the Emergency Committee for Employment to help agencies organise their efforts in tackling unemployment - but although congress allocated $500 mil to agencies it was inadequate to meet the scale of the problem. 1932 he also passed the Federal Home Loan Bank Act which was designed to help loan associations provide mortgages, however this was only up to 50% of the value of the property and so was ineffective.

- Hoover’s most radical measure was the 1932 Reconstruction Finance Organisation. This had the authority to lend up to $2bil to banks and companies in distress. However, it only gave a small number of loans to major banks. 1932 he furthered its work by passing the Emergency Relief Construction Act allowing for emergency loans to public works in bankrupt state. This alienated many of his supporters who felt it was overly interventionist. In many ways this pre-empted the New Deal.

War Debt and War Veterans

- 1931 given Europe was virtually bankrupt (and more especially Germany) Hoover offered a 1931 postponement of the repayment of war debt if other countries would do the same (a moratorium). It was too little too late.

- 1925 Congress had agreed a ‘veterans bonus’ payable to US soldiers in 1945 based on years of service. The veterans marched to Washington in 1932 to demand immediate payment of this bonus, camping out. Although the House of Rep voted to allow immediate payment of the bonus, it was vetoed by the Senate. Hoover allowed his Secretary of War to attack the camp, clearing the mob. This caused a national outcry and humiliated Hoover.

Key Questions:

How far was the Wall Street Crash the main cause of the Great Depression?How far was Hoover responsible for the Great Depression?How far was Hoover successful at dealing with the Great Depression?

FDR, The New Deal, and Economic Recovery

1932 Election

- The extreme left came to prominence for its radical solutions to poverty. The Communists ordered marches against unemployment, using the example of the USSR to argue Communism was not affected by economic crises.

- Roosevelt who had been Mayor of New York was the most popular democratic candidate. He did not offer radical economic solutions, attacking Hoover for ‘extravagant public spending’. However’ FDR did capture the public imagination talking about ‘the forgotten man’. Equally, he spoken about the ‘New Deal for the American People’.

FDR’s style

- Inaugurated March 1933 - FDR ignored Hoover in the handover period. Did not want to associate himself with FDR’s unsuccessful policies.

- Inauguration speech argued Americans were resilient and would fight to save the economy. ‘The only thing we have to fear is fear itself’.

- FDR much more media savvy than Hoover. Used twice weekly press conferences to spread ideas, and invited questions. Got media on his side. Also used radio and fireside chats inviting the public to tell him their problems.

- Appointed experts to top jobs regardless of political affiliations unlikely predecessors.- First 100 days (First New Deal) as setting course for presidency.

100 Days Key Legislation

Reasons for What was in the ActEmergency Banking Relief Act

Restoring confidence in the American Banking System.

Briefly Closed banks (March 6~ 9) - allowed Reconstruction Finance Organisation to buy bank stock to support banks.In a Fireside chat FDR attempted to persuade US citizens to put spare money in banks to keep the economy (banks) solvent.

Tennessee Valley Authority

provide fundamental social amenities and economic development in the Tennessee Valley, especially regions affected by the Great Depression

Control floods by building dams, improve navigation, alleviate standard of life of farmers, provide electric power

Improved living standards, average income in region grew by 200% 1929-49.

Civilian Conservation Corps

Provide jobs to young men

operated under the army’s control

provided CCC camps

soil conservation and reforestation

dug canals and ditches

built over thirty thousand wildlife shelters

stocked rivers and lakes with nearly a billion fish

restored historic battlefields, and cleared beaches and campgrounds.

The Economy Act To cut salaries Cut salaries in government and ex

soldiers pensions

Truth in Securities Act

To regulate the offer and sale of securities

Prohibit frauds (misrepresentations, deceit)

Tell the public (investors) the truth about their businesses

Investors’ interest should be the first aim

Federal Emergency Relief Act (May 1933)

unemployedweak relief system

- Federal Emergency Relief Administration (FERA)

- $500 million to help the unemployed with relief

- Harry Hopkins- should raise $ through

borrowing, tax rise and etc.- Effectiveness limited as funds too

low, and poorly distributed, but set precedent of government giving direct funds for relief

Farm Credit Act agriculture - connected various agencies dealing with agricultural credit into one body, the Farm Credit Administration.

