Transcript THE GREAT DEPRESSION BEGINS

THE GREAT
DEPRESSION
BEGINS
Photos by photographer Dorothea Lange
SECTION 1: THE NATION’S
SICK ECONOMY
As the 1920s advanced, serious problems
threatened the economy while
Important industries struggled, including:
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Agriculture
Railroads
Textiles
Steel
Mining
Lumber
Automobiles
Housing
Consumer goods
FARMERS STRUGGLE
• No industry suffered as
much as agriculture
• During World War I
European demand for
American crops soared
• After the war demand
plummeted
• Farmers increased
production sending
prices further downward
Photo by Dorothea Lange
CONSUMER SPENDING
DOWN
• By the late 1920s,
American consumers
were buying less
• Rising prices, stagnant
wages and overbuying on
credit were to blame
• Most people did not have
the money to buy the
flood of goods factories
produced
GAP BETWEEN RICH &
POOR
• The gap between rich
and poor widened
• The wealthiest 1% saw
their income rise 75%
• The rest of the
population saw an
increase of only 9%
• More than 70% of
American families
earned less than $2500
per year
Photo by Dorothea Lange
HOOVER WINS
1928 ELECTION
• Republican Herbert
Hoover ran against
Democrat Alfred E.
Smith in the 1928
election
• Hoover emphasized
years of prosperity
under Republican
administrations
• Hoover won an
overwhelming victory
THE STOCK MARKET
• By 1929, many Americans
were invested in the Stock
Market
• The Stock Market had
become the most visible
symbol of a prosperous
American economy
• The Dow Jones Industrial
Average was the barometer
of the Stock Market’s worth
• The Dow is a measure
based on the price of 30
large firms
STOCK PRICES RISE
THROUGH THE 1920s
• Through most of the
1920s, stock prices
rose steadily
• The Dow reached a
high in 1929 of 381
points (300 points
higher than 1924)
• By 1929, 4 million
Americans owned
stocks
New York Stock Exchange
• The stock market:
• the public invests in
companies by buying
stocks; in return for this
they expect a profit
(dividend)
• b/c of booming 1920's
economy, $ was plentiful,
so banks were quick to
make loans to investors
• also investors only had
to pay for 10% of the
stock's actual value at
time of purchase
– this was known as
BUYING ON MARGIN,
and the balance was
paid at a later date
• this encouraged STOCK
SPECULATION - people would
buy and sell stocks quickly to
make a quick buck
• b/c of all this buying & selling,
stock value increased (Ex: G.E
stock $130  $396/share)
• this quick turnover didn't aid
companies  they needed long
term investments so they could
pay bills (stock value was like an
illusion)
• unscrupulous traders would buy
and sell shares intentionally to
inflate a given co.'s stock value
• all of this gave a false sense of
security/confidence in the
American market
SEEDS OF TROUBLE
• By the late 1920s,
problems with the
economy emerged
• Speculation: Too many
Americans were engaged
in speculation – buying
stocks & bonds hoping for
a quick profit
• Margin: Americans were
buying “on margin” –
paying a small percentage
of a stock’s price as a
down payment and
borrowing the rest
The Stock Market’s bubble was
about to break
 beginning in Oct.
1929, investors’
confidence dropped,
leading to a
market collapse
 all tried to sell at once
and bottom fell out of
market = panic
selling… (many
bankruptcies as banks
called in loans)
 only a tiny minority of
people traded on the
stock exchange, but
they possessed vast
wealth, and the crash
had a ripple effect on
the economy
 For the poor.......
 mass consumption
was already low
(poor could afford to
buy little)
Unemployment
 unemployment rose
 no government
assistance at first
 since people could
not buy, productivity
was cut back = more
unemployment.
