The Great Depression

The Great Depression 1929-1941

Stock Market Crash (1929) • In the days prior to the crash there were some warning signs – but most people ignored them and continued speculating • Investors started to dump their investments and look for something more secure • On October 29, 1929 “Black Tuesday” people sold over 16 million shares in an attempt to salvage some money

Stockbrokers sold stock they held for buyers who could not meet their margin calls • President Hoover tried to calm the people by saying everything was fine • In a few months stockholders had lost over $40 billion • By 1930 over 4 million were out of work; banks collapsed; people lost their savings; farms were foreclosed • The crisis seemed to feed on itself as more and more people lost their jobs • Most people were saved from starvation by soup kitchens

Causes of the Crash and Depression • 1. The country had been producing more than it could sell • 2. Profits had gone to a small, wealthy group and not to the workers who would have spent the money and probably prevented the crisis • 3. Credit was too easy to obtain and for too little security • 4. The Hawley-Smoot Tariff of 1930 • 5. In 1930 a terrible drought ruined many farmers

By 1933 over 13 million were out of work, others worked for reduced wages and/or shorter hours • People created shelters called “Hoovervilles” • People made shelters from cardboard and used newspapers “Hoover blankets” to keep themselves warm • Many just abandoned everything, became hobos and traveled the country by “riding the rails” • Treasury Secretary Mellon and Hoover both believed the economy would cure itself • Both asked business owners to keep factories open

Gradually Hoover realized more needed to be done – he rushed through government contracts • Hoover asked the Federal reserve to make credit more available, while Congress passed a small tax cut • The Hawley-Smoot Tariff (1930) raised duties to an all-time high to protect American manufacturers – but other nations retaliated and it ultimately hurt the economy • Economist asked the president to remove the tariff, but it was an election year so he refused

In 1931 the failure of Austria’s largest bank put even greater pressure on European economies and even less likelihood for the payment of war debts • In 1932 Congress established the Reconstruction Finance Corporation to allow loans to banks, mortgage associations, railroads, and insurance companies • In the first six months they issued $1.2 billion in loans

Bonus Army March (1932) • In some areas farmers took the law into their own hands and formed the Farmers’ Holiday Association calling on farmers to strike and block delivery of farm products • There was even some talk of revolution • In the Spring of 1932 over 15,000 veterans formed the Bonus Expeditionary Force and marched on Washington demanding payment of a war bonus approved in 1924 • The House passed the bill, but when the Senate refused most marchers went home

Those that stayed camped near the Capitol • Congress offered to pay their fare home if they left – some did • In a scuffle in July a policeman opened fire and killed two veterans • Hoover ordered General MacArthur aided by Dwight D. Eisenhower and George Patton to disperse the crowd • The soldiers forced the veterans to leave, but injured many and killed one (an eleven year-old boy) • The administration claimed the Bonus Army was full of Communists and troublemakers intent on revolution

The Election of 1932 • Hoover had won the election in 1928 by promising a “chicken in every pot” • The Republicans re-nominated Hoover for 1932, but he had little interest • The Democrats nominated Franklin D. Roosevelt (a distant cousin of Theodore) • Roosevelt was well-educated and well-spoken, he had also held many important positions in past administrations, but had suffered from polio which left him wearing leg braces

During the campaign Roosevelt promised a New Deal for America, but did not elaborate • He blamed Hoover and the Republicans for the Depression and gradually elaborated on his New Deal – a balanced budget, regulation of utilities companies, and a promise to repeal Prohibition • Roosevelt won the election 472-59 • In the Winter of 1932-3 the situation continued to get worse • At the inauguration in March the people expected action • Roosevelt claimed “the only thing to fear is fear itself”

The first plan was to relieve the conditions of the unemployed • Second part was to stimulate industry • Third part was pay farmers for reducing their crops which would ultimately raise the price of commodities • Roosevelt called Congress to meet for a special session and then closed the banks for a four day holiday • Immediately Congress passed the Emergency Banking Relief Act which allowed sound banks to reopen and provided managers for those in trouble

Fireside Chats • On March 12, Roosevelt talked to the nation in the first of his “fireside chats” • He told the people to keep their money in the banks and reassured the nation that he was working to solve the problem • Congress passed the Economy Act which granted the president power to cut federal salaries and they passed the Beer-Wine Revenue Act which amended the Volstead Act and permitted the sale of low levels of alcohol • The Twenty-First Amendment was passed in December ended Prohibition

