Causes of the Great Depression

Politics in the 1920s• Following, Harding and

Coolidge, Herbert Hoover won the presidential election of 1928 as the Republican candidate.

• In 1928, Americans were still wrapped up in the “roar” of the 1920s and expected everything to keep going strong in the economy. Hoover promised the American public that prosperity would continue into the 1930s.

• “2 chickens in every pot and 2 cars in every garage”

• We will have more than what you need (chickens) and more than what you want (cars)

• All republican presidents- promised prosperity for all

Old McDonald had a…• During WWI, many farmers had

bought more land and machinery (and borrowed money from the bank to do so) to produce more crops to supply our troops.

• After WWI, demand was not as high, but farmers were still producing high amounts.

• One industry that didn’t “roar” as well as others during the 1920s was farming.

• They produced more crops than they could sell. This meant there was a surplus of goods which caused the price to go down.

• **Since they couldn’t sell their goods at a high price, they couldn’t pay their bills and went deeper into debt.

Cause #1

• The majority of the people in America in the 20s had low incomes and little savings while a very small minority of the population was very wealthy. This is called an uneven distribution of wealth.

• The rich became much richer while the poor became less poor

• There weren’t enough Americans buying all of the goods we were producing

Cause # 2

• A healthy economy needs a good balance of production and consumption. Leading up to the Great Depression, there was overproduction and under consumption.

• Too many Americans did not have enough money to buy what they needed or wanted

Cause # 3

• In the 1920s, a lot of Americans bought their frivolous “wants” in installments (credit) meaning they didn’t actually have the money.

• Americans spent more than what they had/made- they went into debt

• We were living beyond our means

Stock Market Crashes

The Spark that Starts the Great Depression

Uh Ohhhh

• Buying stock is risky because until you sell it, there really isn’t any money except on paper.

• A few people were worried that all of this prosperity would break but no one really listened to the experts.

• People kept buying and selling stock. The first sign of trouble was on Thursday, October 24, 1929 when no one was buying stocks at high prices- so prices started to drop.

Crash and Burn• This led to a panic!

Everyone wanted to sell their stocks but no one wanted to buy- so prices dropped. This all happened on October 29, 1929- “Black Tuesday.”

• The people who suffered the most were the ones who bought on margin.

• People who bought stock on margin not only lost their money but lost the banks money as well and went into debt. Some people couldn’t take it and so they committed suicide.

• **The Stock Market Crash was the spark that started the Great Depression which lasted from 1929 to 1941.**

Causes and a Spark

• Cause 1: Uneven distribution of wealth

• Cause 2: Underconsumption and overproduction

• Cause 3: Americans were spending more money than they had (in debt)

• Spark: Stock Market Crash on Black Tuesday when everyone wanted to sell, no one wanted to buy, so the prices dropped

Hardships of Life During the Depression

Life in America and the Dust Bowl

Let’s Bank On It

• As the Stock Market crashed, millions of Americans rushed to their banks to withdraw their money- but they were turned away. This led to a drop in consumer confidence

Bank Crisis

• American’s took whatever money they had and hid it in their mattresses and bread boxes

• The banks had run out- there just wasn’t enough money in circulation

• This forced thousands of banks to close

Cycle of Depression

• With the Crash of the Stock Market and banks failing, the US started into a depression where the following characteristics are found: – 1. Few Jobs and 2. Little

Demand

• Depressions work into a cycle:

WorkersLose

Their Jobs

Can’t Buy

Goods

Don’tGet Paid

BusinessesClose

Not Only in America

• Because of the Dawes Plan, the US was lending money to Germany to invest and pay back France and Great Britain

• In the 1930s, Germany stopped paying their reparations and we couldn’t continue to give any aid either so Europe went into a Depression as well

Unemployment

• Initially the unemployed rate was 3.7% which is GREAT

• But as the Depression worsened, 25% of Americans lost their jobs (That’s 1 out of every 4!)

• Those who didn’t lose their jobs had their wages and hours cut

Unemployed Americans• At this time we didn’t have

welfare!**

• If you lost your job, you couldn’t pay rent, buy nutritious food, and many children had to drop out of school to get jobs

• Families had to get their food at food banks and breadlines started by charities

http://forwardliberally.files.wordpress.com/2008/09/great-depression-soup-line.jpg

Hoovervilles

• Millions of unemployed Americans had to live on the streets

• They formed communities called Hoovervilles named after President Herbert Hoover

Gated Communities!

• Hoovervilles were shantytowns of tents and shacks or lumber, tin and glass.

• They were on parks and any deserted land.

• They kept themselves warm with fires and covered themselves with newspapers. (Hoover blankets).

Plight of the Farmers

• We have mentioned that farmers had been overproducing crops ever since World War I. Life got worse for farmers during the Great Depression

• Part of the reason is the Great Plains suffered from a drought

Farmers Woes

• From 1930 to 1934, one million American farmers couldn’t pay their mortgages

• Banks foreclosed on the land and took it back (and the machinery)

• Some worked as tenant farmers (similar to sharecropping)

No More Grass

• During WWI, with demand high, farmers bought land on the Great Plains and continuously planted on it. They cut down the tall grass which had kept the topsoil from blowing away

• With constant growing, especially with wheat, the land lost a lot of nutrients and didn’t get a break

Orange? Alamo? Rose? Nah… Dust

• Dust Bowl is the nickname given to the Great Plains during the 1930s.

• Drought, loose topsoil, and high winds and overplanting contributed to dust storms that blinded and choked farmers, killed cattle, birds, and fish. It got everywhere- destroyed farms and houses

• Dust from Nebraska actually traveled to Massachusetts! That’s how strong the winds were

Okie Dokie!

