Transcript Great Depression in the Americas

1914 – 1940ish
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1920 Economic Growth
Causes of the Depression
Solutions to the Depression
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In search of prosperity after WWI Americans elected three Republican Presidents
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Warren G. Harding, Calvin Coolidge, and Herbert Hoover
Harding-run itself without government. interference
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Laissez Faire policy
LABOR
▪ Decline of Unions
▪ Offered benefits such as higher wages or stock ownership
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Reduced spending and showed a surplus in the treasury
Raised protective tariffs and European nations retaliated by increasing theirs making it tougher to sell goods overseas
Returned to the laissez faire approach to reduce government regulation of business
Close friends in office, Ohio Gang, got rich at the citizens they were supposed to serve
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Died in office of a heart attack in 1924
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COOLIDGE
Hands Off” – believed government didn’t have to do much for America to prosper
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Quiet, honest, and frugal
Believed the creation of wealth benefited the nation as a whole
Reduced national debt, trimmed federal budget, and lowered taxes to give incentives for business
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Economy soared
Farmers struggled to keep land
Prices of goods fell
African Americans faced severe discrimination
Mexican Americans faced low wages
Coolidge believed it was not his responsibility to help create and ideal nation
Hoover
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Teapot Dome Scandal-leased oil properties to private oilmen in return for ‘loans’ which were just bribes
More involved with the economic output of products and the efficiency
PROSPERITY
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New Goods, economic boom, rising wages, high productivity, automobile had ripple effect
Advertising / Credit Buying
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Wartime shortages forced saving at home
and soldiers came home with back pay
Inflation – too much money and too few
goods
Production couldn’t meet demand
War was over so people began striking
Farmers did not share in the prosperity of the
decade
Overproduction, cars, prohibition, and
changing social values
There were five main sources of the 1920s
economic boom:
1. Effect of WWI on technology.
2. Scientific management
3. Rapid increase in worker productivity
4. Psychology of consumption
5. Relations between the federal government and
big business
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1. Effect of WWI on Technology.
 During the war, a significant labor shortage,
combined with the need for increased
production, necessitated new, more efficient
methods of production.
 The War stimulated a number of old
industries, such as petroleum and steel
 Money was spent on new machinery for
industry
2. Scientific management
 American industries implemented scientific
management on a grand scale, pouring
millions of dollars into industrial research.
3. Rapid increase in worker productivity.
 Workers earned higher wages and became
better consumers.
 A new innovation appeared: the installment
plan, which encouraged Americans to build
up debt in order to buy consumer goods.
4. Psychology of consumption.
 Americans wanted to get rich, and to do so with little
effort.
 Radio
▪ 3 million American households had radios
 Motion pictures
▪ one of the ten largest industries in the United States during the
1920s, selling 100 million tickets a week
▪ Joseph P. Kennedy
▪ During eight months in Hollywood, he made $6 million.
 New electric appliances
▪ Lightened the load of the middle-class American housewife
▪ Women became America's greatest consumers
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1920’s begins the consumer revolution
 New and affordable goods became affordable to the public and not just
the wealthy
▪ Washing machines, vacuum cleaners, irons, radios, and refrigerators
 Advertising became popular to sell more product
 Bought products that didn’t even exist a year before
▪ Kleenex and Listerine
 Began buying on credit, or installment buying
▪ Own products now they would have had to save for years in order to own
 Americans began putting money into stocks for money quick
▪ Bought on margin-purchasing stock from a broker over a period of months
and using the stock as collateral
 Rural Americans were still facing hardship, wealth was poorly
distributed, industry wages rose at a slower rate than corporate sales,
farm incomes declined, their debt grew and farm prices fell
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Automobile industry
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One automobile for every five Americans
Two factors led to the rising popularity of cars:
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Cost-- The price of automobiles declined steadily until the mid-1920s
Credit-- installment plan
Stocks rose in price, factories produced more, and wages rose
Ford brought mass production to new heights
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Model T was a reliable car the average American could afford
Assembly line techniques dropped production to 90 minutes
1927, 56% of Americans owned a car
Ford gave employees Sat. and Sun. off
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Stimulated growth in other industries
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Created new and often better paying jobs, spurring national prosperity
Gave people a new sense of freedom and prosperity
Live farther from their places of work in suburban communities
Created a more mobile society
Broke down the stability of family life.
