U.S History: The Great Depression

Economic Boom

A period of general prosperity in the 1920s that collapsed in the Great Depression of the 1930s.

Bull Market

A stock market in which stock prices were steadily increasing. In the 1920s, stock prices became vastly inflated, reflecting the results of speculation rather than the true value of the stock based on company earnings.

Bonus Expeditionary Force

About 40 000 unemployed veterans and their families-former members of the American Expeditionary Force during World War 1-camped out in Washington D.C. in the summer of 1932, hoping to persuade Congress to grant them a promised bonus. Fearing a possible riot, President Hoover used the army to disperse this force. Many were shocked by this action.

National Recovery Administration (NRA)

All businesses and companies in the same industry were asked to cooperate in drawing up a code of fair practice. Each code set standard prices, limited production, reduced the work week to 40 hrs an established a minimum wage. President Roosevelt had the power to approve the code or suggest changes. Once the code was approved, businesses voluntarily following the code were allowed to display large posters with blue eagles, informing customers that they were members. It also guaranteed the rights of workers to organize into unions, established a National Labor Board to settle labor-management disputes, and abolished most forms of child labor. It an atmosphere of economic crisis, the New Deal and its agencies encouraged businesses to cooperate and antitrust restrictions on price-fixing and collaboration were ignored. Some critics say that this agency favored the Big Business, since it was more influential in drawing top the code of fair practice. In 1935, the Supreme Court declared the act unconstitutional.

Smoot-Hawley Tariff

American tariffs protected American markets, but made it harder for producers to sell their goods abroad. Some countries retaliated against the United States by setting up high tariffs on American goods. Thus, the effect of high tariffs was to restrict international trade. This tariff was the highest U.S tariff of all and went into effect in 1930 just after the stock market crash. It raised customs duties on thousands of goods and contributed to a reduction of U.S trade by more than half.

Herbert Hoover

As a republican who believed in the laissez-faire economics, he did not think that it was the federal government's job to interfere in the economy and he feared that federal aid would weaken individual character. In the beginning of the Depression, he held meetings with business leaders asking them not to lay off workers. He cut taxes and increased federal spending on public works projects (ex: Hoover Dam). He called for a 1-year international postponement on the payment of war debts. He directed a federal agency to but surplus farm crops. He saw "rugged individualism" as the key to American success, and believed that emergency relief for the needy should come from local government and private charities. He established the Reconstruction Finance Corporation to put into place his "trickle-down" approach. The RFC would give emergency loans to banks and businesses. He believed that cheap loans to businesses would save them from bankruptcy and expand again. As they extended, they would hire more workers. The benefits would then trickle down to the average American. However, his efforts proved inadequate to cope with the magnitude of the problem.

Buying on Margin

Buying stock by putting down only 10% and borrowing 90%. People then sold the stocks after they went up in price to pay off the loan.

Dust Bowl

Farmers on the Great Plains had to contend with environmental disasters as well as the Depression. they had removed the tough grasses that once protected the soil. A series of droughts in the early 1930s dried up crops and topsoil, turning the soil into dust. The strong winds of the Great Plains then swept the dust eastwards. Blizzards of dust fell from the sky, choking farmers and livestock. Farmers had to abandon their farms. Many fled west to California, where they became known as "Okies" because so many of them came from Oklahoma. they hoped to find work on fruit farms or in cities, especially because government policies had cut off the influx of migrant workers from Mexico. Nevertheless the Okies were distrusted, and often had difficulties finding work.

New Deal

It was pragmatic, making choices based on trial and error. Roosevelt was willing to try anything that would work. He created so many agencies so quickly during his first term that many Americans referred to various programs as "alphabet soup". It was novel, both in its size and its underlying assumption that the federal government had a major role in running the peacetime economy. Roosevelt explained its measures as three goals: Relief, Recovery, and Reform. The first one lasted from Roosevelt's inauguration (1933) to 1935 and was mainly aimed at relief and recovery. As soon as Roosevelt took office, he assembled Congress for a special session to cope with the nation's economic problems. Democratic control of both Houses of Congress and the mood of the nation permitted Roosevelt to push through major legislation that would not have been possible in more normal times. It instituted the bank holiday, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission. It also provided relief to the unemployed, home and farm owners, instituted the Tennessee Valley Authority and more recovery measures. After the Supreme Court shut down some of the first's ideas, Roosevelt changed his approach. This second deal started in 1935. It was aimed more at reform and security. It was put in place to make sure another Depression would not happen again. It created the Works Progress Administration, the Social Security Act, the National Labor Relations Act and the Fair Labor Standards Act. Many Americans feared that Roosevelt was turning America towards socialism. It finally came to an end after Roosevelt's court-packing plan alienated Southern Democrats, who refused to back anymore of his measures. In 1936, when the economy seemed to be recovering, Roosevelt cut government spending, which worsened the Depression. Roosevelt resumed federal spending and the WPA began rehiring the unemployed.

