LECTURE #19: THE GREAT DEPRESSION & THE NEW DEAL (1929-1941)

1. LECTURE #19: THE GREAT DEPRESSION & THE NEW DEAL(1929-1941) Derrick J. Johnson, MPA, JD Advanced Placement United States History, School for Advanced Studies

2. Causes of the Great Depression • In his inauguration speech, President Herbert Hoover professed that the goal of the Republican Party was to wipe out poverty in the 1930s. • Many Americans foresaw a continuation of the dizzying economic growth that had taken place during the 1920s. • However, careful observers of the American economy noticed several disturbing trends. These trends included the following: • Agriculture • Farm prices were at a record high during WWI, dropped after the war, and never recovered. As result, many farmers weren’t able to pay back their loans. • Installment buying • Large numbers of Americans were purchasing automobiles, vacuum cleaners, and similar household products on credit. • This cause many families to have their household income tied up on big ticket items and less money was available to buy smaller ticket items that were on sale and available.

3. Causes of the Great Depression • Uneven distribution of wealth • America was wealthy during the 1920s, but the wealth did not “trickle down” to everyone in our society. • The working class did not produce much gains wealthy during the 1920s and the wealthy class began to curtail their spending. • The stock market • There were case of ordinary citizens becoming very wealthy by purchasing stock. Some of these people were engaged in speculation, meaning that they would invest in something that was very risky, but they could make a killing on if it succeeded. • Another common practice was buying shares on “the margin.” A stock broker might allow a buyer to purchase stock for only a percentage of what it was worth; the rest could be borrowed from the broker.

4. Causes of the Great Depression • As long as stock prices continued to rise, investors would have no trouble paying brokers back these loans. After the stock market crash, brokers wanted payments for these loans. Countless numbers of investors had no way to make these payments.

5. The Stock Market Crash • In early September of 1929, the prices of stocks crested. • The price of stocks fell very gradually during most of September and early October. • Some investors began to noticed that factories were beginning to lay off workers. Whispers were heard around Wall Street that perhaps the price of stock was too high, it might be good to sell before prices began to fall. • On Wednesday, October 23, the value of a share stock dropped on average by 20 points in the last hour of trading. • On October 24th, a massive amount of stock was sold, and prices again fell dramatically. • Stock brokers to investors not to worry and President Hoover also said that the stock market and the economy were “on a sound and prosperous basis.”

6. The Stock Market Crash • Despite their efforts, prices continued to fall on Monday, October 28, and on the following day, Black Tuesday, the bottom fell out of the market. • Prices fell by 40 points that day and investors losses were over $20 million. • This resulted in bankers and stock brokers frantically calling in loans. Very few investors had the money to make good on their loans.

7. The Impact of the Stock Market Crash • In the weeks immediately following the crash, important figures from the banking world and President Hoover all assured the American people that America was still economically sound, and that the crash was no worse than other stock downturns that had little long term effect on the economy. • The impact of the crash had a profound effect on the American economy. This resulted in the following: • Bank closings • Income fell for industrialists • Domino effect on the economies of the world.

8. The Impact of the Great Depression • Many Americans felt a huge sense of uprootness in the 1930s. There were many foreclosures of homes. • By late 1932, virtually all sectors of American society were affected in some way by the Great Depression (GD). • It was not uncommon for people to share jobs during the GD. • Women and minorities were often the first to lose their jobs. • Many behaviors of the 1920s, like buying on credit, were forgotten during the 1930s. • Many private agencies formed soup kitchens and emergency shelters. • Those with nowhere to live in cities often ended up in Hoovervilles, which were settlements of shacks usually located on the outskirts of cities. • The greatest human suffering of the GD era might have existed in the Dust Bowl. For most of the decade, massive dust storms plagued the residents of Oklahoma, Kansas, Nebraska, Colorado and Texas.

9. The Impact of the Great Depression • Farm production in this area fell drastically for much of the decade. • A severe drought was the cause of the dust storms, although poor farming practices also contributed to them. • Many Dust Bowlers traveled to California to get agricultural jobs there, and just scraped by. John Steinbeck’s, The Grapes of Wrath discusses the Dust Bowlers experience in California during the GD.

10. Herbert Hoover & the Great Depression • Contrary to popular belief, Hoover did try to stop the GD. • He believed that the crisis could be solved through voluntarism. Hoover urged Americans to donate all they could to charities, and he held several conferences with business leaders where he urged them not to lay off workers or reduce wages. • When it became obvious that these measures were not enough, public opinion quickly turned against Hoover. • The Hoover administration did take several specific measures to offset the effects of the Depression, which include the following:

11. Herbert Hoover & the Great Depression • The Agricultural Market Act – created a Federal Farm Board that had the ability to give loans to the agricultural community and buy crops to keep farm prices up. • The Hawley Smoot Tariff Act– raise tariffs to the highest point ever in U.S. History. • Reconstruction Finance Corporation - Hoover did authorize more money for public works programs, and, in 1932, he authorized the creation of the Reconstruction Finance Corporation. This agency gave more money to banks, who were then authorized to loan this money to businesses and railroads. • However, Hoover came across to the public as being interested in helping the wealthy rather than helping the common man. • In the summer of 1932, a group of 17,000 unemployed WWI vets, known as the Bonus Army, descended on Washington, D.C. Their main goal was to lobby the government to give them the bonuses that they were suppose to get in 1945 immediately.

