April 22st, 2009 Happy Earth Day! Do Now: hw & notes out

HW: New Deal Packet Quiz

The Great Depression

1929-1941What were the causes of the Great Depression

and how did the depression affect the lives of

Americans?

I. Causes to the Depression & CrashA. Weak Economy: What is a depression ?

• Severe economic decline marked by business failures, high unemployment & low production & prices.

Stock Market measures health of economy / business by buying and selling stock (supply and demand.)

• 1) Overproduction <---> Under consumption• 2) Over expansion of credit

• Buying stocks “on the margin”• 3) Unregulated banks

Stock Market measures health of economy / business bybuying and selling stock (supply and demand.)Stock- ownership in company.

New York Stock Exchange

B. The Crash

10/29/29- Prices drop dramatically 16.5 million shares traded @

a loss Consequences: A) 30 billion wiped out

(income drops by 40%) B) Investors who bought on

the margin went bankrupt C) banks failed because

loans not repaid D) Factories lay off workers E) People lost confidence in

the economy

Expansion*Increase production

*Wages high

Case in Point: Model T Ford

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Henry Ford’s company mass produces Model T. Assembly line production makes the process quick and affordable. Company makes money, investors make money, workers make money….

WHAT HAPPENS WHEN EVERYONE WHO WANTS A MODEL T HASALREADY PURCHASED ONE????

Case in Point: Model T Ford

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Henry Ford’s company meets the demand for Model T. Supply meets Demand.

Peak (Supply meets demand)

WHAT WOULD HAPPEN IF HENRY FORD CONTINUED PRODUCINGMODEL T’s AT THE SAME RATE DURING PEAK AS HE HAD DURINGEXPANSION?

Case in Point: Model T Ford

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Henry Ford must reduce production to meet lower demand for Model T.Company does not make as much money, investors do not make as muchmoney, and some workers may be laid off.

Recession(Business Slump)

*Decrease Production*Decrease Wages*Layoffs

II. World Wide Effects WWI created an economic imbalance 1920- US worlds “creditor” nation 1929-Europe linked financially to US

• US banks /business loans helps Europeans to pay back war debts.

After Crash: Hawley-Smoot Tariff-Problem? High protective tariff that produced

retaliatory tariffs in other countries, strangling world trade.

Dawes Plan and Young Plan- U.S. loans money to Germany to pay reparations, ends afterstock market crash.

What is strange about this financial arrangement?

III. Political Repercussion

Limited role of gov’t “rugged

individualism” Voluntary aid

(neighbor helping neighbor)

Gov’t help would destroy ppl’s self respect

Insisted things would get better soon…“no one is actually starving”

Herbert Hoover (R)(1929- 1933)What is the problem with Hoover’s approach?

B. Attempts to revive the economy Trickle-Down Theory

• as business improves so benefits will trickle down to the public

• 1) cut taxes to spur buying• 2) Increase gov’t spending on public projects• 3) Reconstruction Finance Corp.

• Help RR, banks, & insurance co. so they won’t go bankrupt

• 4) debt moratorium-temp. halt of payments of war debts

IV. Impact of Depression

A. unemployment 1932-13 million

(25%) unemployed Decrease wages,

decreased farm prices

5k banks failed 86K business fail

Farmers worst hit by Great Depression. New machineryincreased crop yields, but surplusesmeant crop prices remained low— Mortgaged farms are lost.

How did massive unemployment impact the nation’s psychological state?

Feelings of shame, depression,hopelessness.

Bonus Army- 20,000 WWI vets protest in D.C.

They want pensions, a few violent skirmishes & army

is called in. “Hoovervilles”-

homeless who sleep in shanty towns

B. Other effects: Women & minorities lose jobs Dust Bowl- (1933-1934) Farmer’s plight

in Great Plains made worse by drought and the consequent dust storms

25% of farmers migrate out of “Dust Bowl.”

“Okies” escape the dust storms and move to California.

(Steinbeck’s novel, Grapes of Wrath)

Black Blizzard

Dust storm approaching Stratford, Texas - 1934

Consumed by “Dust Bowl”-“dust pneumonia,” brown snow reaches northeast.

Hoover (R) FDR (D)

V. Election of 1932

Why did FDR win by such a wide margin in 1932?

FDR offered a NEW DEAL for the American people.

Active role of gov’t: FDR

New Deal- gov’t programs tosolve problems of Great Depressionand put people back to work.

3 “R’s” : Relief, Recovery, Reform

VI. What’s the deal with the New Deal?

Franklin Delano Roosevelt (D)(1933-1945)

At inauguration, FDR rallied a frightened nation in which 1 in 4 workers were unemployed. “We have nothing to fear, but fear itself.”

A. “New Deal” : Vast collection of programs formulated to

combat the Depression, influencing social, political & cultural attitudes in the US, commitment to gov’t action

3 R’s of the New Deal Relief: short-term actions designed to tide ppl

over until economy recovered Recovery: economic aid to stimulate the

economy ”pump-priming” , increase incentives to produce & rebuild ppl’s purchasing power

Reform: remedying the defects in the structure of the US economy, create new agencies. Gov’t job is to protect the ppl against risks they couldn’t handle themselves