- helped the co-ordination.-

Emergency Farm Mortgage Act (april)

agriculture - loaned funds to farmers in danger of losing their properties

The Frazier-Lemke Farm Mortgage Act(June)

agriculture - lent money to farmers whose lands had already been repossessed so they could recover them

Home Owners Refinancing Corporation (June 1933)

housing - helped homeowners in difficulties by offering new mortgages at low rates of interest over longer periods

Glass Steagall Act banking system - commercial banks were banned- bank officials were not allowed

to take personal loans- authority over open-market

operations was centralised by being transferred to the Federal Reserve Board in Washington

- Many argued still needed more control of finance

- Individual bank insured upto

$2500, worked with the Federal Deposit Insurance Corporation (FDIC)

- Banks had to join Federal Reserve - seemed to favour bigger banks

- FDR’s aim as to preserve rather than destroy US capitalism

Gold Standard and Quantitative Easing

Increased availability of US dollars and stop gold leaving the country

-Took US off the gold standard, bringing down value of dollar abroad, increasing exports

-FDR refused to participate in 1933 London Conference on currency reform

-1934 Gold Reserve Act pegged gold at 35$ and ounce, 1933 had been 21$ an ounce.

Agricultural Adjustment Act

OverproductionFarming had priority over industry - 30% of workforce worked in agricultureFarmer’s Holiday association threatened strike action

- Increase farmers’ income- pay farmers to reduce their

production of ‘staple’ items++- Reduction of cotton production,

destroyed cotton surplus to force up prices

- Also destroyed food surplus - massive public criticism, many of public lacked food, not least to failure of wheat crop 1933.

- Farm income rose from 4.5$bil 1932 to 6.9$bil 1935.

Securities Act Oversee Stock Market Activities

- Aimed to prevent fraud on Stock Market, led to prosecution of a number of people for fraud and embezzlement.

Silver Purchase Act

Silver value all time low -> Raise value of Silver

Treasury buy silver until monetary value equalled 33% of gold

Indian Reorganisation Act

to encourage native american culture in a shift from the former policy of assimilation

tribes reorganised into self governing bodiescontrol land sales, however remained poor.

National Industry Recovery Act June 1933

unemployment and low consumer demand

National Recovery Administration -> ‘yellow dog’ clause outlawed/workers participate in collective bargaining-industrial expansion promoted (suspension of anti-trust legislation for two years)-however many of codes unworkable, accused of favouring big business (eg

supported by Henry Ford)-Did not make a different - 1933 launched a ‘Buy Now’ campaign to encourage people to spend money. Advocated 10% wage increase and 10 hr cut in working week, did not make a difference.-Argued NRA did little except encourage companies to exploit workers, 1935 ruled unconstitutional by Supreme Court.Public Works Administration -> funded with 3.3bil$ purpose was ‘pump priming’ - initially slow to work but eventually helped build over 30,000 schools and 50,000 miles of road, many new electricity cables and 4 huge national parks to be created.

Federal Housing Administration

stimulate building industry

to offer federal insurance to protect the ability to repay low interest, long term mortgages

Alternatives to the New Deal

- The Republicans found it hard to opposed it given the failures of Hoover. The struggled to field a strong electoral candidate throughout the 1930s.

- Liberty Leaguers organised in April 1934 to promote private property and enterprise. Its leaders saw FDR as a traitor to his class, and likened the New Deal to Communism. By 1936 they had 125,000 members, but died out after FDR’s 1936 electoral victory.

- End Poverty in California started by novelist Upton Sinclair - argued unemployed should work in state cooperatives.

- ‘Share our Wealth’ - Huey Long governor of Louisiana ordered massive public works programme including 3000 miles of paved highway 1928-33. 1934 argued private fortunes over $3mil should be seized, education should be free, and old aged should have guaranteed pensions. Argued a third party should be founded to fight 1936 election, however assassinated 1935 a month after announcing he would run for president.

- Old Age Revolving Pensions - Francis Townsend a retired doctor argued all over 60 not working should be given $200/month to boost consumption and encourage the elderly to retire. Although this was entirely unrealistic Townsend clubs soon had 500,000 members across the USA.

- Francis Coughlin - A priest who’s radio programme had an audience of 30-40mil. Argued banks should be nationalised, 1934 founded National Union for Social Justice. Became anti semitic and praised European dictators - led to falling popularity.

