The Great Depression & The New Deal – Flashcards

- Endless Era of Prosperity - Republican decade - Country grew increasly prosperous - Consumption, gross national product, stock market went increased - Bullish economy

- Republicans chose him as their candidate in 1928 - Born in Iowa, orphaned as a child - Graduated from Stanford, degree in geology - Was a mining engineer, worked all over the world - 1914: had a vast amount of fortune, retired, devoted himself to public service - Served as coordinator of the Belgium relief program, head of the Food Administration, Secretary of Commerce - Philosophy: competition important, voluntary cooperation between labor and management, american greatness showed itself when owners/workers/government officials converged on common goals

- Farmers increased harvest yields and brought more land to meet unprecedented crop demands of WWI - Also brought costly farm equipment - Contradicted huge debts and additional morgage payments followed them into 1920s - After war American crop demands fell sharply - Post-war production remained high - Farmers were failing to sell their huge crop surpluses and pay the debts they owed banks and other institutions

- Uneven distribution of the nation's wealth created economic wealth created economic problems - National family incomes: More than 60% had less than $2000/yr, 24,000 of nation's wealthiest had more than $100,000/yr (50 times the average family income) - Wealthy families did not consume 50 times as much as the average families - Wealthy spent a lot on consumer products, but not enough to keep the economy booming - Healthy economy = more people buy more products, creates even more wealth, economy avoids under-consumption (limits economic growth)

- Expansion of credit partially hid (economic) problems - Americans bought car, appliances, radios, and other goods on credit (including stocks) - They used installment credit, each year they kept on racking up more debt - In the past, Americans feared debt and put off buying goods until they had the cash to pay in full - Easy credit changed this behavior during the 1920s

The Cycle: 1. Expansion -Rising production, employment, and income 2. Peak 3. Contraction - Declining production, employment, and income (note: this cycle continuously repeats itself)

- October 29, 1929 - "The Bottom Fell Out" : More than 16 million shares were sold as the stock market collapsed, billions of dollars lost

- Marked by the beginning of the Great Depression - Lasted from 1929 to 1941 - Economy faltered and unemployment soared

- A lot of people tried to withdraw their money at the same time - Led to the failure of banks

- Misguided monetary policy led to failure of banks - 1920s : Federal Reserve (regulates the amount of money in circulation) cut interest rates to stimulate economic growth - 1929 the Reserve worried about investor over-speculation, limited the money supply to discourage lending - Not enough money in circulation to help the economy after the stock market crash

- The collapse of stock prices, combined with reduced consumer spending = fall of businesses - Business Responses: 1. Cutbacks to maintain price levels 2. Layoffs to reduce payroll - August 1931, Henry Ford closed several of his Detroit car factories, putting nearly 75,000 people out of work

- Production cuts kept increasing: businesses closed plants and fired workers to save money - 1933 - Approx. 25% of all American workers had lost their jobs

- Government hoped to reduce downward slide, began protecting American products from foreign competition - Passed in June 1930 - Raised prices on foreign imports to a level so that they could not compete in the American market - Inspired European countries to retaliate and enact protective tariffs of their own - International move toward high protective tariffs closed markets (especially when American manufacturers and farms had tons of unsold products) - Equally disastrous to global economy = destroyed international trade

1. U.S. profits plummet 2. U.S. investors have little or no money to invest abroad 3. European nations cannot pay off war debts 4. European production plummets 5. Europeans cannot afford American goods (6. The cycle continues)

- Problem: lack of government interference in the economy led to the depression - Critical problems in money supply, distribution of wealth,stock speculation, consumer spending, productivity, and employment could have been controlled by proactive government policies - Solution: Governments spend more money to keep people employed when the economy slows

1. Problems in consumption 2. Economic hardships before 1929 in Europe and rural America 3. Uneven distribution of wealth 4. Overspeculation in the stock market (5. Combined with poor or misinformed economic decisions by Congress and President Hoover)

- Between 1921 and 1929 the annual average unmeployment rate never rose above 3.7% - After the depression hit, in 1933 the annual average unemployment rate was 24.9%

- Song written by E.Y. Harburg (early 1930s) - Story of an American "Everyman", a worker who labored to build the country and a citizen soldier who fought to defend it. The depression has left him out of work, out of money, and out of dreams - Harburg said: "This is a man who says: I built the the railroads... I fought your wars... [Why] should I be standing in line now? What happened to all this wealth I created?"