• Since dust destroyed the land, farmers had to pack up and leave their homes

• Farmers who left the Great Plains and traveled out West (especially to CA) looking for jobs were called Okies.

• However, once they got out West, life wasn’t much better- no jobs

• John Steinbeck’s Grapes of Wrath

Presidential Responses to the Depression

Hoover

Didn’t Cause It• In 1929, everyone was

blaming President Hoover even though it wasn’t his fault. While he didn’t cause the GD, he didn’t do much to fix it.

• Hoover’s policy towards the economy was much like that of Harding and Coolidge- “laissez faire”

But Didn’t Fix It

• This policy didn’t work though and so he asked businesses and entrepreneurs to keep employment, wages, and prices at current level- **he wanted them to volunteer to do so, he did not mandate it.**

• What 3 efforts did Hoover do to help the economy?

• He cut taxes, lowered the interest rates, and created public works programs. Public works programs are government construction that would create jobs and fix community problems (i.e. build dams, bridges, sewers, schools)

Trickle Down

• Trickle down economics

– Hoover requested that the rich in America donated money to charities.

• He thought that if the rich spent money, it would eventually get to the poorest members in society (But it didn’t)

Volunteers? Anyone? Anyone?

• However, volunteerism did not work- businesses cut wages and laid of workers because it was in their own best interests.

• Americans focused on themselves, instead of the interests of the nation.

Oh Dam• Americans showed

their disapproval with Hoover’s “efforts” by nicknaming negative aspects in society after him (i.e. Hoovervilles)

• Hoover did create one project that really helped give Americans jobs- the Boulder Dam, later renamed the Hoover Dam in 1930 which would supply three states with **hydro-powered electricity

Foreshadowing…

• The Depression caused many Americans to blame capitalism and democracy for our problems and thought communism may be a better solution (like in Russia). In Europe during the Depression, leaders like Hitler and Mussolini were gaining power.

BONUS! Army

• Veterans from WWI came to Washington D.C. to demand that they get their bonus early.

• Supposed to get money for their time in the military in 1945 but they wanted it in 1931 (Depression)

• Hoover vetoed giving the Bonus Army their money early

• Veterans set up Hoovervilles outside of White House

• Gens. MacArthur and Eisenhower ordered troops to use force (tear gas and bayonets) to remove them

Time for Change

• By the next election of 1932, Americans wanted Hoover out of office. They voted for Democrat Franklin Delano Roosevelt (FDR).

• When he won- his theme song was “Happy Days Are Here Again”

Presidential Responses to the Great Depression

FDR

A New Deal

• FDR came up with a plan to solve problems of the Great Depression called the New Deal. It was a program that had 2 phases.

• The first phase focused on the 3 R’s: Relief, Recovery, and Reform which would take place in his first 100 Days in office. **In the first 100 days, FDR passed 15 laws which was HUGE- this was the “first New Deal”**

Fireside Chats

• FDR and his brain trusts (a group of advisors) took three steps immediately to fix problems: they declared a bank holiday, only reopened the ones that were in good shape, and he started fireside

chats.

• The President used the radio to explain his policies to American families. Since every American had one, it was a way for FDR to connect to the people- it also increased his popularity- the public felt

connected.

Holiday!

• On March 12, 1933, FDR told the public it was safer to have their money in the reopened banks than under their mattresses. **He helped to increase the public’s confidence in the government.**

• **He created the FDIC- Fed. Deposit Insurance Corporation- to ensure that if we invested our money- it would be there when we went to get it

Let’s Go Fishing!

• **The New Deal would completely change the role of the government forever. This would end policies of laissez faire and would create a strong national government that gets involved to fix problems.**

• **Even though FDR wanted to increase government involvement, he didn’t want to give hand outs. He believed in the motto: “If you give a man a fish, you feed him for a day, if you teach him how to fish, you feed him for a lifetime.” **

Social Security

• Because the public supported FDR and all the efforts he was making, he started the 2nd New Deal in 1935. One of the most important bills of the century which is still around today is the Social Security Act. Explain what that act did:

• When a person worked, some of their paycheck would be put into a savings account and the employer would match it. When they retired, they would get a little of that money each month.

Alphabet Soup

• FDR created a lot of new programs during the Great Depression- they all had acronyms so they were called “Alphabet Soup” Examples?

• FDIC- insured money in banks

• AAA- Agricultural Adjustment Act- paid farmers NOT to grow crops

• CCC- Civilian Conservation Corps- built telephone lines, dams, planted trees

• NRA- National Recovery Act- companies were “patriotic if they joined” agreed to pay workers good wages, better hours, etc.

• PWA- Public Works Admin- built schools, post offices, houses, airports, hospitals

Let’s Experiment!

• **It was kind of like a trial and error period- keep introducing programs until some work and try to get the economy growing again- like a doctor prescribing medicine

Problems

• FDR was threatened by this so he tried to pack the court with six new justices who were Pro-New Deal and would support him- this technically would break our system of checks and balances, so it never passed.

• While the majority of Americans loved FDR, there were many critics who didn’t think his policies were good- many of them were in the Supreme Court. Many of the justices in the Court declared New Deal legislation as unconstitutional.

Pack The Court

ER

• Not only was FDR influential, but so was his wife Eleanor Roosevelt. She got her hands on as well. Most first wives were “decorative” but she campaigned and fought for rights of veterans, poor, and women. Even after FDR died, she became a representative to the UN

The End is in Sight!

• Overall, the New Deal did help to start some economic growth during the Depression by providing jobs and fixing problems, but it won’t fully recover until the US enters WWII.