Broke down traditional morality
Economic Effects of the Automobile:
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Steel, glass, rubber, asphalt, wood, gasoline, insurance, and road construction
Social Effects of the Automobile:
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The weekend never existed before then
Own workers became potential buyers, earning more money, and having more time to enjoy it
Promoted growth of other industries. Especially petroleum, rubber, and steel.
Helped fuel the creation of a national system of highways.
Created new service facilities
People of every income level considered the automobile a necessity rather than an luxury. People were willing
to sacrifice food, clothing, and their savings in order to own a car.
5. Relations between the federal government and big business.
 There were four major ways in which the federal government supported
big business.
 High tariff policies. The Fordney-McCumber Act (1922) and the HawleySmoot Act (1930) created the highest-ever schedule of tariffs for foreignmade goods.
 Andrew Mellon. Secretary of the Treasury from 1921 to 1932. In response
to his demands, Congress repealed the excess profits tax and reduced the
rates for corporate and personal income taxes. Mellon provided business
leaders with a list of tax loopholes which the IRS had drawn up at Mellon's
request.
 Cutbacks in the Federal Trade Commission (FTC). The federal
government had created the FTC to regulate big business and to look into
unfair trade practices, but the commission did less and less of this in the
1920s.
 Herbert Hoover. As Secretary of Commerce and as President, Hoover
encouraged price-fixing and believed that the government was responsible
for helping businesses profit.
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Stock Market Crash
 Wednesday, stock prices dropped so sharp that investors lost about $5 billion
 BLACK THURSDAY: October 24, 1929, Everyone tried to sell their stocks afraid they
would be worthless
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False Prosperity
 overdependence on mass production, consumer spending, advertising, welfare
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capitalism, high tariff, "invisible hand"
automobile was the leading industry
chemicals, appliances, radio, aviation, chain stores
overproduction in textiles, farming, autos
real wages increased only 11%
60% population less than $2000 poverty minimum
top 5% earned 33% income - spending by the rich essential
Andrew Mellon cut taxes
Banking Crisis
 deposits withdrawn, deflation
 9000 banks fail in 1930, 1932 waves
 Austria's bank failed May 1931
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Over speculation
 Prices had risen far above the stocks actual value and investors had
used unsound and unethical practices
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Margin buying
 People were able to invest money that they didn’t really have
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Stock pooling
 Wealthy investors got together and bought large blocks of certain
stock, traded to make it look active and then sold on an agreed upon
date
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Federal Reserve Board lowering interest rates
 Lowered rates it charged member banks and they lowered rates for
customers which put more money into circulation. This money was put
into get rich schemes instead of solid, long-term investments
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Unemployment
 ripple effect as leading factories close
 rose to 25-35% of total labor force, 80% in Toledo
 farm income declined 60%; 1/3 lost land
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Trade Collapse
 foreign countries retaliate with high tariffs
 Weimar Republic unable to pay reparations or U.S. banks loans
 U.S. had been creditor with $638m annual surplus
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Republican Policy
 laissez faire, balanced budget, trickle down, voluntarism
 no use of monetary or fiscal policies
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Unequal distribution of wealth and income
 The tremendous concentration of wealth in the hands of a
few meant that continued economic prosperity was
dependent on the high investment and luxury spending of
the wealthy
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Unequal distribution of corporate power
 Ongoing movement of business consolidations and mergers
in the United States
 Eliminated competition in major American industries
 If just a few companies went under after the Crash, the
whole economy would suffer
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Limited or poor state of economic intelligence.
