The Great Depression and the New Deal, 1929-1939 Chapter 24 Notes

Chapter 24 - The Great Depression and the New Deal, 1929-1939 - Depression in 1930s felt different from past depression, more failures and unemployment Causes and Effects of the Depression, 1929 -1933 - - Wall Street Crash - Huge economic boom in 1920s, average investor bought $1,000 in stocks and doubled within year - Millions lost money in October, 1929 - Balck Thursday and Black Tuesday - October 24, unprecedented amount of stocks being sold, stock prices plunged - The next day, bankers tried to fix issue by buying millions of stocks - Selling continued on monday and on tuesday, everything was sold and no buyers Causes of the Crash - - - Uneven distribution of Income - Wages increase very little compared to increased productivity - Top 5% richest owned 33% of all income; product demand decline, business lay off workers Stock Market Speculation - People speculate stock in hopes the price would go up to get quick profit - Buying on margin - borrow money to buy stock; if stock price go down then they lose everything Excessive Use of Credit - People thought economic boom would last forever so increased use of credit; debt led to bank failures and loans - Overproduction of Consumer Goods - Weak Farm Economy - Government Policies - - Overproduction, high debt, low prices since end of WWI Government had faith in business and didn’t control or regulate; high tariffs to protect US industries but hurt farmers and international trade - Federal Reserve only tried to protect gold standard, people try to get money out of banks asap which caused more banks to fail - Global Economic Problems - US failed to recognize European economic problems, high tariffs weakened Europe and contributed to worldwide depression - Effects - US Gross National Product dropped from 104bil to 56bil, nation’s income declined 50% - 20% of banks closed wiping 10 million savings accounts, money supply contracted 30% and 25% of workforce unemployed - Ended republican domination in the government Hoover’s Policies - Hoover thought the crash would end very soon; urged businesses not to cut wages and unions not to strike, and private charities to increase efforts for needy and jobless - Took traditional view that public relief should come from state and local government, not federal - Responding to a Worldwide Depression - Hawley-Smoot Tariff (1930) - In June, 1930, Hoover made highest tariffs rates in history; tax increase from 31% to 49% European countries retaliate by playing high tariffs on US goods, international economies went into further depression - Debt Moratorium - Hoover stopped Dawes Plan, international economy suffered from massive loan defaults, and banks all over the world had many withdrawing money - Domestic Programs: Too Little, Too Late - By 1931, Hoover convinced that federal gov needed to help so assisted farmers and struggling businesses - Federal Farm Board - Created in 1929 before crash but powers enlarged to meet economic crisis Help farmers stabilize prices by holding surplus grain and cotton in storage, but too much to handle continued overproduction - Reconstruction Finance Corporation (RFC) - Emergency loans stabilize key businesses then benefits would trickle down to smaller businesses and ultimately bring recovery - Despar and Protest - Unrest on the Farms - Farmers in midwest formed Farm Holiday Association which attempted to reverse prive drop by stopping crop of grain harvested; effort collapsed after violence - Bonus March - WWI veterans went to DC and demanded immediate payment bonuses, Congress couldn’t pass the bill, 2 veterans killed in clash between police - Hoover sent army to crush revolt, used tear gas and tanks to destroy shantytowns; Americans regard Hoover as heartless and uncaring - The Election of 1932 - Republicans nominate Hoover, Democrats nominate FDR - Results - Hoover as “Lame-Duck” President - - 60% of voters thought it was time to change and both houses had democratic majority 20th amendment (aka lame-duck amendment) shortened period between presidential election and inauguration so the start of new term would be January 20th Franklin D. Roosevelt’s New Deal - Expanded government and presidential powers to deal with depression - FDR: The Man - - - Disability - He was paralyzed by polio but eventually got control of his upper body but still couldn’t walk - Warm personality, gifted speaker, inspired people Elanor Roosevelt - Most active first lady in history, wrote newspapers, speeches, and traveled - Influenced FDR to