1929-1939

The Great Depression

1928: Hoover v. Smith

“A chicken in every pot and a car in every garage” – Herbert Hoover

A period of severe economic decline, marked by unemployment, decreasing business activity, and falling prices.

Previous depressions: 1830s, 1870s, and 1890s

Depression:

Shocking after a decade of unprecedented prosperityImpacted all areas of American lifeDamaged confidence in the future

Great Depression: 1929-1939

Median incomes plunged to half of what they had been in 1929

¼ out of workImpacted all areas of American lifeDamaged confidence in the future

Rock bottom: 1932-1933

1920s prosperity was superficialCauses of the Depression were complex and largely

ignored throughout the decade

Causes of the Great Depression

The wealthiest 5% took in nearly 1/3 of the nation’s income

Nearly ½ of the nation’s families earned less than $1,500 a year—while H. Ford made $14 million

Causes: 1) Mellon’s tax cuts 2) Businesses increased profits while holding down wages

Effects: Depressed consumer purchasing power

1. Uneven distribution of income

Secretary of Treasury Andrew Mellon

1921-1932

In 1929, 200 corporations controlled ½ of the corporate wealth

Some industries thriving (auto) while others like agriculture declining steadily

Average income for a farmer $273

2. Uneven distribution of corporate wealth

For an economy to function properly, the total demand must equal total supply

In 1920s there was an oversupply of goods (mechanization of industry & farming responsible)

3. Overproduction & under-consumption

demand

supply

1920s Economy

Installment plansBorrowing on margin to buy stocksPrivate banks loaned out millions rising debt

throughout the 1920s

4. Easy credit

America prospered in the 1920s, while European nations struggled to rebuild after the war

U.S. lent $7 billion to Europe during the warAnother $3 billion by 1920

5. Large scale international wealth distribution problems

Britain & France

U.S.

Germany

loansreparations

investments

Fordney-McCumber Tariff of 1922Hawley-Smoot Tariff of 1930

Protective tariffs

Now the British item is priced at $5

Americans are encouraged to buy the cheaper item produced in the US

A 25% tariff is levied on such itemsA $1 tax is added to the price

How a tariff worksAn item costs $4 to make in Britain

By 1929 about 4 million Americans or 3% of the population owned stocks

Stockbrokers were willing to lend up to 75% of the stocks purchasing price

Americans wanted to take advantage of the “bull market” (rising stock prices)

6. Speculation on the stock market

Example: RCA stock $85 in Sept. 1928, $420 one year later—even though the company had not paid a single dividend

Stock prices peaked in Sept. 1929

Stock Market plungesPanic on Oct. 24, 1929 (Thursday), stocks prices plungeOct. 29, 1929 (“Black Tuesday”), 16 million shares of stock

dumped in one day

7. Shortsighted government policiesMellon’s tax cutsProtective tariffsFederal Reserve Board tightens credit

Tax cutsProtective

TariffsTightening of credit

1. Depressed purchasing power

2. Inability to sell goods at home or abroad

Depressions effectsWidespread bank failuresBankrupt businessesHigh unemployment

Depression effectsDecrease in worldwide tradeIncreasing numbers of homeless personsWidespread hunger and illness

Dust storm approaching Stratford, Texas - 1934

Dust buried cars and wagons in S. Dakota in 1936

Storm approaching Elkhart, Kansas in 1937

Public opinion made him the villain of the Great Depression. In fact, the 31st president was a visionary -- but a hopelessly inept politician.

--David M. Kennedy

Hoover is ineffective at responding

Hoover Dam (Public Works Projects)

Hoover successfully organized and authorized the construction of the Boulder Dam (Now called the Hoover Dam) The $700 million project was the world’s tallest dam (726 feet) and the second largest (1,244 feet long)The dam currently provides electricity, flood control and water for 7 western states

Hoover Dam Today

The World War Adjusted Compensation Act of 1924 had awarded WWI Veteran bonuses in the form of certificates they could not redeem until 1945.

The principal demand of the Bonus Army was the immediate cash payment of their certificates.

Bonus Army 1932

President Herbert Hoover ordered the army to clear the veterans' campsite.

General Douglas MacArthur commanded the infantry and cavalry supported by six tanks.

The Bonus Army marchers, with their wives and children were driven out, and their shelters and belongings burned.

Hoover responds

Death & disaster: 4 dead, 1,017 injuredAt least 69 police injured

Franklin D. Roosevelt

Herbert Hoover

Party Democrat Republican

Home state New York Iowa

Running mate John Gardner Charles Curtis

Electoral votes 472 59

States carried 42 6

Popular vote 22,821,277 15,761,254

% of Popular vote 57.4% 39.7%

1932 Presidential Election

A vote against Hoover = FDR win

Happy days are here againThe skies above are clear againSo, Let's sing a song of cheer again!

A New Deal“I pledge you, I pledge myself, to a new deal for the

American people.” –FDR 1932

Relief, Recovery, Reform

Depression/New Deal Vocab.First 100 days- special session of CongressAlphabet soup- New Deal legislationLame Duck Amendment- 20th Amend.

Pump priming-the theory that government spending projects can generate economic growth in a recession.

1st New Deal: 1933-19352nd New Deal: 1935-1936 (greater focus on reform)End of the New Deal: 1936-1939

New Deal Vocab.Brains Trust—professors from Columbia Univ. who had

informal conversations about economic and social policy with President Roosevelt.

Black Cabinet—men and women who composed the first sizable representation of African Americans in white-collar posts in the federal government (i.e. Mary McCleod Bethune

Rexford Tugwell

Mary McLeod Bethune