great depression Flashcards
How far was speculation responsible for the Crash?
Stock market speculation in the 1920s drove up stock prices artificially.
Buying on margin: Investors borrowed up to 90% of the stock price, making the market highly volatile.
As confidence fell, massive sell-offs ensued, leading to the collapse.
Contributing factors:
Weak banking system: Many banks invested depositors’ money in stocks.
Overproduction in industries like agriculture and manufacturing.
Income inequality: A large portion of the population couldn’t afford to purchase goods, leading to declining demand.
Impact of the Crash on the Economy
Bank failures: 9,000 banks closed between 1930 and 1933.
Unemployment skyrocketed: From 3% in 1929 to around 25% in 1933.
Gross National Product (GNP) fell by almost 30%.
Wages and hours cut: Many businesses reduced worker wages and hours to stay afloat.
Global impact: The U.S. economic downturn affected Europe, worsening the Great Depression globally.
Social Consequences of the Crash
Widespread poverty: Homelessness increased, with “Hoovervilles” (shantytowns) emerging in major cities.
Farming crisis: Farmers faced foreclosure as crop prices plummeted. Dust Bowl conditions made it worse.
Psychological effects: Many families lost life savings; suicide rates increased during the early 1930s.
Why did Roosevelt win the election of 1932?
Hoover’s unpopularity: Seen as ineffective in addressing the Depression.
His response was based on voluntarism and limited federal intervention.
Roosevelt promised a “New Deal”: Advocated for direct government action.
Charisma and optimism: Roosevelt’s confidence contrasted with Hoover’s.
Democratic strategy: Focused on urban, labor, and African-American voters, who had suffered severely.
How far did the character of the New Deal change after 1933?
First New Deal (1933–1934): Immediate relief and temporary economic recovery programs.
Public Works Administration (PWA): Infrastructure projects.
Federal Emergency Relief Administration (FERA): Direct aid to the unemployed.
Second New Deal (1935–1938): More radical, focusing on long-term reform and social welfare.
Social Security Act (1935): Introduced pensions and unemployment insurance.
Wagner Act: Strengthened labor rights and collective bargaining.
Why did the New Deal encounter opposition
Republicans: Opposed government intervention and high spending.
Wealthy and business interests: Objected to higher taxes and increased regulation.
Supreme Court: Ruled several New Deal programs unconstitutional (e.g., NRA, AAA).
Radical critics:
Huey Long: Argued for wealth redistribution through his “Share Our Wealth” program.
Father Coughlin: Opposed Roosevelt for not doing enough to nationalize banks.
Why did unemployment persist despite the New Deal?
Many New Deal programs were temporary or underfunded.
Structural problems in the economy (e.g., overproduction, low wages) remained unresolved.
Some New Deal policies were designed to protect wages, which could limit job creation.
The 1937 recession: A reduction in federal spending led to a sharp rise in unemployment.
Was the New Deal a failure because it didn’t solve unemployment?
No: It stabilized the economy, provided relief to millions, and introduced long-lasting reforms.
Social Security, FDIC, and labor laws were significant reforms.
Yes (in part): Unemployment remained high until World War II, which finally ended the Depression by boosting production and demand.
Reactions to the Wall Street Crash (Hoover)
Hoover’s response:
Voluntarism: Encouraged businesses to maintain wages and production without direct government aid.
Hawley-Smoot Tariff (1930): Increased tariffs, which worsened global trade.
Reconstruction Finance Corporation (RFC): Provided loans to banks and businesses but was seen as too little, too late.
The 1932 Presidential Election: Hoover
Defensive Strategy
Limited Government Intervention
Criticism of Roosevelt
Focused on Business Support
Lack of Aggressive Campaigning
Roosevelt’s Inauguration and the ‘Hundred Days’
Emergency Banking Act: Stabilized the banking system.
Civilian Conservation Corps (CCC): Employed young men in public works.
