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Chapters 23 and 24

The Great Depression

The Great Crash of 1929 / Short-Term Causes of the Great Depression


Short-term causes of the Great Crash / Great Depression:
1. bull market (values of stocks are greatly increasing, e.g. stock selling at 16x its earnings)
2. people buying stocks “on margin” (very low down payments, e.g. buying stock for 5% of what it’s worth)
3. overspeculation (stock marketers gambling)
29 October 1929: “Black Tuesday” -> Dow goes from 381 to 41
(however it actually takes about a year to really fall into depression)

Long-Term Causes of the Great Depression


1. weak industries (agriculture, railroads weak; many options mean industry and productivity generally decrease)
2. overproduction of goods (supply up, demand down, prices lower, cash flow lower)
overproduction = underconsumption!
3. uneven distribution of wealth (half of population lived below poverty line)
4. unstable banking system
5. weak international economy
protectionism (economic isolationism) -> higher tariffs
Hawley-Smoot Tariff of 1930: highest tariff in US history (60%)

The Reality of the Great Depression


By 1932, 22% of banks have failed (5,700). Over 30,000 businesses have failed. Unemployment has reached 25% (13
million), and as high as 33% if farmers are included. Cities have it worst: Chicago’s unemployment is 50%. Wages drop
majorly, meaning much less money spent. A quarter of all farmers lose farms to foreclosure/bankruptcy. People really lose
self-worth; families break apart. Homeless build makeshift shantytowns called “Hoovervilles.” Depression is largest and
most devastating in US history. GNP gets cut in half.

Hoover’s Great Depression Action


philosophy: outside forces in Europe caused Depression, so we have to fix international economy in order to fix the
domestic economy (significance: takes too long to initiate domestic measures because he believes problem lies with
international economy)
1. farming: Agricultural Marketing Act creates producers’ cooperatives (co-ops); Federal Farm Board (est. 1930) is given
half billion dollars to buy up surpluses of American goods to sell abroad, which actually encourages overproduction and so
prices stay low
2. Hawley-Smoot Tariff (see earlier): “economic declaration of war” - actually helps destroy international economics
3. attempts at domestic recovery:
-volunteerism encouraged: avoid firing people, don’t strike, continue to give to charities
-public works programs: Congress appropriates $750 mil (1930) for public works to stimulate employment, best example
Hoover Dam
-Reconstruction Finance Corporation (RFC) - 1932: Congress gives half to 2 billion dollars to give to railroads, banks, and
other financial institutions (everyday Americans MAD)
-Norris-LaGuardia Anti-Injunction Act (1932) outlaws injunctions and “yellow dog contracts” (anti-union contracts)
-“Rugged Individualism” preached - refusal to relieve individuals based on idea that it would destroy American work ethic
4. one-year freeze on international debts, hoping to help Europe recover, completely fails
5. Bonus Army / Bonus March: unemployed veterans of war march on Washington; significance: remaining 5,000 get in
dispute with troops sent to get rid of them -> 2 veterans killed -> Hoover seen as heartless
summary of Hoover: he prevented a worse depression and paved the way for FDR, which is good.

Foreign Policy under Hoover


1. Asia
Sept 1931: Japan attacks Manchuria
LoN condemns it, Japan leaves LoN
US: Hoover-Stimson Doctrine: declaration that US will not recognize any territory acquired by force
Japan bombs Shanghai -> Japanese aggression leading into WWII
2. Latin America
Hoover wants to abandon interventionist ideas of Teddy R
makes goodwill trip in 1928
America doesn’t care about investing abroad anymore (slightly more pressing domestic economic matters)
Latin American relations improve
The New Deal

FDR Beginnings
Intro to FDR and Eleanor
FDR comes from wealthy NY family, was asst. naval secretary during WWI, was Cox’s VP candidate, gets polio/paralysis
in 1921, confined to wheelchair, governor of NY during 20s, public works and aid programs on local level, upper class
hate him which is great for winning elections, speaks on “plight of the forgotten man,” most politically slick man ever born
Eleanor pushes him to continually maintain his political career; first very active first lady; “conscience of the New Deal”;
publishes column; Hillary of the 1930s; actually part of FDR’s cabinet
Transition of Office
Election of 1932: FDR crushes Hoover; almost all blacks shift to Dem Party; FDR: “I pledge you, I pledge myself, to a new
deal.”
Hoover’s Lame Duck Period: Hoover tries, unsuccessfully, to pass a bunch of laws to jeopardize FDR’s plans; leads to
20th Amendment, which makes all presidential/VP terms start in January (idea: shorten lame duck period)
FDR inaugural address: “The only thing we have to fear is fear itself.”
FDR Cabinet: “brain trust” of experts; SecState Cordell Hull, SecLabor Frances Perkins, SecInterior Harold Icks, Sec
Commerce Harry Hopkins, Eleanor Roosevelt

