Causes of the Great Depression and New Deal Unit Test
How did the expansion of government during the New Deal affect the nation?
The new deal expanded the government's role in our economy, by giving it the power to regulate previously unregulated areas of commerce. Those primarily being banking, agriculture and housing. Along with it was the creation of new programs like social security and welfare aid for the poor. increased government control over the economy and money supply; intervention to control prices and agricultural production; the beginning of the federal welfare state, and the rise of trade
Father Charles Coughlin
demagogue → at the extreme of the political spectrum, denounced the New Deal, appealed to people's emotions and prejudices he was a Roman Catholic priest and attracted millions of listeners to his radio broadcasts "radio priest" → stirred up hatred against Wall Street bankers and greedy capitalists. Grew increasingly critical of FDR for not doing enough to help the poor, saying that FDR had "out-Hoovered Hoover"
Liberal
expansion of liberty
Bonus Army
gathering of around 10,000-25,000 WW1 veterans with their families, converged on Washington D.C. to demand immediate bonus payment for wartime service to alleviate the economic hardship of the Great Depression underlines the hysteria and panic the Great Depression brought upon the American people and the determination of the US government to stay in control ended up not receiving the money they came for and many individuals were hurt (Hoover ordered the police to take them away)
Banking Reform Act of 1933: Federal Deposit Insurance Corporation (FDIC)
guaranteed individual bank deposits up to $5,000. Helped restore public confidence in banks and stabilize the banking system. Limited the freedom of banks to trade in stocks and bonds.
Laissez faire ideology
hands off policy main policy of Hoover Republican presidents of the 1920s allowed businesses to do what they wanted with little government interference. Led to the collapse of the Stock Market which then led into the Great Depression.
High Tariffs (Hawley-Smoot Tariff)
increased tax on foreign imports to the US by 20% made it harder for other countries → bad planning
Public works
many works to supply jobs to unemployed Americans Mount Rushmore government funded created jobs and pride for the US under Roosevelt's program called the New Deal WPA, PWA, and CCC all created to help give jobs out to the unemployed reduced unemployment by hiring the unemployed to build new public buildings, roads, bridges, and subways.
Deflation
money goes out of economy, prices go up, business investments go under, employment goes down, spending goes down deflation was the result of a collapsing financial sector and bank failures Prices dropped an average of nearly 7% every year between the years of 1930 and 1933.
Socialist Party
more critical views from the left Norman Thomas → leader of party, found little to praise about New Deal except for the TVA Upton Sinclair → called for a more radical New Deal and urged California's state government to buy, rent, or seize unused land and factories and give them to jobless workers to use to produce their own food and goods (called it the End Poverty in California → EPIC, was soon defeated)
How did ordinary Americans endure the hardships of the Great Depression? What were the conditions of the Great Depression I.e. Unemployment etc.?
The Great Depression affected the daily lives of average Americans by causing them to be unemployed. People who had homes or apartments became homeless because they had no money to pay rent. Families fell apart when the husbands would leave to go search for jobs. Many suffered depression and committed suicide. steep declines in industrial production and in prices (deflation), mass unemployment, banking panics, and sharp increases in rates of poverty and homelessness.