- Makeshift shantytowns of tents and shacks built on public land or vacant lots - Homeless people cobbled houses out of lumber scraps, tar paper, tin, and glass - One of the largest Hoovervilles in Central Park, NYC a) There people covered themselves w/ newspapers called Hoover blankets, to stay warm at night b) They walked around with their empty pants pockets turned inside out, a sign of poverty known as as Hoover flags

- Bushel of wheat a) 1919 = $2.19 b) 1932 = $0.38 - A pound of cotton a) 1919 = $0.3534 b) 1932 = $0.652

- 1932: Combination of drought, loose topsoil, and high winds resulted in dust storms. Most of the dust storms started in the southern Great Plains especially the high plain regions of Texas, Oklahoma, Kansas, New Mexico, and Colorado. This region became known as the Dust Bowl - Dust Bowl refugees were called Okies - Okie families migrated to California, Oregon, Washington, or any place where they might find a job

- Howard University Sociologist: "[African Americans were] the last to hired and the first to be fired - In the South, landowners threw African American sharecroppers off plots they were farming - African Americans migrated to northern cities but there were no jobs waiting for there, only more poverty - 1932: Unemployment among African Americans was around 50% (nearly double the national rate)

- As an economist President Hoover believed in a hands-off policy, believing that the upswings and downswings of of business cycles were a natural occurrence - He felt government should not interfere with these events, although he realized this was a policy of do nothing - Hoover asked business and industrial leaders to keep employment, wages, and prices at current levels - At the same time he called for the government to reduce taxes, lower interest rates, and create public-work programs - Plan: Put more money into the hands of the businesses and individuals to encourage more production and consumption - Hoover's plan did not work because it relied to much on volunteerism (and localism was not able to support it) - Hoover believed using federal resources to provide direct relief to individuals was unconstitutional - He opposed public assistance and favored "rugged individualism" so that people could better themselves through their own efforts - As months went on unemployment increased, charities ran low on money, and local and state governments could no longer help

- Hoovervilles and homelessness was on the rise - The President's failed policies were laid bare - Poor Americans called trucks pulled by horse or mule "Hoover wagons", campfires "Hoover heaters", and cardboard boxes "Hoover houses" - The association of the President's name with suffering and want indicated Americans' negative feelings about their leader

- Hoover decided to reverse course and use federal resources to battle the depression - He believed the economy suffered from a lack of credit and urged Congress to create the Reconstruction Finance Cooperation (RFC) -Passed in 1932 the RFC gave more than a billion dollars of loans to railroads and large businesses, also lent money to banks so they could extend more loans to struggling businesses - Based off of trickle-down economics - RFC did not work well under Hoover's guidance - Too often bankers did not increase their loans to businesses, and businesses did not use the loans they received to hire new workers = the money did not trickle down to the bottom of the economic pyramid

- If the government lent money to bankers, they would lend it businessmen. Businessmen would then hire workers, production and consumption would increase, and the depression would end - This theory held that if money poured into the top of the economic pyramid will trickle down to the base

- Hoover's one successful project - During the 1920s, Secretary of Commerce Hoover called for the construction of a dam on the Colorado River - Congress approved the project as a part of a massive public works program (approved by the time Hoover became president) - Workers broke ground on Boulder Dam (later renamed Hoover Dam) in 1930 - Construction brought much needed employment to the Southwest during the early 1930s

- WWI vets came from across the country to Washington D.C. and protested, known as the Bonus Army - In 1924 Congress passed Adjusted Compensation Act which provided a lump-sum payment to veterans in 1945 - In 1931 many veteran group began demanding early payment of the bonus, arguing that out of work vets needed the money to support themselves. - Congress agreed and passed a bill to provide early payment of bonuses, however President Hoover vetoed this bill (he said many of vets did not need the early payment) - Hoover sympathized with marchers, but called for General Douglas MacArthur and federal troops to "[s]urround the affected area and clear it without delay." - General Douglas MacArthur exceeded his order deciding to move all the marchers out of city, ordering his troops to use tear gas and bayonets - Generals MacArthur's forces included future WWII generals Dwight Eisenhower and George Patton - More than 1,000 marchers were tear-gassed, and many were injured, some very badly - Completely ruined Hoover's image and chances of re-election in November 1932

- As child he enjoyed all the privileges of an upper-class upbringing , including education at elite schools and colleges - Gained a great deal of self-confidence and a belief that public service was a noble calling from his parents and teachers - In 1905 he married married his distant cousin Eleanor Roosevelt - In the summer of 1921 while vacationing FDR slipped off his boat into the chilly waters of the North Atlantic. The same evening he woke with a high fever and severe pains in his back and legs. Two weeks later he diagnosed with polio and never fully recovered the use of his legs - 1903: Earned a BA in history from Harvard University - 1910: Elected to the New York State Senate - 1913: Appointed Assistant Secretary of the Navy - 1920: Campaigned as Democratic nominee for Vice President - 1921: Contracted polio, which paralyzed his legs - 1928: Elected governor of New York State - 1933: Inaugurated as President of the United States of America

