The 1930s: Depression and New Deal Flashcards
Why did the US economy crash in 1929?
- Economy boomed through 1920s, the value of shares rose, this led to speculation on the stock market.
- Speculators are only interested in short-term profit, fuelled a dangerous development - buying ‘on margin’
- People borrowed money to buy shares in companies, with the intention of selling those shares when they rose in value to pay back the loan and keep profit. US banks lent 9 billion dollars to speculators in 1929 alone.
- Ordinary people + institutions were buying on margin, Businesses + wealthy investors even banks speculated
- System depends on confidence, in autumn 1929 investors began to lose confidence in the Us economy and began to sell their shares
- This panicked other investors into selling their shares, particularly those who had bought on margin
- Value of US companies rapidly collapsed as investors desperately tried to sell their shares for any price they could get. Some shares became virtually worthless.
- In just four trading days, the market lost nearly half of its value. This became known as the Wall Street Crash
The human cost - in the countryside
People in agricultural areas had not enjoyed much of the prosperity in the 1920s, so they were the hardest hit by the Depression.
- As farm income fell, thousands of farmers were unable to pay their mortgages and went bankrupt
- Some farmers organised themselves to resist banks taking back their homes
- When sheriffs came to seize their property, bands of farmers holding pitchforks and hangman’s nooses persuaded the sheriff’s to retreat
Despite these attempts at resistance, most farmers had no choice but to pack their belongings into their trucks and leave their homes. They became migrants, picking up work where they could. African American farmers and labourers were often worse off than their White neighbours as they lost their land and their farms first.
In the 1930s, the southern and Midwest states experienced a prolonged drought.
- Over-farming combined with the drought caused the topsoil to turn to dust
Faced by this range of problems, many people in the rural USA faced hunger and malnutrition
The human cost - in the towns
Unemployment rose rapidly.
- For example, in 1932 in Cleveland, 50% of workers were unemployed and in Toledo this figure was 80%
- Forced to sell their homes or evicted because they could not pay their rent, city workers joined the army of unemployed searching for work of any kind
- Thousands were taken in by relatives but many ended up on the streets
- Thousands of children could be found living in wagons or in tents next to the tracks
Every town had a ‘Hooverville’ - a shanty town of ramshackle huts where the migrants lived while they searched for work. In 1931, 238 people were admitted to hospital in New York suffering from malnutrition or starvation.
What were the aims of the First New Deal (Roosevelt)?
- Tackle the urgent needs of the poor and economy
- Decrease the unemployment rate
- Restore confidence in the US industry
Agricultural Adjustment Administration (AAA)
- Tackle the long-term problems facing farmers
- It set quotas to reduce farm production in order to force prices gradually upwards
- Helped farmers modernise and use farming methods that would conserve and protect the soil
- Cases of extreme hardships, farmers were also given help with mortgages
Tennessee Valley Authority (TVA)
- Built a series of dams on the Tennessee River, these transformed the region bringing water to the dried-out land
- Provided electricity for this underdeveloped area
- Building the dams created thousands of jobs in an area badly hit by the Depression
Public Works Administration (PWA)
- Used government money to build: schools, roads, dams, bridges and airports
- These would be vital once the USA had recovered + created millions of jobs
National Recovery Administration (NRA)
- Improved conditions in industry and outlawed child labour
- Set out fair wages and sensible levels of production
- To stimulate the economy by giving workers money to spend, without overproducing and causing a slump
- Over 2 million employers joined the scheme
The impact of the First New Deal
- Measures introduced during the Hundred Days had an immediate effect
- Restored confidence in government
What were the aims of the Second New Deal?
- To make the USA a fairer place for all
- Continuing to tackle unemployment
- Tackle the needs of ordinary people - strengthening unions, financial security in old age
Revenue Act
- Introduced a 79% tax on incomes over $5 million
- By pursuing tax avoiders and introducing other taxes on the wealthy, Roosevelt raised the amount of tax paid by the wealthiest 1% of Americans from 7% in 1932 to 16% in the Revenue Act of 1937
Wagner Act
- Forced employers to allow trade unions in their companies and to let them negotiate pay and conditions
- Made it illegal to sack workers for being in a union
Social Security Act
- Provided state pensions for the elderly and for widows
- Allowed state government to work with the federal government to provide help for the sick and disabled
- Set up a scheme for unemployment insurance
- Employers and workers made a small contribution to a special fund each week, if workers became unemployed they would receive a small amount to help them out until they could find work
Works Progress Administration (WPA)
- Brought together all organisations whose aim was to create jobs
- Extended this work beyond building projects to create jobs for office workers and even unemployed actors, artists and photographers
Resettlement Administration (RA)
- Helped small holders and tenant farmers who had not been helped by the AAA
- Moved over 500,000 families to better quality land and housing
