Chapter 30-31 History Study Guide

Contrast the ideological responses to the economic collapse by the following groups: conservatives, liberals, and radicals.

1. Conservatives: • Response: Conservative groups generally believed in limited government intervention in the economy and emphasized the importance of free-market principles. They often advocated for balancing budgets, reducing government spending, and allowing the economy to self-correct without significant interference. • Solution: Conservatives favored policies that focused on fiscal responsibility, reduced government intervention, and relied on private enterprise to restore economic stability. They were cautious about excessive government intervention or expansion of social welfare programs, fearing it could lead to increased government control and inefficiencies. 2. Liberals: • Response: Liberal groups believed that government intervention was necessary to address the economic crisis and provide relief to those affected. They emphasized the need for social reforms and government action to alleviate poverty, unemployment, and inequality. • Solution: Liberals supported initiatives like the New Deal, which aimed to provide relief, recovery, and reform. They endorsed government programs to create jobs, regulate financial markets, establish social safety nets (such as Social Security), and invest in public works projects to stimulate the economy and assist those in need. 3. Radicals: • Response: Radicals, including socialist and communist groups, saw the economic collapse as a fundamental failure of capitalism. They believed that the system itself was flawed and called for a complete overhaul of the economic and social structure. • Solution: Radicals advocated for more radical and transformative changes, such as nationalizing industries, redistributing wealth, and advocating for worker control of production. Some even called for the establishment of a socialist or communist system that prioritized

What direct actions did Hoover enact to help the economy? Explain their intended purpose and actual outcome.

1. Federal Farm Board: Hoover established the Federal Farm Board in 1929 to support agricultural prices and stabilize the farm economy. The board aimed to assist farmers by buying surplus crops and using price-support measures. However, the program's impact was limited, and agricultural prices continued to fall, exacerbating the agricultural crisis. 2. Reconstruction Finance Corporation (RFC): The RFC was established in 1932 to provide financial aid to struggling banks, industries, and businesses. Its purpose was to lend money to stabilize and revive economic sectors facing financial difficulties. However, the RFC's efforts were criticized for being too cautious and limited in scale, unable to address the depth of the economic crisis adequately. 3. Voluntarism and Public-Private Cooperation: Hoover encouraged voluntarism and cooperation between the government, businesses, and private organizations to address the economic challenges. He believed that private charity and cooperation among different sectors would be sufficient to alleviate the crisis. However, these efforts were insufficient in addressing the widespread unemployment, poverty, and economic distress experienced by the population. The intended purpose of these actions was to provide relief to struggling sectors, stabilize the economy, and restore confidence. However, the actual outcomes were largely ineffective in reversing the economic downturn. The measures were criticized for being too limited and hesitant in their approach, lacking the scale and scope needed to address the magnitude of the crisis.

How did Federal Reserve officials try to combat the economic crisis? What was the outcome of their response?

1. Monetary Policy: Initially, the Federal Reserve tightened the money supply, aiming to maintain the gold standard and stabilize prices. However, this policy restricted credit availability and liquidity in the banking system, exacerbating the crisis by reducing the funds available for lending and investment. 2. Discount Rate Changes: The Federal Reserve made occasional adjustments to the discount rate (the interest rate at which banks could borrow from the Fed). They lowered the rate in some instances to encourage banks to borrow more and increase lending to stimulate economic activity. 3. Open Market Operations: At times, the Fed engaged in open market operations, buying government securities to inject liquidity into the financial system. However, these efforts were limited and often insufficient to address the magnitude of the crisis. 4. Emergency Actions: In response to bank runs and financial panics, the Federal Reserve occasionally provided emergency loans to some troubled banks to prevent further collapses and stabilize the banking system. The outcome of their efforts fell short in effectively stemming the tide of the Great Depression, contributing to the prolonged and deepening economic hardship experienced during that period.

The First Hundred Days enacted programs to provide relief, recovery, and reform. Define each of the three types of programs and list a specific measure in each category.

1. Relief Programs: These initiatives aimed to provide immediate assistance to individuals and sectors most affected by the economic crisis. • Example: The Civilian Conservation Corps (CCC) was a relief program that provided employment opportunities to young, unemployed men in conservation and natural resource projects. It aimed to alleviate unemployment and offer relief to families affected by the Depression by providing jobs and a steady income. 2. Recovery Programs: These programs focused on stimulating the economy and promoting economic recovery by creating jobs and restoring confidence in the financial system. • Example: The Works Progress Administration (WPA) was a recovery program that aimed to combat unemployment by providing jobs to millions of unemployed individuals. It funded various public works projects, including the construction of roads, bridges, public buildings, and parks, thereby stimulating economic activity and providing employment opportunities. 3. Reform Programs: These measures sought to implement long-term changes and regulatory measures to prevent future economic crises and address underlying systemic issues. • Example: The Securities Act of 1933 was a reform program that aimed to regulate the securities industry and restore confidence in the stock market. It required companies to provide truthful information about their securities to the public and established the Securities and Exchange Commission (SEC) to oversee and regulate the securities markets, thereby preventing fraudulent activities and ensuring transparency in the financial sector.

