1920's Good economic times Tues. Oct. 29th, 1929 –

› NYC Stock market crashed › depression that would last until 1942

Invest in cos. by purchasing stocks› expect a profit

Booming 1920's economy, › $ were plentiful › banks were quick to make loans to investors

BUYING ON MARGIN› Investors only paid 10% of stock's actual value

at time of purchase› balance paid at a later date

STOCK SPECULATIONBuy and sell stocks quickly Make a quick buckstock value increased

› (Ex: G.E stock $130 $396/share)Quick turnover didn't aid cos.

› needed long term investments to pay billsUnscrupulous traders

› buy and sell shares to inflate stock valueFalse sense of security/confidence in the American market

Oct. 1929 investors’ confidence droppedmarket collapsePanic Selling

Everyone sell at once bottom fell out of

market many bankruptcies as

banks called in loansEven though a tiny minority traded stocks

they possessed vast wealth

crash had a ripple effect on the economy

Poor AmericansMass consumption already low Poor could afford to buy littleUnemployment roseNo gov't assistance at firstEconomic Cycle

productivity cut back

further unemp. purchasing power

declined again reduced

productivity yet again

Unemployment

Purchasing Power Productivity

1920's› U.S. Eco. was based on Economic Cycle

Production of goods› demand had to be there› resulted in high employment and a healthy

economy 1924-27 Overproduction

› productive capacity doubled › technological innovation› no new jobs were added› more consumer goods but not enough people to

buy them

Uneven Distribution of Wealth0.1% at top owned as much as bottom 42% of American families 42% below poverty lineMiddle Class

› 58% above the poverty line› not wealthy› had jobs from industrialization & consumerization› lost jobs when productivity declined

Low savings› cut back on purchases

Decline in consumption

President HooverGovt shouldn’t play active roleVOLUNTARY NON - COERCIVE COOPERATION

› bankers/business › gave tax breaks in return for

private sector economic investment

Organized some private relief agencies for the unemployedHOOVER MORATORIUM

› put a temporary stop to European WWI debt & reparations payments

› Euro. countries were to purchase American goods instead to stimulate American economy

Early 1931These measures appeared successful, but then......TARIFF WARS

› Smoot Hawley high tariff to protect U.S. industry hoped to stimulate purchasing of U.S. goods fatal error...

Congress didn’t understand we’d become

› GLOBAL ECONOMYIn retaliation

› other countries passed high tariffs › no foreign markets purchased

American goods› U.S. productivity decreased again

1931 ContinuedSoviets flooded world market with cheap wheat

› 1/2 U.S. price› attempt to get money to pay Austrian

banks price was too low so couldn't BANKERS’ PANIC

Austrian banks borrowed from German banks

› appealed to the BANK OF INT'L SETTLEMENT

› Austrian and German banks went bankrupt

German banks had borrowed from Americans,

› U.S. banks began to go bankrupt › wiped out thousands of Americans’ life

savings

Increasingly unpopular Persuaded Congress to establish

› RECONSTRUCTION FINANCE CORPORATION power to make emergency loans to banks too little too late…

Wouldn't allow programs of direct gov'tal aid to individuals › didn't want to erode sense of "RUGGED

INDIVIDUALISM"

Isolated Protest Movements Dairy farmers

› frustrated w/low price of milk › refuse to sell (dump it)

WW1 veterans › pensions discontinued by congress› march on Washington = BONUS MARCH (by

BONUS ARMY)› reached Washington

set up shantytowns = HOOVERVILLES food scraps = HOOVER-MEALS hitchhiking journeys = HOOVER RIDES

