Causes of the Great Causes of the Great DepressionDepression

Section 1Section 1

Prior to the DepressionPrior to the Depression

During the 1920’s consumption, the GNP, and the During the 1920’s consumption, the GNP, and the stock market all went up.stock market all went up.

The Republican Party took credit for the prosperity The Republican Party took credit for the prosperity America was enjoying – Harding & CoolidgeAmerica was enjoying – Harding & Coolidge

Herbert Hoover was elected president in 1928.Herbert Hoover was elected president in 1928. Hoover’s philosophy was simple. He stressed the Hoover’s philosophy was simple. He stressed the

importance of competition, but also voluntary importance of competition, but also voluntary cooperation between labor and management.cooperation between labor and management.

Hoover believed that American greatness showed Hoover believed that American greatness showed itself when owners, workers, and government itself when owners, workers, and government officials converged on common goals.officials converged on common goals.

Lingering Problems of the 1920’sLingering Problems of the 1920’s

During WWI demand for crops sky rocketed. This During WWI demand for crops sky rocketed. This led to an increase in harvest yields and farmers led to an increase in harvest yields and farmers farmed more land – ¼ of US workforce = farmersfarmed more land – ¼ of US workforce = farmers

Farmers had to buy costly new tractors and Farmers had to buy costly new tractors and equipment to meet demand.equipment to meet demand.

When the war ended the demand for crops went When the war ended the demand for crops went down and farmers started falling into debt.down and farmers started falling into debt.

The result was a rural depression during the 20’s The result was a rural depression during the 20’s and many farmers were forced to sell of their and many farmers were forced to sell of their lands.lands.

Uneven WealthUneven Wealth

Industrial workers wages increased and provided Industrial workers wages increased and provided workers with more disposable income.workers with more disposable income.

Productivity per hour increased by 32%.Productivity per hour increased by 32%. Corporate wages increased 65 percent. So the rich Corporate wages increased 65 percent. So the rich

became richer, and the poor became less poor.became richer, and the poor became less poor. More than 60% of all families earned less than 2,000 More than 60% of all families earned less than 2,000

dollars a year.dollars a year. 24,000 of the wealthiest families earned more than 24,000 of the wealthiest families earned more than

100,000 dollars a year. This led to an uneven 100,000 dollars a year. This led to an uneven distribution of wealth.distribution of wealth.

The wealthiest 1% of the population earned as much The wealthiest 1% of the population earned as much money as the bottom 42%money as the bottom 42%

Economy and CreditEconomy and Credit

A healthy economy needs more people buying more A healthy economy needs more people buying more products, which will create more wealth.products, which will create more wealth.

Under consumption will limit economic growth.Under consumption will limit economic growth. Many Americans did not have enough money to buy Many Americans did not have enough money to buy

what they wanted or needed.what they wanted or needed. Many Americans bought on credit. Pay a small down Many Americans bought on credit. Pay a small down

payment and then pay in installments.payment and then pay in installments. 80% of radios – 60% of cars - 80% of radios – 60% of cars - This masked the problem, and allowed Americans to This masked the problem, and allowed Americans to

live beyond their means.live beyond their means.

Stock Market Crash of 1929Stock Market Crash of 1929

By 1929 many soaring stock prices were based By 1929 many soaring stock prices were based purely on confidence. purely on confidence.

In September the market began to sputter and fall. In September the market began to sputter and fall. Prices started to slide down. Prices started to slide down.

Investors started to lose confidence.Investors started to lose confidence. On October 29On October 29thth, or Black Tuesday, the market , or Black Tuesday, the market

collapsed and 16 million shares were sold.collapsed and 16 million shares were sold. Fortunes were wiped out, and many investors who Fortunes were wiped out, and many investors who

had bought on margin lost everything they had.had bought on margin lost everything they had.

Great Depression BeginsGreat Depression Begins

Great Depression: A period of time from Great Depression: A period of time from 1929 to 1941 in which the economy faltered 1929 to 1941 in which the economy faltered and unemployment soared.and unemployment soared.

Banks start to fail: People lost confidence in Banks start to fail: People lost confidence in the banking system, and many pulled their the banking system, and many pulled their money out of the banks. The banks could money out of the banks. The banks could not survive this run of requests by people for not survive this run of requests by people for their money.their money.