FDR’s First Hundred Days (Mar 9 - June 16) / First New Deal
Overview
-weekly fireside chats
-plan of relief, recovery, and reform
-ideas: unemployment insurance, minimum wage, conservation, old age insurance
-Congress basically gives FDR a “blank check”
-1933-1935: First New Deal [foundation laid in first 100 days]: SEC, TVA, PWA, CCC
Banking Crisis
-by 1933, 11,000 banks have failed. 38 states have closed their state banks.
-FDR’s first week in office: ten day national banking holiday declared, after which only olvent banks could reopen
-Mar 6: FDR takes America off gold standard; all gold to be cashed in for paper currency; controlled inflation
-Mar 9: Emergency Banking Relief Act: gov’t can open sound banks and merge/liquidate unsound ones; funded by RFC
-Mar 12: first “fireside chat”; brings in 35 mil Americans; assures Americans that new banks are safe; trying to restore faith
in financial/banking system
-June: HOLC (Home Owners’ Loan Corporation) founded; allows tons of homeowners to refinance mortgages and avoid
foreclosure which indirectly helps banks who gave out these loans; middle class shifting toward Dem Party
-Summer: Glass-Steagall Banking Reform Act (“Banking Act”) - creates Federal Deposit Insurance Corporation (FDIC):
any deposit up to $5K is federally insured; divide between commercial (savings/checking) banking and investment (Wall
St) banking -> banks and big business become regulated
-May: Federal Securities Act: requires that stock buyers given credible info on what stocks are actually worth
- June 6 1934: SEC (Securities and Exchange Corporation) established; designed to protect public against fraud and
deception in stock market; regulates Wall St
-1935: Public Utility Holding Company Act: prevents businesses from buying failing businesses at minimum capital (“on
margin” dying out)
Relief and Unemployment Programs
1. Civilian Conservation Corps (CCC): est. Mar 31 1933; employs close to 3 mil young men at many different jobs
involving conservation, building, etc.; most of monthly payments go to family of CCC member; 3 mil new consumers!
2. Federal Emergency Relief Administration (FERA): est. May 1933: Harry Hopkins heads it; gives $3 bil to states for
“dole” payments (dole = wages for work projects for unemployed); “on the dole” basically becomes what Hoover feared,
where people take handouts and don’t work for a living; inspires the better CWA
3. Civil Works Administration (CWA): est Nov 1933: basically the FERA but makes you dig ditches or clean sidewalks to
“earn” your money; basically federal chores
4. Public Works Administration (PWA): headed by Harold Icks; over $4 bil to provide jobs on public projects (building
schools, dams, etc.) -> INFRASTRUCTURE, not just “chores”; problem: money not spent quick enough
5. Works Progress Administration (WPA): est. May 1935; “second half of New Deal”; focus on transportation; more
successful than PWA; employed 40% of nation’s workers; part of WPA was the Federal Arts Project (FAP), which found
part-time occupations for students of the arts (basically FDR trying to get artsy votes)
6. National Youth Administration (NYA): provides part-time jobs for students; originally part of WPA; part of “2nd New
Deal”
Agricultural Efforts
1. Agricultural Adjustment Act/Administration (AAA), 1933: eliminate surpluses by paying farmers to farm less and to kill
off excess livestock to be fed to unemployed; works great until ruled unconstitutional by Butler v US after which FDR
makes 48 mini-AAAs.
2. Federal Farm Loan Act: federal loans to farmers to delay foreclosure
3. Dust Bowl in fall 1933 because of drought leads to 2 major measures:
-Frasier-Lemke Farm Bankruptcy Act (spring 1934): delays foreclosure
-Resettlement Administration (May 1935): helps relocate farmers to new communities built by CCC
Industry and Labor
1. National Industrial Recovery Administration (NIRA), June 16, 1933 [100th Day]: designed to prevent extreme
competition, labor management disputes, and overproduction; establishes code (“Codes of Fair Competition”): sets
minimum wages, maximum work hour, minimum prices, and quotas on production, and Section 7A protects right to
organize and collectively bargain
2. National Recovery Administration (NRA): supplementary to NIRA: enforces NIRA policies and promotes enthusiasm for
NIRA; “blue eagles” in storefronts that abide by codes of fair competition; business does improve
3. Wagner Act, aka National Labor Relations Act of 1935: the legal, constitutional version of Section 7A
4. Congress of Industrial Organizations (CIO): NOT A FEDERAL THING; this is a union that happens to be founded at this
time; founded by John L. Lewis; difference from AFL: CIO was union for unskilled workers, AFL is for skilled workers
Tennessee Valley Authority
May 1933, very regional, Muscle Shoals area, public corporation, hugely successful
goal: reform monopoly that utility companies had
hydroelectric power plants, dams -> money, energy, and JOBS!
provides full employment to Western TN, reduces price of electricity, stopped flooding, improved navigation
BUT: criticized for being incredibly socialistic; “planned economy”