The Hundred Days • From March 9 to June 16 was known as the Hundred Days • Congress received and enacted 15 major pieces of legislation • After solving the banking problems the administration focused on helping the farmers and homeowners • Roosevelt created the Farm Credit Administration to consolidate all farm credit agencies and to offer refinancing at lower interest rates

Financial Help (1932) • In April the country abandoned the gold standard • The Federal Securities Act required full disclosure of information about stocks and bonds • The Home Owners’ Loan Act allowed homeowners to refinance mortgages at lower rates • The Glass-Steagall Banking Act created the Federal Deposit Insurance Corporation to guarantee bank deposits up to $5,000. It also increased the power of the Federal Reserve to regulate credit

Relief for the People • Congress created the Civilian Conservation Corps (CCC) which was intended to create work for the unemployed and unmarried men between 18 and 25. The program employed nearly 3 million young men • The workers were paid about $30 a month and spent their time building roads, campgrounds, and planting trees • The Federal Emergency Relief Administration (FERA) sent money through state agencies in the form of grants to create education programs as well as direct cash payments to individuals

The first federal attempt at work relief was through the Civil Works Administration – the CWA provided federal jobs for those who could not find work. The CWA was dissolved in the spring of 1934, but immediately afterwards the number of unemployed skyrocketed • Roosevelt advocated giving people jobs as opposed to financial hand-outs • In 1935 Roosevelt asked Congress for $4.8 billion in the Emergency Relief Appropriation Act to pay for the programs • Congress created the Works Progress Administration (WPA) to manage the programs

Relief for Farmers • With the drop in the price of farm commodities in the late 1920s, many farmers could not afford to plant crops • The Agricultural Adjustment Act of 1933 planned to pay farmers to destroy their crops in an attempt to raise prices • Eventually animals were slaughtered as well as crops destroyed • The decline in supply did increase the prices, but the shortage was as much due to the “dust bowl” which wiped out many farms on the Great Plains between 1932 and 1935

In 1936 the Supreme Court ruled in United States v. Butler the AAA’s tax on food processors as unconstitutional • Congress responded by passing the Soil Conservation and Domestic Allotment Act which removed quotas, but still provided funds for farmers who took land out of production • In 1938 Congress passed the Second Agricultural Adjustment Act

Industrial Relief • The National Industrial Recovery Act (NIRA) • The act had two parts: one dealt with economic recovery, the second created the Public Works Administration (PWA) • The NIRA also created the controversial National Recovery Administration (NRA) to help businesses by setting wages and prices and to create more jobs • The symbol of the NRA was the “Blue Eagle” and the words “We do our part” started to appear in windows and on products

Unions worried about the loss of their power and about the ability of companies to fix prices • In response the NRA changed to allow workers to form unions • Problems started when larger companies began to dominate industries and eliminated competition • The legislation was terminated by the Supreme Court in 1935 because it was deemed unconstitutional in the Schechter Poultry Corporation v. United States case • Although the act was a failure it did establish the forty-hour work week and ended child labor

The Tennessee Valley Authority • One of the largest and most successful programs was the creation of the Tennessee Valley Authority (TVA) • The Tennessee Valley was a very underdeveloped and impoverished area • The idea was to build a series of dams on the Tennessee River. The result would be more industry, better schools and libraries, and cheap hydroelectric power

New Deal Critics • Not everyone approved of the New Deal legislation and attacks from all sides • H. L. Mencken complained that Roosevelt was creating a welfare state • Father Charles Coughlin “the radio priest” preached to millions every week via his radio show. In initially he supported the New Deal and blamed the Depression on wealthy bankers, but by 1934 he had turned against Roosevelt – calling the president a liar

Dr. Francis Townsend suggested that all people over 60 receive $200 a month, the money could be raised through a sales tax. The plan was for the older people to spend the money in the same month and thereby generate far more purchasing power • Needless to say the plan attracted plenty of followers • The most vocal critic was Huey Long, once governor and senator of Louisiana • Long was nicknamed the modern-day Robin Hood for his “share our wealth” plan

Long proposed to make “every man a king” by limiting the amount of money the wealthy could possess • The government would take control of all incomes over $1 million and estates over $5 million. This money would then be distributed to the less fortunate • Long and Coughlin both appealed to the mass through populist movements that feed on dissatisfaction and disappointment • In 1935 Long was assassinated and while the movement continued it did not thrive without Long

The Communist party attacked the New Deal for being too conservative • While it communism never really attracted a mass appeal it did became especially appealing to Hollywood people

