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GREAT DEPRESSION GREAT DEPRESSION AND THE NEW DEALAND THE NEW DEAL
Hard Times in the 1930’sHard Times in the 1930’s
What What waswas the Great the Great Depression?Depression?
The The worst economic crisis of the centuryworst economic crisis of the century Over 13 million people unemployed Over 13 million people unemployed That’s That’s 35 % unemployment35 % unemployment / 50% for African- / 50% for African-
Americans and LatinosAmericans and Latinos A A crisis in the banking industrycrisis in the banking industry ““Dust bowl” as a result of drought and poor Dust bowl” as a result of drought and poor
farming practicesfarming practices Farmers lost cropsFarmers lost crops Many people lost their homesMany people lost their homes A A social and psychological crisissocial and psychological crisis
Three areas of problemsThree areas of problems
Consumer spending:Credit
Banking industry:Reckless practices
Farming Sector: Dust Bowl
overproduction
normal business cycle
Great Depression Great Depression Business cycleBusiness cycle
Business cycle since the Business cycle since the Great Depression: healthierGreat Depression: healthier
What caused the Great What caused the Great Depression?Depression?
Unequal distribution of wealthUnequal distribution of wealth Stock market crashStock market crash of 1929 of 1929 Industrial Industrial overproductionoverproduction – farmers and – farmers and
businesses were producing more goods than businesses were producing more goods than could be bought and used. could be bought and used.
Easy creditEasy credit Banks had made unwise loansBanks had made unwise loans Banks lent too much moneyBanks lent too much money People could not pay back their loansPeople could not pay back their loans
Causes of 2008 Causes of 2008 “Recession” “Recession”
DeregulationDeregulation of banking industry leads to of banking industry leads to reckless home lending practicesreckless home lending practices (ARM (ARM loans) and to loans) and to inflated home valuesinflated home values
Homeowners used Homeowners used equityequity in homes to take in homes to take out loans (used houses as ATM machines)out loans (used houses as ATM machines)
Stagnant (low wage growth) wagesStagnant (low wage growth) wages Easy creditEasy credit Jobs continuing to move overseasJobs continuing to move overseas Unequal distribution of wealth Unequal distribution of wealth
EFFECTSEFFECTS
Great Depression 2008 “recession” Great Depression 2008 “recession”
Stock market crashStock market crash Bank failures Bank failures Loss of people’s moneyLoss of people’s money Widespread unemployment Widespread unemployment
over 25% over 25% 50% foreclosure rate on 50% foreclosure rate on
existing mortgagesexisting mortgages Homelessness Homelessness divorce rate divorce rate
““Hoovervilles” Hoovervilles”
Rise of movie industryRise of movie industry
Housing market collapse Housing market collapse
foreclosure rates : foreclosure rates : CA, NV, AZCA, NV, AZ
unemploymentunemployment
Rise of tent cities Rise of tent cities Banks / investment firms Banks / investment firms
bailed out before the bailed out before the American peopleAmerican people
Budget cuts Budget cuts Tightening of credit Tightening of credit
Presidential leadershipPresidential leadership Early Depression era 2008 Early Depression era 2008
Hoover (R) Hoover (R) 1929 – 19331929 – 1933 ““Rugged Individualism”Rugged Individualism” Private charity Private charity Some loans to help Some loans to help
business create jobsbusiness create jobs RFC – Reconstruction RFC – Reconstruction
Finance Corporation Finance Corporation
Bush (R) Bush (R) 2001 – 20092001 – 2009 Bank bailoutsBank bailouts $250,000 amount $250,000 amount
of money insured in bank of money insured in bank accountsaccounts
food stamps food stamps
Presidential leadershipPresidential leadership
FDR FDR 1933- 19441933- 1944 Relief, recovery, Relief, recovery,
reform reform Government created Government created
jobsjobs: New Deal – : New Deal – specific individual specific individual programsprograms
““Alphabet agencies” :Alphabet agencies” : CCC, WPA, etcCCC, WPA, etcDealt with Dealt with long-long-
lasting reform-lasting reform- Social Security, FDICSocial Security, FDIC
Obama Obama 2009 -2009 - Relief, only some weak Relief, only some weak
reform/ recovery effortsreform/ recovery efforts ARRA – American ARRA – American
Recovery and Recovery and Reinvestment ActReinvestment Act
Provides extended Provides extended benefits for unemployed benefits for unemployed plus funds states can plus funds states can apply for “shovel –ready apply for “shovel –ready projects.” projects.”
Short –term relief, Short –term relief, hope hope that private industry that private industry will create jobs, but will create jobs, but that is not happeningthat is not happening
Presidential leadership Presidential leadership
FDR AND THE NEW DEAL
1933- 1942
FDR + New Deal FDR + New Deal continuedcontinued
Presidential leadership Presidential leadership 2008 - 2008 - ARRAARRA
ARRA in Kentucky
Causes: Unequal Causes: Unequal Distribution of WealthDistribution of Wealth
No middle classNo middle classHowever, because of the However, because of the
availability of credit, people availability of credit, people are “buying” goodsare “buying” goods
Buying Buying on crediton credit creates creates a a false demandfalse demand for for productsproducts
Buying on credit created Buying on credit created false demandfalse demand
What happens to demand when people have reached their credit limit?