support minorities and less fortunate New Deal Philosophy - The Three R’s - New Deal programs were to serve the 3 R’s: relief for people out of work, recovery for business and economy, and reform of economic institutions - Brian Trust and Other Advisors - FDR relied on a group of advisors who assisted him as governor of NY: Louis Howe was chief political adviser and university professors in group Brain Trust helped with economic matters - FDR appointed the most diverse positions in history; ex. Secretary of Labor Frances Perkins was first woman in cabinet - The First Hundred Days - Right when he got into office, FDR called Congress for 100-day session; made WPA, AAA, CCC, NRA - Bank Holiday - Called for all banks to close on March 6, 1933, FDR went on radio and explained they would reopen after enough time for reorganization - Repeal of Prohibition - Beer-Wine Revenue Act legalized sale of beer and wine, 21st amendment repealed 18th ending prohibition - Fireside Chats - Financial Recovery and Reform Progress - Went on radio and assured everything was safe; people put money back in banks - Emergency Banking Relief Act authorized government to examine banks and reopen them - Glass-Steagall Act increased regulation of banks ad limited how banks could invest money - FDIC guaranteed individual bank deposits and gold standard was restricted to international transactions - - HOLC provided refinancing for homes to prevent foreclosures - Farm Credit Administration provided farms loans to prevent foreclosures Relief for the Unemployment - FERA offered grants of money and soup kitchens for jobless - PWA gave thousands of jobs; including public works, bridges, dams, roads - CCC employed me on projects on federal land for money - TVA hired people in poorest region to build dams, operate power plants, control floods, and manufacture fertilizer - Industrial Recovery Program - NRA directed by Hugh Johnson attempt guarantee reasonable profits for businesses and fair wages; also suspended antitrust laws - Farm Production and Control Program - AAA reduced farm production to boost prices and offer to pay government subsidies for every acre they plowed under; NRA and AAA both declared unconstitutional - Other Programs of the First New Deal - CWA added to PWA to create more jobs sponsored by federal government - SEC created to regulate stock market and place limits on speculation; also protected form insider trading - FHA gave construction industry and homeowners a boost by enduring bank loans for building homes - Law set gold price at $35 per ounce The Second New Deal - 1st one focused on recovery, 2nd focused on relief and reform - Relief Programs - WPA spent billions of dollars to provide jobs; employed 3.4million people in first year - NYA provided part time for young people to help them stay in school - RA provided loans for sharecroppers, tenants, and small farmers; also established federal camos where - Worked constructing, painting, writing workers could find decent housing - Reforms - National Labor Relations (Wagner) Act (1935) - Replaced National Industrial Recovery Act (unconstitutional); guaranteed worker’s right to join union and outlawed business practices that were unfair to labor - REA provided electricity for rural areas - Federal Taxes - - NLRB enforce law to make sure workers’ rights protected - Revenue tax of 1935 increased tax on incomes of wealthy and on large gifts The Social Security Act - Created federal insurance program based upon collection of payments from employees and employers - Social Security trust fund would then make monthly payments to retired people 65+ - Also gave unemployed compensation to workers and disabled throughout working careers - The Election of 1936 - Democrats nominated FDR and Republicans nominated Alf Landon - FDR won every state except Maine and Vermont; Africans now support FDR and many in the north too Opponents of the New Deal - Liberal Critics - Conservative Critics - Criticized ND for doing too much for businesses and too little for poor - ND gave too much power to federal government; alarmed by: increased regulations, pro union stance, and - Conservatives including Alfred Smith and John Davis formed AMerican Liberty League to stop ND form financing of government programs via borrowed money (deficit financing) subverting the US economy and political system - Demagogues - Critics used people’s desperate need for immediate solutions to go on radio and propose simple schemes for ending “evil conspiracies” (Father Coughlin), guaranteeing economic security for