- However despite opposition 1934 mid term congressional elections Democrats gained in both houses, winning 69 out of 96 seats in the Senate.

- First New Deal as setting precedent. Arguably a series of steps to deal with the economy rather than a single comprehensive plan, aimed to preserve social order which was threatened by riots and strikes 1931-3 (Leuchtenburg). Clearly enhanced power of central government (Moley). Arguably had its roots in populism and progressivism which were major forces in 19th century politics (Schlesinger).

- Arguably did little to help economy, for example some policies such as NRA made price fixing worse and AAA paid farmers to cut production (Fulsom)

Second New Deal

Reasons/Background

- Mid term Democrat victory as paving way for second new deal which aimed both to correct problems with first, and build upon it. Electorate as expecting further more radical changes. Climate in congress for more legislation.

- FDR aimed to deal with criticisms of individuals such as Huey Long and Coughlin. Also frustrated with supreme court which was trying to overturn legislation such as the NRA as unconstitutional.

- FDR frustrated with big business, and lack of support from US chamber of commerce. Wanted to support small businesses (eg with Public Utility Holding Act).

- Nonetheless 1935 vetoed veterans’ bonus and reminded government needed to spend public funds meaningfully

- Like the first new deal a series of laws, rather than a single coherent passage.- Arguably aimed to bring back competition curtailed by 100 days, but with clearer

guidelines.

.An Evaluation

- Centralised banking system, and helped small business.- Provided legalised trade unions.- Social Sec Act first national system of benefits.- Congress seen to be acting. 1936 election FDR won 60.8% of vote, and won all but

two states.

The Supreme Court

- Increasingly opposed FDR. 1935-6 found 11 laws unconstitutional (previous to 1935 only found 60 laws unconstitutional in its history).

- Found NRA unconstitutional in ‘sick chicken’ case. Recognised although federal government could intervene in inter-state commerce, could not in internal commerce of states. Suggested government did not have powers to oversee national wide economic affairs.

- Judicial Reform Bill - 1937 FDR presented a bill stating the president could appoint a new justice when any judge over 70 failed to retire within 6 months. He also wanted to increase the number of judges from 9 to 15, arguing that they needed more judges to keep up with the work. This would have allowed him to appoint more liberal judges. However it backfired a he was accused of trying to rig the court, senators over 70 were also afraid their jobs might be at risk.

- Nonetheless the court was worried, and upheld FDR’s Social Security Act and National Labour Relations Act.

Problems with Agriculture

- The AAA tended to be dominated by the most powerful landowners, and many thought it only benefitted the wealthy. The agriculture sector remained weak.

- The Dustbowl - Over cultivation in rural America, coupled with drought led to the top soil being blown away from many states. In 1934 35 mil acres of arable land was destroyed. This led to mass migration, Oklahoma losing 440,000 people, while Kansas lost 227,000. Unemployment rose to 39% in Arkansas in 1933. The majority went to California, who patrolled the border to stop the so-called ‘oakies’ entering.

- 1933 the government set up the soil erosion service, planting trees and shelter beds, and advising farmers. However it was too late. The dustbowl ended in 1937 when heavy rains brought floods.

- This led to a large number of farms changing hands and farmers defaulting on mortgages.

Labour Relations

- Many industries ignored unions despite Wagner Act and rights granted to them in NIRA. Also anger at Black Leg labour (using people to break strikes).

- Most infamous event 1937 ‘memorial day massacre’ when Chicago police shot 10 strikers.

- 1935 formation of Committee of Industrial Organisations united a number of unions. Union membership consequently rose to 7 mil in 1937, and number of strikes to 4470.

- FDR consulted with Unions, who in 1940 made largest contribution to FDR’s election campaign.

Roosevelt Recession

- 1937 economy plunged back into recession. Employment in manufacturing falling by 23% and national income by 13%. Gains made during New Deal lost.

- Big business blamed for price fixing/- FDR decided to spend more (national debt increased hugely during New Deal) -

congress voted for a $3.8bil budget, the majority going to the PWA and WPA.- 1939 unemployment still 9mil.

Third New Deal

- Characterised by permanent government spending to counter economic problems.

- Bankhead-Jones Farm Tenant Act, July 1937 – created Farm Security Admin, designed to help tenants get loans to buy and restock farms. Replaced Resettlement Adminstration. By 1947 40,000 had bought their own farms through their efforts, and 90,000 families borrowed $800mil to rehabilitate farms.

