Unit ?: Great Depression and New Deal Flashcards
causes of the GD
- consumerism
- cycle of stock market crash -> bank failure -> loans and credit unavailable -> withdraw unnecessary purchases -> business failures -> deflation -> more unemployment -> no money to spend
- no trust in the economy
- Hoover’s “volunteerism” - overproduction
- farmers kept producing goods like they did in WWI
- people kept buying products on credits or installment payments, which overestimates the demand
- uneven wealth distribution
- caused deflation, business closures, mass unemployment/wage cuts, banking collapse - welfare capitalism
- a system where businesses provide benefits to workers (higher wages, paid vacations, health plans, schooling) to improve working conditions without gov’t intervention
- the GD ended such capitalism - wealth Mal-distribution
- can be improved by raising taxes or minimum wage
- unequal income growth
- low wages -> weak consumer spending -> businesses overproduced, leading to layoffs and factory closures - Credit/Installment Plans
- credit = borrow money to buy goods with promise to pay later, usually with interest
- installment = pay for expensive items in small monthly payment instead of paying all at once
- confidence in economy (risky bc of ambiguity of future) - Supply and demand
- overproduction and low demand
- deflation - speculation
- expectation that the stock is going to go up; investing money in risky assets in hopes of making quick profits
- economic boom => belief that the stocks would always go up
lack of gov’t regulation => no rules on buying on margin and banks loaned money freely
easy credit/margin buying - buying on margin
- “get rich quickly”
- make a small down payment for stocks - rest is paid off when you make money or sell it.
farmers and the silent depression
time when the farmers faced economic depression long before GD
- caused by overproduction after WWI, heavy borrowing/debt, and dust bowl
stock market crash
- 10/29/1929
- caused by speculation, buying on margin, overproduction, low wages, wealth inequality, weak consumer spending
- black Tuesday
- caused: massive bank failures, businesses collapsed, factories shut down, unemployment soared, consumer spending plummeted, deflation, housing market collapse and foreclosures, and international trade collapsed
bank runs
- a large number of people withdraw their money from a bank at the same time, fearing that the bank will fail.
gross national product
(GNP)
- total value of all goods and services produced by a country’s economy in a given period
- a key measure of economic health
caused by banks failure, stock market crash, decline in consumer spending, and deflation
unemployment
3.2 % in 1929
25 % in 1933
1.2 % 1944
- caused by stock market crash, business failures, decline in consumer spending, dust bowl
- effects on Americans: homelessness and Hoovervilles
Election of 1928
(r) Herbert Hoover vs. (d) Alfred E. Smith
- 31st president
- “chicken in every pot and a car in every garage” = necessity met, materials met
- rugged individualism = people should help themselves, not rely on gov’t aid. (+) - limitless wealth, (-) - if smth happens, its totally up to you
- believed of the gov’t interference would weaken personal responsibility and slow economic recovery
- self-reliance = individuals should be responsible for their own needs (hard work = success). opposed gov’t funded jobs programs
- volunteerism = belief that private charities, businesses and local communities — not the federal government — should help people during the GD. businesses should keep high wages
Smoot-Hawley Tariff
- 6/17/1930
- goal: to protect American farmers and industries by raising tariffs on imported goods
- idea: to help american businesses by making foreign products more expensive, encouraging people to buy american goods instead
- failed bc other countries also retaliated by raising their own tariffs on american goods, destroying us trade relations instead of helping
- prices went up for consumers since american businesses faced less competition
- many factories shut down when the trade collapsed
Hoovervilles/Shantytowns
- homeless people’s houses
- symbol of poverty, gov’t inaction, and the suffering of millions of Americans
- Hoover refused to provide direct federal aid
Reconstruction Finance Corporation (RFC)
- gov’t agency created under Hoover to provide financial aid to struggling banks, businesses, and local gov’t
- one of Hoover’s few direct gov’t interventions, but it was too late and too little
- hoover believed that helping banks and businesses first would eventually help the public through the trickle-down theory
- critics called it “relief for the rich”
The bonus army
a group of WWI veterans who marched to Washington DC in 1932, demanding early payment of their promised military bonuses
- sent the US army to forcefully remove them. when they refused, they used tear gas and violence –> damaging hoover’s reputation
Dust bowl
caused by:
- drought
- overfarming
- soil erosion
- high winds
- poor farming technique
effect:
- destroyed possession, killed crops, animals, and even people
- farm failure
- mass migration (many to California, called OKIES)
Farmer’s Holiday Association
a protest movement led by farmers
- aimed to stop farm foreclosures, raise crop prices, and push for gov’t action during GD
- organized farm strickes, blocked food deliveries to cities, and demanded fair treatment from the gov’t
langston hughes
poet, writer, and leader of the Harlan renaissance
- themes in hughes’ writing
- black pride and cultural identity
- racial injustice and inequality
- everyday life of black americans
Dorothea lange
the photographer of the GD
- migrant mother
Election of 1932
(D) Franklin D. Roosevelt vs. (r) Herbert Hoover
FDR - promised New Deal to revitalize economy and provide relief to suffering Americans
HH - defended his belief
Franklin Delano Roosevelt
- New Deal
- 100 days
FDR’s Inaugural Address
- “the only thing we have to ear is fear itself”
- reassured the nation, restored confidence, and set the stage for the New Deal
- 100 days
Eleanor Roosevelt
longest-serving First Lady
- revolutionized the role of First Lady — she was a political leader
- fought for civil rights and racial equality, even when it was unpopular
supported women’s rights, working with NAACP (pushed FDR to ban discrimination in gov’t jobs and helped create the Fair Employment Practices Committee (FEPC)
- used her voice to promote democracy, human rights, and equality worldwide.
FDR’s 100 days
march to June 1933
- 3 Rs
immediate actions:
- banking crisis (Emergency Banking Relief Act and declared a National Bank Holiday to stop bank runs)
- fireside chats (FDR speaking directly to the American people vis radio, explaining his plan => encouraged trust in banks, leading to more deposits than withdrawals when banks reopened.
- “Capitalism was saved in 8 days”
major laws passed
- glass-steagall act (separated commercial and investment baking to prevent speculation)
- took the US off the Gold Standard
- job creation and economic recovery (CCC, PWA, TVA)
- Agricultural and farmning reforms (AAA and farm credit act)
- Social welfare and labor reforms (FERA giving $500 million in direct aid, HOlC helping homeowners refinance mortgages and avoid foreclosure, NIRA set fair wages and hours for workers)
Keynesian Economics
John Maynard Keynes
- series of programs, public work projects, financial reforms, and regulations by FDR
- inflate money supply
- massive gov’t spending can help a collapsing economy and encourage more private spending
(-) - deficit spending = when the gov’t spends more money than it takes
before this was laissez faire
( CCC, PWA, TVA, Social security act, FERA)
idea = once the economy recovered, tax revenue would rise, and the debt would be repaid
First new deal vs. second new deal
first new deal (focus on relief and recovery)
- economic recovery
- quick stabilization
- experimentation
- business, banking, and employment
- temporary props to capitalism
second new deal (create permanent programs to protect workers, the elderly, and the poor)
- economic security
- social safety net for industrial workers
- redistributing income to restore purchasing power
- permanent welfare state
- redefined $ inequality as the enemy of American freedom
National Bank Holiday (Emergency Banking Act)
closing all banks for 4 days, allowing only stable ones to reopen
gave president broad powers over the federal reserve system
Glass-Steagall Act
created FDIC to insure bank deposits