What actions did action Congress take to protect American businesses? What was the outcome of their response?

1. Smoot-Hawley Tariff Act: Congress passed this legislation in 1930, significantly raising tariffs on imported goods. The aim was to protect domestic industries by imposing high taxes on foreign goods, but it resulted in retaliatory tariffs from other countries, reducing international trade and exacerbating the economic downturn. 2. Emergency Banking Act (1933): This Act was part of President Franklin D. Roosevelt's New Deal. It aimed to stabilize the banking system by declaring a national bank holiday to prevent further bank runs. It provided the government the authority to regulate and reorganize banks, aiming to restore public confidence in the banking sector. 3. National Industrial Recovery Act (NIRA): Passed in 1933, this act sought to stimulate industrial recovery by establishing codes of fair competition for industries and encouraging collective bargaining. It created the National Recovery Administration (NRA) to oversee these efforts. However, the NIRA faced legal challenges and was eventually declared unconstitutional in 1935. 4. Securities Act of 1933 and Securities Exchange Act of 1934: These Acts aimed to regulate the securities industry and stock exchanges, providing more transparency and oversight to prevent fraudulent activities that contributed to the stock market crash. 5. Social Security Act (1935): Congress established the Social Security system to provide financial support for retired workers, the unemployed, and other vulnerable populations, aiming to alleviate poverty and stimulate economic security. The outcome of these responses varied. The Emergency Banking Act helped restore confidence in the banking system, stabilizing it to some extent. However, the Smoot-Hawley Tariff Act worsened international trade relations and contributed to the deepening of the global economic downturn. The Nat

Explain the role that economic fear played in the stock market crash and in the bank failures that followed.

1. Stock Market Crash: Economic fear was a driving force behind the stock market crash of 1929. As stock prices began to decline in late October, investors became increasingly anxious and uncertain about the future of the market. Fear of losing their investments led to a panic-driven sell-off, causing a rapid and drastic drop in stock prices. This fear-induced selling intensified the market downturn, amplifying the crash and eroding investor confidence. 2. Bank Runs: Economic fear also played a crucial role in triggering bank runs. As news of the stock market crash spread, depositors grew anxious about the safety of their savings. Fearful of losing their money due to the economic downturn and fearing that banks might fail, people rushed to withdraw their funds from banks. This mass withdrawal of deposits created liquidity problems for banks, as they couldn't meet the high demand for cash, ultimately leading to many bank failures.

What factors led to the banking crisis?

1. Stock Market Crash: The 1929 stock market crash eroded investor confidence and triggered widespread financial panic. 2. Bank Runs: Fearful depositors rushed to withdraw their savings, leading to liquidity issues for banks. 3. Speculative Investments: Banks had invested heavily in the stock market and made risky loans, leading to losses when stock prices collapsed. 4. Economic Downturn: The broader economic decline led to decreased consumer spending, business failures, and increased loan defaults, weakening banks. 5. Bank Failures and Panics: Insolvency and collapses of banks due to bad investments and panicked depositors further exacerbated the crisis. 6. Lack of Regulation: The absence of banking regulations and safeguards left banks vulnerable to shocks and failures. 7. Tight Monetary Policy: The Federal Reserve's policy of tightening the money supply worsened the situation by restricting credit availability.

Describe the conditions for workers and everyday citizens during Hoover's administration.

1. Unemployment: The economic collapse led to widespread unemployment as businesses closed, industries contracted, and job opportunities dwindled. Unemployment rates soared, reaching unprecedented levels, leaving millions of people without work. 2. Poverty and Homelessness: The economic downturn plunged many individuals and families into poverty. With limited job opportunities, people struggled to afford basic necessities such as food, shelter, and clothing. Homelessness became a pressing issue, leading to the emergence of Hoovervilles—makeshift settlements of homeless individuals. 3. Economic Struggles: Everyday citizens faced financial struggles due to reduced wages, declining income, and limited access to credit. Many lost their life savings as banks collapsed, leaving them in dire financial situations. 4. Agricultural Crisis: Farmers, especially in rural areas, faced significant challenges. Falling agricultural prices, combined with drought conditions and debts, led to widespread foreclosures, farm closures, and agricultural distress. 5. Limited Government Assistance: Hoover's administration initially focused on voluntarism and believed in limited government intervention. While efforts were made to encourage private charity and local relief efforts, the federal government's assistance was limited compared to the magnitude of the crisis. 6. Civil Unrest: The dire economic conditions and lack of government intervention contributed to civil unrest and protests. Demonstrations, strikes, and marches by unemployed workers and veterans seeking relief were common.

business cycle

A business cycle refers to the recurring pattern of economic expansion and contraction that an economy experiences over time. Business cycles are influenced by various factors such as changes in interest rates, fiscal policies, consumer confidence, technological advancements, and global economic conditions. Governments and central banks often implement policies to manage and stabilize the economy during these cycles, aiming to reduce the severity of recessions and promote sustainable growth.