- Second Agricultural Adjustment Act Feb 1938 – Established quotas for five staple

crops (rice, tobacco, wheat, corn, cotton) – those who kept quotas got subsidies.

Designed to keep surplus in poor years for good years. However, AAA too complicated for many individual farmers, and gave county committees too much to do.

- Wagner-Steagall National Housing Act, September 1937 – designed to clear slums

and build public housing. $500 mil allocated, and by 1941 160,000 homes built for slum dwellers. However, failed to meet needs of Northern Cities where millions remained in poor housing.

- Fair Labor Standards Act, June 1938 – Fixed minimum wages and maximum hours

of work in all industries engaged in inter state commerce. Wages and hours division set up in Department of Labor who could impose fines. However, exempted jobs such as domestic servants/farm labourers many of who were poor African Americans.

- Revenue Act 1938 – had increased company taxes. Weakened when congress

removed proposed tax on company profits.

- In this period FDR accused of trying to take too much power. Had aimed to create Executive Office of the President with a bigger staff. Rejected by Congress in April 1948, FDR created it by an Executive Order in Sept 1939.

- => Aug 1938 Gallup Poll 50% of Americans accused FDR of trying to create a

dictatorship in the USA, compared with 37% previous October.

The Great Depression and African Americans

- FDR needed the votes of Southern Democrats, many of whom were racist. Also he wanted to focus his legislation on organisations such as the AAA/NRA which worked against African Americans.

- Anti lynching bills were put in front of congress in 1934/7 but FDR did nothing to support them.

- FDR did employ more African Americans in government, for example Mary Bethune was head of the National Youth Associations department for African American affairs.

- The civil service trebled the number of African Americans 1932-41 (to 150,000).- Millions of African Americans did benefit from relief measures.

Women

- Women held a number of key government posts during the New Deal, more than any time until the 1990s. For example Eleanor Roosevelt was very politically active, Francis Perkins was Secretary of Labour, and Ruth Owen first female ambassador (to Denmark). Their influence was lost with the onset of war.

- The New Deal did little for women, many of whom lost their jobs. For example the 1933 Economy Act forbade members of the same family working for federal government.

- NRA codes allowed unequal wages, the CCC barred women entirely.- In the professions 90% of jobs taken by men.

- On average in 1930s women earned $525/year, half the average wage of men.

New Deal Evaluation

- Major debate how far the New Deal succeeded (for example as opposed to WW2).- Leuchtenburg argued only partially successful, did recognise unrecognised groups

such as labor unions, but failed to recognise African Americans and share croppers.- The New Left (eg Howard Zinn) argue it was limited.- Libertarians have criticised the New Deal as creating the problem of welfare

dependency. Equally it did not bring economic recovery, redistribute national income, or help certain groups.

- It has a huge legacy in the present day as seen in the controversial repeal of the Glass Steagall Act in 1999. Equally, the 1937 Housing Act led to the creation of organisations such as Fanny Mae, and Social Security Act led to Medicare. Equally JFK’s inauguration speech was very similar to FDR’s. It also helped create an urban America, for example via the work of the TVA and REA.

Key Questions

What was the impact of the New Deal?How successful was the New Deal?Why was the New Deal criticised?

The Impact of the New Deal on the Arts

Literature

- Had a major influence, most well known writers Dos Passos, Steinbeck, and Wolfe.- Dos Passos - in 1930s wrote masterpiece USA Trilogy - focussed on gradual

abandonment of American Dream to one of despair.- Thomas Wolfe - focussed on diversity of US urban life in novels Look Homeward

Angel and You Can’t go Home Again- Steinbeck’s novella Of Mice and Men focusses on life in the poor rural south during

the 1930s. Grapes of Wrath follows the fortunes of the Jarrow family as they are forced off their land in the the midwest by the dustbowl and emigrate to California. It is a powerful indictment of the cruelty caused by the depression, as they struggle to survive.

- Langston Hughes, a significant African American poet in 1938 published his collection Let America by America again. It focusses on the plight of the urban poor, and how minorities and the poor cannot achieve the American Dream.

- Federal Writers’ Project - set up by Henry Alsbury to provide employment for authors and turned into a scheme supporting 6600 of them. Compiled local and oral history, for example 2,300 first person slave narratives. Also produced a detailed guide to each state.