American Liberty League 1934
right wing thought the new deal had gone too far in expanding the role of the federal government included politicians, wealthy industrialists, bankers, and religious leaders attacked FDR as a leftist radical and called New Deal legislation socialist and unconstitutional one of their founders was Al Smith (former NY governor and Democratic candidate for president in 1928) → thought the New Deal was a betrayal of Progressive ideas about good government and threw his support to the Republican candidate for president
International instability - Dawes Plan
banks would loan money to Germany. Germany would use that money to pay reparations to Britain and France. Britain and France would repay that they owed to America. Increased the amount Germany owed the US. Only a short term improvement. US loans to Germany dried up by 1928
Civilian Conservation Corps (CCC)
gave young men jobs planting trees and working on other conservation projects
Conservative
preserve traditional values
Business cycle - recession and depression
recession and depression going up to peak: increased/mass production, increased employment, increased spending and installment plan, new marketing/advertising techniques going down into recession: fall in spending on houses, cars, buis. firms depression: failure of banks and no money left, durable goods were not capable of bringing the economy back, collapse of money supply, collapse of world trade, stock market crash of 1929, government policies, multiplier effect
Radical
sweeping social, economic, political changes
National Labor Relations Board - 2nd new deal
to protect the rights of the wager act This board had the power to supervise union elections to ensure they were free and democratic. It could also penalize employers for unfair labor practices, such as attempting to discourage workers from joining or forming a union
Works Progress Administration (WPA) - 2nd new deal
under the big bill a work relief organization, put more than 3 million Americans to work in its first year. They built hundreds of thousands of bridges, public buildings, and parks. At the urging of Eleanor Roosevelt, the WPA also established art projects. It hired unemployed artists to paint murals in public buildings. Musicians combed the American backcountry to find and record folk music. Writers created guidebooks to the states. It created a lot of controversy because many conservatives denounced the program's cost, while labor unions attacked it for depressing wage rates. Despite this, the program continued to expand and by 1936, it employed 7 percent of the American workforce.
First 100 Days
Hundred Days, in U.S. history, the early period of Franklin D. Roosevelt's presidency (March 9-June 16, 1933), during which a major portion of New Deal legislation was enacted.
What were the effects of the bank crisis in the U.S. on international politics?
-Over $6 billion goods were bought on credit, 80% of Americans had no savings -Other countries were facing depression because of the weakness of the Dawes Plan because the US couldn't give out any loans
National Industrial Recovery Act - Supreme Court challenge
1935 → Schechter Poultry Corp v. United States the court ruled that the act violated the constitutional separation of powers by giving the president, rather than Congress, the power to issue "codes of fair competition" to businesses
New Deal Coalition in Politics
1936 election: signaled the emergence of this political partnership included minority groups such as women, but also groups such as industrial workers, farmers, immigrants, reformers, southern whites, and city dwellers loyalty to the democratic party and FDR held these groups together they trusted FDR: knew he would provide for the people in need the belief that government could make a difference in voters' lives inspired many people to become more involved in politics and they often supported democratic candidates 1936 election: over 70% of African American voters were for Roosevelt (major shift in Black population, traditionally supported Republicans as the party of Lincoln and Emancipation)
FDR's failed "Court Packing Plan"
1937 → FDR presented congress with legislation to redesign the Supreme Court called for adding a new justice for every justice over the age of 70 FDR claimed the Court was behind on its work, partly because aging justices could not keep up but he really just wanted to pack the Supreme Court with liberal justices who would favor New Deal programs Republicans, Democrats, and the American people expressed outrage at this plan, so congress rejected the bill
Lowered taxes
At first, during the great depression, the government raised taxes, especially on property because they needed the money, but this was a terrible idea and putting people in even more debt. But, to try and assist with the recovery, the government lowered income taxes and other taxes. After the First World War ended on November 11, 1918, there was a deflationary recession from January 1920 to July 1921. To facilitate recovery, income tax rate was reduced from 73 percent in 1921 to 58 percent in 1922, and later to 46 percent in 1924 and 25 percent in 1925. The tax cuts allowed the U.S. economy to grow rapidly during the mid and late 1920s. Between 1922 and 1929, real gross national product grew at an annual average rate of 4.7 percent and the unemployment rate fell from 6.7 percent to 3.2 percent.
Stock Market Crash 1929 - "Black Tuesday" (causes/effects)
Causes of Black Tuesday included too much debt used to buy stocks, global protectionist policies, and slowing economic growth. Black Tuesday triggered a chain of catastrophic macroeconomic events in the US and Europe, which included mass bankruptcies and unemployment, and dramatic declines in production and money supply
Fireside Chats
FDR knew that he must calm people's fears and did this by giving a series of radio addresses called fireside chats. In the podcasts, he explained his plans and asked Americans for their support
How did FDR attempt to get around the Supreme Court?