Contrast President Hoover's and President Roosevelt's beliefs on federal relief efforts.

Hoover leaned towards limited government intervention and relied more on voluntarism and indirect aid, while Roosevelt supported extensive federal intervention through government programs and policies aimed at directly addressing the economic crisis and providing relief to those affected by the Great Depression.

Hoovervilles

Hoovervilles were makeshift shantytowns or settlements that emerged during the Great Depression in the United States. They were named after President Herbert Hoover and were a symbol of the severe economic hardships faced by many Americans during that time.

Why were farmers the first to suffer economic hard times?

Overproduction and Falling Prices: After World War I, technological advancements in farming led to increased productivity. However, this surge in output resulted in overproduction of agricultural goods, causing a surplus in the market. Oversupply led to falling prices for farm produce, significantly reducing farmers' incomes. 2. Debt Burden: To finance machinery, land, and production costs, many farmers took out loans during the prosperous 1920s. When crop prices dropped, they struggled to repay these debts. The combination of declining incomes and mounting debt became unsustainable for many farmers. 3. High Tariffs and Reduced Exports: The implementation of high tariffs, including the Hawley-Smoot Tariff Act in 1930, resulted in retaliatory tariffs from other countries. This disrupted international trade and reduced foreign markets for American agricultural goods, further exacerbating the problems of overproduction and low prices for farmers. 4. Environmental Factors: Drought and adverse weather conditions in the Midwest, particularly during the Dust Bowl of the 1930s, devastated agricultural lands, leading to crop failures and worsening the financial plight of farmers. 5. Limited Government Assistance: The government's response to aid struggling farmers was limited initially, compounding their difficulties in coping with the economic downturn.

buying on margin

Paying a small percentage of a stock's price as a down payment and borrowing the rest

public works

Public works refer to projects, initiatives, or activities undertaken by the government or its agencies for the benefit of the public and the community as a whole. These projects are aimed at improving public infrastructure, services, or facilities that serve the common good.

Social welfare

Social welfare refers to a range of programs, services, and benefits provided by the government or other organizations to support the well-being, economic security, and quality of life of individuals and communities within a society. These programs aim to assist and protect vulnerable populations, alleviate poverty, and promote social and economic equality.

Black Tuesday (October 29, 1929)

The American stock market crashed, marking the start of the Great Depression. On this day, stock prices plummeted, causing widespread panic among investors and leading to a massive loss of wealth. It had a devastating impact on the economy, triggering a decade-long depression characterized by high unemployment, poverty, and a decline in industrial production.

Describe the goal of the Bonus Army. Explain the outcome of their goal including specific events.

The Bonus Army was a group of World War I veterans who marched to Washington, D.C., in 1932 to demand immediate payment of a bonus promised to them for their military service during the war. The Bonus Army sought the immediate release of the "bonus certificates," which were essentially certificates entitling veterans to receive a bonus payment scheduled for 1945. The goal of the Bonus Army was to petition the government for early payment of these bonuses, which were intended to provide financial relief to the struggling veterans during the Great Depression. Many veterans were experiencing unemployment, poverty, and dire economic conditions and saw the bonus as a means of immediate assistance. The outcome of the Bonus Army's goal was that Congress did not approve the immediate payment of the bonuses as requested by the veterans. The eviction of the Bonus Army from their camps was met with public outrage and criticism, as the treatment of the veterans was seen as harsh and unjust.

Bull Market

The Bull Market of the 1920s was a period of significant economic growth and prosperity in the United States. It was characterized by a sustained upward trend in the stock market, marked by soaring stock prices and increased investor participation. The market boom was fueled by factors such as technological advancements, increased industrial production, easy access to credit, and a general sense of optimism following World War I. This period of economic exuberance eventually culminated in the stock market crash of 1929, which led to the onset of the Great Depression, one of the most severe economic downturns in history.