Remember that banks have made some unwise loans as well.
Industrial Overproduction = too many Industrial Overproduction = too many products and not enough buyersproducts and not enough buyers
WAGES NOT KEEPING UP WITH WAGES NOT KEEPING UP WITH INFLATION INFLATION
SUPPLY GREATER THAN DEMANDSUPPLY GREATER THAN DEMAND
Chain reactionChain reaction
Fewer goods are sold.
Demanddrops.
In order to stay in businesscompanies cut
wages
People lose theirconfidence &
start saving their money
Demanddrops even
further.
Companies are forced to cut costs
by laying people off
Even more peopleLose their confidenceAnd spend less money
People lose their jobs.
The Spiral Of
Depression
Stock Market CrashStock Market Crash
Many stocks Many stocks purchased purchased
Stock prices fellStock prices fell Huge sums of money Huge sums of money
lostlost
Thursday, October 24, 1929
BlackBlack TuesdayTuesday
Black TuesdayBlack Tuesday
Five days before the actual crash, (known as “Black Tuesday” or Five days before the actual crash, (known as “Black Tuesday” or the “Big Crash”) there was a major sell-off of stocks due those the “Big Crash”) there was a major sell-off of stocks due those falling prices. As the prices continued to fall, panic struck causing falling prices. As the prices continued to fall, panic struck causing even more calls to pour in to sell stocks. The brokers demanded even more calls to pour in to sell stocks. The brokers demanded cash to cover their loans and when the investors couldn't come up cash to cover their loans and when the investors couldn't come up with the extra money, they had to sell their stocks leaving them at with the extra money, they had to sell their stocks leaving them at a loss of money. The dumping of so many stocks on the market a loss of money. The dumping of so many stocks on the market jolted investors’ confidence and caused prices to plunge. The jolted investors’ confidence and caused prices to plunge. The plunge in those prices was wiping out the savings of millions of plunge in those prices was wiping out the savings of millions of Americans who had invested in the stocks. The Dow had lost over Americans who had invested in the stocks. The Dow had lost over 500 points making the stock market finally crash on October 29, 500 points making the stock market finally crash on October 29, 1929. Prices sank to a shocking new low as investors dumped 1929. Prices sank to a shocking new low as investors dumped over $16 million shares of stock on the market leaving over $16 million shares of stock on the market leaving shareholders at a loss of some $30 billion. Then by November shareholders at a loss of some $30 billion. Then by November 13th, the prices had hit rock bottom. With all of this money loss 13th, the prices had hit rock bottom. With all of this money loss and panic, it was sure to cause more problems for the people in and panic, it was sure to cause more problems for the people in the future that was soon to come. the future that was soon to come.
““Migrant Mother”: The Face Migrant Mother”: The Face of the Great Depression of the Great Depression
The ResultsThe Results Bank FailuresBank Failures
The Results:The Results:UnemploymentUnemployment
UnemploymentUnemployment
DustbowlDustbowl
A traveler noticed a nice new hat by the side of the road, and he stopped to pick it up. Under the hat was a man, buried up to his neck in the dust! As he dug the poor fellow out, the traveler asked if he wanted a ride into town. "No, I'll get there myself," the man replied, "I'm on a horse." (Excerpt from THE DUST BOWL by Tricia Andryszewski, p. 33.)
Poor farming practices + Poor farming practices + drought = drought = DustbowlDustbowl
Dust clouds + high winds Dust clouds + high winds = terrifying experience= terrifying experience
What areas were affected What areas were affected by the Dust Bowl? by the Dust Bowl?
OKIESOKIES: Refugees from the : Refugees from the Dust Bowl. They usually Dust Bowl. They usually
went to Californiawent to California
The Results: HARD TIMESThe Results: HARD TIMES
Loss of homesLoss of homes ““HoovervillesHoovervilles””
Here were all these people living in old rusted-out car bodies. ... One family ... [was] living in a piano box. This wasn't just a little section, this was maybe 10 feet wide and 10 feet long. People living in whatever theycould junk together. ..."
The Results: Soup kitchensThe Results: Soup kitchens
The results: The results: People on “ relief ” People on “ relief ”
The results: The results: Social UnrestSocial Unrest: Fear : Fear of a Socialist Revolutionof a Socialist Revolution
The ResultsThe Results: Social : Social unrest and labor activityunrest and labor activity
DepressionDepression
DepressionDepression
DepressionDepression
Did everyone suffer Did everyone suffer during the Great during the Great Depression?Depression?
Two Presidents respond to the Depression:Two Presidents respond to the Depression: One fails and the other One fails and the other changes the role of changes the role of government forever!government forever!