FDR viewed his second term as a mandate (a grant of authority) to extend the New Deal further but feared that the Supreme court would block his efforts tried the Court Packing system - did not work Eventually the court shifted course and became more accepting of government regulation of the economy. They kept acts like the Social Security Act and the Wagner act → refined their understanding of liberty (became the protection of law against the evils which menace the health, safety, morals, and welfare of the people instead of just freedom of private enterprise to act without government interference)
Describe Franklin D. Roosevelt's philosophy for dealing with the Great Depression.
His objectives were to calm the economic fears of Americans, develop policies to alleviate the problems of the Great Depression, and gain the support of the American people for his programs.
How did the federal government respond to the economic collapse that began in 1929? Why?
Hoover did barely anything to help the failing economy because he was conservative and feared too much government intervention FDR created the New Deals but also he wanted to first, provide relief to those who needed it most; and second, re-structure the US economy from the bottom up. Because of this strategy, most of the other reforms in the First 100 Days were focused on the first goal—to provide relief.
Volunteerism and localism
Hoover relied on volunteers, local organizations, and churches to supply for the needy. He thought this would be the best way for the economy to recover. Laissez-faire. Although FDR wanted to take a hands-on approach, he continued to look to these organizations for help because everyone was needed in the repairs.
How did the National Labor Relations Act or Wagner Act change the Federal government's approach toward labor unions?
It gave employees the right to form and join unions, and it obligated employers to bargain collectively with unions selected by a majority of the employees in an appropriate bargaining unit. they felt protected and stable for the future
How effective was the New Deal in addressing the problems of the Great Depression?
It put people back to work. It saved capitalism. It restored faith in the American economic system, while at the same time it revived a sense of hope in the American people. But economically, it was less successful. It did not completely bring the economy back to where it had started, but it was WWII that helped to complete that goal
Federal Emergency Relief Administration (FERA)
It sent funds to state governments, which then distributed the cash to the needy. For the first time in American history, a federal agency provided direct relief to the unemployed. State and local agencies also pitched in with supplies of food and clothing to help the poor.
How did the fireside chats impact upon the people's connection to their government?
Roosevelt continued to use fireside chats throughout his presidency to address the fears and concerns of the American people as well as to inform them of the positions and actions taken by the U.S. government. Americans no longer felt alone and as though they had direct help. The radio gave them hope for the future.
What was the significance of the construction of the Hoover Dam and Mount Rushmore? How did these projects affect the U.S. economy?
The Hoover Dam created tons of hydro electricity that helped power homes and cities and farmers received a dependable water source. Mount Rushmore symbolized what America could accomplish and it is a symbol of freedom, liberty, and power. It led to lots of money from hydropower and from tours. -gave Americans pride
National Industrial Recovery Act (NIRA) of 1933
The NIRA was the centerpiece of the New Deal's efforts to breathe life into the economy. It was designed to increase production while boosting wages and prices. Its goals were to make more goods available and to give consumers more money with which to buy them. The NIRA targeted the needs of three groups: business, labor unions, and the unemployed
What is the legacy of the New Deal?
The New Deal did not end the Depression. Nor did it significantly redistribute income. It did, however, provide Americans with economic security that they had never known before. The New Deal legacies include unemployment insurance, old age insurance, and insured bank deposits. It caused a shift in government philosophy causing Americans to believe that the federal government has a responsibility to ensure the nation's economy and the welfare of its citizens.
National Recovery Administration (NRA)
To help business, the law set up the NRA which worked with business leaders to create codes of fair competition in various industries. Each industry followed its own code, which required companies in that industry to standardize products, set minimum prices, and announce any expected price increases. With this, the gov now increased regulation and economic planning and moved away from laissez-faire policies of the past
Tennessee Valley Authority (TVA)
Wanted to promote economic development in one of the poorest regions in the country, the Tennessee River Valley. The TVA, an independent government agency, built a series of dams on the Tennessee River and its tributaries. The dams provided flood control and hydroelectric power to seven southern states. They also battled erosion and deforestation which were serious problems in the valley. They also brought badly needed jobs to the region and encouraged businesses to invest there.
Hooverville
a shanty town built by unemployed and destitute people during the Depression of the early 1930s.