Black Tuesday

October 29, 1929; date of the worst stock-market crash in American history and beginning of the Great Depression. Corporations and private shareholders all tried to sell their stocks at the same time. Prices kept getting lower as people competed to sell and no one was willing to buy. In 3 weeks, stocks lost half their value and $30 billion just disappeared.

Fireside Chats

Roosevelt came into power at a time when new means of communication (radio and motion pictures with sound) made it possible for the President to reach out to more people than ever before. He gave these informational radio addresses to millions of listeners in which he explained his policies in simple conversational terms. His chats were phrased to emphasized optimism, unity, and respect for listeners.

Bank Holiday

Roosevelt closed all the nation's banks just after his inauguration. Each bank was permitted to reopen only after the government inspected its records and found it financially sound. This gave banks an opportunity to avoid runs an which all their customers tried to withdraw their funds. In his fireside chats, Roosevelt encouraged the public to redeposit their savings in the reopened banks. The Emergency Banking Act authorized the federal government to assist threatened banks with emergency funds.

Social Security

Single most important act passed by the New Deal. Americans continued to be protected by this today, which now makes up a large part of the federal budget. One of the reasons the Depression had caused so much human suffering was that Americans had no "safety net" to fall back on when they were struck by unemployment, illness, or a death in the family. This act changed all this by adopting measures already in existence in several European countries: unemployment insurance, retirement benefits, grants for the disabled and orphaned.

Great Depression

The greatest economic crisis in the nation's history. Production fell by half and one quarter of the workforce was unemployed. The stock market crash set off a chain reaction. People who lost money on the stock market could no longer invest or buy as many goods. Businesses and consumers stopped making new purchases. Businesses fired workers, creating mass unemployment. Banks failed. Prices and the demand for goods failed. People lost their homes and many even had to beg for food. President Hoover believed in laissez-faire economics and did not think the government should interfere too directly in the economy. He took some steps but his actions were too little, too late. In 1932, Franklin D. Roosevelt won the presidential election and put in pace the New Deal to try to remedy the situation.

Speculation Boom

The practice of buying real estate, stocks, or anything else to sell later at a profit. During the 1920s, the government failed to regulate banks and the stock market effectively and it flourished. Bankers often placed their depositors' money in shaky, unsound investments. Private lent money to stock market speculators.

Agricultural Adjustment Act (AAA)

The purpose of this act was to promote the recovery of farmers. Like the NRA, it limited production. By creating artificial scarcity, it would encourage crop prices to rise. Under the first act, the government simply paid farmers to plant fewer acres and kill extra livestock. Food prices did go up, but the Supreme Court declared the act unconstitutional in 1936 on the grounds that Congress could not control economic activities in a single state. Congress reacted by passing an act that paid farmers to grow crops like clovers, which helped conserve the soil, instead of continuously growing the same food crops. In 1938, Congress passed the second act, under which the government decided how much of a crop should be marketed each year. Each farmer was given a limited number of acres to plant. After the harvest, farmers' surpluses were stored by the government until prices rose to parity level. Meanwhile, the government gave loans to farmers based on the value of their stored crops. Government experts also showed farmers new ways of soil conservation. This new act was successful both in raising prices and in increasing the fertility of the soil.

Relief, Recovery, Reform

The three components of the New Deal's legislation. The relief was aimed at the unemployed and home/farm owners. For work relief, the CCC, PWA, and CWA were created. Work relief was a government project that gave people meaningful work. This preserved their dignity and also improved the nation's economy by providing much needed roads and public funding. in terms of relief for home and farm owners, agencies gave them loans at low interest rates to allow owners to avoid foreclosure. For Recovery, Roosevelt had a plan of "priming the pump". Through its relief programs and public work projects, the government put money in the hands of consumers. They hoped they would spend it, increasing the demand for other products. Producers would start to produce again and hire more workers. These workers would also spend their money increasing demand further. The cycle would continue until the Depression was over. The Recovery aspects created many recovery agencies. The goal was to help industry recover from the Depression. Other agencies, like one to insure bank loans to homeowners for home improvements. The reform came from the creation of agencies like the WPA and SSA.It also perched to reform labor and improve conditions for workers.

