The Great Depression & The New Deal

1. The Great Depression & The New Deal

2. Hoover becomes President: 1928 • Herbert Hoover (R) v. Alfred Smith (D) • American son, businessman • Immigrant, Catholic, anti-Prohibition • Focus of election: • Prosperity, debt/tax reduction, tariff (econ. =) , enforcement of Volstead Act • Republican victory: 444 – 87 EC, 21 m. – 15 m. • HH = 1928-1932

3. The Good. . . • Business strong • “I have no fears for the future of our country.” • Income up • Inflation stable • Stabilization of economy • AG Marketing Act, 1929  Fed. Farm Board, farm surplus • Hawley-Smoot Tariff on farm goods, 1930

4. The Bad . . . • Hidden effect of tariff • Price for consumer • Export (farmers) • Inefficiency • Foreign reprisal

5. Twenties Prosperity • Misguided optimism • New Era of PERMANENT growth • “Get-rich quick” schemes • $$ + autos = real estate boom (FLORIDA) • Collapsed in ‘26

6. The 1920s Stock Market • Tax reductions  capital investment (Wall Street)  $$$ •  Buying stocks on margin • 10% down, stock as collateral

7. Early Signs • ‘27- decline in housing construction • Auto sales match demand • Business inventories up • Consumer spending slowed • ‘29- decline in production, employment • Stocks rise- speculation

8. . . . The Ugly • September 4-5 • Waver  drop • October 22 • “I know of nothing fundamentally wrong with the stock market or with the underlying business and credit structure.” –Bank president • October 23-24 • Stock values drop, unloading of stocks • Oct. 29 = BLACK TUESDAY • -23% • October 1929 • -37% (avg)

10. The Response • Consumers slow purchasing • Orders decrease • Wages down, layoffs • Decline in purchasing power  more cutbacks • Multiplier Effect • Farm commodities fall 50% • Bank failures @ 9k • Business failures • Factories, mines • Slow erosion of stock values • By ‘33, 20% of peak value in ’29

12. Causes and Flaws • Business • Prices set for high profit • Profit back into business, NOT wages •  rise in production, fall in purchasing power • Hidden by installment plans/credit • Demand falls – investment falls • Tariffs • Deflation hidden • Loans to Europe = foreign demand for US goods • Later, stock market better option

13. Government • Mellon Plan • Oversaving, decrease in demand • Low interest rates  money supply high, speculation • Low enforcement of antitrust laws • Hostility toward Unions • Discouraged collective bargaining • Imbalance in income • High Tariffs • Gold Standard • ‘29  tighten $$ supply

14. The Human Toll • Unemployment • 1.6 m (3%)- ‘29  12.8 m (25%)- ‘33 • Blacks, Mexicans first to be let go • Jobless, homeless, penniless • Jobless, Homeless, Penniless • Bank failures – NO FDIC • Soup kitchens, churches, local welfare • “Hobos” and “Tramps” • Hoovervilles and Hoover blankets

19. Hoover’s Efforts @ Recovery • How bad is it really? • Mellon, Hoover views • Self-cure, limited action + confidence • “We have passed the worst and with continued effort we shall rapidly recover.” –HH • Corporate profits vs. purchasing power • Keep business open, fair wages, no strikes • Conservative focus = look to the past • Farm surplus (AG. Mrkting Act) • Tax cuts • H-S Tariff • Public Works • Jobs

20. Europe’s Decline • 1931- Austrian bank failure •  PANIC! • Hoover’s response: re: DEBT moratorium • Euros: gold withdrawn from banks, dump stocks • All abandon gold standard • Worsen US economy

21. Congressional Efforts @ Recovery • Dem. Control in House, high influence in Senate by 1930 • ‘32- Reconstruction Finance Corporation (RFC) • Emergency loans to banks, insur. Co., RRs • ‘32- Glass-Steagall Act (FDR) • Stop the run, restore confidence, commercial vs. investment • FDIC • ‘32- Federal Home Loan Bank Act • Financial aid to mortgage institutions

22. Direct Relief? • . . .”Is there any reason why we should not likewise extend a helping hand to that forlorn American, in every village and every city of the U.S., who has been without wages since 1929?” – NY Senator Robert Wagner • Hoover lacks leadership in relief movement • Small step: ’32- Emergency Relief and Construction Act • $300+ m.: No cash payments, but relief loans to states, local gov. building projects, public works

23. Farmers and Vets • Farmers • Dust Bowl hits‘28-’30 • Survival • Efforts to raise prices • Bonus Expeditionary Force • WWI vets to DC, spring ‘32 • 15k+ want immediate payment (Bonus Bill, ‘24) of life insur. • House , Senate   camp out near Capitol • Forced out by July: fire, MacArthur, Eisenhower, Patton + 700 soldiers

26. *Hoover and Foreign Policy* • Good Neighbor Policy • Tour of Latin America, ‘28 • Back away from intervention (RC to MD) •  FDR’s Good Neighbor Policy • Stimson Doctrine, ‘32 • Result of Japan’s rise to power, totalitarianism • ’31- invasion of Manchuria, later Shanghai bombing • US won’t recognize territory acquired by force in China