- FDR's distant cousin - Married FDR in 1905 - President Theodore Roosevelt's niece

In the summer of 1921 while vacationing FDR slipped off his boat into the chilly waters of the North Atlantic. The same evening he woke with a high fever and severe pains in his back and legs. Two weeks later he diagnosed with polio and never fully recovered the use of his legs

FDR convinced that the federal government had to play an active role in promoting recovery and providing relief to Americans. He experimented with different approaches to see which one worked best.

- Both advocated very different approaches to the problems of the Great Depression - Hoover believed that depression relief should come form state and local governments and private agencies - Roosevelt believed that the depression required strong action and leadership by the federal government - Hoover said: "This campaign is more than a contest between two men... It is a contest between two philosophies of government."

- FDR sought the advice of a diverse group of men and women to plan the New Deal - Among the most influential was a group of professionals and academics who the press nicknamed the "Brain Trust" - As democrat, FDR nominated two republicans and a woman to serve in his Cabin

- During the first hundred day in office, FDR proposed and Congress passed 15 bills - Goals: 1) Relief 2) Recovery 3) Reform - FDR wanted to provide relief from the immediate hardships of the depression and achieve a long-term economic recovery. He also instituted reforms to prevent future depressions.

- FDR called Congress into a special session the day after his inauguration and convinced them to pass laws to better the nation's banking system - The Emergency Banking Bill gave the President broad powers, this included the power to declare a four-day bank "holiday" - All banks in the nation were ordered to close, these four days gave them time to get their accounts in order before they reopen for business

- FDR's proposals sought to reform the nation's financial institutions - One act created the Federal Deposit Insurance Corporation (FDIC), which insured bank deposits up to $5,000.00 - Congress passed the Agricultural Adjustment Act (AAA), which sought to end overproduction and raise crop prices. To accomplish these goals , the AAA provided financial aid, paying farmers subsidies not to plant part of their land and to kill off excess livestock - Tennessee Valley Authority (TVA) a government agency created by Congress in 1933 - TVA built a series of dams in the Tennessee River Valley to control floods and to generate electric power. The agency also replanted forests, built fertilizer plants, created jobs, and attracted industry with the promise of cheap power - Civilian Conservation Corps (CCC) created by FDR to counter the depression's devastating impact on young men - Provided jobs for more than 2 million young men. They replanted forests, built trails, dug irrigation ditches, and fought fires - Eventually extended work and training to Mexican American and other minority youth, as well as to whites - FDR's favorite New Deal program - Public Works Administration (PWA) - Built bridges, dams, power plants, and government buildings - Built important projects still in use today such as NYC's Triborough Bridge, the Overseas Highway linking Miami and Key West, etc. - These public works projects improved the nation's infrastructure and created millions of new jobs for workers

- Chief complaint against the New Deal = Made Federal Government too powerful - The Right made this claim - Critics say the government was telling business how to operate, spending large sums of money , and pilling up a huge national debt - For conservatives the New deal was destroying free enterprise and undermining individualism - Some conservatives accused FDR of supporting socialism - Some leading socialists claimed that the New Deal did not do enough to end the depression - Norman Thomas, the Socialist Party's presidential candidate, claimed that FDR's only concern was saving the banking system and ensuring profits for big business - The American Communist Party described the New Deal as a "capitalist rule"

- A Roman Catholic priest, presented a bigger challenge to FDR than the Populist Critics - He attracted millions of listeners to his weekly radio show - At first he supported the New Deal, but over time he stopped supporting FDR, accusing him of not doing enough to fight the depression - Said that FDR "out-Hoovered Hoover" and called the New Deal "the raw deal" - Mixed calls for the nationalization of industry with anti-Semitic remarks and attacks on "communists" who, he charged, were running the country - By the early 1940s his views became so extreme that the Roman Catholic officials forced him to end his broadcasts - Canadian by birth he could not run against FDR in the 1936 election, instead he supported Senator Huey Long

- Senator of Louisiana and a New Deal critic - Expert performer whose folksy speeches delighted audiences - His solution to the depression was his "Share Our Wealth" program that proposed high taxes on the wealthy and large corporations, and the redistribution of their income to poor Americans - FDR viewed him as a serious political treat - Long did not have deep faith in democracy - Ruled Louisiana as if he owned the state causing him to make many political enemies - Long was assassinated by a political enemy in 1935