Purchasing Power
Productivity
 so w/ additional
unemployment 
purchasing power
declined again 
reduced productivity
yet again (=
ECONOMIC CYCLE)
PRODUCTIVITY AND
UNEMPLOYMENT
• in 1920's U.S. Economy was based on the productivity
– purchasing power - employment cycle
• for many goods to be produced , purchasing demand
had to be there: this resulted in high employment and
a healthy economy
• between 1924-27, U.S. productive capacity doubled but
it was because of technological innovation
 electricity and mechanical advances made for better
production, but no new jobs were added to the
economy
• so more consumer goods were available, but there
weren't necessarily more people to buy them
(OVERPRODUCTION)
• a 2nd major problem:
uneven dist. of wealth
• 0.1% at top owned as much
as bottom 42% of American
families (42% below poverty
line)
• of the 58% above the poverty
line, most fell into the middle
class category - they were
not wealthy; they had jobs
b/c of the industrialization &
consumerization of the
American market place
• this middle class depended
on their salaries and when
productivity declined they
lost their jobs
• and b/c of low savings, they
had to cut back on their
purchases
• this decline in consumption
among the middle class
ruined the whole country
THE 1929 CRASH
• In September the Stock Market
had some unusual up & down
movements
• On October 24, the market took
a plunge . . .the worst was yet to
come
• On October 29, now known as
Black Tuesday, the bottom fell
out
• 16.4 million shares were sold
that day – prices plummeted
• People who had bought on
margin (credit) were stuck with
huge debts
By mid-November, investors
had lost about $30 billion
THE GREAT DEPRESSION
Alabama family, 1938 Photo by Walter Evans
• The Stock Market crash
signaled the beginning of
the Great Depression
• The Great Depression is
generally defined as the
period from 1929 – 1940
in which the economy
plummeted and
unemployment
skyrocketed
• The crash alone did not
cause the Great
Depression, but it
hastened its arrival
FINANCIAL COLLAPSE
• After the crash, many
Americans panicked and
withdrew their money
from banks
• Banks had invested in
the Stock Market and lost
money
• In 1929- 600 banks fail
• By 1933 – 11,000 of the
25,000 banks nationwide
had collapsed
Bank run 1929, Los Angeles
GNP DROPS,
UNEMPLOYMENT SOARS
• Between 1928-1932, the
U.S. Gross National
Product (GNP) – the total
output of a nation’s
goods & services – fell
nearly 50% from $104
billion to $59 billion
• 90,000 businesses went
bankrupt
• Unemployment leaped
from 3% in 1929 to 25% in
1933
U.S. REAL GDP 1929 – 1940
(billions of 1996 dollars)
REAL GDP
1000
900
800
700
600
500
REAL GDP
400
300
200
100
0
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
22 of 43
U.S. Unemployment rates
1929-1940
30
25
20
15
UNEMPLOYMENT RATE (%)
10
5
0
1929
1931
1933
1935
1937
1939
23 of 43
• The U.S. was not the only
country gripped by the
Great Depression
• Much of Europe suffered
throughout the 1920s
• In 1930, Congress
passed the toughest tariff
in U.S. history called the
Hawley- Smoot Tariff
• It was meant to protect
U.S. industry yet had the
opposite effect
• Other countries enacted
their own tariffs and soon
world trade fell 40%
HAWLEYSMOOT TARIFF
CAUSES OF THE GREAT
DEPRESSION
• Tariffs & war debt
policies
• U.S. demand low,
despite factories
producing more
• Farm sector
crisis
• Easy credit
• Unequal
distribution of
income
SECTION 2: HARDSHIPS
DURING DEPRESSION
• The Great Depression
brought hardship,
homelessness, and
hunger to millions
• Across the country,
people lost their jobs,
and their homes
• Some built makeshifts
shacks out of scrap
material
• Before long whole
shantytowns (sometimes
called Hoovervilles in
mock reference to the
president) sprung up
SOUP KITCHENS
Unemployed men wait in line for food
– this particular soup kitchen was
sponsored by Al Capone
• One of the common
features of urban
areas during the era
were soup kitchens
and bread lines
• Soup kitchens and
bread lines offered
free or low-cost food
for people
CONDITIONS
FOR MINORITIES
• Conditions for African
Americans and Latinos
were especially difficult
• Unemployment was the
highest among
minorities and their pay
was the lowest
• Increased violence (24
lynchings in 1933 alone)
marred the 1930s
• Many Mexicans were
“encouraged” to return
to their homeland
As conditions deteriorated,
violence against blacks
increased
RURAL LIFE DURING THE
DEPRESSION
Between 1929-1932 almost ½ million
farmers lost their land
• While the Depression
was difficult for
everyone, farmers did
have one advantage; they
could grow food for their
families
• Thousands of farmers,
however, lost their land
• Many turned to tenant
farming and barely
scraped out a living
THE DUST BOWL
• A severe drought gripped
the Great Plains in the
early 1930s
• Wind scattered the
topsoil, exposing sand
and grit
• The resulting dust
traveled hundreds of
miles
• One storm in 1934 picked
up millions of tons of
dust from the Plains an
carried it to the East
Coast
Kansas Farmer, 1933
The Dust Bowl
• There were more than
300 dust storms, also
known as “Black
Blizzards,” between
1933 and 1938.