- Let’s Now Praise Famous Men a photographic project by James Agee a writer, and a photographer. Showed lives of poor tenant farmers, commissioned in 1936 by Fortune magazine. However not published until 1941 due to horrors depicted.

- Many other photos appeared in newspapers. For example under the head of the farm security admin more than 80,000 photos were compiled - most famously Dorothea Lange’s photo of a ‘migrant mother’.

The Cinema, Music and Radio

- On one level the cinema aimed to help people forget about the Great Depression with epic films such as Gone with the Wind (1939), and sentimental movies about small town USA such as Mr Deeds goes to Town (1936).

- However, there were bleak films too. For example I am a fugitive from a chain gang examined how the unemployed often fall into crime, and in 1940 The Grapes of Wrath depicted Steinbeck’s novel. Chaplin also depicted life during the Great Depression in Modern Times (1936), and the KKK were attacked in Black Legion (1937)

- Radio was very popular in the 1930s, as seen in the huge revenue raised from advertisers, CBS making $10mil in 1933.

- Popular music also depicted the Depression, for example the song Brother can you spare a dime.

Key Questions

How did the Great Depression affect American culture?

The Great Depression in Canada

- Post world war one Canadian economy struggled due to collapse in wheat prices. In 1921 the price of wheat halved from $2 to $1 per bushel.

- There were a series of disputes around pay and working conditions which often led to violence. For example there was unrest in Winnipeg in May 1919, and many in the western coalfields where 22,000 went on strike in 1922.

- The Maritime provinces felt they were being marginalised, particularly as population moved inland to cities.

- During late 19th century there had been a mass of railway building.- By the end of the 1920s 54% of the pop lived in the cities. Average per capita income

was $500 giving a good standard of living. Radios proliferated.- Due to proximity to the USA Canada became the second large car manufacturer in

the world, exporting a third of the cars it manufactured. There was also a huge amount of road building.

- Many people bought shares, often using margin financing. British Columbia had 83 in the 1920s.

- However provincial authorities were overburdened with responsibilities, for example regarding contracts to develop hydroelectric power.

- There was tension regarding ‘Americanisation’ of Canadian culture. Equally there was a growing separatist movement in Quebec with the growth of the journal Action Francaise. This had been a major issue in WW1 due to the introduction of conscription.

- Economic growth was uneven. For example Canada supplied 3mil tons of newsprint to the USA. However agriculture struggled despite the fact the years 1925-9 saw 24 mil hectares under cultivation.

- Equally there was an increasing reliance on the USA.

The causes and effects of the Depression in Canada

- Canada was over-reliant on staple exports such as grain. In the 1920s 25% of the Canadian economy was dependent on staple goods. However there was a huge surplus in the early 1930s (12mil bushels in 1934) which was catastrophic for the Canadian economy. Many farm incomes fell by 75%.

- Overproduction was also a problem both in terms of agricultural and industrial goods.- The stock market collapsed in October, bluechip shares losing $5bil on 24 Oct. By

mid 1930 stocks of the leading 50 companies had fallen by an additional 50%.- The Depression led to a massive fall in demand, automobile sales falling to 25% of

1929 levels. Millions lost their jobs, unemployment rose to 27% by 1932.- This meant an increase from 116,000 unemployed people to 826,000 unemployed

people by 1933.- The Canadian dollar fell so much they could no longer get loans from the USA. Three

major financial concerns collapsed, and the Sun Life Insurance Company found itself on the edge of bankruptcy.

- The income from railroads fell by 50% and the annual deficit rose to $560 due to a collapse in demand.

- By 1932 industrial production fell by 58% compared to 1929, and unemployment stood at 33%.

- Many farmers were crippled - wheat exports fell by 75%, and there was severe drought on the prairies leading to a dust bowl. 1931-5 250,000 migrated away from the prairies to cities, and the income from farming fell from $363mil in 1928 to $11mil in 1931.

- There was little organised welfare in Canada. In 1930 the Prime Minister Mackenzie King made a speech refusing to give any money to provincial governments run by the Conservative party - his opposition. Nonetheless, provinces did raise their own taxes, for example petrol taxes rose by 50%.

- By 1933 1.5 mil Canadians reliant on some form of direct relief. Newfoundland, a semi independent province, declared bankruptcy in 1933.