Welfare state/"New Liberalism" - Legacy of the New Deal
a social system in which the government takes responsibility for the economic well-being of its citizens didn't want to only offer short term relief for those in need, but long term, such as the Social Security Act some critics said it went against American principles such as self-reliance and individualism, but gov assistance still continues today in various forms
Unemployment, reduction in consumption and income: Durable goods
durable goods were not capable of bringing the economy back because the money supply collapsed so there was no money to buy anything
Mexican Americans
faced poverty and unemployment during the depression jobs dried up in the southwest where most Mexican Americans lived failing farms and businesses could not afford to hire them the AAA, which paid farmers to plant less led to more unemployment jobless mexican americans resettled in cities or relied on work-relief programs Mexican laborers who were not American citizens could not enroll in work relief more than ⅓ returned to Mexico, some went willingly while others were deported
Identify New Deal policies that were intended to provide immediate Relief during the Great Depression? Promote economic recovery? Permanently reform aspects of the American economy?
immediate relief: - reconstruction finance corporation - Federal emergency relief administration - emergency relief appropriation bill (Big bill) promote economic recovery: - agricultural adjustment act - WPA, PWA, CCC - national industrial recovery act (all of the ones that helped the workers/unemployed) Permanently reform aspects of the American economy - social security act - wagner act - federal deposit insurance corporation - securities and exchange commission - tennessee valley authority
Securities and Exchange Commission (SEC)
in hopes to reform the stock market they created the SEC which required companies to publish the important facts about their businesses. It also regulated the activities of stockbrokers and others in the investment business
Emergency Relief Appropriation Bill ("Big Bill") - 2nd new deal
it created several new agencies and called for nearly $5 billion in new spending, an unprecedented increase
Describe President Herbert Hoover's philosophy for dealing with the Great Depression.
laissez-faire approach/hands off relied on communities, smaller businesses, and churches to help with the economic decline, limited role for the government thought the wealth would trickle down to those who needed it
What was the "bank run" of 1930 and what are some of the reasons it happened?
large numbers of anxious people withdrew their deposits in cash, forcing banks to liquidate loans and often leading to bank failure. Illiquidity coupled with a contagion of fear is seen as the major factor in precipitating the financial crisis.
Dr. Francis Townsend
left-wing critic → greater aid to the needy devised a plan calling for monthly payments of $200 to everyone over the age of 60. Recipients would promise to retire and claimed his plan would free up jobs for younger workers and boost the economy
Unequal distribution of wealth
more than half the families filing tax returns were only earning $1,500 or less and needed at least $2,500 to live comfortably many farmers were in debt after the war b/c surplus crops caused prices to collapse foreign/unskilled workers earned extremely low wages African Americans were the last to be hired and first to be fired. This uneven distribution of income between the rich and the middle class grew throughout the 1920's. A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. Overproduction and underconsumption were affecting most sectors of the economy. Old industries were in decline (farming and mom & pop shops)
Women
much of their progress stemmed from Eleanor Roosevelt → she wanted FDR to place more women in gov positions the gov hired an unprecedented amount of women Frances Perkins reached a high position in gov for the first time (FDR's secretary of labor) → first female member in the cabinet and worked to create Social Security and the Fair Labor Standards Act Mary McLeod Bethune served as a special advisor to the president on minority affairs. She also worked in the National Youth Administration (NYA) → increased opportunities for young African Americans The Economy Act of 1932 → prohibited a husband and wife from both working for the federal government. Some Women were pressed to leave the workforce to free up jobs for men with families to support
Agricultural Adjustment act - Supreme Court challenge
occurred one year after the Schechter Poultry Corp v. United States thought that a law "to regulate and control agricultural production was a matter beyond the powers delegated to the federal government"
African-Americans
offered hope for them bc they were hit especially hard during the depression direct government relief and work relief programs such as the CCC and WPA helped many AA survive educated AAs got jobs in government. William Hastie → a lawyer who rose from a position as an advisor to the president on race relations to become the first AA to serve as a federal judge AA still continued to suffer from oppression and some New Deal agencies practiced segregation, especially in the South. FDR failed to confront lynching and declined the antilynching bill when it came before congress Eleanor Roosevelt took a more courageous stand. When the daughters of the American Revolution refused to allow a renowned black singer, Marian Anderson, perform at Constitutional Hall, she arranged for her to sing outdoors, on the steps of Lincoln Memorial.