Gross National Product (GNP)

The total value of all the goods and services produced by a nation in a single year, including income from U.S investments but not income earned by foreigners in the U.S. During the Great Depression, the GNP of the United States greatly decreased. Producers no longer made goods because there was no one who would buy them. Industrial production in 1932 was just half of what it had been in 1929. Many businesses went bankrupt.

Hoovervilles

These were shantytowns that sprang up on the outskirts of cities to demonstrate against the government's relative inaction and to show their frustration with Hoover's lack of leadership.

National Recovery Act

This act was designed to help industry recover from the Depression by increasing prices and reducing wasteful competition. It created a new agency: the National Recovery Administration.

Works Progress Administration (WPA)

This agency created employment by creating new public works projects. It spent over $11 billion and gave 9 million people jobs building public schools, courthouses, roads, and bridges. It also hired unemployed architects, writers, and musicians and paid them to paint murals, design buildings, write guidebooks, and produce plays and concerts. This policy greatly encouraged the creative arts during this difficult period.

Civilian Conservation Corps (CCC)

This agency gave outdoor jobs to young men, such as planting trees and draining swamps. Members lived in camps supervised by army officers, and received free uniforms and food. They were required to send most of their pay home to their families.

Federal Deposit Insurance Corporation (FDIC)

This corporation was created to insure deposits in banks so that people would no longer worry about losing their savings in the event of bank failures. If a bank failed, the federal government would pay a depositor the value of the deposit up to a specified amount.

National Labor Relations Act

This law also known as the Wagner Act replaced several provisions of the National Industrial Recovery Act, which was declared unconstitutional in 1935. This law gave workers the right to form unions, to bargain collectively, and to submit their grievances to the National Labor Relations Board. Employers could not engage in "unfair" anti-union practices. By allowing workers to organize, Roosevelt hoped to push up wages, increase workers' purchasing power, and create fair working conditions.

Tennessee Valley Authority (TVA)

This was a major experiment in public ownership. The South was the region hardest hit by the Depression. Many areas still lacked electricity, running water, or significant industry. The Tennessee Valley was was an impoverished region covering parts of 7 states. The act built and maintained 21 large dams along the Tennessee River. These dams controlled floods, produced hydroelectricity, and manufactured fertilizers. private electric companies complained with having to compete whit the government in selling electricity. Meanwhile, the government used its own costs in generating hydroelectricity to judge whether the rates charged to consumers by private companies were fair. Construction of the dams and the introduction of conservation measures like the planting of trees brought greater prosperity to the region. Although the experiment was a success, Congress failed to extend this approach to other parts of the country.

Sit-down Strike

This was organized in 1936 by automobile workers at the General Motors plant in Flint, Michigan. During this strike, the workers occupied the factory or plant and prevented the owners from using it. Roosevelt refused to use the federal government to intervene on behalf of General Motors. Eventually, as a result of the strike, General Motors agreed to recognize the automobile workers' union.

Franklin D. Roosevelt

When he took the office in March 1933, the Depression was at its height. Americans were confronting a series of economic problems of catastrophic dimensions. The president was well advised and supported by his wife. He was also an excellent speaker and communicator. He implicated the New Deal and worked so many agencies so quickly that Americans described the New Deal politic as "alphabet soup". He also had the court-packing plan, which caused the end go the New Deal.

Court-packing Plan

the greatest threat to the New Deal came from the Supreme Court. the Court ruled that both the National Industrial Reconstruction Act and the Agricultural Adjustment Act were unconstitutional. Roosevelt feared that the Supreme Court might overrule all of the New Deal legislations. By 1937, he was especially worried that it would overturn the Wagner Act and the Social Security Act. He therefore proposed to Congress that the President should be allowed to appoint a new Justice of the Court for each Justice who did not retire upon reaching age 70. The proposal would have let Roosevelt appoint 6 new Justices. This plan was widely condemned by the public and rejected by Congress. The Senate refused pass the provision fro additional Justices. This plan alienated Southern Democrats, who refused to back further New Deal measures, which put an end to the New Deal.