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Chapter 20: The Great Depression

In October of 1929, the bottom fell out of the stock market with a huge “bam” and the Great Depression began. How did this happen?
1. Weakness in the overall economy-
a. Farmers weren’t doing so great in the 20’s.
b. Other industries such as the textile, railroad and coal industries weren’t doing so well.
c. The real estate market began to dip.
d. The automobile market began to dip.
e. By the end of the decade, factories were overproducing.
2. Unequal distribution of wealth-
a. Forty percent of the nation was very poor
b. Five percent of the nation owned ninety percent of all the money. Since there was no stable middle class, we were dependant on the spending of a small portion of the population for all the buying.
3. Weak business structure- Coolidge had allowed business to run, have monopolies, and expand immensely. As a result, when one business fell, they all fell because one business was controlling everything.
4. Weak banking structure- about six thousand banks failed almost immediately after the stock market crashed.
5. Inadequate government policies- all government policies that were great for business were terrible for the depression.
a. The government in the 20’s gave tax breaks for the wealthy and business, widening the gap between the rich and the poor.
b. The Federal Reserve System lowered interest rates- this makes people glad to borrow, but led to irresponsible borrowing.
6. Weak international economy-
a. Europe hadn’t picked up since World War I and America did nothing to help them.
b. America placed a tariff on foreign goods, so the economy didn’t pick up.
c. European countries owed America money.

Hoover was president in January of 1929. Hoover was a self-made millionaire. He was an excellent businessman, a humanitarian and was very involved during World War I in the relief effort. However, he didn’t satisfy America at this time.

He tried tremendously to help:
1. Passed laws to increase jobs. During his time, the Hoover Dam was built- brought about new job opportunities.
2. Passed laws to give money to the real estate and railroad companies that were on the verge of bankruptcy. This was called the Reconstruction Finance Corporation.
3. Stopped war debts.

Hoover told everyone that prosperity is around the corner- he was upbeat. But history feels that Hoover did too little, too slowly. Hoover was a believer in rugged individualism- a person shouldn’t get handouts, they should make it work.

In the summer of 1932, a group of World War I veterans came to the White House to discuss their bonuses. They wanted to receive these bonuses earlier than was decided upon, but Hoover didn’t allow for this. Hoover told the veterans to go home, but they didn’t and stayed on the lawn. Tear gas was sprayed to get them off the lawn.

Hoover believed in the Puritan work ethic- Americans can do it, they just have to work hard.

Human impact of the Great Depression-

Unemployment was at an all time high. 25% of the work force and 40% of African Americans were unemployed. African Americans and unskilled workers were hit the hardest. People selling items in the street and hobos now became a common sight.

Life in the city was difficult. Many people lost their homes. They lived in cardboard shacks, and the towns were called Hooverville. People would sleep on park benches with newspapers covering them- known as Hoover blankets.

Rural life was not much better. Farmers that were already depressed became even more depressed. In the 1930’s, there was a prolonged drought along much of the West. These states were called the Dustbowl. Some of the farmers in Oklahoma moved to California- called Oakies. John Steinbeck wrote about them in a book called “The Grapes of Wrath”.

The suffering of the people shaped the culture of the time. People now looked for inexpensive forms of leisure. Movies shut down. Many of the movies and novels of this time were escapist novels.

In 1932, Franklin Delano Roosevelt became president. He ranked as one of the best presidents the US ever had. He inspired support and confidence in the American people. He was a master politician and he knew how to connect to the people to have them back him in what he was doing.

FDR was also a controversial figure:
1. He tried to change the Supreme Court when they went against him.
2. He ran for a third term in office and then a fourth. After he died in 1951, the 22nd amendment was passed, stating that one could only be president for two terms.

Roosevelt surrounded himself with bright people, therefore he was nicknamed the “Brain Trust”. These smart people influenced his way of thinking. He appointed the first woman to the Cabinet- Frances Perkins.

Another influence on Roosevelt’s way of life was his wife, Eleanor. She was a great humanitarian and encouraged her husband to help the poor and needy. After Roosevelt’s death, Eleanor became a leader in human rights issues. She was one of the key writers of the Universal Declaration of Human Rights. This became the blueprint for the dogma of the United Nations.

Roosevelt introduced his program to end the Great Depression- the New Deal. He had fireside chats (spoke on the radio, which was kept on the mantle over the fireplace), to speak to the nation and tell them what he was doing. He divided his program into three basic goals:
1. Relief- direct relief for those that are suffering.
2. Recovery- for the economy, so it grows again.
3. Reform- so that something like this should never happen again.

