Transcript Ch 8 Great Depression

Causes of the Great
Depression
Section 1
Prior to the Depression
 During the 1920’s consumption, the GNP, and the
stock market all went up.
 The Republican Party took credit for the prosperity
America was enjoying – Harding & Coolidge
 Herbert Hoover was elected president in 1928.
 Hoover’s philosophy was simple. He stressed the
importance of competition, but also voluntary
cooperation between labor and management.
 Hoover believed that American greatness showed
itself when owners, workers, and government
officials converged on common goals.
Lingering Problems of the 1920’s
 During WWI demand for crops sky rocketed. This
led to an increase in harvest yields and farmers
farmed more land – ¼ of US workforce = farmers
 Farmers had to buy costly new tractors and
equipment to meet demand.
 When the war ended the demand for crops went
down and farmers started falling into debt.
 The result was a rural depression during the 20’s
and many farmers were forced to sell of their
lands.
Uneven Wealth
 Industrial workers wages increased and provided
workers with more disposable income.
 Productivity per hour increased by 32%.
 Corporate wages increased 65 percent. So the
rich became richer, and the poor became less
poor.
 More than 60% of all families earned less than
2,000 dollars a year.
 24,000 of the wealthiest families earned more than
100,000 dollars a year. This led to an uneven
distribution of wealth.
 The wealthiest 1% of the population earned as
much money as the bottom 42%
Economy and Credit
 A healthy economy needs more people buying
more products, which will create more wealth.
 Under consumption will limit economic growth.
 Many Americans did not have enough money to
buy what they wanted or needed.
 Many Americans bought on credit. Pay a small
down payment and then pay in installments.
 80% of radios – 60% of cars  This masked the problem, and allowed Americans
to live beyond their means.
Stock Market Crash of 1929
 By 1929 many soaring stock prices were based
purely on confidence.
 In September the market began to sputter and fall.
Prices started to slide down.
 Investors started to lose confidence.
 On October 29th, or Black Tuesday, the market
collapsed and 16 million shares were sold.
 Fortunes were wiped out, and many investors who
had bought on margin lost everything they had.
Great Depression Begins
 Great Depression: A period of time from
1929 to 1941 in which the economy faltered
and unemployment soared.
 Banks start to fail: People lost confidence in
the banking system, and many pulled their
money out of the banks. The banks could
not survive this run of requests by people for
their money.
 By 1931 over 3,500 banks failed in America.
The Other Reason Banks Failed
 During the 20’s the Federal Reserve cut
interest rates to stimulate economic growth.
 By 1929 the Fed was worried about
investors over speculation, and the Fed
eliminated money supplies to discourage
lending.
 By doing this there wasn’t enough money in
circulation and when people went to get
their money out of the banks, the banks had
no currency.
Unemployment Rises
 When the banks failed consumer spending
decreased.
 Business leaders believed that the survival of their
companies depended on layoffs to reduce payroll
and production cutbacks to maintain prices.
 As businesses closed plants and fired workers,
unemployment grew and spending shrank.
Businesses kept cutting more production and
more workers.
 By 1933, nearly 25 percent of Americans lost their
jobs.
Hawley-Smoot Tariff Act
 To encourage people to buy American products.
The government passed the Hawley-Smoot Tariff
to drastically raise the prices on foreign goods.
 European countries retaliated by raising their tariff
rates.
 The act added to problems of the depression.
Foreign markets were now closed to American
producers.
 The act helped destroy international trade. No
one was selling goods overseas.
Depression Goes Global
 Germany ceased their reparation payments
to Britain and France.
 The US agreed to suspend France and
Britain’s war debt payments.
 The global economy had been largely
funded by US loans to Europe, but now the
US had to cutback the loans.
 European nations started seeing bank
failures, banks closing, and unemployment.
Theories…
 Milton Friedman – economist - believed that
the depression was the result of the
contraction of the money supply
 John Maynard Keynes – economist –
argued that a lack of government
interference in the economy caused the
depression
 Ludwig von Miles – economist – criticized
centralized economic planning and
management
SECTION 2
The Depression and the Job Market
 During the 1920’s the unemployment rate
had never been above 3.7%.
 Now it was near 25%.
 Many workers kept their jobs, but saw their
wages or hours cut. Many workers brought
home paychecks that were up to 30% less
than their pre-depression check.
The Look of the Depression
 Many people’s clothes started to look worn.
Collars and cuffs became frayed, and the
knees of men’s pants became patched
because of the holes in the knees.
 People ate smaller meals, water replaced
milk, and people ate less meat.
 People went to soup kitchens for free meals.
 Or waited in bread lines: places were people
lined up for free scraps of food.
Hoovervilles
 People sold furniture, pawned jewelry, and moved
to cheaper housing to save money for food.
 Millions were evicted from their homes; people
lived in empty railway cars, boxes, and on
benches.