By 1931 over 3,500 banks failed in America.By 1931 over 3,500 banks failed in America.

The Other Reason Banks FailedThe Other Reason Banks Failed

During the 20’s the Federal Reserve cut During the 20’s the Federal Reserve cut interest rates to stimulate economic growth.interest rates to stimulate economic growth.

By 1929 the Fed was worried about investors By 1929 the Fed was worried about investors over speculation, and the Fed eliminated over speculation, and the Fed eliminated money supplies to discourage lending.money supplies to discourage lending.

By doing this there wasn’t enough money in By doing this there wasn’t enough money in circulation and when people went to get their circulation and when people went to get their money out of the banks, the banks had no money out of the banks, the banks had no currency.currency.

Unemployment RisesUnemployment Rises

When the banks failed consumer spending decreased. When the banks failed consumer spending decreased. Business leaders believed that the survival of their Business leaders believed that the survival of their

companies depended on layoffs to reduce payroll and companies depended on layoffs to reduce payroll and production cutbacks to maintain prices.production cutbacks to maintain prices.

As businesses closed plants and fired workers, As businesses closed plants and fired workers, unemployment grew and spending shrank. Businesses unemployment grew and spending shrank. Businesses kept cutting more production and more workers.kept cutting more production and more workers.

By 1933, nearly 25 percent of Americans lost their jobs.By 1933, nearly 25 percent of Americans lost their jobs.

Hawley-Smoot Tariff ActHawley-Smoot Tariff Act

To encourage people to buy American products. To encourage people to buy American products. The government passed the Hawley-Smoot Tariff The government passed the Hawley-Smoot Tariff to drastically raise the prices on foreign goods.to drastically raise the prices on foreign goods.

European countries retaliated by raising their tariff European countries retaliated by raising their tariff rates.rates.

The act added to problems of the depression. The act added to problems of the depression. Foreign markets were now closed to American Foreign markets were now closed to American producers.producers.

The act helped destroy international trade. No The act helped destroy international trade. No one was selling goods overseas.one was selling goods overseas.

Depression Goes GlobalDepression Goes Global

Germany ceased their reparation payments Germany ceased their reparation payments to Britain and France.to Britain and France.

The US agreed to suspend France and The US agreed to suspend France and Britain’s war debt payments.Britain’s war debt payments.

The global economy had been largely The global economy had been largely funded by US loans to Europe, but now the funded by US loans to Europe, but now the US had to cutback the loans.US had to cutback the loans.

European nations started seeing bank European nations started seeing bank failures, banks closing, and unemployment.failures, banks closing, and unemployment.

Theories…Theories… Milton Friedman – economist - believed that Milton Friedman – economist - believed that

the depression was the result of the the depression was the result of the contraction of the money supplycontraction of the money supply

John Maynard Keynes – economist – argued John Maynard Keynes – economist – argued that a lack of government interference in the that a lack of government interference in the economy caused the depressioneconomy caused the depression

Ludwig von Miles – economist – criticized Ludwig von Miles – economist – criticized centralized economic planning and centralized economic planning and managementmanagement

SECTION 2SECTION 2

The Depression and the Job MarketThe Depression and the Job Market

During the 1920’s the unemployment rate During the 1920’s the unemployment rate had never been above 3.7%.had never been above 3.7%.

Now it was near 25%.Now it was near 25%. Many workers kept their jobs, but saw their Many workers kept their jobs, but saw their

wages or hours cut. Many workers brought wages or hours cut. Many workers brought home paychecks that were up to 30% less home paychecks that were up to 30% less than their pre-depression check.than their pre-depression check.

The Look of the DepressionThe Look of the Depression

Many people’s clothes started to look worn. Many people’s clothes started to look worn. Collars and cuffs became frayed, and the Collars and cuffs became frayed, and the knees of men’s pants became patched knees of men’s pants became patched because of the holes in the knees.because of the holes in the knees.

People ate smaller meals, water replaced People ate smaller meals, water replaced milk, and people ate less meat.milk, and people ate less meat.

People went to soup kitchens for free meals. People went to soup kitchens for free meals. Or waited in bread lines: places were people Or waited in bread lines: places were people

lined up for free scraps of food.lined up for free scraps of food.