Federal Government Responses to the Great Depression

- MacKenzie King’s (1925-30) liberal party believed in laissez faire economics, and that the economy would right itself if left alone. He believed in balancing the budget and a limited government role, and that intervention would make things worse. He also believed in international trade, and not raiding tariff barriers. He lost the 1930 election.

- The Conservatives led by Bennett won the 1927 election with a majority of 31 seats. They adopted the wartime precedent of public loans by setting up the National Service Loan of $150mil.

- 1931 Unemployed and farm relief act - federal government allocated $20mil for emergency relief. Seen as a Keynsian measure.

- 1934 Public Works Construction Act - federal building programme of $40mil to create jobs, eg in National Parks.

- 1934 Farmers Credit Arrangement Act - Allowed farmers to remain in their farms rather than face eviction through foreclosure. By 1938 36,000 cases handled with $550mil in money owed.

- With as many as 70,000 hoboes in Canada, Bennett’s government set up work camps, run by the Dept of National Defence. They were only paid 20 cents a day, and accommodation was very basic. Those who refused to join were often arrested for vagrancy. Bennett was heavily criticised for this.

- Bennett increased tariffs to react to high US tariffs reducing trade with the US, but this only succeeded in isolating Canada in the international markets. In Manitoba it was estimated they lost $100 per farm.

- Bennett sought to use imperial preference (ie British Empire) to boost trade, holding a conference on this in Ottawa in 1932. It allowed exports to Britain to rise by 60%, whilst imports from Britain to Canada only rose by 5%.

- May 1932 set up Canadian Radio Broadcast Commission to stop too much influence from the US over the radio. Bennett argued this would ensure impartiality.

- Canadian banks did not suffer as much as US banks - 1934 set up centralised bank of Canada. This meant banks could not issue their own bank notes and had to transfer gold reserves.

- Bennett’s response seen as inadequte by many Canadians - the so called ‘Bennett buggy’ a horse drawn Ford, was a reminder he had failed to create prosperity

- Bennett attempted to create a large scale program to help him win the election in 1935. Borrowed from American President (Roosevelt’s New Deal), Bennett creates “Bennett’s New Deal”.

- Key was new employment and social insurance act which offered comprehensive unemployment and allied benefits.

- Also included max 8 hr working day, 48 hr week. Federally supported farm credits. Prairie farm rehabilitation act designed to help 100,000 farmers in south restore fertility of land.

- Wanted to set up Canadian Wheat Marketing board to regulate prices of wheat.- Bennett’s New Deal called for the following: maximum work week, minimum wage,

regulations on working conditions, unemployment insurance, health and accident insurance, revised old age pension plan and agricultural support programs.

- Bennett’s New Deal was too little too late and he lost the 1935 election to the liberals (Mackenzie King).

- Bennett’s New Deal never came to fruition and in 1937 the Judicial Committee of the Privy Council declared most of the “New Deal” Ultra Vires (outside the government’s power).

Alternative Responses

- The notion of ‘social credit’ found popularity in rural communities - for example in Alberta William Alberhart, a Christian preacher, suggested a system whereby everyone would be given $25 of paper credit a month. The Social Credit party were elected in Alberta, but the federal court blocked their ability to print their own money.

- Antigonish movements in Nova Scotia and the maritime provinces emphasised adult education and social cohesion - by 1932 there were 179 study clubs with 1500

members. By 1938 the number had risen to 1110. They advocated credit unions to offer credit outside of banks. By 1939 each province had a credit union.

- The Cooperative Commonwealth Fed was founded in 1932, and argued all industry should be nationalised and there should be welfare measures and federally organised state planning. It attracted 300,000 votes in British Columbia but did not acquire a national following.

- 1924 Communist Party of Canada founded. Repressed under Bennett for promoting violent overthrow of the government, and in 1931 8 Communists arrested including their leader Tom Buck.

- In Quebec the Union nationale promoted regulation of banks, and legislation to promote small scale business and destroy the power of big business. It won 58% of the vote, and despite authoritarian and anti Communist tendencies remained in power until the 1960s.

- In 1935 a trek was organised (On to Ottawa trek) of members of work camps, and over 1000 men left Vancouver for Ottawa where they planned to demand work. After the trains they were on refused to go further than Regina a riot broke out, and 2 protestors were killed.

- 1937 Strike action at a General Motors Factory led to wages being raised.