Harley-Smoot Tariff Act

The Hawley-Smoot Tariff Act, passed in 1930, was an American legislation that substantially raised tariffs on imported goods, reaching historically high levels. It was an attempt to protect domestic industries by imposing high taxes on imported goods, aiming to shield American manufacturers and farmers from foreign competition during the Great Depression. However, the act had unintended consequences. Instead of revitalizing the economy, it sparked retaliatory tariffs from other countries, leading to a decline in international trade. This trade war worsened the economic downturn by reducing global trade and exacerbating the effects of the Great Depression.

New deal

The New Deal was a comprehensive series of economic and social programs and reforms implemented by President Franklin D. Roosevelt's administration in response to the Great Depression. It aimed to address the severe economic crisis and provide relief, recovery, and reform to the United States during the 1930s.

Reconstruction Finance Corporation

The Reconstruction Finance Corporation (RFC) was a government agency established in 1932 during the administration of President Herbert Hoover in response to the Great Depression. Its primary objective was to provide financial support to banks, industries, and other institutions that were struggling due to the economic downturn.

Discuss how overproduction and underconsumption worked together to help ruin the economy. Include the role of the wealth gap.

The combination of overproduction and underconsumption created a vicious cycle: businesses faced declining sales due to limited consumer demand, leading to production cuts, layoffs, and further income reduction for workers. This, in turn, worsened the underconsumption problem as more people lacked the financial means to purchase goods, perpetuating the economic downturn. The wealth gap played a crucial role in this scenario by concentrating purchasing power among a small segment of the population while leaving a larger portion with insufficient resources to drive demand. This disparity contributed significantly to the imbalance between production and consumption, amplifying the economic hardship experienced by the majority and deepening the effects of the Great Depression.

In what way did early New Deal laws change the role of the federal government? Give examples.

The early New Deal laws significantly changed the role of the federal government by expanding its involvement in various aspects of the economy and society. These changes marked a shift towards a more active role for the government in addressing economic and social issues. Some examples of how early New Deal laws altered the federal government's role include: 1. Increased Government Intervention in the Economy: • Creation of Regulatory Agencies: Laws like the Securities Act of 1933 and the establishment of the Securities and Exchange Commission (SEC) marked increased federal oversight of the financial markets. The SEC was tasked with regulating the securities industry, ensuring transparency, and preventing fraudulent activities in the stock market. • Banking Regulation: The Banking Act of 1933 (Glass-Steagall Act) aimed to reform the banking system. It established the Federal Deposit Insurance Corporation (FDIC), which provided deposit insurance to bank depositors, enhancing confidence in the banking system. 2. Expansion of Social Safety Nets: • Unemployment Relief: The creation of programs like the Civilian Conservation Corps (CCC) and the Federal Emergency Relief Administration (FERA) provided jobs and relief to the unemployed during the Great Depression. These programs signaled a departure from the traditional reliance solely on private charity and local relief efforts. • Social Security: The Social Security Act of 1935 was a landmark legislation that established the Social Security system in the United States. It provided a safety net for the elderly, unemployed, disabled, and dependent children, marking the government's commitment to social welfare programs. 3. Labor and Agricultural Reforms: • Labor Rights: The National Labor Relations Act (NLRA) of 1935, also known as the Wagner Act, guara

Discount rate

The interest rate on the loans that the Fed makes to banks

Explain how the speculative stock boom of the 1920s came about

The speculative stock boom of the 1920s was fueled by several factors: 1. Economic Expansion: The aftermath of World War I saw a period of economic growth and industrialization in the United States. Industries expanded, production increased, and technological advancements contributed to this growth. 2. Availability of Credit: The 1920s saw easy access to credit and loans. This availability of easy money encouraged many people to invest in the stock market, often buying stocks "on margin," meaning they borrowed money to purchase more stocks than they could afford with their own funds. 3. Rising Investor Optimism: Positive sentiment and optimism prevailed among investors due to the strong performance of the stock market. Many believed that stock prices would continue to rise indefinitely, creating a speculative frenzy where people bought stocks with the expectation of quick profits. 4. New Investment Opportunities: The introduction of new technologies and industries, such as automobiles, radio, and aviation, provided novel investment opportunities. Investors saw these emerging industries as avenues for significant returns. 5. Media Influence: The media, particularly newspapers, played a role in promoting stock speculation. Some newspapers published exaggerated stories of stock market successes, enticing more people to invest. 6. Lack of Regulation: The regulatory framework for the stock market was relatively lax compared to today. This lack of oversight allowed for speculative practices and contributed to the unchecked rise in stock prices.

trickle down theory

The trickle-down theory, also known as trickle-down economics or supply-side economics, is an economic theory that suggests economic benefits provided to the wealthy and businesses will eventually "trickle down" to benefit the rest of society, particularly those in lower income brackets. Critics of the trickle-down theory argue that it disproportionately benefits the wealthy while doing little to address income inequality or improve the economic situation for those at the lower end of the income spectrum.