Economic consequences of WSC

Large speculators were ruined – rich lost most (why?)

Rockefeller – 80% of his wealth

Downturn in spending

Unable to repay loans – bankruptcy for people and banks

At first = tragic, isolated events: Hoover was optimistic:

- Cut taxes to stimulate spending

BUT could not avoid the onset of the Great Depression: crash had destroyed the most NB economic factor = confidence

Over 4000 banks collapsed 1929-1931

- People lost confidence, withdrew their money and saved it at home

- Hard currency seen as safest option

- Eg Bank of NY : 1/3 of New Yorkers invested in it = worst banking failure in US history

- 1931: crisis in Eur banks – knock on effect on US

As people kept money, they were not spending: US economy founded upon mass consumption

Meant less money for the banks to give out loans, mortgages etc

Businesses were forced to cut back/close: wage cuts, rise in unemployment, cut in production

1928-1933 industrial and farm production dropped by 40%, average wages by 60%

As workers lost jobs or were paid less = spent less; fewer goods bought = fewer jobs

By 1933, 14 mil unemployed, 5000 banks had gone bankrupt – collapse in urban areas affected countryside (which had already been struggling)

People couldn’t afford to buy so much food – less demand – prices went into free fall: total farm income only $5 bil

Couldn’t sell surplus to other countries (tariffs, other countries also suffering and couldn’t afford US goods because lack of trade meant that there was no way they could earn $)

Trade reduced from $10 bil - $3 bil 1929-1932

Human cost of the Depression

People in agricultural areas worst affected (why?)

Farm income fell → farmers couldn’t pay mortgages

Some farmers resisted: barricades etc

-most had to just pack up their belongings and live on the road: find work wherever they could

Black farmers and labourers often worse off: lost land & farms first

Hunger, malnutrition

Southern States, Mid-West: over-farming and drought turned topsoil into dust which was caught up by the wind: creation of a dustbowl (“the Dirty Thirties”)

-dust covered everything – made life unbearable

-many headed for California, in search of a better life

Destitute migrants = enduring image of the Depression

Dustbowl and a Hooverville

Urban areas = rapid unemployment

-Cleveland: 50% workers unemployed; Toledo 80% workers unemployed

Workers were forced to leave homes; live on the streets – high levels of homelessness

Once they had contributed to the boom; now they had to queue in long lines for soup and bread

Travelled along the railways looking for work (approx. 2 mil 1932); lived in tents or wagons next to the track

Hoovervilles

Had to scrape food from dustbins

Starvation, malnutrition

1932 Presidential election

Hoover had refused to accept extent of problem until ‘32 – subject to severe criticisms about how he was handling the crisis

Seen as having done nothing, although he had:

- Attempted to boost economy with tax cuts

- Tried to persuade businessmen not to cut wages

- Propped up banks with Reconstruction Finance Company

- Invested in public works (but not enough to have an impact)

- Attempted to protect economy with tariffs (but had the opposite effect – lack of trade was devastating)

BUT most people saw these attempts as inadequate – solutions did not match the scale of the problem

-Hoover and govt had not wanted to drastically change policy

- believed problem lay with Europe, not US economy; ‘laissez-faire’ (businesses should be left alone to recover, no need for govt help); natural for an economy to go in cycles of boom and bust – prosperity was ‘around the corner’

-1932 Hoover blocked Garner-Wagner Relief Bill ($2.1 billion investment to create jobs)

Hoover did little to help people suffering from the effects of the GD: didn’t believe it was the govt’s role to provide social security

-thought that govt help would cause people to become less independent and less willing to work

1932 War Veterans’ March in Washington

-wanted early pension payout

-peaceful march

-Hoover refused to meet them; sent MacArthur (who ‘convinced himself’ that they were communists)

-violent reaction from police and troops (burnt down their camps and fired teargas)

Very damaging to Hoover’s reputation

Franklin D Roosevelt

Democrat candidate, open personality – inspired confidence

- Not a radical but believed in active govt to improve lives of ordinary people (although still as a last measure)

- Planned to spend public money to create more jobs

- Open to advice on NB issues from experts (factory owners, agricultural businesses, trade unions etc)

- Popular appeal: ‘Fireside chats’; lifting prohibition

Promised a ‘New Deal’ to the American people

Landslide victory for Democrats

Worst Republican election defeat

The New Deal: the hundred days

Sweeping reforms:

-all banks closed until govt inspection : 5,000 trustworthy ones reopened; supported by govt money

-set of regulations to prevent speculation: Emergency Banking Act and the Securities Exchange

Sunday night fireside chats: explained what he was doing and why on the radio every Sunday (listened to by 60 mil)

Federal Emergency Relief Agency:

-tackled urgent needs of the poor

-$500 mil spent on blankets, soup kitchens etc

Civilian Conservation Corps -

- Aimed at unemployed men (money went home to families)

- Sign on for renewable 6 month contract

- Mostly work on environmental projects

- Created jobs for 2.5mil

Agricultural Adjustment Agency

-long term plan to help farmers

-quotas to reduce farm production: push prices up (remember: supply and demand!)