• These storms often
featured fast moving
clouds of dust several
miles wide that covered
farms and homes,
destroyed crops, and
made people sick.
The Dust Bowl
• The Dust Bowl refers
to parts of the Great
Plains that
experienced the most
intense soil erosion
and dust storms of the
1930s.
• This region included
parts of Oklahoma,
Texas, Kansas,
Colorado, and smaller
parts of New Mexico
and Nebraska.
The Dust Bowl
• Many people left the region
hit by the Dust Bowl. They
abandoned their homes and
looked for work in Western
states, such as California.
• However, many stayed
behind and attempted to
maintain their lives and
farms.
Migrant family in San
Francisco, 1935
Farmer leveling dust hills in Texas,
1938
• The 1930s created the term
“hoboes” to describe poor
drifters
• 300,000 transients – or
hoboes – hitched rides
around the country on
trains and slept under
bridges (thousands were
teenagers)
• Injuries and death was
common on railroad
property; over 50,000
people were hurt or killed
HOBOES
TRAVEL
AMERICA
EFFECTS OF DEPRESSION
• Suicide rate rose more
than 30% between 19281932
• Alcoholism rose sharply in
urban areas
• Three times as many
people were admitted to
state mental hospitals as
in normal times
• Many people showed great
kindness to strangers
• Additionally, many people
developed habits of
savings & thriftiness
SECTION 3: HOOVER
STRUGGLES WITH
THE DEPRESSION
• After the stock market
crash, President
Hoover tried to
reassure Americans
• He said, “Any lack of
confidence in the
economic future . . . Is
foolish”
• He recommended
business as usual
Herbert
Hoover
HOOVER’S PHILOSOPHY
Hoover believed it was the individuals job to
take care of themselves, not the governments
• Hoover was not quick to
react to the depression
• He believed in “rugged
individualism” – the idea
that people succeed
through their own efforts
• People should take care of
themselves, not depend on
governmental hand-outs
• He said people should
“pull themselves up by
their bootstraps”
HOOVER’S SUCCESSFUL
DAM PROJECT
• 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 TAKES ACTION:
TOO LITTLE TOO LATE
Hoover’s flurry of activity came
too late to save the economy or
his job
• Hoover gradually softened his
position on government
intervention in the economy
• He created the Federal Farm
Board to help farmers
• He also created the National
Credit Organization that
helped smaller banks
• His Federal Home Loan Bank
Act and Reconstruction
Finance Corp were two
measures enacted to protect
people’s homes and
businesses
A. Hoover’s Philosophy:
Rugged Individualism & Laissez-Faire -- Not
Welfare
• "Unemployment in the sense of distress is
widely disappearing. . . . We in America
today are nearer to the final triumph over
poverty than ever before in the history of
any land. “
-- Hoover, 1928
• Hoover was increasingly
unpopular, but he continued
to try...  he persuaded
Congress to establish the
RECONSTRUCTION
FINANCE CORPORATION
• had power to make
emergency loans to banks
• but it was too little too
late…
• and Hoover wouldn't
involve himself in any
programs of direct gov'tal
aid to individuals -didn't
want to erode Americans
sense of "RUGGED
INDIVIDUALISM"
• people were frustrated - isolated protest movements