elderly (Dr. Townsend), and redistributing wealth (Huey Long) - Father Charles E. Coughlin - Catholic priest attracted large crowd proposed plan calling for issuing inflated currency and nationalizing all banks; superiors from church ordered him to stop - Dr. Francis E. Townsend - Before Social Security Act, he became hero to seniors by proposing plan to guarantee secure income: 2% of federal tax to create fund where retired people receive $200/month - Huey Long - Most dangerous of the demagogues; proposed “Share Our Wealth” program that promised minimum income of $5000 for everyone; challenged FDR for president in 1935 but killed - The Supreme Court - 2 cases in 1935 killed NRA and AAA; FDR tried to stop Court obstacles - Court Reorganization Plan - Proposed judicial-reorganization bill in 1937 that allowed him to appoint additional justice for each current justice who was older than 70 ½ yrs old (allowed him to add 6 more) - Reaction - People outraged with tamper of checks and balances, first time where Congress struck down his bill; even Democratic senators didn’t support - Aftermath - In 1937, Supreme Court upheld more laws: Wagner Act and Social Security Act - Justices retired during 2nd term allowing him to appoint new ones who supported his reforms Rise of Unions - National Industrial Recovery Act and Wagner Act legalized labor unions - Formation of the C.I.O. - Group of unions within American Federation of Labor wanted membership to extend to all people, - In 1935, unions joined together and made a Committee of Industrial Organization; in 1936, AF of L regardless of race, sex, and skills suspended the C.I.O. unions and became its chief rival - Strikes - Companies still resisted union demands so strikes frequent during the depression - Automobiles - Workers in General Motors plant in Michigan struck by not working; formed united Auto Workers union and company gave them their demands - Steel - On memorial day, 1937, demonstration by picketers at Republic Steel in Chicago ended in 4 deaths when police fired into crowd - Fair Labor Standards Act - Minimum wage fixed at 40cents/hour - Max standard workweek of 40 hours and extra pay if work overtime - Child labor restrictions on hiring people under 16yrs old - U.S. v. Darby Lumber 1941, Supreme Court ruled child labor illegal Last Phase of the New Deal - Fair Labor and Standards Act was last major reform, ND lost momentum in late 1930s - Recession, 1937-1938 - Causes - Social Security Tax reduced consumer spending and relief from public works balanced budget and reduced national debt - Keynesian Economics - According to John Maynard JKenes, deficit spending was helpful in difficult times because government needed to spend well above its tax revenues to initiate economic growth - FDR’s advisers adopted theory and had positive results Weakened New Deal - After court packing incident, people didn’t automatically follow FDR and more republicans in Congress - Nazis in Germany attracted attention toward foreign affairs blocked more New Deal legislation Life During the Depression - - - Women - Women more in charge with care taking but struggled to get food to sought to work - Accused of taking jobs from men; got lower pay Dust Bowl Farmers - Great Plains became dust bowl, wind blew away tons of topsoil, farmers can’t plant - People from Oklahoma migrated to CA to try and find factory work - Federal government created Soil Conservation Service in 1935 to teach farmers African Americans - Higher percentage of unemployed, excluded from state and local relief programs - Improvements - WPA and CCC provide low paying jobs; received moral support from Elanor Roosevelt and Harold Ickes from incident where AA singer Marian Anderson refused the use of Constitution Hall in DC so they arranged a performance for him at Lincoln Memorial - Mary McLeod Bethune directed National Youth Administration, established Federal Council on Negro Affairs to increase AA involvement in ND - Fair Employment Practices - - Executive order in 1941 to assist minorities in getting jobs in defense industries American Indians - John Collier appointed to Bureau of Indian Affairs in 1933, established CCC projects that gains Indians - Indian Reorganization (Wheeler-Howard) Act (1934) involvement in WPA and ND programs - In 1934, Congress repealed Dawes Act and replaced it this: returned lands to control of tribes and supported preservation of Indian cultures - Mexican Americans - Suffered frmo discrimination, source of agricultural labor but depression and ND pushed them to go back to Mexico