Consumerism and installment buying (buying on credit)
people bought things that they didn't need and debt they couldn't afford which led to the stock market crash people had no savings and were more focussed on living in the moment then for the future
American Indians
positive results even before depression, american indians lived in poverty John Collier (FDRs commissioner of Indian affairs) hoped to repair the damage with the Indian New Deal ended the policy of forced assimilation, replacing gov run boarding schools with public schools on reservations. encouraged greater cultural awareness about American Indians and improved health care for them gave Indians more control over policies that affected their lives Indian Reorganization act of 1934 → indian communities received the right to set up their own tribal governments didn't lift them out of poverty, but it reversed harmful policies and restored pride
National Housing Act : Federal Housing Administration (FHA)
provided loans to help people meet their mortgage payments. The FHA gave a boost to the banking and construction industries by insuring mortgage loans up to 80 percent of a home's value.
National Fair Labor Standards Act 1938 - 2nd new deal
regulated conditions in the workplace set a minimum wage of 25 cents an hour and a maximum 44 hour workweek for most workers. It banned oppressive child labor long standing with the Wagner act and promised to make the Americans lives more secure
Multiplier effect
sales begin to fall, businesses slowed their expansion, and workers lost their jobs the prosperity of workers in all these industries allowed them to spend a lot of money, thus providing income to other workers → spread of new spending
Wagner Act - 2nd new deal
seen as the bill of rights for organized labor guaranteed workers the right to self-organization, to form, join, or assist labor organizations, and to bargain collectively through representatives of their own choosing long standing
Social Security Act - 2nd new deal
social insurance program that provides two main types of benefits: retirement and disability. Retirement benefits are cash payments made to retired workers sometime after they reach the age of 62. The government finances these payments by taxing current workers and their employers. Disability payments are payments made to workers who have become too disabled to continue working, regardless of their age. Severely disabled children are eligible for the Social Security payments as well. set up an unemployment insurance program for workers. Makes payments to people who have lost their jobs and are seeking new work. Funding comes from taxes on employers. Usually, they last for 6 months, however, congress has extended it for longer periods during economic recessions.
Speculation - land booms and stock market
speculators took the risk of buying something in hopes of selling higher prices collapsed after a hurricane in Florida and they were left with worthless land people only wanted to get rich quick --> invested all their money in stocks The market crashed from "over speculation." This is when stocks become worth a lot more than the actual value of the company. falsely high stock prices
What caused the Great Depression?
stock market crash (people were buying stocks on investment plans and could not actually afford to pay them back. Eventually when people panicked and sold all of their stocks, businesses went out of business because they had invested all of their money) banking crisis (people had deposited their money in banks for safe-keeping, banks loaned that money out to people for investments, when the stock market crashed people could not pay back the banks for their loans, people withdrew their money, banks closed and money disappeared) overproduction (industry thrived in the 1920s which caused mass production, but not enough money for people to afford and therefore people going into debt and installment loans) underconsumption (by 1929 people had to borrow money in order to spend, farmers overproduced while prices dropped, multiplier effect bc of industry failures)
Workers/unions
strengthened the labor movement NIRA and Wagner Act → guaranteed the right for workers to form unions and bargain collectively → boosted power of labor unions (more equal footing with employers) unions became stronger and grew American Federation of Labor (AFL) → an alliance of unions and wanted to organize workers by craft and industry (John L. Lewis was a supporter of this idea) John L. Lewis helped to create the Congress of Industrial Organizations (CIO). They were suspended by the AFL for industry wide organizing but formed an independent federation. They grew quickly and accepted African Americans and other workers shunned by the AFL. Unions membership rose to 28% by 1940 while it was at 14% in 1935
Gold standard
the nation's currency was based off the value of gold did not open money supply → deeper inflation
Emergency Banking Act →Bank Holiday (1933)
this law reformed the banking system and gave the federal government more power to supervise bank activities on March 6, 1933 FDR ordered all banks to close temporarily and stopped withdrawal of funds from financial institutions
to help labor unions
to help labor unions, the NIRA guaranteed workers the right to organize and bargain collectively. Now there were minimum wages and maximum hours in various industries
Public Works Administration
to help the unemployed The NIRA allotted $3.3 billion for various public works. The PWA oversaw the projects. FDR wanted to both create jobs and restart the economy with a large infusion of gov cash. Unfortunately, the PWA spent its money so slowly that it had little effect on jobs or the economy
Deficit spending - "priming the pump" - Legacy of the New Deal
to meet the enormous cost of all the new federal programs, FDR resorted to deficit spending (spending more than the government receives in revenues) he financed the deficit by borrowing money
Federal Reserve System - Weak central banking system
too many people were unable to pay back loans, especially when people began to take their money out when the stock market crashed people could no longer access their money savings that they had put into banks. When the prices of stocks were extremely high (higher than it actually is b/c of borrowed money) people were selling their stocks. no regulations on banks b/c of laissez-faire solidified factors of depression Typically, banks hold onto only a small percentage of all the money depositors entrust to them, and lend out the rest in search of a profit; that's how they make their money.