MacKenzie King’s Government 1935-8

- 1934 MacKenzie King aimed to intervene much more directly in economy then in previous term.

- Made a trade agreement with the USA in 1935 reducing tariffs, and with the US, GB and Canada in 1938.

- Agreed to deficit spending 1937-8 to pay for job creation schemes.- War brought financial recovery, economy mixed latter half of 1930s, gold rushes and

radium mining helped boost mineral industry.- Federal Government got more powerful - for example raised income taxes by almost

50% and sales tax from 1% to 8%.- 1938 King created a National Employment Commission which created unemployed

insurance.- 1937 King Commissioned Rowell-Sirois Report to look at federal and provincial

relationships. Recommended federal government take over welfare provision and majority of money from taxation.

Impact of the War on Canada

- Dept of Munitions and Supply set up Sept 1939 given task on adapting and expanding existing industries towards war.

- Set up 28 ‘crown corporations’ to oversee production of munitions etc.- Wartime prices and trade board - employed officials to ensure supplies maintained. - 1940 state created Social Security (unemployment insurance). 1944 also started

family allowances.- In WW2 number of civil servants quadrupled. Unemployment fell from 500,000 in

1939 to 0 by 1941.- Many women worked, from 638,000 in 1939 to more than 1 mil in 1944. Paid less.- War solved depression much more clearly than in USA - King/Bennett did little.

Key Questions

- How far were successive Canadian governments successful at dealing with the GD?- What alternative responses were there to the GD?

The Great Depression and Latin America (Brazil)

- Previous to 1930s Latin America as very dependent on USA. Notion of the ‘Big Stick’ policy and ‘Dollar Diplomacy’.

- Dependent on US - most of population could not afford manufactured, government made money from tariffs not direct taxes.

- USA as only interested in trade on its own terms.

Brazil in the 1920s

- Last decade of the ‘Old Republic’.- Economy dominated by coffee production - if coffee prices fell below a certain level

government would buy coffee beans and store them until prices rose.- Rubber/sugar production had fallen due to Asian competition- Brazil focussed on producing primary goods, imported majority of manufactured

goods and 80% of grain. Shift away from Europe and towards USA - US owned 35% of Brazil’s debt.

- Military as having significant role - military spending increased in the 1920s. In particular tentes (junior officers) launched a series of rebellions. For example in 1924 they seized and held the city of Sao Paulo for 22 days.

- 1922 Communism party formed focussed on notion of egalitarian revolution, Catholic church also began to focus on alleviating poor living conditions.

- 1926 Luis won the election with 98%. Economy doing well, however national debt a problem. By 1926 was $900 mil with annual interest payments of $175 mil. By 1930 had risen to 1.18 bil and 200 mil annually.

- 1929-30 coffee prices more than halved, trade with GB fell by 37% and warehouses full of unsold coffee.

- Prestes (nominated successor of Luis) won election. The opposition led by Luis won considerably less votes. A military rebellion led to Vargas becoming leader in 1930.

Brazil in the 1930s

- 1932 new electoral code have votes to all literate adults, introduced secret ballot, and election justice to oversee elections.

- Tenentes pushed for a stronger presidency, land reform, regular plebiscites, more equality of income - matched many fascist parties of Europe. However within a few years power reduced due to lack of unity, and the fact more liberal middle classes favoured more democracy.

- Many local states opposed Vargas who wanted more central control. Led to war in 1932 with tenetes who opposed Vargas, focussed on Sao Paolo lasting 3 months. However showed Vargas could not afford to ignore coffee exporting elite of Sao Paolo.

- 1932 Economic Adjustment Act reduced debts of coffee planters affected by the Depression. Appointed a Paulista civilian as the new State interventor.

- 1934 Constitution strengthened power of presidency. President elected to serve in both houses of Congress for four years, Chamber of Deputies made of representatives of 50 corporations on Mussolini’s model plus 250 deputies representing population. Aimed to reduce power of old elites.

- Communist party gained popularity due to Depression. 1935 group National Liberation Alliance (NLA) emerged from party - slogan ‘Bread, land and liberty’, demanded land redistribution, nationalisation of foreign enterprise and more democracy. Membership as big as 100,000. Banned March 1935 under National Security Act which designated left wing groups as subversive.

- Government increasingly repressive - Jan 1936 created Bureau for Repression such as Commission for stopping Communism, and Oct 1936 a National Security Tribunal to try such people. Ended Communist threat.