• EX: Dairy farmers frustrated w/low price of milk
refuse to sell (dump it)
• EX: WW1 veterans (pensions discontinued by
congress) march on Washington = BONUS MARCH
(by BONUS ARMY)
• they reached Washington by 1931, set up
shantytowns = HOOVERVILLES (food scraps =
HOOVER-MEALS, hitchhiking journeys = HOOVER
RIDES)
• after one year they were forcibly dispersed by the
Army (MacArthur/Eisenhower)
• Pres. Hoover’s responses…
• he didn't believe that the gov't should
play an active role in the economy
• he persuaded bankers/business to
follow his policy of VOLUNTARY NON COERCIVE COOPERATION where he
gave tax breaks in return for private
sector economic investment
• Hoover also organized some private
relief agencies for the unemployed
• he worked out a system with European
powers that owed U.S. money as a
result of WWI debts = HOOVER
MORATORIUM - put a temporary stop
to war debt & reparations payments
• Euro. countries were to purchase
American goods instead to stimulate
American economy
• in early 1931 these measures
appeared successful, but then......the
TARIFF WARS
• Democrats in Congress passed a high
tariff (SMOOT HAWLEY) to protect
U.S. industry (hoped to stimulate
purchasing of U.S. goods)
• this turned out to be a fatal error...
• Congress did not understand that the
world had become a GLOBAL
ECONOMY
• in retaliation other countries passed
high tariffs and no foreign markets
purchased American goods, so U.S.
productivity decreased again
• also in 1931, the Soviets
flooded the world market
with cheap wheat (1/2 U.S.
price) in an attempt to get
money to pay back Austrian
banks ( but price was too
low and they couldn't)
• this resulted in the
BANKERS’ PANIC
• Austrian banks borrowed
from German banks and
appealed to the BANK OF
INT'L SETTLEMENT (Fr
veto)
• Austrian banks and loaning
German banks therefore
were forced into bankruptcy
• and b/c German banks had
borrowed from Americans,
U.S. banks began to go
bankrupt, wiping out life
savings of thousands of
Americans
BONUS
ARMY
• A 1932 incident further
damaged Hoover’s image
• That spring about 15,000
World War I vets arrived
in Washington to support
a proposed bill
• The Patman Bill would
have authorized Congress
to pay a bonus to WWI
vets immediately
• The bonus was scheduled
to be paid in 1945 --- The
Army vets wanted it NOW
BONUS ARMY
TURNED DOWN
Thousands of Bonus Army soldiers
protest – Spring 1932
• Hoover called
the Bonus
marchers,
“Communists
and criminals”
• On June 17,
1932 the Senate
voted down the
Putnam Bill
BONUS MARCHERS CLASH
WITH SOLDIERS
• Hoover told the Bonus
marchers to go home–
most did
• 2,000 refused to leave
• Hoover sent a force of
1,000 soldiers under the
command of General
Douglas MacArthur and
his aide Dwight
Eisenhower
AMERICANS SHOCKED AT
TREATMENT OF WWI VETS
• MacArthur’s 12th infantry gassed more than 1,000
marchers, including an 11-month old baby, who died
• Two vets were shot and scores injured
• Americans were outraged and once again, Hoover’s
image suffered
• 1932 ELECTION
• 1 out of 4 was
unemployed…
• nat'l income was
50% of what it had
been in 1929
• Repubs. nominated
Hoover  no hope
• winner by a
landslide =
FRANKLIN DELANO
ROOSEVELT (Dem N.Y. governor)