Hoover fails to respond Hoover fails to respond effectively to the effectively to the DepressionDepression
““rugged individualism”rugged individualism” Thought government Thought government
relief would be bad for relief would be bad for people’s characterpeople’s character
VoluntaryVoluntary associations associations CharityCharity Failed to recognize how Failed to recognize how
big the economic crisis big the economic crisis waswas
FDR FDR and the and the New DealNew Deal increase the size increase the size of the federal government and bring it of the federal government and bring it
into our lives into our lives
Worldwide Worldwide Depression leads Depression leads to social and political unrestto social and political unrest
And the rise of dictators And the rise of dictators in Europe and Japanin Europe and Japan
But many in the US are But many in the US are burying their heads in the burying their heads in the sand….. AMERICA FIRST!sand….. AMERICA FIRST!
America First movement..America First movement..
1933 – 1933 – FDRFDR TAKES OVER – TAKES OVER –AND JUST IN TIMEAND JUST IN TIME
The New Yorker Magazine’s The New Yorker Magazine’s view of the inauguration!view of the inauguration!
Election of 1932Election of 1932
FDRFDR: The nation’s only : The nation’s only 4 term4 term President. Served through the President. Served through the Great Depression and WW IIGreat Depression and WW II
Families on ReliefFamilies on Relief
““The only thing we have The only thing we have to fear …..to fear ….. is fear itself”is fear itself”
“Our greatest primary task is to put people to work”
Franklin Delano Roosevelt
FDR: “This generation of FDR: “This generation of Americans has a rendezvous Americans has a rendezvous with destiny”with destiny”
FDR inspires FDR inspires confidence confidence
A New President A New President and a New Dealand a New Deal
I NEVER FORGET I NEVER FORGET THAT I LIVE IN A THAT I LIVE IN A HOUSE OWNED BY HOUSE OWNED BY ALL THE ALL THE AMERICAN PEOPLE AMERICAN PEOPLE AND I HAVE BEEN AND I HAVE BEEN GIVEN THEIR GIVEN THEIR TRUST.” TRUST.”
FDRFDR
Reversing the Spiral of Reversing the Spiral of DepressionDepression
Government Spending $
Alphabet Agencies
More Jobs
More Spending
Demand for goods increases
More goods have to be produced
More people withJobs = more pay $
More Spending
Demand for goods increases
More goods have to be produced
More Jobs
More Pay = More Taxes
Cycle of
Prosperity!
Democrats called this Process
‘Pump Priming’
FDR’s FDR’s New DealNew Deal: : Relief, recovery, reformRelief, recovery, reform
Relief for the needyRelief for the needy Jobs providedJobs provided Banking, Business and government reformedBanking, Business and government reformed
FDR gets to workFDR gets to work: : The First 100 daysThe First 100 days
Emergency BankingEmergency Banking ActAct
Bank “holidays”: Bank “holidays”: banks are ordered banks are ordered closed on certain closed on certain daysdays
Glass – Steagall ActGlass – Steagall Act creates creates FDICFDIC: : Federal Deposit Federal Deposit InsuranceInsurance
The Alphabet AgenciesThe Alphabet Agencies
FDR’s New DealFDR’s New Deal: Government : Government grows and takes over parts of the grows and takes over parts of the economyeconomy
AAA – Agricultural Adjustment ActAAA – Agricultural Adjustment Act CCC – Civilian Conservation CorpsCCC – Civilian Conservation Corps NRA – National Recovery ActNRA – National Recovery Act WPA – Works Project AdministrationWPA – Works Project Administration PWA – Public Works AdministrationPWA – Public Works Administration SSA – Social Security AdministrationSSA – Social Security Administration REA – Rural Electrification AdministrationREA – Rural Electrification Administration TVA – Tennessee Valley Authority TVA – Tennessee Valley Authority
Fireside ChatFireside Chat: May 7, : May 7, 19331933
AAAAAA
CCCCCC: Employed young men : Employed young men for outdoor work. Units for outdoor work. Units
were racially segregated were racially segregated
WPA – Works Project WPA – Works Project AdministrationAdministration
The WPA put artists to The WPA put artists to workwork
WPAWPA
Dorothea Lange documents Dorothea Lange documents the Depression for the the Depression for the FSAFSA
Her most famous photo: Her most famous photo: Migrant MotherMigrant Mother
(and how a photo –and a photographer- (and how a photo –and a photographer-
can lie)can lie)
Dorothea Lange documents Dorothea Lange documents Japanese internmentJapanese internment 1942 1942
Court – packing schemeCourt – packing scheme: FDR : FDR
declares war on the Supreme Courtdeclares war on the Supreme Court
FDR’S SURPRISE MOVE TO ADD MORE JUSTICES TO THE SUPREME COURT DIDN’T WORK BUT SCARED IT INTO PASSING HIS
NEW DEAL LEGISLATION
HomeworkHomework: A New Deal : A New Deal for the Artsfor the Arts
A NEW DEAL FOR THE ARTS WEBSITEA NEW DEAL FOR THE ARTS WEBSITE
Problems and Criticisms Problems and Criticisms of the New Dealof the New Deal
Some programs were Some programs were wastefulwasteful Charges of Charges of socialismsocialism At first, the U.S. Supreme Court struck At first, the U.S. Supreme Court struck
down some of FDR’s New Deal programsdown some of FDR’s New Deal programs FDR responds to this threat to his New FDR responds to this threat to his New
Deal with the Deal with the court- packing schemecourt- packing scheme