Unit 1 - The Great Depression in America Flashcards
Republican values
Less taxes for businesses so that they have increased investment power
Rugged individualism - little gov intervention + people look after themselves
Lassiez faire approach - let economic events run their course
Democrat values
Willing to accept and encourage change
Increased gov control
Will intervene in economic matters to support social concerns/problems
Higher taxes
‘A Return to Normalcy’ 1920
1920 - USA didn’t sign TOV and refused to join League of Nations which triggers period of isolationism regarding international affairs
Harding (republican) won 1920 election with ‘A Return to Normalcy’
Focus on themselves, not world
Protectionist policy + Ford McCumber tariffs
What caused the economic boom in the early 1920s?
1) Republican policies
- Fordney McCumber tariff
- Low tax on wages
- Allow powerful single companies in one specific area eg Rockefeller oil
2) New technologies + consumer goods
3) Productivity
Henry Ford
Mass production = faster and cheaper
Assembly Line
By 1928 a Ford TT (car) was $285 (3 month wage) so very affordable
Car industry caused growth in other American industries eg steel (20%), rubber (80%)
Triggered cycle of prosperity
Change in consumer behaviours re economic boom
Credit - buy now pay later/deserve to have things - consumer culture
8/10 radios and 6/10 cars purchased on credit
Mail order companies - rural areas
Chain stores - cheap, standardized products
Rural industries were losers of the 1920s economic boom
1920 economic boom focused on cities
During WW1 farmers had to increase production but the sudden fall in demand caused overproduction so they had to sell products at low prices
Unable to sell overseas because of retaliatory tariffs
1924 - 600,000 farmers lost farms
1928 - half of American farmers living in poverty
Traditional industries were losers of economic boom
Coal industry: prices fell so thousands being made redundant bc too much coal being produced for such a small demand
Ship building: new technology = less ships being built = companies forced to make thousands of people redundant
Cotton industry: new synthetic fibers created = easier to produce in factories needing less workers = large number of textile mills forced to close = less jobs
Speculation and the banks
1920s = booming economy = more money to ‘play with’ = many investing in stock market to try and increase wealth
Seen as way to get rich quick
1920 = 4 million shareholders by 1929 there was 20 million
In 1928, 600,000 new investors - speculators
1929 = banks lent $9 mill for speculation
During the 1920s 40c of every $1 loaned was for the purchase of stocks
Unregulated and unrestricted by gov
Overproduction - slowing of boom
Farmers struggling so forced to borrow money
1924 - 600,000 farmers lost farms
3 million going to city
City $140pm vs Rural $49 pm
Increase competition for jobs = wages start to decline
Boom slowing - mass production of luxury items = surplus but can’t sell overseas bc of tarffis
12 million living below poverty line but still had access to credit
Panic - mass selling of shares
1929 = US personal debt high and unable to repay
By end of 1929, 6 mill had migrated to cities in hope of work / selling of stocks bc decrease economy and confidence
June 1929 = output of car industry decreased for the first time in 4 years + knock on effect on other industries
Wall Street Crash
21st - 29th Oct 1929 = Wall Street Crash
21st = less confidence so selling stocks
24th = banks buying mass stocks to try and keep market stable
28th = stock prices severely decreased and banks not supporting
29th = stock prices continue to decline - selling shares for a fraction of the cost – $14 billion lost in a single day
Social impact of WSC
Rapid increase in unemployment + widespread poverty in urban areas
Unemployment in 1928 = 5 mill and in 1932 = 12 mill/
main form of aid = charities
40 mill Americans part of a family where main breadwinner was out of work (1/3)
Those who had employment forced to accept lower wages (if not, would be replaced bc ppl so desperate for work)
Women in Tennessee textile mills = $2.29 for 50hr week
Sawmills = 5c an hour
High unemployment + low wages = unable to repay loans = homelessness
1932 = 273,000 families evicted from homes
No gov support = homeless forced to live in shanty towns called ‘Hoovervilles’
Open parks + railroads
Tin, boxes, rubbish for makeshift home
33% of deaths in 1932 due to poverty
Economic impacts of WSC
Banks + industries collapse
5000+ banks 1932-33 bust
Foreign trade decreased from $9 bill to $3 bill
Industrial manufacturing decreased 45% = less jobs
House building decreased by 80%
Rural areas
1920-1932 farmer income dropped by 70% bc overproduction
1932 = The Dustbowl - 90 million acres destroyed and damaged so many being evicted
To escape hardship, 1-2mill men left for cities in hope of finding work = more competition for jobs in cities
300,000 Oklahoma farmers migrated to California to search for work
Hoover’s initial response to GD