-helped farmers modernise, use farming methods that would protect the soil

-farmers also received help to pay mortgages

-Success BUT modernisation = less need for manual labour = loss of jobs

National Industrial Recovery Act: set up Public Works Administration &

National Recovery Administration

PWA Public Works Administration:

-govt money used to build schools, dams, roads – infrastructure

-long term returns, and short term creation of jobs

NRA: (Voluntary for companies)

-improved working conditions in industry & outlawed child labour

-set fair wages, sensible levels of production

-stimulate economy by giving workers money to spend

Tennessee Valley Authority

- Resolved problems in Tennessee (valley crossed 7 states): flooding in winter, drought in summer

-Farming area was a dustbowl; many social problems (poverty, no electricity)

-Too severe to be solved by one state and inter-statal co-operation was difficul

-TVA cut across local govt powers

- Built a series of dams – transformed region

- Dams = irrigated dried up areas; provided electricity; created thousands of jobs

Verdicts on the New Deal

Pressure on Roosevelt:

- ‘37 prosperity returning; R’velt bowed down to conservative pressure:

- Cut budget, many workers on govt schemes were fired, cuts in spending had a knock-on effect throughout the economy: led to spike in unemployment again

- ’37 Recession MC voters lost some confidence but he still managed to win the election in ‘40 (popular with ordinary Americans)

- More difficult to push through reforms in the Senate (Republicans blocked this)

- Ppl were less united behind the New Deal BUT focus was on the war

Second New Deal

o By 1935 = Roosevelt was facing much criticism - Some complained that the New Deal was doing too much (wealthy

businesses) - Others said not doing enough o USA not recovering as fast as Europe o Businesses weren’t enthusiastic about the National Recovery Administration - Henry Ford had cut wages o Introduced Second New Deal: focus on ordinary people - Strengthening unions for workers’ rights, financial security for older people, measures to keep reducing unemployment

Key aspects of New Deal

1. Wagner Act • Employers had to allow trade unions• Had to negotiate pay and conditions with unions• Could not fire a worker for being a union member

2. Social Security Act • State pensions • Worked with state governments to provide help for the sick and disabled• Set up unemployment insurance• Workers = unemployed, received a small amount of money (paid as a part of

salary) until they found work

3. Works Progress Administration • Worked to create jobs • Included artists, actors, photographers

Opposition to the New Deal

1. NOT ENOUGH!

• Not doing enough to help poor • Many Americans still desperately poor• Worst hit = African Americans in rural areas• Very important critic = Huey Long • Saw New Deal as overly complicated - Used his power to help the poor - Taxed big corporations - Used money to build roads, schools, hospitals - Employed African Americans on same terms as White

Americans - Clashed with KKK- Proposed scheme = Share our Wealth = personal

fortunes limited at $3 mil, maximum income = $ 1 mil per year

- Proposed pensions for 60 +, free radios and washing machines

- Assassinated 1935

• Townsend Clubs formed by Dr Francis Townsend – campaigned for pension of $200 for over 60s

• Catholic priest – Francis Cloughlin - Set up National Union for Social Jusice

2. TOO MUCH!• Criticised by Republicans, business

communities: I. New Deal too complicated; too many

regulatons II. Government should not support trade

unions/call for higher wages (ie no state inference – the business market should deal with these issues

III. TVA = unfair competition for private companies

IV. New Deal policies = like Communist USSR, inappropriate for democracy

V. Roosevelt = dictator VI. High taxed discouraged people from

working hard – gave money to people doing nothing/ unnecessary jobs

New Deal a success?

Decide according to what he wanted to achieve

- By 1940, unemployment was still high & eco was not booming

- BUT economic recovery wasn’t his only aim: he wanted to reform American society

1. A new society?

Restored faith in govt

New Deal – big social and eco programme that would not have been possible before; set the tone for future welfare policies

No corruption scandals

-Secretary of the interior – Harold Ickes- tapped employees’ phones to ensure no corruption, employed Jewish people, African Americans etc

Divided the USA: R’velt often accused of being communist & undermining US values; Ickes accused to being ‘anti-business’ bec of support for trade unions

New Deal undermined local govt

2. Industrial workers

NRA & 2nd New Deal strengthened labour unions

R’velt tried to negotiate with trade unions and corporations

Combination of unions eg Committee for Industrial Organisation were big enough to bargain with big business

Union of Automobile Workers eventually recognised by Ford & General Motors

Big business still remained powerful

Unions treated with suspicion by employees

Many strikes broken up with violence4

Companies eg Chrysler, Ford employed own thugs/controlled local police forces

End of 1930s – unions had become v strong; strengthen further after the war

3. Unemployment and the economy

Created millions of jobs

Stablised banking system

Cut business failures

TVA etc brought improved living standard, jobs to deprived parts of USA

Projects provided infrastructure – roads, power stations, schools

BUT underlying eco problems never solved

US econ took longer to recover than Eur to recover

Confidence remained low = spending was at 75% of pre-29 standards

Cut of budget in ‘37 led to recession

6 mil unemployed in ‘41 (war brought unemployment to an end)

4. African Americans

Approx 200,000 benefited from CCC, other agencies, relief programmes, slum clearance & housing projects

Some agencies discriminated against African Americans – racial segregation in CCC; no mortgages to black families in white areas

35% unemployed – less likely to get jobs (mainly manual)

Domestic workers were not included in the Social Security Act

R’velt never passed any civil rights legislation (eg lynching), fearing that he would lose support of Democrats in southern States

5. Women

Some women achieved prominent positions

- E. Roosevelt – campaigner on civil rights

- African American Bethune headed of National Youth Organisation

- Frances Perkins = Secretary of Labour (removed 59 corrupt officials from Labour dept, key in implementation of Second New Deal) BUT attacked for being a communist

Most programmes aimed at male manual workers (only 8000 women in CCC)

Local govt avoided paying social security to women (introduced ‘loopholes’ – qualifications, special conditions)

6. Native Americans

Indian Registration Act 1934 – provided money to help Native Americans buy and improve land; control their tribal areas; preserve & practise traditions, laws & culture; develop land as they wanted to

BUT remained a poor & excluded section of society