HoovervillesHoovervilles

People sold furniture, pawned jewelry, and moved People sold furniture, pawned jewelry, and moved to cheaper housing to save money for food.to cheaper housing to save money for food.

Millions were evicted from their homes; people lived Millions were evicted from their homes; people lived in empty railway cars, boxes, and on benches.in empty railway cars, boxes, and on benches.

People grouped together in Hoovervilles; People grouped together in Hoovervilles; shantytowns built on public land or in vacant lots.shantytowns built on public land or in vacant lots.

The Largest Hooverville was in Central Park in The Largest Hooverville was in Central Park in NYC.NYC.

Newspapers were used as blankets and called Newspapers were used as blankets and called Hoover blankets.Hoover blankets.

http://youtu.be/5ZWvlIi4zQs

Rural AmericaRural America

Prices for farm goods bottomed out…and many Prices for farm goods bottomed out…and many gave up farming because they could not make any gave up farming because they could not make any money.money.

In Sioux City, Iowa farmers threatened to strike if In Sioux City, Iowa farmers threatened to strike if the price of milk did not go up. They were ignored, the price of milk did not go up. They were ignored, and in protest they dumped 1000 gallons of milk in and in protest they dumped 1000 gallons of milk in the street in protest.the street in protest.

Between 1930 and 1934 nearly 1 million farmers Between 1930 and 1934 nearly 1 million farmers lost their farms.lost their farms.

Some farmers did not leave, and became tenant Some farmers did not leave, and became tenant farmers, working for big land owners instead of farmers, working for big land owners instead of themselves.themselves.

Dust BowlDust Bowl

A great drought hit most of the Great Plains during the A great drought hit most of the Great Plains during the 1930’s.1930’s.

Farming made the drought worse. Farmers had plowed Farming made the drought worse. Farmers had plowed under the natural grass which had kept topsoil from under the natural grass which had kept topsoil from blowing away. With no rain and less grass, the land blowing away. With no rain and less grass, the land turned to dust.turned to dust.

Dust storms blew across the Plains, sometimes Dust storms blew across the Plains, sometimes reaching 8,000 feet high, and they could move up to reaching 8,000 feet high, and they could move up to 100 miles an hour. The storms could kill if people were 100 miles an hour. The storms could kill if people were caught outside.caught outside.

Dust blew in the air all the way to the Atlantic Ocean Dust blew in the air all the way to the Atlantic Ocean and eastern cities.and eastern cities.

OkiesOkies

Many families trapped in the Dust Bowl had to leave Many families trapped in the Dust Bowl had to leave the region. the region.

Okies: Term given to people leaving the Dust Bowl, Okies: Term given to people leaving the Dust Bowl, even if the people were not from Oklahoma.even if the people were not from Oklahoma.

800,000 people migrated out of the Dust Bowl.800,000 people migrated out of the Dust Bowl. Many headed west to California and Oregon.Many headed west to California and Oregon. Many were promised jobs, however many times Many were promised jobs, however many times

there were none when they arrived.there were none when they arrived. Rural states lost population, while large cities gained Rural states lost population, while large cities gained

population.population. The Federal Government eventually dammed The Federal Government eventually dammed

western rivers to provide irrigation to the Plains.western rivers to provide irrigation to the Plains.

Family LifeFamily Life

The Depression shattered families. Many men The Depression shattered families. Many men deserted their families because they were deserted their families because they were ashamed that they could not provide for them.ashamed that they could not provide for them.

Others sank into depression or despair.Others sank into depression or despair. Those who were employed often feared they Those who were employed often feared they

would lose their jobs. Many also felt guilty would lose their jobs. Many also felt guilty because so many of their friends and relatives because so many of their friends and relatives were unemployed.were unemployed.

Birthrates plummeted: People could not afford to Birthrates plummeted: People could not afford to have more children.have more children.

Family LifeFamily Life

Many kids quit school and ran away from home Many kids quit school and ran away from home looking for work.looking for work.

Discipline became a problem at home.Discipline became a problem at home. Many African-American families looked to their Many African-American families looked to their

families and religion for guidance during the families and religion for guidance during the depression.depression.