12. Herbert Hoover & the Great Depression • At Hoover’s urging, the Senate rejected legislation authorizing this. Most of the Bonus Army members went home, but a few thousand stayed, living in shacks along the Anacostica River. Hoover ordered them to be removed. • Military forces led by Douglas MacArthur used tear gas and cleared the remaining bonus marchers from their camp and burned down their shacks.

13. The Election of 1932 • In a joyless convention, the Republican Party re-nominated Herbert Hoover for president. In newsreels seen by the public, he came across as being “unsmiling” and “lacking in warmth.” • He insisted that his policies would eventually led the country out of the GD. • Hoover also warned against “mindless experimentation” in the creation of government policies. • The Democrats nominated the wealthy Governor of New York, and distant cousin of Former President Theodore Roosevelt, Franklin Delano Roosevelt (FDR). After serving as Assistant Secretary of the Navy under President Woodrow Wilson, Roosevelt unsuccessfully ran for Vice President during the 1920 election.

14. The Election of 1932 • In 1921, he contracted polio, which left him unable to walk for the rest of his life. The psychological effect of his condition changed his personality to the extent that he becomes more empathetic to the plight of others. • As Governor of New York, FDR instituted relief programs that became models for others across the country. During his campaign, promised a “New Deal” for the American people and, unlike Hoover, he was prepared to “experiment” with government solutions. • FDR’s warm and friendly public image contrasted with Hoover’s joyless and disinterested image and it worked in his favor. • Roosevelt emerged victorious with 472 electoral votes (22,821,277popular votes) to Hoover’s 59 electoral votes (15,761,254 popular votes).

15. The Franklin D. Roosevelt Presidency President Franklin D. Roosevelt Born: January 30, 1882 Died: April 12, 1945 Term in Office: (1933-1945) Political Party: Democrat

16. The Franklin D. Roosevelt Presidency

17. The Franklin D. Roosevelt Presidency Supreme Court Appointments by President Roosevelt Hugo Black – 1937 Stanley Forman Reed – 1938 Felix Frankfurter – 1939 William O. Douglas – 1939 Frank Murphy – 1940 Harlan Fiske Stone (Chief Justice) – 1941 James Francis Byrnes – 1941 Robert H. Jackson – 1941 Wiley Blount Rutledge – 1943 States Admitted to the Union None

18. The First Hundred Days • FDR’s inauguration speech in 1933 was one of optimism. He set the tone for the New Deal era by saying that “the only thing we have to fear is fear itself.” He was determined to boost the moral of the public and he took steps to raise the public confidence in his administration. • Within weeks of taking office, FDR gave the first of many radio addresses called fireside chats. • FDR would usually explain the immediate problem facing the country and outline his reasons for the solution. • FDR assembled an able cabinet and he encouraged them to experiment in efforts to overcome the great depression. • During the first Hundred Days of the Roosevelt Administration, countless programs were proposed by the administration and passed by Congress. During the first Hundred Days of FDR’s administration, the following was passed: • The Twenty-First Amendment - repealed prohibition

19. The First Hundred Days • The Banking Act of 1933 – created the Federal Deposit Insurance Corporation (FDIC) which renewed confidence in the banking system. • The Civilian Conservation Corps (CCC) – expanded forest and conservation programs. • The National Industrial Recovery Act (NIRA) – committees of both union and owners in each major industry would meet to set prices, working hours, wages and work expectations. The National Recovery Administration (NRA) was developed to enforced the policies of the NIRA. However, in the case Schechter v. United States (1935), NIRA was declared unconstitutional. • The Agricultural Adjustment Administration (AAA) – attempted to stop the sharp decline in farm prices by paying farmers not to produce certain crops and livestock. It was hoped that this would cause prices to rise.

20. The First Hundred Days • The Tennessee Valley Authority – authorized the construction of a series of dams that would provide electricity and flood control to the people living in the Tennessee River Valley. • The hundred days and months that followed it provided some economic relief to those affected by the Great Depression, but by no means solved the basic economic problems facing the United States. • The 1934 midterm elections showed that most Americans favored FDR’s policies, but 20% of Americans were still out of a job.

21. The Second New Deal • Many wealthy members of American society were appalled by the actions of the FDR administration. • He was called a traitor to his class, a communist, and far worse. • However, other elements of FDR’s supporters were urging him to do more. • As a result, the Second New Deal, beginning in 1935, included another flurry of legislation which included the following: • Resettlement Administration – established in 1935, offered loans to small farmers who faced foreclosure. • The Work Progress Administration (WPA) - It took people that were on relief and employed them for 30 to 35 hours a week. They would work constructing buildings, schools, hospitals, etc. • The Wagner Act – which reaffirmed the right of workers to organize and utilize collective bargaining. The National Labor Relations Board was created to enforce the provisions of the WPA and the Wagner Act.

