Chapter #22Chapter #22“Crash & Depression”“Crash & Depression”

1929 - 19331929 - 1933

Good videos

4 minute explanation– https://www.youtube.com/watch?v=-b1dTvNa

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Section #1“The Economy in the Late 1920’s”

Healthy Economy?– 1925: Stock market $27 Billion – 1928: stock values rose $11.4 billion. The

year was described as “of unprecedented advance, of wonderful prosperity.” – New York Times

– Oct. 1929: stock values hit $87 Billion.– Since 1914 workers wages 40%.– Unemployment under 4%.

– Best selling book: “The Man Nobody Knows (1925) – Bruce Barton

– 1929 article by John J. Raskob – “Everybody Ought to Be Rich”

– welfare capitalism: An approach to labor relations in which companies met some of their workers’ needs without prompting by unions.

Uneven Prosperity

The Rich get richer!The Rich get richer!• Huge corporations• 200 large companies

controlled 49% of American industry.

• 24,000 families (0.1%) had incomes of more than $100,000 & held more than 34% of the country’s total savings.

The Poor get poorer!The Poor get poorer!• 71% of individuals and

families earned less than $2,500.

• 80% of families had no savings.

• Everyone in the family, including children, had to work to get by.

Income Distribution, 1920

1%5%

29%65%

$10,000 and over

$5,000 - $9,999

$2,000 - $4,999

$1,999 and Under

Other Economic Dangers

Buying on Credit– Increased personal debt.– Installment plans made

expensive items irresistible.

Stock Market– speculation:speculation: the practice of

marking high-risk investments in hopes of getting a high gain.

– buying on margin:buying on margin: purchase a stock for only a fraction of its price and borrow the rest.

– Brokers charged high interest rates and could demand payment or loan at any time.

Supply & Demand– Warehouses full of unbought

goods.– Automobile industry.– Housing construction fell 25%

from 1928 – 1929.

Farmers– Prices for farm products

plummeted after the wartime demand ended. (wheat & cotton)

– Farmers bought more land.

Workers– Most laborers did not benefit

from prosperity of big business.– 56 hour work week for 16 to 18

cents an hour = $10 a week.

Section #2:“The Stock Market Crash”

Dow Jones Industrial Average: an average of stock prices of major industries.– Early 1928 = 191.– Hoover’s inauguration day, March 4, 1929 = 313.– September 3rd, all time high at 381.

The Market Crashes– Black Thursday: October 24, 1929, worried investors began to sell

and stock prices fell. (ex. GE $400 down to $283)– Black Tuesday: October 29, 16.4 million shares were sold.

– By Nov. 13, 1929, the Dow Jones had fallen from 381 to 198.7 = losses totaling $30 billion. Known as the Great Crash.

– business cycle: the periodic growth and contraction of a nation’s economy. See page #636.

*In billions of dollars. Based on Standard and Poor’s index of common stocks.Source: Historical Statistics of the United States, Colonial Times to 1970.

The Stock Market Crash

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Effects of the Crash

Great Depression: a severe economic decline that lasted from 1929 until the United States’ entry into World War II in 1941.– Millions of Americans lost their jobs, homes, and farms.– 1931 Henry Ford closed down his Detroit plants, 75,000

unemployed.– Gross National Product (GNP): the total value of goods and

services a country produces annually.• $103 billion in 1929.• By 1933 it was only $56 billion.• Bushel of wheat went from $1.04 in 1929 to 38 cents in 1932.• Banks close

– 5,000 banks closed.– By 1933, 9 million savings accounts vanished.

Impact on the World

When the world’s leading economy fell, the global economic system began to crumble.– U.S. insisted that Britain and France repay war debts.– Congress kept wartime tariffs high.– Allies had to rely on Germany’s reparations payments for

income.• German banks failed when U.S. companies investments failed.

– Europeans could no longer afford to buy American made goods.

– American stock market crash caused a downward cycle in the global economy.

Causes & Effects of the Great Depression

CAUSES*The 1920’s economy is out of balance.*Americans are increasingly in debt.

*Speculation is on the rise.*Overproduction slows industrial growth.

*The federal government introduces a tight money policy in order to control credit.*The stock market crashes in October 1929.

THE GREAT DEPRESSION

Effects*Millions of workers lose their jobs.

*Gross National Product falls dramatically.*Many banks fail.

*Increased poverty leads to health and social programs.*Global economy suffers.

Section #3 Social Effects – Great Depression

Immediate impact did not hit all – 1931-32 allall were effected.

Professional, white collar, blue collar-ALLALL lost jobs, savings accounts, & homes. Poverty did not discriminate.

“Hooverville”What environmental condition compounded the

Great Depression?

Hoovervilles

Hoovervilles

Children eating their Christmas dinner during the Great Dep: turnips and

cabbage.

Anxiety, Suicide, Family Stress

Competition for scarce resources especially jobs, caused an increase in discrimination

56% of Blacks were unemployed in 1932

Less divorces… why? Suicide way up… why?

Section 3 - continuedThe Grapes of Wrath – John SteinbeckWhat was the Dust Bowl?

The Dust Bowl:1930’s, “dirty thirties”

Great Plains (average of 20 in. rain/year)– TX, OK, KS, NM, CO

Black blizzards– Heights of 8,000 feet

– Single storms could carry more than 300 million

Rabbits, birds, field mice suffocated

“We live with the dust, eat it, sleep with it.”

Destroyed 5 million acres of wheat

Okies – dust bowl refugees

Dams eventually help as does the gov’t (subsidies)

Section 4 - Surviving the Great Depression Determination and humor

– People helped each other– Identify problems with social, political and

economic systems

However, some people (blacks, immigrants, Jews) were still discriminated against – Ex. Scottsboro Boys Case Ex. Scottsboro Boys Case

The Communist and Socialist Parties offered solutions to the problems of capitalism and democracy.

Signs of Changesec.4 cont.

1933, during the heart of the Depression, Prohibition was ended with the 21st Amendment.

Empire State Building construction started in 1930. Why was it considered a Why was it considered a symbol of hope?symbol of hope?

What was Hoover doing?!

Hoover’s response to the Depression – “world-wide economic conditions beyond our control”

Voluntary action by businesses to keep wages up was Hoover’s “fix-it” plan; businesses did not continue to voluntarily help

Gov’t stimulated the Depression economy with public works projects (i.e. Hoover Dam)

Hoover Dam!Hoover Dam!

Hoover Dam – Completed in 1936

Hoover’s demise . . . From ‘Great Humanitarian’ to cold & hard-hearted!

Hoover’s RFC – gave gov’t credit to banks to extend loans – Trickle down theory of economics made the gov’t look like they were helping bankers and not ordinary people. (Reconstruction Finance Corporation – banks still failed)

Hawley-Smoot tariff – the highest in history, backfired- Europe raised their tariffs – stifled trade.

Propaganda efforts against Hoover aided in his political downfall, in addition to economic conditions not improving.

The Bonus Army – sec 5 cont.

1932 – 20,000 WWI veterans march on D.C. demanding their pensions payments.

The H.O.R. agreed to pay, the Senate did not.

President Hoover called in General MacArthur to drive the marchers out of D.C. – he turned the military against those who fought to defend freedom during WWI.

The New Deal & F.D.R (D) “Happy Days are here again!”

Landslide for FDR/Eleanor – 7 million popular votes.

More voted against Hoover.

Many minorities favored FDR.