The Second New Deal • With opposition from Congress and the Courts Roosevelt launched his Second New Deal in which he demanded legislation must be passed • Congress passed the legislation, but some of it proved very controversial • The National Labor Relations Act (Wagner Act) gave workers the right to negotiate through unions of their choice. It also prevented employers from interfering with union activities • The Social Security Act (1935) included pensions for retired workers

The act also created a federal-state unemployment insurance program • These programs initiated the belief that the federal government is responsible for the welfare of those people who can not be employed • A major problem was the Social Security payroll tax was regressive – a fixed fee was paid by all, regardless of earnings. The tax also took money out of circulation

The Election of 1936 • By 1936 the New Deal and its supporters held the advantage • The Republicans had trouble finding anyone who even wanted to run for president. They ended up with Alfred Landon of Kansas • Landon was a moderate and even approved of some of the New Deal legislation • Roosevelt won in a landslide (523-8)

The Court-Packing Plan • After winning the election, Roosevelt believed he had a mandate for his New Deal • However many of his plans had been thwarted by the Supreme Court – none of whom had been appointed by Roosevelt, but six were older than 70 • Roosevelt could not wait for time to change the Court • Roosevelt asked Congress to allow him to appoint an extra Justice for each one who was over 70 who would not retire. (But never more than 15)

Roosevelt claimed the Court needed new blood and help with extra cases • Congress, and the nation immediately rebuked the president for trying to “pack” the Supreme Court • After the court-packing scheme the Court became more sympathetic to New Deal legislation • Ironically, before he left office Roosevelt was able to appoint nine Justices • Attempts to pack the court seriously backfired on the president and cost him a great deal of support

The End of the New Deal • In 1937 the short-term benefits of the New deal were disappearing as the country faced another severe economic downturn • Early indications had seemed to promise recovery as unemployment declined and industrial output increased, but so did the deficit • To help stop the deficit Roosevelt cut back on federal spending, which precipitated a new recession • Nearly 4 million workers lost their jobs – causing heated debate in the administration about how to cure the problem

The debate was over either limiting regulation on businesses and cutting spending or increase government control through regulation • Eventually Roosevelt decided to use consumer spending to end the Depression • His ideas came from the book The General Theory of Employment, Interest, and Money (1936) written by British economist John Maynard Keynes • The main idea was that government should spend its way out of a depression regardless of trying to maintain a balanced budget • Roosevelt increased spending but recovery was still slow

The public turned against Roosevelt and the Democrats • Roosevelt made matters worse when he promised to rid the party of those who opposed the New Deal – the Republicans made huge gains in the 1938, midterm election • By the end of 1939 the New Deal was practically dead as people demanded a more conservative approach • However, events in Europe were about to shape the next period of American history

Foreign Policy • During the 1930s the nations of western Europe the United States were too busy with their own problems to interfere with the political events in Germany or China. The Americans adopted a policy of increasing isolationism • In 1931 the Japanese occupied Manchuria and made it a puppet state • The occupation violated the Nine-Power Treaty and the Kellogg-Briand Pact. When China asked the League of Nations for help they received nothing

In 1932 Secretary of State Henry Stimson issued the Stimson Doctrine: the United States refused to recognize any treaty, or agreement that violated American treaties or the Open Door policy with China – the doctrine had no effect on the Japanese • 1933 Japan withdrew from the League of Nations • Soviet Union - In 1933, forced by the need to increase trade, America recognized the Soviet Union. In return the USSR promised not to interfere in American affairs

In November 1933 the United States formally recognized the Soviet Union and renewed diplomatic relations • In 1934 the Platt Amendment was repealed. The navy kept a base at Guantanamo Bay • Buenos Aires Conference (1936) - American states promised to consult each other if threatened or remain neutral if aggression was between any two of them • The Neutrality Act of 1935, signed by Roosevelt it promised to keep America out of any wars and it prohibited the sale of weapons and ammunition to all warring nations

Weeks after the treaty was signed Italy invaded Ethiopia • Mussolini did not need to buy arms but he did need oil, which was not part of the Neutrality Act • In 1936 Adolf Hitler ordered German troops into the Rhineland in violation of the Versailles Treaty • Also in 1936 General Franco led an uprising in Spain • In 1937 Congress passed another Neutrality Act – prohibited Americans from traveling on ships of nations at war, prohibited the sale of arms and loans, and prohibited the arming of American merchant ships trading with warring nations

