The Fourth Political Party System: 1932 - 2015

The Great Depression and the Initial Realignment

The Lead up to the Depression: 1) The Road Building Boom

1) As late as 1921 No Highway in the United States had a

Number.

2) Chains on all 4 Wheels and a shovel with a collapsible

handle were necessary equipment for all cars.

3) Between 1921 and the Depression Government expenditure

for Streets and Highways exceeded the capital outlays for

most Private Industries.

4) These expenditures were a "Hidden" Subsidy for the

Automobile Industry and had the effect of Stimulating the

Economy in general.

The Lead up to the Depression: 2) The Housing Industry

1) Housing Construction boomed between the end of World

War I and 1926. After 1926 it slowly dropped off.

2) Rapid Population Growth and Pent-up Demand because of

WWI produced strong demand.

3) The Fact that Real Wages were not Rising as fast as

Productivity Suggests that Demand for Housing was

Exhausted by the late 1920s.

The Great Bubble: Suppose You had $100 to invest in the Stock Market in July 1926

July 1926 $100 July 1927 112 July 1928 148 January 1929 193 September 1929 216 December 1929 147 December 1930 102 July 1932 34

1) Many People and Corporations had bought stocks on Margin

from Brokers -- usually 10% down and 90% borrowed.

2) Brokers in Turn borrowed Money from non-Bank Sources.

Many Corporations invested their Surplus Profits in

these Endeavors.

3) The Bubble was also Fueled by Investment Trusts. These

sold their own debt instruments and then used the money

to buy stock.

4) The craze became so Intense that it looked like it could

go on forever.

Herbert Hoover (early 1929): "We in America are nearer to

the final triumph over poverty than ever before in the

history of any land ... We have not reached the goal, but

given a chance to go forward with the policies of the last

eight years, we shall soon with the help of God be in

sight of the day when poverty will be banished from this

nation."

John J. Raskob (Chairman of the Democratic Party, Summer

1929): "If a man saves $15 a week, and invests in good

common stocks, and allows the dividends and rights to

accumulate, at the end of twenty years he will have at

least $80,000 and an income from investments of around

$400 a month. He will be rich. And because income can do

that, I am firm in my belief that anyone not only can be

rich, but ought to be rich."

The Empire State BuildingConstructed 17 March 1930 – 11

April 1931

ECONOMICS Unemployment GNP Consumer Prices Manufacturing Investment Stocks 1929 3.2 104.4a 73.3b 58b 16.2c 260.2d 1930 8.7 95.1 71.4 48 10.3 210.3 1931 15.9 89.5 65.0 39 5.5 136.6 1932 23.6 76.4 58.4 30 .9 69.3 1933 24.9 74.2 55.3 36 1.4 89.6 1934 21.7 80.8 57.2 39 2.9 98.4 1935 20.1 91.4 58.7 46 6.3 106.0 1936 16.9 100.9 59.3 55 8.4 154.7 1937 14.3 109.1 61.4 60 11.9 154.1 1938 19.0 103.2 60.3 46 6.7 114.9 1939 17.2 111.0 59.4 57 9.3 120.6 1940 14.6 121.0 59.9 66 13.2 110.2 1941 9.9 138.7 62.9 88 18.1 98.2 a $ Billions in 1929 Prices. b 1947-49 = 100 base c Gross Private Domestic Investment ($ Billions) d Average Prices of Stocks (1941-43 = 100)

Four Distinct Periods:

a.1930 - 1933: Steep Decline

b.1933 - 1937: Steep Recovery

c.1937 - 1938: Recession

d.1938 - 1941: Tooling up for World War II

Initial Realignment of Various Groups 1930 - 1937

DEMOCRATS1) Lower to Lower Middle Class -- In Particular the Working Class (Especially Urban Areas)2) Lower Income in General3) White Ethnic Groups: Catholics, Jews, Poles, Irish, Slavs, Italians4) Organized Labor5) White Southerners 6) New Voters -- Especially Immigrants who entered before 19247) Northern Blacks

REPUBLICANS

1) Upper Middle to Upper Class2) Middle to Higher Income in General3) White Protestants4) Business5) Professionals6) Southern Blacks

Summary -- Realignment of the 1930s (to late 1930s) -- Neither Party

Replaced

1. Breadth and Depth of the Underlying Grievance – Economic Disaster.

Sudden and Unexpected and the Republicans were blamed for it.

2. Capacity to Provoke Resistance – Haves vs. the Have Nots.

3. Leadership – Lagged Behind the General Public. The Republicans were

unable to adapt.

4. Division of Polar Forces Between the Two Parties – Affected Mainly the

Republicans. They were Reduced to a fraction of their former Support.

5. Strength of Existing Party Attachments – Strong, but overwhelmed by

the sheer Magnitude of the Economic Disaster.

•SUMMARY – Realignment of the 1930s (to late 1930s) -- The Realignment Scenario

Clearly Type 2 -- Realignment in which Neither Party is Replaced.The System Stays in State A With a Dramatic Shift of the Electorate to the Democratic Party.