“Second New Deal”


1. Fair Labor Standards Act of 1938, aka Wages and Hours Bill: last piece of New Deal legislation; deals with businesses
in interstate commerce only; minimum wage and 40 hour workweek; child labor under 16 is illegal; lower-class and
unskilled workers are now huge allies of Democratic Party
2. Housing Reform: Federal Housing Administration (1934) stimulates housing industry by giving small loans to
homeowners; United States Housing Authority (USHA, 1937) provides low-cost construction in poor communities; lots of
big business dissent all around
3. Social Security Act of 1935: inspired by industrialized European countries; by 1939, over 40 million Americans become
eligible; most far-reaching of New Deal programs; 3 main things: provides unemployment insurance, provides old age
pensions for retired workers, and financed by tax on all workers; Republicans and conservatives are critics of Social
Security and “cult of leisure”
4. Revenue Act of 1935: raised income tax on higher incomes, gifts, and inheritance; very Democrat idea
5. Indian Reorganization Act of 1934: Bureau of Indian Affairs (BIA) Commissioner John Collier convinces Congress to
repeal Dawes Act (which gave land to individual Indian families) and instead enact this act, which restores tribal
ownership of lands and does all other sorts of stuff that Indians like (recognizes tribal self-governments, gives loans,
allows dances, etc.)

Critics of the New Deal


1. American Liberty League: wealthy Republicans and conservative Democrats; want to fight “socialistic” New Deal
policies
2. Fr. Charles Coughlin: originally supports New Deal but turns against it when he believes it only benefits industry; has
huge radio audience (40 mil listeners), but cancelled when he gets old and anti-Semitic
3. Huey Long (senator and governor of Louisiana): aka “the Kingfish”; program: “Share Our Wealth”; wants to give every
family $5K at the expense of the wealthy; great as state politician because he helps out locally but frowned upon
nationally because it’s freakin’ COMMIE. Assassinated 1935.
4. Dr. Francis Townsend: he’s an academic, not a politician, so his plan to give $200 a month to senior citizens so long as
they spend it all is unenforceable and a little silly; importance: focus on elderly

Election of 1936
1. “New Democratic Coalition” - Democratic candidate is FDR; consists of African-Americans, unions, lower class
unskilled workers, intellectuals/academics, South, city machines/immigrants
2. Republicans (Alfred Landon of KS): wealthy, North, etc.
3. FDR wins by a ridiculous margin (Landon gets 8 electoral votes, literally); New Deal is doing well

FDR and Justice


2 major legal cases:
1. Schechter v United States (1935): NRA is unconstitutional; legislative power rests with Congress alone and they cannot
delegate that power [codes of fair competition are illegal]; Congress cannot control intrastate commerce
2. Butler v. United States (1935): ruled that tax funding AAA is unconstitutional (tax on farm products that goes to farmers:
unfair! you can’t double-dip profits!)
importance: these cases force FDR to fix his recovery plan
1937: Judiciary Reorganization Bill (“court-packing plan”) - attempt by FDR to get rid of old conservative justices; creates
“retirement requirement” at age 70 -> overstepping system of checks and balances, you bloody dictator! the bill is NOT
passed, but because of his multiple terms and the justices’ old ages, FDR ends up appointing 9 justices in his terms.

End of the New Deal


1937-8 recession wipes out most of gains made since 1933; this is when FDR starts employing Keynesian economics.
Keynesian economics: deficit spending (in order to get economy ready for increase, better to spend even with huge
deficit)
this recession leads to Democrats losing their supermajority in the midterm elections of 1938, so Republicans can block
any further New Deal legislation. Besides, with WWII looming, people stop focusing so much on what’s going on at home.

Criticisms of the New Deal


1. fails to fully cure Great Depression (unemployment never gets lower than 15%)
2. bureaucracy gets huge what with all these new administrations, etc.; government becomes biggest business in America
3. states’ power decreases greatly
4. national debt doubles from $20 billion to $40 billion
5. critics say US has become “handout” country, claim destruction of American work ethic
6. huge class conflict arises between laborers and big businessmen
7. accusations of socialism
8. FDR nicknamed “dictator” with regard to Supreme Court

People end up arguing that WWII, not the New Deal, actually cured the Great Depression.

Support/Praise for the New Deal


1. saves American capitalism (we don’t experience the socialist/fascist revolutions going on in Europe)
2. FDR restores faith in presidency with his symbolically positive presence
3. relief, if not recovery, definitely achieved
4. a lot of New Deal reforms still exist today
5. proves things can get done in America if we take a “middle-of-the-road” approach
6. slightly fairer distribution of wealth

One essay will be on the Great Depression, the other on the New Deal. Caution: if doing Great Depression, since it’s so
brief, you gotta know everything; if doing New Deal, since there’s so much info, you gotta make sure you just don’t list a
bunch of crap.

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