Stick to Republican ideals:
Laissez faire - letting economic events run their course/economy will fix itself
Rugged individualism - little gov support
Business responsibility to create jobs
Hoover attempt to help industry
1930: Hawley-Smoot tariffs created - increased tariffs on European goods by 20-60% (failed)
Aim = encourage American to buy American goods however this failed bc spending was low due to high unemployment and low confidence
European nations reacted and placed retaliatory tariffs on their goods
Hoover attempts to fix banks
Purpose = rebuild confidence in banks bc without banks, no credit for businesses + couldn’t lend to cover production and wage costs therefore declining economy
Action taken too late
1929-32 5000 banks closed
ppl not spending beyond necessities + didn’t trust banks
1932 Introduction of Reconstruction Finance Corporation
Aim = increase confidence in banking industry
$12 bill federal money invested but this wasn’t enough to fix problems and was too late
Hoover tried to fix consumer spending
Hoover believed only way to get out of crisis was to get ppl spending
Encouraged businesses not to lower wages
= businesses going bankrupt
Gov reduced income tax in hope it would get ppl spending but low confidence meant ppl saved spare money bc uncertain about future / tax already low so tax cuts weren’t large amounts of money/
12 mill unemployed = no income to get taxed = not affected + not spending
Hoover attempted to fix social problems
Hoover viewed as callous and insensitive and a ‘do nothing’ president
1931 claimed there was no starvation from the depression but in New York, there were 20 known cases / seen as out of touch
Increased federal gov expenditure to encourage employment growth
1919 3% GDP vs 1932 20% GDP
Federal Farm Board = purchased large amounts of crops to support farmers
Hoover Dam + other building projects = more spending on gov projects (1930 - $116 mill) which increased employment
Refused to provide benefits or gov support so ppl had to rely on charaties
NYC 1932 $79 mill charity relief raised (1 month wage for 800,000 ppl)
Roosevelt’s New Deal
RELIEF RECOVERY REFORM
Help victims of depression through social welfare relief
Encourage economic recovery by providing jobs for unemployed
Reform economic and banking system to ensure depression couldn’t happen again
Passed 15 major laws in his first 100 days in office
Emergency Banking Act (EBA) 1st New Deal
Immediately, all banks closed for 4 days, assesed and evaluated then given permission to reopen if gov found them financially secure
9th - 12th March 1933 = 5000 banks reopening
Civilian Conservation Corps (CCC) 1st New Deal
Young unemployed men given work in countryside (roads, trees) for 6 months
$35 a month, food and accommodation
2.5 mill took part
Planted 200 mill trees which corrected dust bowl
Agricultural Adjustment Act (AAA) 1st New Deal
Aim = less farm production and higher food prices
Set up quota system to stop overproduction
Any loss of earnings made up by gov subsidy bc had to plough all growing crops and kill 6 mill piglets (1933)
Farmers income increased by 2.5 between 1932-35
National Industrial Recovery Act (NRA) 1st New Deal
Aim = boost industrial activity
Created national symbol (blue eagle) to coordinate businesses
Boost wages by reducing competition and increasing consumption
Intention = correct market failure
Tennessee Valley Authority (TSA) 1st New Deal
Control problems caused by Tennessee River in the South
Regular floods = soil erosion = dust bowl
3% of homes had electricity but by 1953, 93% had electricity
33 dams built and forests created
Provided work for ppl in this region
Work Progress Administration (WPA) 2nd New Deal
Focused on gov funded public works
8.5 mill given employment
$1 billion spent
2500 hospitals
5900 schools
570,000 miles of road
2566 murals
17750 sculpture
Helped reduce demand for jobs
Increased wages
Angry business owners
The Social Security Act (SSA) 2nd New Deal
Pension fund for all retired ppl (except domestic workers and farmers)
Stopped focus on self help and charities
Soil Conservation and Domestic Allotment Act (SCDA)
Paid farmers to plant soil building crops
Hope - counteract dust bowl
Employment in rural USA = less competition for jobs in cities
The National Labor Relations Act (NLRA)
2nd New Deal
Protected workers = allowed to join trade unions to bargain/demand working conditions/wage
Hope = less chance of strikes therefore protecting economy, businesses and workers
Limitations of Roosevelt’s New Deal
1933-39
By 1936, many congressmen frustrated by FDR’s actions bc increasing national debt (he was spending too much) and was accused of being a socialist
By 1939, Supreme Court ruled 11/16 of the initiatives as unconstitutional including the AAA and NRA in 1935
US economy didn’t return to pre-depression levels until 1943 - this was bc of the war + production for it
Unemployment 19% in 1939
Doubled national debt in 2 terms (waste and failed plans)
Failed to reduce wealth gap between rich and poor)