 People grouped together in Hoovervilles;
shantytowns built on public land or in vacant lots.
 The Largest Hooverville was in Central Park in
NYC.
 Newspapers were used as blankets and called
Hoover blankets.
http://youtu.be/5ZWvlIi4zQs
Rural America
 Prices for farm goods bottomed out…and many
gave up farming because they could not make any
money.
 In Sioux City, Iowa farmers threatened to strike if
the price of milk did not go up. They were ignored,
and in protest they dumped 1000 gallons of milk in
the street in protest.
 Between 1930 and 1934 nearly 1 million farmers
lost their farms.
 Some farmers did not leave, and became tenant
farmers, working for big land owners instead of
themselves.
Dust Bowl
 A great drought hit most of the Great Plains during
the 1930’s.
 Farming made the drought worse. Farmers had
plowed under the natural grass which had kept
topsoil from blowing away. With no rain and less
grass, the land turned to dust.
 Dust storms blew across the Plains, sometimes
reaching 8,000 feet high, and they could move up
to 100 miles an hour. The storms could kill if
people were caught outside.
 Dust blew in the air all the way to the Atlantic
Ocean and eastern cities.
Okies
 Many families trapped in the Dust Bowl had to
leave the region.
 Okies: Term given to people leaving the Dust
Bowl, even if the people were not from Oklahoma.
 800,000 people migrated out of the Dust Bowl.
 Many headed west to California and Oregon.
 Many were promised jobs, however many times
there were none when they arrived.
 Rural states lost population, while large cities
gained population.
 The Federal Government eventually dammed
western rivers to provide irrigation to the Plains.
Family Life
 The Depression shattered families. Many men
deserted their families because they were
ashamed that they could not provide for them.
 Others sank into depression or despair.
 Those who were employed often feared they
would lose their jobs. Many also felt guilty
because so many of their friends and relatives
were unemployed.
 Birthrates plummeted: People could not afford to
have more children.
Family Life
 Many kids quit school and ran away from home
looking for work.
 Discipline became a problem at home.
 Many African-American families looked to their
families and religion for guidance during the
depression.
 Unemployment among AA was about 50% in
1932.
 Okies competed with Mexican-Americans in CA
for jobs.
 Many white Americans clamored for Repatriation,
or encouraging Mexicans to leave the US and go
back to Mexico
Hoover’s Response Fails
Section 3
Hoover’s Response
 Hoover viewed upswings and downswings of
business as a natural occurrence. He also felt the
government should not interfere.
 Hoover asked businesses and industrial leaders to
keep employment, wages, and prices at current
levels.
 He also called on the government to reduce taxes,
lower interest rates, and create public works
programs
 Hoover also called on wealthy Americans to
donate money, food a to charities.
Volunteerism Fails
 Hoover had relied to much on donations,
volunteering and cooperation.
 Businesses still cut wages and laid off workers
because it was in their best interests.
 Localism: the policy whereby problems could
be solved at local and state levels.
 However, local governments did not have the
resources to combat the crisis.
Fighting Back
 Hoover believed that it was a lack of credit
that had caused the Depression
 He decided to use federal resources to
combat the depression.
 Reconstruction Finance Corporation: Gave
loans to railroads and large businesses.
The act also lent money to banks who were
supposed to lend it to businessmen.
 The businessmen would then hire workers
and consumption would increase…..
Fighting Back (cont)
 The theory of lending money to bankers who
would then lend it to businesses was known as
trickle down economics.
 The plan failed though, bankers often did not
lend the money out, and when businesses did
receive loans they did not hire more workers.
 One RFC project that did work was the building
of the Hoover Dam, which brought employment
to the SW.
Capitalism
 Some people demanded radical change. They
wanted the country to accept socialism or
communism.
 These people thought capitalism created
unhealthy competition and spread wealth out
unevenly.
 However, many Americans still believed in the
American Dream or opportunity and progress
 Economic trouble in Europe helped the rise
in Fascist leaders like Benito Mussolini in IT
and Adolf Hitler in GER
 However no fascist shift took place in US
 Most Americans wondered whether
capitalism and democracy would be able to
overcome the economic crisis in the US
 But even though they wondered no one
really lost faith with their country
Bonus Army
 WWI veterans were promised a bonus after WWI, however
it never came.
 Congress said they would pay the bonus in a lump sum in
1941.
 The Bonus Army began to call for Congress to pay it 1931
to help out of work vets.
 Congress passed the bill, but Hoover vetoed it saying
many vets did not need the early money.
 Veterans groups marched on Washington, and riots broke
out when the police tried to kick them out.
 The military lead by MacArthur and included Patton, and
Eisenhower- tear gassed and beat many of the veterans.
 This episode sealed Hoovers fate even though he had not
ordered the violence. He would not be reelected.
Bonus Army Clip