22. The Second New Deal • The Social Security Act – created a national retirement plan for workers over 65 years old. Both workers and employers would pay into the fund and payments would be made to retirees starting in 1942. • The FDR Administration’s Second New Deal confirmed the worst fears of the critics of the New Deal… that FDR was determined to use government as a tool to implement socialist policies.

23. The Election of 1936 • The 1936 Election was framed as the first true national referendum on the presidency of Franklin Roosevelt. The Democrat overwhelmingly re-nominated FDR and the Republicans nominated Governor Alfred Landon of Kansas as their presidential nominee. • FDR often railed against the business class who, according to Roosevelt, opposed many of his policies only so they could continue to get rich. Landon never actually repudiated the programs of the New Deal, but he stated that a balanced budget and less expensive government programs should be top priorities.

24. The Election of 1936 • The election was one of the most one sided elections in American history. Roosevelt emerged victorious with 523 electoral votes (27,752,648popular votes) to Landon’s 8 electoral votes (16,681,862 popular votes). • FDR managed to form a New Deal Coalition, which made the Democrats the major party throughout the 1930s and all the way to the 1980s. • The two groups that joined the Democratic coalition in this era were African Americans and labor unions.

25. Opponents of the New Deal • Opinion polls and election results showed that a large majority of Americans supported Roosevelt. • Nevertheless, his New Deal programs were extremely controversial and became the target of attacks by liberals, conservatives, and demagogues. • Socialists and extreme liberals in the Democratic Party criticized the New Deal for doing too much for business and too little for the unemployed and the working poor. They also accused the president of failing to address the problems of ethnic minorities, women and the elderly. • Conservatives attacked the New Deal for giving too much power to the federal government.

26. Opponents of the New Deal • They argued that the WPA and labor laws, such as the Wagner Act, bordered on socialism and communism. • Conservative Democrats like John W. Davis and Al Smith joined with leading Republicans in 1934 to form an anti-New Deal organization called the American Liberty League. • Father Charles E. Coughlin, who attracted a huge following in the early 1930s through his radio broadcast, made attacks on the New Deal that were considered fascist and anti-Semitic.

27. Opponents of the New Deal • Dr. Francis Townsend became a hero to millions of senior citizens by criticizing the government and by proposing a plan for guaranteeing a secure income. The popularity of the Townsend Plan persuaded Roosevelt to substitute a moderate plan of his own, which became the Social Security system. • FDR’s most “dangerous” critic was Senator Huey Long of Louisiana. Long became a popular national figure by proposing a “Share Our Wealth” program that promised a minimum annual income of $5,000 per American family, by taxing the rich. • In 1935, Long challenged FDR for leadership of the Democratic Party. However, Long’s populist movement was cut short when he was assassinated later that year.

28. The Court Packing Scheme • FDR was frustrated that the United States Supreme Court had struck down several New Deal programs. As a result, in 1937, FDR proposed the Justice Reorganization Bill, which would have allowed him to appoint an additional Supreme Court Justice for every justice over 70 years of age. • Roosevelt would have been able to appoint six new justices under this scheme. • FDR claimed that this would have benefitted the older justices with their workload. • However, many Democrats and Republicans criticized the bill and claimed that the purpose of the act was to change the balance of power in government. • Newspapers editorial compared Roosevelt to the dictators of Europe like Hitler and Mussolini.

29. The Court Packing Scheme • As a result of negative coverage, FDR backed down on the proposal. Also, while FDR was fighting to “pack the Court,” the justices began to back down in their efforts to stop the New Deal. As it happened, several justices retired during FDR’s second term, enabling him to appoint a majority on the Court who would agree to allow New Deal programs to stand.

30. The Last Years of the New Deal • From 1933 to 1937, the economy showed signs of gradually pulling out of the GD. However, by the winter of 1937, the economy once again had a backward slide and entered into a recessionary period. • FDR’s Administration took the blame for the economic situation. The new Social Security tax reduced consumer spending at the same time that FDR was curtailing expenditures for economic relief and public works. This was all done in an effort to balance the budget. • British economist, John Maynard Keynes advanced his theory that deficit spending was necessary because in difficult times the government needed to spend well above its tax revenues in order to initiate growth.

31. The Last Years of the New Deal • FDR accepted Keynes approach and implemented his policies. As federal spending on public works and relief went up, so too did employment and industrial production. • Although the economy improved, there was no boom and problems remained. After the Court-packing fight of 1937, the people and Congress no longer automatically followed FDR, and the 1938 elections brought a reduced Democratic majority to Congress. • A coalition of conservative Democrats and republicans block further New Deal legislation. Also, beginning in 1938, fears about the aggressive acts of Nazi Germany diverted attention from domestic concerns towards foreign affairs. • As the whole of Europe was on the edge of war, the United States was on the verge of entering a war that would forever change the course of American history.

32. THE END OF LECTURE #19