 Most American economists and political leaders in 1929 still
believed in laissez-faire and the self-regulating economy
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Causes of the Great Depression
 Agriculture
▪ Farmers had huge debts, failed to sell off huge crop surpluses,
couldn’t pay debts to banks
▪ Rural depression in 20’s living credit month to month
 Uneven distribution of wealth
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Corporate profits skyrocketed, making the rich, richer
Workers became less poor, not rich
Wealthiest 1% made as much as the bottom 42%
Wealthy did not buy enough to keep the economy going
Overproduction of farmer and under consumption of the
lower-income industrial worker created instability
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Causes of the Great Depression
 Credit allowed citizens to accumulate more debt
▪ Masked the problems of Americans living beyond their means
 Stock Market Crashes
▪ Prices had no basis in reality
▪ Investors gambled with money they didn’t have
▪ October 29, 1929 bottom fell out of the market, 16 million
shares were sold as the market crashed
▪ Did not start the depression but did spark a chain of events
that would make it worse
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Chain Reaction
 Banks collapse
▪ Everyone tried to withdraw money that was not there
▪ 3691 banks went under in 3 years
▪ Federal Reserve limited money supply to discourage lending
▪ Too little money in circulation to help economy after the crash
 Businesses close and unemployment rises
▪ Crash reduced consumer spending
▪ Cutback production and laid off workers and closed factories
▪ Americans lost jobs, unemployment grew, incomes shrank,
consumers spent less money
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Chain Reaction
 Tariffs add to woes
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Raised prices on foreign imports
European countries retailiated and raised tariffs on our goods
Created huge abundance of unsold products
Destroyed international trade
 Depression then goes global
▪ WWI reparation payments, war debt payments and
international imbalance of trade
▪ International economy had been funded by US loans
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Canada
 Too many people had no means to buy what it could
produce.
 Enormous wheat crop in 1928 was the immediate cause of
depression
 Wheat farmers pooled their harvest together instead of
going to the exchange board
▪ It worked and they added to their acreage and equipment
▪ Problem was the next year they ran into too much inventory too little
demand and competition from U.S., Argentina, Australia, and the
Soviet Union
 This meant half the countries purchasing power was out, the
equipment that was sold on credit could not be paid back,
and savings were virtually nonexistent
American banks no longer had money to loan other
nations
 Raised tariffs which made matters worse
 Reduced European imports
 Brought international trade to a virtual standstill
 Hoover gave European nations a one year grace on
debts, but this did nothing to help
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African Americans
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1939 election Roosevelt had their support
Placed more blacks in federal positions than any other president
They were called black cabinet
**not a single piece of civil rights legislation was enacted during the Roosevelt years**
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Held jobs in mining, railroad construction, and the steel industry
Most were migrant farm workers
Often resented by labor groups for accepting low wages
U.S and Mexico agreed on a program to encourage them to return home
Mexican Americans
American Indians
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Made some clear gains
Indian Reorganization act in 1934 halted the allotment of land to individuals and re-established tribal
ownership
Goal IRA was to improve economic conditions among Indians and to permit a return to the rich heritage
of communal work and life
¼ of people that worked for IRA were Native American
Women
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Made Gains
First Lady Eleanor Roosevelt
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Served as a symbol of the changing role of women in American society
Hoovers Response
 Saw Europe and Asian countries after WWI
 Gave economic aid to citizens and thought it took
away individual initiative
 RUGGED INDIVIDUALISM
 We would wait it out, this is how we grew to
greatness
 COMMUNITY CHESTS
▪ People contribute to privately organized welfare
funds
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Hoover’s Response Fails
 Hoover followed a hands off policy and saw downswings as natural
occurrence
 Asked businesses to keep employment, wages, and prices at current
levels
 Called government to reduce taxes, interest rates, and create publicwork programs
▪ Put more money into the hands of businesses and individuals to encourage
more production and consumption
 Requested wealthy to give more money to charities
 Relied too much on volunteer cooperation
▪ Wanted to encourage recovery not legislate recovery
▪ Wanted state and local governments to provide relief measures
▪ Didn’t have enough money or men to do anything
▪ Favored ‘rugged individualism’
