Important events

Question 1

What was the “Roaring Twenties”?

Answer 1

The 1920s in America, long period of prosperity.

By late 1921, the signs of recovery after WWI were clear.

The people of the 1920s, especially those nearer the top of the economic ladder, came to see the era as one of fabulous prosperity” –> because of highly innovative industries.

Women “bobbed” their hair, smoked and drank like men. Premarital sex became more acceptable.

For farmers the roaring of the 1920s sounded only from a distance. Their postwar depression did not end until 1925, and even then farm income remained below the level of 1914 for the rest of the decade.

Society: Population rises, migration from rural to urban (and south to northeast and west), a mainly white urban elite, majority working class, women subordinate to men.

Technology and labour: Increasing use of mass production in industries (steel, auto, chemicals, rubber), cars for the middle class but limited roads, radio and movies spreading, electricity is primarily urban.

Question 2

What was the Wall Street Crash in 1929?

Answer 2

In the space of a few days in October 1929, values on the New York Stock Exchange abruptly collapsed, wiping out the heady optimism of the “great bull market” of 1928–1929 and the seeming invincibility of Republican prosperity”.

“The soaring stock market became the symbol of prosperity, seeming to signify the endless capacity of the American economy for wealth production. Though limited by modern standards, the number of Americans drawn into stock market speculation grew rapidly and was far greater by the late 1920s than ever before. Thus, when the crash came, it had a stunning impact on the confidence of consumers and investors”.

The depression was at that time seen as surprising.

Question 3

What were the roots of the depression? (clue: we discussed six different explanations)

Answer 3

Supply and demand + Republican party policies + agriculture + US financial system + international factors + belief structures.

1. Supply and demand: Technological developments. The balance between supply and demand had become increasingly unbalanced (more production than consumption).
2. Republican party policies: The republicans offered normalcy and normalcy meant minimal government. Taxation levels were much lower than today. Spending was restricted and budgets were balanced.
3. Agriculture: During the war, the agriculture was encouraged to produce more and more (for example to feed the troops). Over-expansion. Farmers responded to reductions in price levels by producing more, and when more was produced, the price levels would drop even further. That was the only mechanism they had.
4. US financial system: The banking system structure was very decentralised, and regulation was minimal. The Federal Reserve Bank was still a new institution and had relatively little authority. The banking system was fragile, many small banks and only a few larger ones (they are the exception rather than the rule). The slightest decrease in economic activity could tip some banks close to the edge. Lack of government oversight. The Wall Street stock was a private institution, not regulated.
5. International factors: WWI: Weakened the British and the French who borrowed money from Wall Street to finance the war. But it was hard to them to pay this money back to the US – the Germans needed to firstly pay back their dept to the British and the French. The Germans had to finance this by also borrowing money from Wall Street. It was called “the travelling dollar system”.
6. Belief structures:
   - Economic: Competitive marketplace
   - Political: Limited government, local and state initiatives, non-intervention
   - Social: Individualism, self-reliance

Question 4

What was the “Roosevelt Recession” (1937-1938)?

Answer 4

Roosevelt was convinced by Morgenthau that the worst of the depression had passed, therefore spendings could be (and were in fact) reduced. However, Morgenthau was not right, the economy starts to go down fast. Almost more drastically than between 1929-1930. The New Deal has put a floor under the collapse which made the economy better, but then in the summer of 1937 the economy went downhill again once spendings were cut.

Question 5

What was the significance of WWII in terms of the Great Depression?

Answer 5

It is unsure whether WWII or the New Deal ended the Great Depression.

“A solid prosperity did not return until 1941, when governmental spending on defense mounted rapidly as the United States became the “arsenal for democracy” in a world at war”.
–> Massive spending, job creation
–> The turn of politics away from reform

“Economic recovery during 1939–1941 and the return of full employment during World War II led Americans and their political leaders to move rapidly to the political center”.