Transcript problems of the Depression

The Depression
Problems and Solutions…
Problem 1: over production
• The economy is producing more goods
than can be purchased and consumed.
What to do?
• Car production has been reduced from 411,000 a month
in 1929 to just 89,000 a month in 1932. The average
American can no longer afford a car.
• 1 billion barrels of oil were produced in 1929;
this year there will be just 800,000
• Farm production was way over the demand and
the price of wheat dropped from $1.37 to $0.61
a bushel in 1930. Farmers are now LOSING
$1.50 on every acre they plant!
What to do?
1.
2.
3.
The federal government should allow farmers and
businesses to fail. The business cycle always has ups
and downs. Eventually the economy will right itself
without the government interfering.
The federal Government should create a planning
agency, overseen by the govt., but with input from the
business leaders, to better plan production goals.
Farmers should be paid by the govt. to take crops out
of production until farm prices are stabilized.
The federal govt. should oversee and plan all business
and agricultural production to more closely match
supply and demand.
Problem #2: Unequal Wealth
• People can’t buy things because most don’t
have enough money.
– 1 % of the population has 59% of the wealth. 33% of
the money is held by 12% of the people and the last
87% are left with just 8% of the money.
– 92% of American families have an income of $2,500
or less
– The wealthy spend their money on luxury items rather
than necessities, so things like vacuum cleaners,
refrigerators and other goods don’t sell.
What to do?
1. The federal government should do nothing
about this so-called “problem”. The rich people
worked hard and deserve their money.
2. The federal government should pass laws
leading to higher taxes on the wealthy. The
money from those taxes can go to help the
poor.
3. The federal govt. should take the income and
property of the rich and redistribute it so all
Americans share equally.
Problem #3: Unemployment
• This problem has been growing since the stock
crash. Unemployment has now reached high
levels.
– In 1920 only 49 per 10,000 businesses failed. In 1932
the failure rate was 159 per 10,000.
– Business profits have dropped from $10 billion in
1929 to just $1 billion in 1932.
– 13 million people are out of work; many others
have taken severe pay cuts.
– One man walked 900 miles looking for work.
– In New York, there were 300 available jobs,
and 5,000 people applied!
What to do?
1. The federal govt. should encourage business
growth so that thriving businesses can provide
jobs. Loans should be given to struggling
businesses. Tariffs should be put in place to
encourage people to buy from American
companies.
2. The federal govt. should disregard costs and
immediately begin the construction of public
works -- construction to provide jobs.
3. The federal govt. should take control of all
businesses and industry and provide a job for
every American.
Problem #4: Massive Poverty
• The depression has been hard on
everyone and people are suffering.
– Over 60% of Americans are technically poor
– Nine million savings accounts have been
emptied since 1930.
– 273,000 families have been thrown out of
their homes in 1932.
– 2 million homeless are roaming the countryfarmers, women, children….
– In New York, ¼ of all children don’t get
enough food.
What to do?
1. The wealthy should pay less taxes, then they
will put more money into their businesses and
provide jobs. The govt. should not help the
poor as it will only encourage people not to
look for work.
2. The federal government should immediately
begin a program of direct relief to the poor. The
program should include monthly payments to
those without enough money, free food, and
public housing.
3. The federal govt. should confiscate income
and property from the wealthy and redistribute
it to the poor.
3 solutions
• “ Say civilization is a tree which, as it grows,
continually produces rot and dead wood. The
Radical says: ‘cut it down’. The Conservative
says: ‘don’t touch it’. The Liberal says: ‘let’s
prune it, so that we lose neither the other trunk
nor the new branches.” FDR 1932
• 1’s
• 2’s
• 3’s
Hoover’s failure…
•
Problems continue…
–
–
–
–
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2 million homeless
Americans divided about what to do
Radicals wanted to level wealth
“Tax the rich, feed the poor”
Hoover worked 16-18 hrs/day….
•
•
–
believed in hard work and perseverance
Self-made millionaire
Many attempts… no success
A new president, a new deal…
•
Election of 1932
–
•
Franklin D. Roosevelt…FDR
“ Happy days are here again”
–
–
Promised a NEW DEAL
Country was in 4th year of
depression
•
FDR background
–
–
–
–
–
wealthy family
N.Y.C.
Went to Harvard/
lawyer
1921: polionever walked
again
Governor of NY
1928-32
•
Early recovery once elected
–
Within one week: Congress passed two bills
•
•
–
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Emergency Banking Relief Act
Economy Act: balance budget
By summer of ’33, 3/4 of all banks were back
Everyone in Congress cooperated
•
•
wanted to end depression
FDR took advice
from everyone
What did the NEW DEAL do?
– Aid to elderly -65 years old and
up•
Social Security
Act
– Aid to farmers
•
•
Agriculture Adjustment Act
Govt. subsidized farms to regulate production
– Government pays money not to grow crops…why???
– Direct Relief
•
•
•
Federal Emergency Relief Act
$50 million
local and temporary
– Insured bank deposits
•
Fed. Deposit Insurance Corporation (FDIC)
– maintain stability and trust with banks
– guaranteed to $2,500
– Jobs Programs
•
Civilian Conservation
Corps
– Various jobs created:
sidewalks, golf courses,
trails, helping women
farmers
– Public Housing
•
Public Works Administration
– subsidized housing
– provided cheap housing
– helped some pay rent
– Regulate stock market
•
Securities and Exchange Commission
– registered stocks, limit credit, investigate fraud (Martha
Stuart)
Lasting Impact…
• Unemployment dropped every year from
1934-1939
• Business failures decreased
• Many programs still used today!
• However, only WWII and the need for
increased production really helped!