“Black
Thursday” (October 24, 1929)
The Crash did NOT cause the Depression, but it triggered the decline.
WHY??
I. Causes of the Depression:
(1)
Lack
of diversification in the American economy during the 1920s
à economic foundation is too narrow
(2)
Maldistribution
of purchasing power with a resulting weakness in consumer demand
à more than 50% of Americans
living below poverty level
(3)
The
credit structure of the economy
à debt, defaulted loans,
reckless investment
(4)
America’s
international trade position
à high tariffs, recovering
European economies
(5)
The
international debt structure
à reparations, loans, debt,
more loans (repeat)
(1)
Collapse
of the banking system is most serious problem
à key to the cycle
(2)
Economy
implodes between 1929 and 1932
à GNP drops by 25 %
à Investment disintegrates
à Consumer price index drops
by 25% and wholesale price index declines by 32%
(3)
Unemployment
skyrockets
à 25% unemployment rate in
1932 (possibly higher)
à 80% unemployment in some
American cities
à 1/3 of workforce is
“underemployed”
(4)
Agriculture
collapses
--> droughts and the “Dust Bowl”
--> gross farm income drops by 60%
(1)
Escapist
pop culture
*Hollywood specializes in comedies, horror films and
musicals
*Radio (serials and soaps)
*Literature of escape and expose’
*Success ethic continues – Dale Carnegie
(2)
Politics
*Communist and Socialist parties reach peak
membership
*ACP – 100,000 members in 1935
*SPA – 15-30,000 members in 1935
Despite the circumstances, no revolution occurred.
(3)
Hoover’s
problems
(a)
An
old-school Progressive, Hoover is paralyzed
(b)
Democrats
sweep mid-term elections in 1930—a bad sign for Hoover’s future
(c)
Hoover
was NOT completely inactive
*federal guidance and
state/local action
(d)
Reconstruction
Finance Corporation (January 1932)
*nearly $ 2 billion in federal aid
*less than 30% of it was used
(e)
Protests
and Marches
*Farmers Holiday Association March
*Bonus Army Marches (June-July 1932)
(4)
Election
of 1932
(a)
Hoover
vs. FDR
(b)
FDR’s
strategy – avoid controversial issues and blame Hoover for everything
(c)
FDR
wins 472 electoral votes to Hoover’s 59
(d)
FDR’s
strengths
*willing to experiment
*an excellent salesman, particularly good on the
radio (Fireside Chats)
(e)
FDR’s
“New Deal”
*an imprecise term at best (FDR had no clue what he
was going to do)
*The “Brain Trust”—a diverse group of
political/economic advisors who designed many of the New Deal programs
The
First New Deal (1933-34)
GOAL: address immediate problems (banking,
unemployment, investment), esp. during the First 100 Days (March-June 1933)
An
“alphabet soup” of legislative programs
(1)
Banking
(a)
Emergency
Banking Act
(b)
Glass-Steagal
Banking Act—creates FDIC
(2)
Unemployment
(a)
CCC
(Civilian Conservation Corps)
(b)
CWA
(Civil Works Administration)
(3)
Numerous
other acts passed that spring, ranging from the creation of the National
Industrial Recovery Administration (NRA) to the Tennessee Valley Authority
(TVA).
Some recovery occurs, but the Depression continues. Opposition to FDR begins to grow.
Second
New Deal (1935-38)
GOAL: institutionalize a framework of relief
programs
(1)
Labor
relations
(a)
National
Labor Relations Act [Wagner Act] (1935)
*created National Labor
Relations Board
(NLRB)
(b)
More
money for relief (short and long term)
*Works Progress Administration [WPA] (1935)
>over
8 million jobs (in all fields)
>expired
in 1943
*Social Security Act (1935)
>pension
fund for elderly and disabled
>funded
through payroll taxes
>set
to begin in 1943
>expanded
in the 1960s
(1)
FDR
isn’t doing enough
(a)
Francis
Townsend
*Old-age pension plan
*undermined by the Social Security Act
(b)
Huey
Long (the “Kingfish”)
*Share-Our-Wealth Societies
*assassinated by an irate dentist
(2)
FDR wasn’t doing enough…and now is doing too much
(a)
Father
Charles Coughlin
*radio personality from Detroit, Michigan
*accused FDR of being a dictator and a pawn of
“Jewish capitalists” (whatever)
Despite
opposition, FDR easily won re-election in 1936 over Republican opponent Alf
Landon of Kansas.
(3)
FDR vs. the Supreme Court
(a)
By
1937, the high court had ruled many of the New Deal programs unconstitutional
(b)
FDR
is peeved and attempts to “pack the court”
(c)
His
attempt fails, but it undermines him politically.
Yet,
the court changes its tune. The tactic
worked…
(1)
Government
regulation of business
(2)
Expansion
of governmental involvement in the economy
(3)
Governmental
responsibility for the welfare of its people
(4)
Government
becomes a major employer of Americans (bureaucracy, military, government
contracts)
(5)
Significant
federal programs and agencies (FDIC, Securities Exchange Commission, Social
Security)
(6)
Increased
visibility and power of the Presidency
(7)
The
“FDR Coalition”
*secured power position of the Democratic Party for
the next fifty years, esp. in Congress
*solidified Democratic Party support from:
>urban
communities
>women
>minorities
>social
and political “liberals”