FDR passed hundreds of laws to bring relief, reform and recovery:
1. Relief- passed laws which made hundreds of jobs and money for the people.
2. Recovery- he passed many laws to help businesses. He encouraged people to go out and shop.
a. National Recovery Act (NRA) - gave the government control of business somewhat in order to help them recover. It also set up codes of competition- have to maintain certain wages and prices. Many people loved the NRA and some even named daughters after it, calling them Nira.
b. Agricultural Adjustment Act (AAA) - recovery for the farmers. Encouraged farmers to throw out their surplus and reduce their crop by paying them to do so. The point of this was that there would now be a greater demand.
3. Reform- many reforms were passed:
a. Securities Exchange Commission (SEC) - set up in order to regulate stocks.
b. Social Security Act (SSA) –
i. Gave benefits to the retirees. This was instituted so that there would be no old men starving. This was the start of the Social Security system that we have today- both the person and the government put away money towards his retirement.
ii. Gave benefits for unemployed, homeless, children, elderly and handicapped.
c. Wagner Act- helped the unions. The New Deal in general helped the labor unions.

Roosevelt in general wanted to help the worker through these fore-mentioned laws. He also wanted to work together with businesses. This was much harder because:
1. Not all businesses wanted to listen to him.
2. The NRA was later declared unconstitutional.

He worked intensely with the labor unions. Labor unions became very strong at this point. The AFL (skilled workers) joined together with the CIO (unskilled workers). Joining is often a sign of strength.

Controversy surrounding the New Deal-

Not everyone agreed with everything that the New Deal was doing. FDR was a pragmatic person and was interested in bringing change. He didn’t have a specific way of doing things, he did whatever worked.

FDR was influenced by populists and progressives. He wanted to use the government to help the people. He tremendously increased the power of government over businesses and the stock exchange. Roosevelt used an economic idea called priming the pump- you put a little bit of water in first to get the pump to start working. He felt that if you would put money in the economy, it would start to work on its own. The legal term for this is called deficit spending.

Two Supreme Court cases that nixed the New Deal laws:
1. Schechter Poultry vs. USA- the Supreme Court ruled that the NRA was unconstitutional because the NRA regulated intrastate trade, which was for the state to take care of, not the government. It was felt that in general, the executive branch is taking on too much power.
2. USA vs. Butler- the AAA was struck down. The Supreme Court said that the Federal government is taking power that belonged to the states. Farms are local, so it’s for the state government to regulate.

Opposition to FDR’s programs:
1. Tennessee Valley Authority (TVA) changed the Tennessee Valley. It used to be that it was poverty stricken, with no jobs. A dam was built, which brought jobs and hydroelectricity. Some people looked as this as good and some looked at it as Socialism.
2. Court Packing Bill- FDR was unhappy that the Supreme Court kept on declaring his laws as unconstitutional. He wanted to change the court, so he told Congress to either kick them out when they turned 70 or add six more judges. Congress said that they aren’t going to pass this bill.

FDR ran for a third term, breaking the tradition. Then he ran for a fourth. People looked at his as a dictator. In 1951, the 22nd amendment was passed stating that a president can’t run for more than two terms.

Different groups of opposition:
1. Republicans, the wealthy, businessmen- they felt that the government was becoming too powerful and that the constitution was being threatened. They felt that the New Deal taxes were unfair to the wealthy, and that socialism was being brought in place of democracy.
2. Socialists and progressives- said that FDR isn’t doing enough. Eugene Debs was a socialist. He felt that wealth in a nation should be distributed more evenly. There were extremists.
3. Woman and African Americans- felt that many of Roosevelt’s projects were helping the white males. They felt that they were getting less pay for the same job.

Three people who opposed FDR- these people were home grown demagogues- they were an outgrowth of the people’s pain and suffering:
1. Francis Townshend- he came up with a program to help all the elderly in this country.
2. Father Coughlin- was a priest. He had a radio show in which he spoke out against the rich. He said that the rich are destroying America. He spoke about Jews so much, saying that they are the businessmen.
3. Huey Long- he was from Louisiana. He was trying to run for the presidency. He was a senator. Long was a flashy fellow. He promised the people money and that he would get them out of the depression. He was assassinated in 1935.

Assessment of the New Deal-
1. Most historians feel that it was World War II that took the nation out of the depression.
2. Nevertheless, the New Deal did help people cope with the depression. Some felt that the New Deal helped prevent further economic and social disaster.
3. Restored confidence in the government.
4. The government assumed a role and responsibility in people’s lives.
5. Increased the nation’s debt because of the deficit spending.