Unemployment among AA was about 50% in 1932.Unemployment among AA was about 50% in 1932. Okies competed with Mexican-Americans in CA for Okies competed with Mexican-Americans in CA for

jobs.jobs. Many white Americans clamored for Repatriation, or Many white Americans clamored for Repatriation, or

encouraging Mexicans to leave the US and go back encouraging Mexicans to leave the US and go back to Mexicoto Mexico

Hoover’s Response FailsHoover’s Response Fails

Section 3Section 3

Hoover’s ResponseHoover’s Response

Hoover viewed upswings and downswings of business Hoover viewed upswings and downswings of business as a natural occurrence. He also felt the government as a natural occurrence. He also felt the government should not interfere.should not interfere.

Hoover asked businesses and industrial leaders to Hoover asked businesses and industrial leaders to keep employment, wages, and prices at current levels.keep employment, wages, and prices at current levels.

He also called on the government to reduce taxes, He also called on the government to reduce taxes, lower interest rates, and create public works programslower interest rates, and create public works programs

Hoover also called on wealthy Americans to donate Hoover also called on wealthy Americans to donate money, food a to charities.money, food a to charities.

Volunteerism FailsVolunteerism Fails

Hoover had relied to much on donations, Hoover had relied to much on donations, volunteering and cooperation.volunteering and cooperation.

Businesses still cut wages and laid off workers Businesses still cut wages and laid off workers because it was in their best interests.because it was in their best interests.

Localism: the policy whereby problems could Localism: the policy whereby problems could be solved at local and state levels.be solved at local and state levels.

However, local governments did not have the However, local governments did not have the resources to combat the crisisresources to combat the crisis..

Fighting BackFighting Back Hoover believed that it was a lack of credit that Hoover believed that it was a lack of credit that

had caused the Depressionhad caused the Depression He decided to use federal resources to combat He decided to use federal resources to combat

the depression. the depression. Reconstruction Finance Corporation: Gave Reconstruction Finance Corporation: Gave

loans to railroads and large businesses. The loans to railroads and large businesses. The act also lent money to banks who were act also lent money to banks who were supposed to lend it to businessmen.supposed to lend it to businessmen.

The businessmen would then hire workers and The businessmen would then hire workers and consumption would increase…..consumption would increase…..

Fighting Back (cont)Fighting Back (cont)

The theory of lending money to bankers who The theory of lending money to bankers who would then lend it to businesses was known as would then lend it to businesses was known as trickle down economics.trickle down economics.

The plan failed though, bankers often did not The plan failed though, bankers often did not lend the money out, and when businesses did lend the money out, and when businesses did receive loans they did not hire more workers.receive loans they did not hire more workers.

One RFC project that did work was the building One RFC project that did work was the building of the Hoover Dam, which brought employment of the Hoover Dam, which brought employment to the SW.to the SW.

CapitalismCapitalism

Some people demanded radical change. They Some people demanded radical change. They wanted the country to accept socialism or wanted the country to accept socialism or communism.communism.

These people thought capitalism created These people thought capitalism created unhealthy competition and spread wealth out unhealthy competition and spread wealth out unevenly.unevenly.

However, many Americans still believed in the However, many Americans still believed in the American Dream or opportunity and progressAmerican 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 ArmyBonus Army WWI veterans were promised a bonus after WWI, however it WWI veterans were promised a bonus after WWI, however it

never came.never came. Congress said they would pay the bonus in a lump sum in 1941.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 The Bonus Army began to call for Congress to pay it 1931 to

help out of work vets.help out of work vets. Congress passed the bill, but Hoover vetoed it saying many vets Congress passed the bill, but Hoover vetoed it saying many vets

did not need the early money.did not need the early money. Veterans groups marched on Washington, and riots broke out Veterans groups marched on Washington, and riots broke out

when the police tried to kick them out.when the police tried to kick them out. The military lead by MacArthur and included Patton, and The military lead by MacArthur and included Patton, and

Eisenhower- tear gassed and beat many of the veterans.Eisenhower- tear gassed and beat many of the veterans. This episode sealed Hoovers fate even though he had not This episode sealed Hoovers fate even though he had not

ordered the violence. He would not be reelected. ordered the violence. He would not be reelected.

Bonus Army Clip