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Hoover tries to go active
 Reconstruction Finance Corporation
▪ Lent billions to railroads, large business, and banks
▪ Trickle down economics
▪ Constructed Hoover Dam on the Colorado River
▪ Brought much needed employment to that part of the country
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Americans protest Hoover
 WWI vets seeking bonus from fighting wanted it
 Congress agreed and passed it, but Hoover vetoed it
 20,000 vets set up camp and occupied empty government
buildings
 Douglas MacArthur moved the marchers out of the city
altogether with George Patton and Dwight D. Eisenhower
▪ Many were injured and tear-gassed
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Franklin D. Roosevelt
 Immediate challenge was the banking crisis
▪ Bank Holiday and could not open until they had been examined
 Also started his first of many fireside chats, where he explained his
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policies in a simple manner
This was Roosevelt’s program to end the Great Depression
 RELIEF-programs to ease suffering of the needy
 RECOVERY-programs to lay the foundation for economic growth
 REFORM-help prevent future economic crises
Believed that the depression required strong action and
leadership by the federal government
 Sought the advice of professionals and academics called the
‘brain trust’
 Emergency Banking Bill, declared 4 day baking holiday, gave
banks time to get their accounts in order before they reopened
 Utilized fireside chats, ability to communicate with the American
people
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Relief
 CCC-Civil Conservation Corps
▪ Planting trees, setting firebreaks, and building dams
▪ Allowed members to develop job skills and earn
diplomas
 FERA-Federal Emergency Relief
▪ Direct relief to city and towns
 CWA-Civil Works Administration
▪ 4 million people jobs
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Recovery
 PWA-Public Works Administration
▪ Highways, bridges, power plants, dams
 TVA-Tennessee Valley Authority
▪ Produce and sell cheap electrical power, control floods, and
encourage private industries to come to the valley
▪ Worked well, but some saw it as socialism
 HOLC-Home Owners Loan Corporation
▪ Bought up mortgages and refinanced them so people could make
payments
 NRA-National Recovery Administration
▪ Help businesses organize codes setting prices and minimum wages
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Reform
 FDIC-Federal Deposit Insurance Corporation
▪ Guaranteed individual accounts and deposits
▪ Stabilized banking system by reassuring people that
their money was safe
 Took the U.S off of the Gold Standard
▪ Worked because people did not lose faith in paper
currency
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The 2nd New Deal
 HOUSING REFORM
▪ Federal Housing Administration
▪ Encouraged to give loans and customers to apply
▪ Gave banks insurance
▪ Change repayment plans and down payments
 Social Security
▪ Huge reform in summer of 1935
▪ Social Security, wanted to help people who were laid off,
disabled, widows and children
▪ Best known now for its old-age insurance
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Public Works
 Wanted to end direct relief and replace it with public
works
 WPA-works progress administration
▪ Built roads, bridges, playgrounds
▪ Encouraged writers, poets, and students
▪ Set up National Youth Administration
▪ Mow lawns, fix furniture, paint, serve
▪ WPA $11 billion of fed. funds, largest of any New Deal programs
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Roosevelt faces opposition
 New Deal made the government too powerful
▪ Telling businesses how to operate
▪ Spending large sums of money
▪ Piling up huge national debt
▪ Destroying free enterprise
▪ Undermining individualism
▪ Threatened individual freedom
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Brazil and Getulio Vargas
 The New York crash of 1929 had a severe impact on Brazilian economy
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(the price of coffee fell from $200,000 the bushel in 1929 to $21,000 in
1930), in result pulling them into the depression of the 30’s
The period was characterized by a large intervention of the State;
Vargas used his nearly unlimited powers to implement deep changes in
Brazil.
Vargas created the DASP - Administrative Department of Public
Service, to adapt the civil service to the new times; DASP was the
beginning of professionalization of civil servants in Brazil
Noticing that the industrialization was changing the labor relationships
in the country, Vargas instituted the minimum wage in Brazil
Passed a labor legislation (basically a declaration of the rights of
workers) which is enforced until today. Because of these acts, which
benefited a mass of urban workers, Vargas is often referred to as Father
of the Poor (Pai dos Pobres)
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Argentina and the Concordancia
 The new president, facing a difficult economic situation,
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instituted several controversial reforms and initiatives.
In 1933 he signed the Roca-Runciman Agreement with Great
Britain, which guaranteed Argentina a fixed share in the British
meat market and eliminated tariffs on Argentine cereals.