Agricultural Adjustment Administration (AAA)
tried to aid farmers by reducing crop production and raising prices. Farmers had long suffered from low market prices for their products, which eroded their purchasing power. Many farmers also lost their jobs because they were unable to pay their mortgages. They aimed to raise crop prices to reach parity (the price that gives farmers the same purchasing power they had during an earlier, more prosperous time). The AAA paid farmers to plant fewer crops (reduce crop supplies and increase market demand). The AAA also provided loans to farmers so that they could pay their mortgages and stay on their land rather than join the jobless cities.
Dust Bowl
when farmers abandoned soil conservation practices and the top layer became extremely dry and infertile, the static electricity grabbed hold of the dust and high winds brought it across the country thousands of deaths and many left homeless 250,000 left the Dust Bowl, but 2/3 were left to stick it out
How did the First and Second New Deals affect various groups of Americans?
The jobs programs employed over eight million people and, while systematic discrimination hurt both women and African American workers, these programs were still successful in getting people back to work. many minority groups still gained less help, except for the American Indians
Bank Crisis - Bank runs and bank failures
Many of the small banks had lent large portions of their assets for stock market speculation and were virtually put out of business overnight when the market crashed. In all, 9,000 banks failed--taking with them $7 billion in depositors' assets
Social welfare
People more well off had an easier time during the depression, but still, everyone had a hard time because money disappeared in the banks. The money people had invested in stocks had vanished. People that were middle class or poor struggled to find food and to stay alive. There was no work for them for a while and had to rely on their communities for help.
Hoover Dam
President Hoover proposed the idea for the dam provided work for thousands of men promoted the economic and social growth of the region (LA) allows CA to produce more food than any state in the US part of the New Deal and funded entirely by the US government
Reconstruction Finance Corporation (RFC)
The Reconstruction Finance Corp. (RFC) was an agency authorized by the U.S. government to loan money to assist the nation's ailing banks after the stock market crash of 1929 and during the Great Depression that followed. a government agency to save failing banks and businesses. Issued government loans to banks, railroads, and other big businesses
Why did the Dust Bowl take place? Describe conditions there. Looking back now, do you think it could have been prevented?
The lack of grass combined with poor soil practices which led to it getting swept in the air by static electricity. So you didn't have rocks as an anchor. Wind easily stripped away the topsoil creating huge dust storms. Somewhat because it Americans had protected the soil better, it would not have been so severe
Huey Long
champion of the poor, seemed to his opponents a wild-eyed demagogue a Louisiana senator with Populist appeal → portrayed himself as the hero of the common man in the fight against big businesses 1934 → launched his Share Our Wealth program with the slogan "Every Man a King". He wanted to take money from the rich and give every American family a grant of $5,000, a guaranteed job, and an income of at least $2,500 per year
Rural Electrification Administration (REA) - 2nd new deal
created under the emergency relief appropriations bill fewer than 20 percent of American farms had electricity. The REA established hundreds of publicly owned electrical cooperatives, built generating plants, and strung power lines. When finished, about 90 percent of the country's farms had access to cheap power.