By 1939, with help from Hitler and Mussolini, Franco had established a fascist dictatorship in Spain • In 1937 Japan and China embarked on a full-scale war. • In December 1937 Japanese planes attacked and sank the American gunboat Panay which had been anchored in the Yangtze River, China. They also attacked 3 American oil tankers • The Japanese government apologized and paid reparations • Declaration of Lima (1938) - 38 American nations would resist threats to their peace

1938 Hitler forced the Anschluss (union) with Austria. Later the same year he invaded the Sudeten region of Czechoslovakia • Still support for isolationism was strong • Roosevelt became openly supportive of European nations fighting fascism and asked to be able to sell material to Britain and France on a cash-and-carry basis. His request was refused • When Germany invaded Poland on September 1, 1939, Roosevelt called a special session of Congress and asked to amend the Neutrality Act

Aid to Britain • The Neutrality Act of 1939 allowed Britain and France to send their own planes to the United States to pick up supplies that had been purchased with cash • By 1940 only Britain remained free from German control and the while Winston Churchill promised to never surrender they did need supplies • Roosevelt order an increase in military production

Undeclared War • In 1940 Roosevelt created the National Defense Research Committee to coordinate the war effort and examine the possibility of developing atomic weapons • Britain negotiated a secret deal with the United States in which they would receive 50 “old” destroyers in return for a 99 year lease on bases in various locations • Congress also authorized the first peacetime conscription which required all men between 21 and 35 to register for service

The Election of 1940 • The Republican choice was Wendell Wilkie, a former Democrat, who supported aiding the Allies • Roosevelt probably would not have wanted a third term but when war broke out he felt he had no other choice. He kept silent about his intentions to join the fight • Roosevelt won a third term (449-82), but it was the closest margin of all his victories

Lend-Lease • Britain informed the United States that they were running out of money, but they still needed the supplies • The Johnson Act of 1934 prohibited loans to belligerent nations – Roosevelt needed another way to keep Britain supplied but not violate any laws • In a fireside chat he told the American people of the Lend-Lease Bill that had been introduced into Congress • America was to be the “Arsenal of Democracy”

The Bill authorized the president to sell, transfer, exchange, lend, or lease any equipment necessary to continue the defense the United States • The Bill was hotly contested for several months before being passed • By 1941 the Germans and their allies had taken invaded Greece, Yugoslavia, and Egypt • Hitler now seemed destined to gain the whole Middle East region • In the summer of 1941 the Germans suddenly invaded Russia, in violation of their non-aggression pact with the Soviets

Atlantic Charter (1941) • In August 1941 Churchill and Roosevelt met at Newfoundland to issue the Atlantic Charter:It called for self-determination for all peopleequal access to raw materialsfreedom of the seaseconomic cooperation • By September 15 nations endorsed the Charter • On September 4, the first attack on an American ship took place. The destroyer Greer was attacked by a German submarine – Roosevelt ordered American ships to shoot any German or Italian ships

Pearl Harbor (1941) • In September 1940 Germany, Italy, and Japan signed the Tripartite Pact – each nation promised to declare war on any other nation that declared war on any of the three • The Germans wanted the Japanese to attack Russia from Manchuria, but in 1941 the Japanese signed a non-aggression pact with the Soviet Union • The Japanese were more interested in the natural resources of the Pacific – especially oil, rubber, and iron

In July 1941 the Japanese declared a protectorate over all of French Indochina • Roosevelt:A) froze Japanese assetsb) restricted oil exports to Japanc) joined the army of the Philippines with the United States army under the command of General MacArthur • The Japanese, desperate for oil, formulated a plan to capture Dutch and British colonies in the Pacific • The Japanese underestimated the determination of the United States, a move that eventually cost them the war

The Japanese planned a surprise attack on the American base at Pearl Harbor – the purpose was to sink the aircraft carriers • Even while both nations negotiated the Japanese prepared for war • On the morning of December 7, 1941 the Americans decoded a Japanese message ordering the diplomats to break off negotiations at exactly 1 p.m. Eastern time (7:30 a.m. Honolulu time). The message was not received in Hawaii in time • Japanese planes attacked Pearl Harbor for almost two hours with little resistance • Over 2,400 servicemen and women were killed

Fortunately the American carriers were all at sea and so they remained in tact • Now there was no issue of neutrality • The next day Roosevelt asked Congress for a war resolution against the Japanese • December 7, he said would be “a date which will in infamy” • On December 11, Germany and Italy both declared war against the United States

The Great Depression