After one year › forcibly dispersed by the Army

1932 ELECTION1 out of 4 unemployed…Nat'l income

› 50% of 1929Hoover nominated

› no hopeFRANKLIN DELANO ROOSEVELT

› Dem - N.Y. Gov.› Won by landslide

FDR’s program to fight the Depression

Revolution in American society› changed way gov't functions

First phase › eco. reform › FDR believed gov't involvement

was crucial Step 1- BANKING HOLIDAY

› banks shut down › subject to gov't inspection› allowed to open when "healthy“› people's confidence returned › they redeposited, allowing

banks to invest in the economy

Step 2 - stock market reform Security Exchange Commission

› police the NYSE › first chmn. was Joseph P. Kennedy› practice of buying on margin

regulated Step 3 - put more $ in circulation

› FDR went off the GOLD STANDARD › gov't could print more $ than Fort

Knox gold reserves would allow› wages and prices increased› Inflation

dollar value lower› gave gov't spending power

(Keynesian economics)

National Industrial Recovery Act(NIRA) National Recovery Admin (NRA) › end animosity btwn labor and

business › redirected to industrial growth

Fair labor codes› business challenged NRAwages› no child labor› shortened work hours› claimed communist› LIBERTY LEAGUE

Supreme Ct. overturned the NIRA & NRA

fed. gov't was exceeding its authority

TENNESSEE VALLEY AUTHORITY (TVA)Promote hydroelectric powerControl flooding Lower rates Private industry

› manufacturing fertilizer› fed. gov't. took ownership

nationalization v. privatization

The Annual MoveThe Annual Moveby Otis Dozier, 1936by Otis Dozier, 1936

The Annual MoveThe Annual Moveby Otis Dozier, 1936by Otis Dozier, 1936

Construction of the Construction of the DamDam

by William Gropperby William Gropper

Construction of the Construction of the DamDam

by William Gropperby William Gropper

1933 - AGRUCULTURAL ADJUSTMENT ACT (AAA)Aid Farmers restore farmers' purchasing power restore family farm

› farmers cut back on crop production › pay them equivalent SUBSIDIES

Bad side: › food production down when millions starving› white landowners paid not to farm

got rid of Black tenant formers

1935 - AAA declared unconstitutional Too much control over individual statesRevised and introduced as new legislationFood Stamp Act of 1939

› gave away surplus food to poor› guaranteed (small) farmers a market

UNEMPLOYMENTStill a major problemFDR

› wary of gov't handouts› wanted people to earn their keep › gov't agencies were created –

temporarilyCIVILIAN CONSERVATION CORPS (CCC)

› 1933 › establish work for young men (18-

25) soil conservation flood control road construction Blacks not permitted to enroll

Other AgenciesNATIONAL YOUTH ADMIN. (NYA)

› jobs for young in urban areasFED. EMERGENCY RELIEF ACT (FERA)

› aimed at older workersWorked well, but…

› unemp. was still at 6 million in 1941› solution for this would be the ind. boom of

WW2

SOCIAL REFORM after 1935

› New Deal turned to Social Welfare› more legislation

National Labour Relations Act (Wagner Act)› legitimized unions› collective bargaining › collective action (strikes, etc...)› outlawed blacklists & anti-union practices

Social Security Act (1935)Feared by opponents

› "creeping socialism“› WELFARE STATE› unemployment insurance› old age pensions

Took some $ out of circulation › payroll deductions› purchasing power already low› only covered unemployed

1936 - "Soak The Rich" tax

ELECTION OF 1936FDR won easily

› v Repub. Alf Landon - Kansas governor

Victory gave FDR mandate to continue New Deal policies First objective

› reorganize Supreme Court› they disallowed some New Deal

legislation # of judges changed from 9 15

› "pack the court”Judges retired

› FDR appointed new ones› support New Deal

Late 1930's FDR concerned w/int'l issuesProposed no new major domestic reformsELECTION OF 1940

› FDR broke with tradition › ran a 3rd time

Both parties approved of (most) New Deal legislationWanted an isolationist foreign policyFDR won in 1940 (and again in 1944)

Third revolution in U.S. culture and politics› more gov't involvement › in context of traditional U.S.

democracy (not socialist…) Helped stimulate economy

› only WWII would solve any lingering problems

Expansion of U.S. gov't in :1) eco. = constant gov't intervention/deficit spending 2) social reform = welfare state - gov't was expected to play a role in any economic crisis

Fundamentally reformed (not transformed) American society…