Chapter Twenty-Four

The Great Depression and the New

Deal
1929-1939
Causes and Effects of the Depression
 Wall Street Crash
• In October 1929, the stock market crashed.
There wasn’t enough money to go around;
people bought things on credit and paid in
installment plans, and there eventually wasn’t
enough
• On Black Thursday, millions of people sold stocks,
and the prices went to the ground
• The next day, bankers bought millions of dollars
worth of stocks
• After that, everyone kept selling, and no one
would buy
 Causes of the Crash
• An uneven distribution of income
• Stock market speculation
– Get rich by ‘playing the market’
– Buying on the margin
• Borrow most of the cost to buy a share
– Too much credit
– Overproduction of goods
– Weak farming economy
 Effects
• The National Gross Product dropped 50 billion
dollars in four years
• The nation’s income dropped 50%
• 20% of banks closed
• 13 million (25%) of people were unemployed
Hoover’s Politics
 Responding to a Worldwide
Depression
• Hawley-Smoot Tariff (1930)
– Taxes on foreign imports ranged from 31 to 49
percent
– Europe raised their tariffs too
• Debt Moratorium
– The Dawes plan failed
 Domestic Programs
• Federal Farm Board
– Assisted farmers in keeping prices steady
• Reconstruction Finance Corporation
– Helped railroads, banks, and insurance companies
recover
 Despair and Protest
• Unrest on the Farms
– Farm Holiday Association
• Farmers stopped the price of grain from dropping by
not giving any to the public.
• This soon collapsed.
• Bonus March
– Veterans demanded their bonuses, which had
been promised to them at 1945
 The Election of 1932
• Republicans
– Hoover
• Democrats
– Franklin D. Roosevelt
• Roosevelt won election
Roosevelt’s New Deal
 FDR: The Man
• Paralyzed from polio
• His wife, Eleanor Roosevelt, was the ‘most
active first lady in history’
 The New Deal Philosophy
• The Three R’s
– Relief for people out of work
– Recovery for businesses and economy
– Reform for economic institutions
• Brain Trust and Other Advisers
– A group of university professors which helped
Roosevelt
 The First Hundred Days
• Bank Holiday
– Banks were closed on March 6th to allow
reorganization
• Repeal of Prohibition
– Beer-Wine Revenue Act passed which legalized
and taxed alcohol
• Fireside Chats
– Roosevelt spoke over the radio to the American
People
 Financial Recovery Programs
• Emergency Banking Relief Act
– Examine finances of banks
• Federal Deposit Insurance Corporation
– Guaranteed bank deposits up to $5,000
• Home Owners Loan Corporation
– Prevented foreclosures
• Farm Credit Administration
– Low interest loans to farmers
 Relief Programs for the Unemployed
• Federal Emergency Relief Administration
– Gave out grants for the creation of soup kitchens
• Public Works Administration
– Gave money to states for Internal Improvements
• Civilian Conservation Corps
– Employed citizens on projects on federal land
• Tennessee Valley Authority
– Hired thousands to build dams and other nature
related things
 Other Recovery
• Industrial Recovery
– National Recovery Administration
• Promised fair wages and hours
• Declared unconstitutional in Schechter vs. US
• Farm Production Control Program
– Reduced crop production to increase prices
 Other Programs of the First New Deal
• Civil Works Administration
– Hired people for construction projects
• Securities and Exchange Commission
– Controlled the stock market and avoided playing
the market
• Federal Housing Administration
– Gave construction and housing industries loans
• An ounce of gold became worth $35
The Second New Deal
 Relief Programs
• Works Progress Administration
– Spent billions to provide people with jobs
• Resettlement Administration
– Created federal camps for the homeless
 Reforms
• National Labor Relations (Wagner) Act (1935)
– Guaranteed the rights to join unions
• Rural Electrification Administration
– Supplied electrical power to most rural areas
• Federal Taxes
– Income tax on the wealthy increased
 The Social Security Act
• Monthly payments to people over the age of
65
• Dependant children and mothers,
unemployed, or disabled also received
benefits
 The Election of 1936
• Republican
– Alfred Landon
– Progressive
• Democrats
– Roosevelt
• Roosevelt won in a landslide
Opponents of the New Deal
 Liberal Critics
• Socialists and liberals felt that the New Deal
incorporated too much relief for the big
businesses and monopolies, and too little
relief for the poor people who needed it most
 Conservative Critics
• Republicans who criticized the New Deal
called laws and groups such as the WPA
communist
 Demagogues
• Father Charles E. Coughlin
– Priest who attacked the New Deal over the radio
– Anti-Semitic and fascist
• Dr. Frances E. Townsend
– Had the idea that 2% of all federal tax should be given
back to all of the elderly
– The basis of the Social Security system
• Huey Long
– Made a plan that promised a $5,000 income for ALL
American families
– Assassinated in 1935
 The Supreme Court
• Court-Reorganization Plan
– Called the Court Packing bill
– The president was authorized to appoint a justice to
the supreme court for every justice that was older
than 70.5 years
• Reaction
– People got pissed :P
– Bill was shot down in Congress
• Aftermath
– Supreme Court upheld the Wagner Act and Social
Security Acts
Rise of the Unions
 Formation of the C.I.O
• Committee of Industrial Labor
– John L. Lewis, leader, president of the United Mine
Workers Union (There’s that miner thing again)
– Was suspended and renamed the Congress of
Industrial Organizations
 Strikes
• Automobiles
– A strike at General Motors in Michigan (1937)
ended with the company giving in to demands,
and recognizing the United Auto Workers Union
• Steel
– The larger corporations recognized the CIO unions
– Smaller corporations refused, and four unionists
died as the police opened fire on a strike
 Fair Labor Standards Act
• Established…
– Minimum wage
– Maximum hours
– Outlawed child labor
– US vs. Darby Lumber and Co
• Supreme Court ruled that the Act was legal
Last Phase of the New Deal
 Recession, 1937-1938
• Banks stabilized
• Businesses moved upwards
• Unemployment declined
• Then, the US slid back into recession
• Causes
– Government policy
– Social Security reduced spending
• Keynesian Economics
– British Economist John Keynes
– ‘Deficit spending was acceptable’
 Weakened New Deal
• Loyalty to FDR was shaken by the Court
Packing Incident
 Life During the Depression
• Women
– Woman’s work force increased
– Still received lower pay
• Dust Bowl Farmers
– Drought in the Great Plains destroyed crops
• African Americans
– Racial discrimination continued
• Fair Employment Practices Committee
– A. Philip Randolph threatened to march on
Washington to demand equal opportunities
 Native Americans
• John Collier established Bureau of Indian
Affairs
• Indian Reorganization (Wheeler-Howard) Act
– Repealed the Dawes Act
– Gave lands back to Tribes