- Right Wing - Integralist Party formed 1932, copied European Fascists, focussed on national consciousness.Slogan ‘God, Fatherland, Family’. Attacked Jews, Freemasons and Communists. 1937 Vargas banned all parties after supposedly discovering an Integralist plan to murder all Communists.

Estado Novo 1937-45

- Vargas’s Brazil known as the ‘estado novo’ (‘New State’). He ruled by decree, set up a special police force, abolished personal freedoms, introduced press censorship and purposes, fascist dictatorship.

- Working classes indifferent, military and nationalists supported Vargas. In 1932 Vargas purged the military of politically unreliable senior officers. By 1933 36 out of 40 generals supported the new government. Vargas also increased military salaris and doubled the size of the armed forces.

- The Integralists attacked the presidential palace after being banned in May 1938, The troops supported Vargas, against the ‘fascist’ Integralists.

- Vargas did not create an political movement like the fascists in Italy or Germany, and there was no paramilitary. 1939 created ministry of propaganda but more of an authoritarian ruler than a dictator.

- Media toed the line, like FDR Vargas used fireside chats and controlled newspapers.- Referred to himself as ‘father of the people’, trade unions state controlled, 1943

Labour Code introduced social security.

Economic Policies

- 1931 Vargas set up national coffee council - ordered cutbacks in planting of coffee trees, and coffee burning where state would buy excess coffee and burn it. By 1939 had destroyed 60 mil bags of coffee.

- Tried to encourage diversification in agriculture - for example in livestock raising and coffee production. The Depression signalled the end of coffee domination.

- Focus on Import Substitituion Industrialisation (ISI) - move towards self sufficiency. For example the company SIAM founded by an Italian immigrant in Argentina made electrical products such as fridges and washing machines.

- Depression led to less imports, and a more favourable trade balance. Industrial sector as a percentage of GDP more than doubled from 21% in 1920 to 43% in 1940.

- Textile production increased.- Vargas introduced protectionist policies, and developed natural resources such as

copper, zinc and diamonds.- Banned some foreign interests, for example 1937 banned them exploiting natural

resources, and 1939 only banks with Brazilian shareholders could operate in Brazil.- 1942 established River Valley Company to exploit iron ore at Itabira. Production of

iron ore five times bigger by 1951.- 1940 Five Year Plan focussed on expanding infrastructure and hydroelectric power.

1939 created National Council for Hydraulic and Electric Energy.- 1938 National Petrol Company created to search for oil, 1953 created Petrobras. No

foreigners allowed to be involved.- 1941 created National Steel Company, created new plant at Volta Redonda. Partially

funded by USA and UK - by 1955 Volta created 646,000 tons/year.- In 1930s industrial growth averaged 6%, 1945 $708 mil foreign exchange surplus.- By 1950 Brazil most industrialised country in Latin America. As a pragmatic,

modernised state (R M Levine), more authoritarian than fascist (O Vianna).- However, still dependent on foreign imported heavy machinery, infrastructure

relatively undeveloped, use of slash and burn in agriculture and large estates (latitfundia) still dominated, most farms did not even have a plough let alone tractor. Most Brazilians remained poor.

- Despite Vargas’s call to ‘March to the West’ to develop new land in the state of Goias by giving 50 acre plots to settlers few moved.

- During late 1930s economy shifted to Nazi Germany, who doubled imports.

Social Developments

- Alot of urban migration - many new arrivals found themselves in shanties or favelas. Vargas called himself ‘the father of the poor’.

- Vargas sought the support of the working classes, a 1931 decree empowering creation of state controlled unions. By 1944 800 with 500,000 members. 1940 one day tax imposed on all workers regardless of whether they were union members. Members got rights such as pensions, minimum wages. However union money often ended up in slush funds, funding big government.

- Vargas strong believer in education - improved teacher training and made primary school attendance compulsory. Univ pop increased by 60% 1920-1940. However few secondary schools, primary attendance remained low. Illiteracy improved dropping from 69.9% of 15 year olds in 1920 to 56% in 1940.

- 1938 creation of Admin Dept of Civil Service based on merit not patronage. Helped middle classes. However patronage continued.

Key Questions

Analyse the political and economic impact of the Great Depression on One Latin American Country?To what extent did Vargas institute an authoritarian regime in Brazil during the Great Depression?