In return, Argentina agreed to restrictions with regard to trade
and currency exchange, and it preserved Britain's commercial
interests in the country.
Many Argentines saw the treaty as a sellout to Britain, although
from the British point of view the pact accorded privileges not
given to any other country outside their empire.
Other unpopular reforms included
▪ Restructuring the monetary system
▪ Establishing agencies to control exports
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Latin America
 Import Substitution Industrialization
▪ Industrial development program based on the
protection of local infant industries through various
policies (international and domestic)
▪ A deliberate effort to replace major consumer imports
by promoting the emergence and expansion of
domestic industries such as textiles, shoes, household
appliances usually requiring the imposition of protective
tariffs and quotas to protect new or infant industries
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Mackenzie King
 Actually in office when Depression hit, but re-
elected later because opposition did not fair well
 Response in second term
▪ Bank of Canada became a public institution
▪ Put $ into Canadian Broadcasting Corporation
▪ Launched government owned Trans-Canada Airlines
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Richard Bedford Bennett – “I promise you action”
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Forced tariff increases – just worsened problem
$20 million in emergency relief
Added a billion in national debt for relief projects
Established work camps for single men
▪ Many only earned 20 cents a day
 Near the end of his term, inspired by F.D.R he:
▪ Unemployment insurance
▪ Maximum hours of work
▪ Minimum wage
▪ Marketing legislation for farmers
▪ Measures against price fixing
▪ Federal Trade Commission
 Too little too late, not enough, or worsened the problem
 Many accepted the responsibility for their plight and died rather than
accept relief
EXTENSION OF POWER OF THE FEDERAL
GOVERNMENT
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BANKING REFORMS=LONG TERM STABILITY
INDUSTRY MONITORED BY THE GOVERNMENT
AGRICULTURE SUPPORTED BY GOVERNMENT
EXTENSION OF POWER OF PRESIDENT
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Active President
Strong Executive Leadership
DEFICIT SPENDING
SPENDING MORE MONEY THAN GOVERNMENT
RAISES IN TAXES
FEDERAL SOCIAL PROGRAMS
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WELFARE STATE RESPONSIBLE FOR ECONOMIC
SECURITY OF ITS PEOPLE
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INTENDED TO HELP IN TIMES OF NEED
GREATER CONCERN FOR WORKERS
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NATIONAL LABOR RELATIONS ACT
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FAIR LABOR STANDARDS ACT
CONSERVATION GAINS
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Permanent part of the government
RENEWAL OF FAITH IN DEMOCRACY
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Roosevelt ensured that the U.S would be strong enough
to defend democracy
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Effects of the New Deal
 Did not end the depression, WWII did that
 Brought fundamental changes to the nation
▪ Changed role of federal government in economy
▪ Role of Presidency
▪ Relationship of American people with government
 African Americans
▪ 1st African American cabinet member
▪ President refused to support anti-lynching campaign because southern
Democrats would block bills
▪ No Civil Rights reforms under Roosevelt
 Indian New Deal
▪ Gave Indians economic assistance and greater control over their own
affairs with new schools and hospitals
▪ Encouraged practice of religion, language, and customs
▪ Indian Reorganization Act restored tribal control over land
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New Deal Coalition
 Southern whites, blue collar workers, poor farmers, and African
Americans
 Since Lincoln African Americans began voting Democratic
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Government Expansion
 New Deal expanded the size and scope of the federal
government
▪ Withdrawing taxes directly from workers’ checks to distributing
benefits to the elderly
▪ Government acted as employer of the unemployed
▪ FDIC and SEC restored American trust in banks and the stock market
▪ Made US a welfare state, the government assumes responsibility for
providing for the welfare of children, poor, elderly, sick, and
unemployed
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Government Expansion
 Troubled conservatives argued the expansion of the
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government limited American rights
This very debate divides liberals and conservatives today
Gave the executive branch much more power
People call it the imperial presidency
Americans after WWII would seek to protect the balance
between the different branches of government and
between the federal and state governments
Called to limit a Presidents term in office to two
consecutive terms