Economic Problems

US History Unit 1: 1930’s Notes

U.S. History Unit 1: The 1930s

Economic Problems:

 Consumer Debt o Buying on credit o Owed merchants and banks

 Buying on margin o When you own stock in a company, you o Buying stocks on credit are part owner of the company. o People lost more money than they had o You hope to earn “dividends”—part of the profits  Over speculation o investors believed stock prices would continually go up o uncontrolled buying drove stock prices up o investors paid much more than the stocks were worth

 Stock Market Crash o Who was president? o Oct 24, 1929, more people were selling stock than buying o Stock prices dropped o Desperate to turn their stocks into cash, people were willing to sell at a loss o Oct 29, 1929—Black Tuesday—The Crash o Started Great Depression

 “Run on the Banks” o Many people withdrew all their money form banks o They feared the banks would run out of money and they would loose their life savings

Great Depression:

 Began 1929  Economic decline until the winter of 1932-33  Then the economy seemed to became “stuck”—recovery was very slow  Real recovery did not occur until 1940—WWII in Europe

 Unemployment: o 1929—3% o 1930s—hovered between 10 and 25%

 Charities—mostly church run o Soup Kitchens—free meals o Bread Lines o Clothing Drives

1 US History Unit 1: 1930’s Notes

o Shelters

Farmers

 Farmers suffered greatly during the Great Depression  Their income decreased in the 1920s and 30s  The Dust Bowl o Draught on the Great Plains during 1930s—Texas to North Dakota o By 1934, it was so severe that the wind began blowing the top soil away o Dense, dark clouds of dust blew across the plains o Many farmers left the plains and went to California to become migrate workers— followed harvest o Worked or traveled by day o Lived in roadside camps at night o Many children were malnourished o Many elderly could not endure these conditions and died  Harley-Smoot Tariff (1930)—Herbert Hoover o Raised tariffs on agricultural products to highest in US history o European nations raised their tariffs o Fewer US crops sold abroad o U.S. farmers lost more money

Herbert Hoover

 Urged Congress to lower taxes—people have more money to spend

 Called for more gov’t spending on “Public Works” o Roads, bridges, and other structures that are built for public use at public expense o To create jobs

 Hesitant to use the government’s full powers to combat the depression o Believed charity was the business of churches, not the government

 “Rugged Individualism” o Phrase often used by Hoover o The belief that individuals can succeed on their own o Government help for people should be minimal

 Bonus Army—1932 o Congress agreed to give WWI veterans a bonus, since they made very little during the war, while civilian workers earned high wages o When the depression started, veterans wanted their money o 20,000 veterans marched on Washington o Bonus often called a “Tombstone Bonus” o To be paid in 1945 or upon death 2 US History Unit 1: 1930’s Notes

o Set up camp on the edge of town o Hoover sent the army to remove them o Bonuses were paid several years later

 Hoover became very unpopular

Election of 1932:

 Republican—Herbert Hoover  Democrat—Franklin Delano Roosevelt  During his campaign for president, FDR had no clear plan to end the depression o He simply called for a “New Deal”  FDR wins by a landslide

Franklin D. Roosevelt:

 Suffered from polio—paralysis  Wife: Eleanor o Progressive—fought for racial equality  In his inauguration speech he said: “…the only thing we have to fear is fear itself”  During his presidency he often give is famous Fireside Chats o Radio address to help reduce the country’s worries during the Great Depression  First and only president to break Washington’s two term tradition o Elected to a 3rd and 4th term

New Deal:

 FDR’s New Deal had three general aims: o Relief—provide help to all Americans in distress o Recovery—spur the economy and get the country out of depression o Reform—prevent another severe depression

First Hundred Days:

 In his inaugural address, FDR called for a special session of Congress to address the economic problems o the session lasted 100 days (not by plan)

 Bank Holiday o Close banks 6 – 9 March, 1933 . Examined bank records . Develop a general plan to protect the savings of the public o Congress created the Federal Deposit Insurance Company (FDIC)

. insured everyone’s bank deposits for up to $5,000 o “Run on the banks” stopped o Public confidence restored o Major turning point in depression

 Many other laws passed

Relief:

 Civilian Conservation Corps (CCC) o put unemployed young men from poor families to work o CCC—perhaps the best o workers lived in camps run by the army known of the New Deal programs o employed 300,000 corpsmen at 1,300 camps o conservation projects—cleared brush, planted trees, etc.

 Works Progress Administration (WPA) o provided jobs for millions of idle men and women o mostly manual labor jobs, but not all o Boston: built subway, expanded airport, taught nursery school

 Federal Emergency Relief Administration (FERA) o Distribute $500 million in federal grant money to state organizations that cared for the poor

Recovery:

 Agricultural Adjustment Act (AAA) o Goal: increase the price of crops by decreasing production o Gov’t rented land from farmers o Nothing could be planted on it

 National Recovery Administration (NRA) o Created to approve and enforce these industrial codes (rules) o Manufacturers could work together to create rules to ensure fair competition within their industry without the fear of antitrust laws o In return, workers were given rights . freely join unions . minimum wage—least pay a worker can receive by law

 Public Works Administration (PWA) o Goal: stimulate the building industry o Main focus: large-scale construction projects

 Federal Housing Administration (FHA) o Goal: offer affordable home financing to those who might not qualify for mortgage loans o Does not actually supply the mortgage loans, but rather, insures them

Reform:

 Social Securities Act (SSA) o Created a system of old-age insurance o Pensions for retirees over 65 yrs. old o Paid for partly by workers, partly by employers o Pensions based on number of years worker paid into the system

 Securities and Exchange Commission (SEC) o Required full disclosure of information on stocks being sold o Reformed the stock market

 Federal Deposit Insurance Company (FDIC) o Insured banks and their customer’s money

 National Labor Relations Board (NLRB) o Created to run union elections and settle disputes

Tennessee Valley Authority (TVA):

 In the 1920s, the U.S. gov’t built an electrical plant at Muscle Shoals on the Tennessee River o TVA took control of the plant in 1933 o Muscle Shoals would be a “yardstick” for determining how much private plants should be charging customers for electricity

 The TVA is best known for: o Providing power to residents of the Tennessee River Valley living in parts of seven states o Building dams o Controlling flooding on the Tennessee o Creating lakes and parks for recreation o Developing forest o Conservation projects o Provided jobs

 TVA’s goals had little to do with ended the depression

Supreme Court:

 Declared the act creating the National Recovery Administration (NRA) and the Agricultural Adjustment Act (AAA) unconstitutional  Conservative judges thought the federal gov’t was asserting too much power  Too much power was delegated to boards

Supreme Court Reform Plan:

 FDR proposed increasing the number of justices on the Court from 9 to as many as 15  He hoped to add men who supported his New Deal programs  “Pack the Court”  Congress and most Americans opposed FDR’s plan  Congress refused to pass the bill

African-American Reaction to the New Deal

 Most Blacks liked FDR  Although most of the New Deal programs were segregated, they did provide jobs to the poor and unemployed, many of whom were black  By provided these jobs, FDR seemed to care about their problems

New Deal Success:

 Gave American confidence—something is being done about the economy  Wages and conditions for workers improved

New Deal Failure:

 Programs did not end the depression—WWII did  Did not address racial inequalities

New Deal Significance:

 Federal government took on a greater role in people’s lives—loss of freedom  Created a “welfare state”—gov’t provided for all or many of the basic needs of its citizens  Power shifted from state and local governments to federal government  The start of “deficit spending”—gov’t spending exceeds its income (borrow money)  Labor Unions grew in strength  Democrats took over Congress