Agricultural Adjustment Act (AAA): Reduced farm surpluses to raise crop prices.
Tennessee Valley Authority (TVA): Regional development and electrification projects.
Strengths of the New Deal
Strengths:
Provided relief to millions of Americans.
Introduced lasting reforms like Social Security, labor rights, and financial regulation.
Restored confidence in government and the economy.
Weaknesses of the New Deal
Weaknesses:
Unemployment remained high throughout the 1930s.
Some programs were seen as too conservative or underfunded.
Criticized for its failure to address racial inequalities and persistent poverty in certain sectors (especially among African Americans and rural populations).
Opposition to the New Deal
Republicans and business interests: Criticized New Deal policies as socialist and harmful to free enterprise.
Wealthy Americans: Disliked high taxes and labor protections.
Supreme Court: Struck down parts of the New Deal (e.g., NRA, AAA) as unconstitutional.
Radical critics:
Huey Long: Argued Roosevelt wasn’t doing enough to redistribute wealth.
Father Coughlin and Dr. Francis Townsend: Pushed for more radical reforms like nationalization of industries and pension plans.
The 1932 Presidential Election: Roosevelt
Promise of a “New Deal”
Targeted key demographics
Fireside Chats
Cross-country campaigning
Alliance with Progressive Democrats
the Republicans opposition to new deal
Belief in Limited Government:
Republicans argued that the New Deal represented an overreach of federal power, infringing upon states’ rights and individual liberties.
Critique of Deficit Spending:
They were concerned about the massive national debt created by Roosevelt’s spending programs, believing it would harm future economic stability.
Philosophy of Self-Reliance:
Many Republicans advocated for a return to individualism and personal responsibility, rejecting the idea of extensive government intervention in the economy.
Formation of the American Liberty League:
This coalition of conservative Democrats and Republicans criticized the New Deal for undermining constitutional principles and promoting socialism.
opposition to new deal the Supreme Court
Judicial Restraint and States’ Rights:
The conservative majority on the Court believed that many New Deal programs violated the Constitution, particularly regarding the balance of powers between state and federal governments.
Key Rulings Against New Deal Programs:
NRA (National Recovery Administration): Declared unconstitutional in 1935 for giving the federal government excessive control over industry.
AAA (Agricultural Adjustment Act): Ruled unconstitutional in 1936 for imposing taxes on processors to support farm income, viewed as an unconstitutional exercise of power.
Resistance to Roosevelt’s “Court-Packing” Plan:
Roosevelt’s attempt to expand the Supreme Court met fierce opposition and was seen as a threat to judicial independence, leading to increased resistance to New Deal legislation.
opposition to new deal business interests
Opposition to Increased Regulation:
Business leaders were unhappy with the extensive regulations imposed by New Deal programs like the NRA and SEC (Securities and Exchange Commission), believing they stifled innovation and profitability.
Concerns Over Labor Rights:
The Wagner Act, which empowered labor unions, was met with resistance from employers who feared loss of control over labor relations and potential strikes.
Fear of Socialism:
Business interests perceived the New Deal as a step toward socialism, threatening their autonomy and the principles of free enterprise.
National Association of Manufacturers (NAM):
This influential group campaigned vigorously against the New Deal, advocating for lower taxes and reduced regulation.
opposition to new deal the rich
Higher Taxes on the Wealthy:
The Wealth Tax Act of 1935 imposed significant tax increases on the richest Americans, causing resentment among the affluent who felt unfairly targeted.
Fear of Class Warfare:
Wealthy individuals believed that New Deal rhetoric promoted class conflict and pitted the working class against the rich, which could lead to social unrest.
Loss of Business Freedom:
The affluent feared that increasing regulations and labor protections would diminish their ability to operate businesses freely and maintain profitability.
Impact on Charitable Giving:
Some wealthy individuals expressed concern that increased taxes would reduce their capacity to contribute to charities and philanthropic causes, which they believed were crucial for societal welfare.
