The Great Depression and New Deal Ch 24
EQ s What were the causes and consequences of the Great Depression? How did Hoover and Congress respond to the Great Depression? What was the First New Deal, and how did it differ from the Second New Deal? How did the New Deal expand the scope of the federal government in the South and West? How did the Great Depression affect American cultural life during the 1930s? What were the limits of the New Deal s reforms, and what legacy did they leave?
Herbert Hoover Elected President in 1928 Self-made millionaire Served in Wilson, Harding, and Coolidge administrations Efficiency movement and associative state No electoral experience or military rank (only other?) Born to Quaker parents/ia Humanitarian Rugged Individualism Associative State Hoover s fortunes will be tied directly to the US economy
October 29, 1929 Black Tuesday
Output Plummets and Prices Fall
Unemployment and the Great Depression
Unemployment (cont.) More than 13 million Americans lost their jobs. Of those, 62% found themselves out of work for longer than a year; 44% longer than two years; 24% longer than three years; and 11% longer than four years. Unemployment peaked at a staggering 24.1% in 1933, and never dropped below 14.3% until World War II. (By contrast, the unemployment rate has never surpassed 9.7% since.)
Bank Failures
Just a normal recession In the late 1920s, the economy started to enter a mild recession House and automobile sales decreased Governments had completed most of their infrastructure projects Total spending in the economy was falling Business firms began to cut production The stock market crash in October signaled to shareholders that profits would fall Wealth decreased and the ability of consumers to meet credit obligations was diminished
Liquidationist/Austrian Keynesian Monetarist Easy monetary policy by the FED created malinvestment. Economy will adjust in long run. "It will purge the rottenness out of the system High costs of How living and do high you living will fix come down. People will work harder, economy? live a moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." Ideological Liquidate implications? labor, liquidate stocks, liquidate the farmers, liquidate real estate. The Great Depression was caused primarily by a fall in total demand (aggregate). In the long run, we are all dead. Animal Spirits The decline in demand was so severe that adequate demand could How be restored do you only by fix large increases in government spending (deficit). economy? Ideological implications? The Great Depression may have originated in a fall in total demand, but its length and severity resulted primarily from the unwillingness of the Federal Reserve System to prevent bank failure and maintain a large enough supply of money FED should have served more effectively as lender of last resort providing liquidity (cash) to banks to stem bank failures economy? stop contraction of money supply. How do you fix Ideological implications?
What do people do when they EXPECT deflation?
Uneven Distribution of Wealth Bank Failures Weak farm economy Excessive Stock Market Speculation 1 2 5 11 9 8 Easy Monetary policy in 1920 s 6 High Debt High Tariffs (Hawley- Smoot) 3 4 12 7 10 Excessive use of credit/installment purchasing Overproduction of goods Buying on Margin
Fischer and Over indebtedness and Deflation 1. Debt liquidation and distress selling 2. Contraction of the money supply as bank loans are paid off 3. A fall in the level of asset prices 4. A still greater fall in the net worths of business, precipitating bankruptcies 5. A fall in profits 6. A reduction in output, in trade and in employment. 7. Pessimism and loss of confidence 8. Hoarding of money 9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.
Hoover Response - the Government should not support the people. What do you think? International Hawley-Smoot Tariff (1930) Debt Moratorium Domestic Federal Farm Board Reconstruction Finance Corp (RFC) Emergency loans/prop up key business
Bonus Army
Hoovervilles
Election of 1932
Solve the Great Depression Using fiscal policy (spending, taxing, and borrowing), how do you help the economy get through the following economic problems? Problem No confidence in banking system High unemployment Deflation Poor business and consumer confidence Unequal distribution of wealth Farming overproduction Solution
"The money changers have fled from their high seats in the temple of our civilization
Franklin Delano Roosevelt - March 4, 1933 April 12, 1945 32 nd POTUS New Deal Distant cousin to TR Aristocrat Democrat NY Asst Sec of Navy Contracted polio in 1921 Unflinching optimism Charismatic Kept quiet between election and inauguration
With Eleanor
FDR at Warm Springs
FDR Polio
A president who cannot walk would now try and help heal a crippled nation
The Three R s Relief Recovery Reform
The Brain Trust
First 100 Days
Bank Holiday Fireside Chat
Financial Recovery
Repeal of Prohibition
Gold Standard
Level 1 Level 2 Level 3 Describe Analyze Evaluate List Compare Imagine Identify Group Predict
Industrial Recovery NRA*** At this moment in time from the early days of the New Deal, it is difficult to recapture, even in imagination, the heady enthusiasm among a goodly number of intellectuals for a government planned economy. So far as can now be told, they believed that a bright new day was dawning, that national planning would result in an organically integrated economy in which everyone would joyfully work for the common good, and that American society would be freed at last from those antagonisms arising, as General Hugh Johnson put it, from "the murderous doctrine of savage and wolfish individualism, looking to dog-eat-dog and devil take the hindmost."
priming the pump
FERA Relief for Unemployed
CCC
CCC Facts 3 Million young men Mr. Roosevelt s Tree Army 3B trees Six month enlistments Quota/Segregated Camps $1 per day Opposition
TVA
AAA***
The Dustbowl
The Great Plow Up
Black Sunday
Grasshoppers
Dust Pnemonia
FDR Visit
Okies
http://www.youtube.com/watch?v=ky- HYHrm_oE
Classify the following New Deal policies as Relief, Recovery, and/or Reform AND EXPLAIN WHY NIRA AAA FDIC FERA Home Owners Loan Corp (HOLC) Farm Credit Admin Bank Holiday Removal of Gold Standard SEC PWA FHA CCC CWA Repeal of 18 th Amendment
Second New Deal (1935)
I welcome their hatred
WPA
Good economics? SSA
Wagner Act/NLRB
Taxes
How did Roosevelt read these results?
Opposition
Conservative Opposition
Demagogues Huey Long Share the Weath
Father Coughlin National Union for Social Justice
Schechter Butler
Court Packing - 1937 AAA and NRA Unconstitutional
CIO
UAW Strike
Fair Labor Standards Act 1. Min Wage 2. Max work week 40 hrs plus 1.5x for OT 3. Child labor restrictions
Last Phase of New Deal Deficit spending = priming the pump
Eleanor Roosevelt
Marian Anderson
Mary Mcleod Bethune Federal Council on Negro Affairs Mary McLeod Bethune once noted, the Roosevelt era represented the first time in their history that African Americans felt that they could communicate their grievances to their government with the expectancy of sympathetic understanding and interpretation.
A. Phillip Randolph
Wheeler-Howard (1934) Indian Reorganization Act/Indian New Deal