27. FDR: Happy Days Are Here Again! • FDR (D) v. HH (R) • Prohibition, Depression, Peace, totalitarian govs. • “I pledge you, I pledge myself to a new deal for the American people.” –FDR • Aristocrat that loved common people • Traditionalist that loved experiment • A charmer with convictions • Skilled political tactician that listened and learned from others • Determined to succeed, cass, manipulator, power hungry, willing to sacrifice , took credit for others accomplishments

28. Campaign Notes • Pledge to balance budget • Short-term deficit OK • Help to farmers • Gov. regulation of electricity • Repeal of Prohibition • CONFIDENT, BOLD, JOYFUL

29. FDR Part I: 1932-1936 • “The only thing we have to fear is fear itself.” – FDR • The Brain Trust • Cordell Hull- SOS • Francis Perkins- SOL • Professor Felix Frankfurter (Harvard)- Advisor • SCJ Louis Brandeis- Advisor • Harry Hopkins- WPA director • William Woodin- SOT • Plan? NATIONAL SPENDING! • Advocated by John Maynard Keynes

30. Challenges • Revive devastated economy • Relieve human misery • Alleviate desperate plight of farmers • Brain Trust Solutions? • Antitrust laws competition • Large corps. + government regulation • Expansion of welfare programs, gov. spending

31. Aims of the Administration • Remedy to financial crisis • Relief to jobless • Promotion of industry • Fed. Spending up, cooperation b/t management & unions • Raise commodity prices • Would raise farm income, subsidies

32. The New Deal • 3/8 – 6/16 = First 100 days = 15 pieces of legis. • 3/6 – 10 = Bank Holiday  HALT THE HYSTERIA • Emergency Banking Relief Act ’33 • Sound banks reopen, managers to others • 3/12 = 1st “Fireside Chat” • “safer to keep your money in a reopened bank than under the mattress.” • 3/13- deposits exceed withdrawals • 3/15- most banks open • Next? • Cut to military pensions, gov. payrolls (Economy Act) • Beer-Wine Rev. Act (3.2%) & 21st Amend.

34. Debt Issue • 20k farm mortgages foreclosed per month •  Farm Credit Administration (FCA) • Emergency Farm Mortgage Act • Refinance farms @ lower rate • Lower monthly payment • Home Owner’s Loan Act • Refinance for city-dwellers (HH had advocated) • Through Home Owner’s Loan Corp. • Glass-Steagall Banking Act • FDIC- $5k • Commercial separate from investment banking

35. Regulation of Wall Street via Federal Securities Act • Stocks/bonds issued registered w/ FTC, SEC (regulatory) • 4/19- OFFICIAL ABANDONMENT OF GOLD STANDARD • No redemption for gold! • Decline in value of $  increase in price = GOOD!

36. Unemployment • The “test of our progress is not whether we add to the abundance of those who have much. It is whether we provide enough for those who have too little.” –FDR • Goals? • Insurance system ($ to retirees, disabled, needy), direct relief to unemployed • Civilian Conservation Corps (CCC) • Useful jobs for men 18-25, $30/month ($25 to family) • Forests, parks, rec. areas, roads, bridges, fish hatcheries, soil erosion • Military discipline instilled, lived in camps, led by army & foresters

37. Federal Emergency Relief Admin. (FERA) • Fed. Gov. + state/local • Grants • $ used to create jobs to build public buildings (5k), bridges (7k), adult literacy, college education, day-care, food/clothing to needy (via local agencies)

38. Federal Work Relief: Priming the Pump • People on gov. payroll, competitive wages • Civil Works Admin. (CWA) • 11/33- 4/34: created public jobs/wages for winter • Highway repairs, sewer work, teachers- $1 billion • Works Progress Administration (WPA) • Through Emergency Relief Appropriation Act (35) • Harry Hopkins • Replaced FERA as managing federal job programs

39. WPA and the Arts • Federal Theater Project • Productions- Orson Welles • Federal Art Project • Federal Music Project • Federal Writers’ Project • Travel guides, slave narratives • Hurston, Ellison • http://newdeal.feri.org/asn/asn00.htm

41. Young People • CCC • high-school diploma • $$ for self, to family • Nat’l Youth Administration (NYA) • Part-time work for students • Tech. training • Johnson in TX, Nixon in NC

42. AG Relief • Need for efficient regulation/planning • As seen in WWI • Agriculture Adjustment Act (AAA)- ’33 and ‘38 • $ to farmers to reduce production • $ from tax on processors of commodities (cotton, four) • By ‘35: farm income up 58% • Drought (‘32-’35= Dust Bowl Migrations), production cut (cotton, hogs) • U.S. v. Butler, ’36 • SC say tax unconstitutional •  Soil Conservation and Domestic Allotment Act (no taxes, quotas)

43. Industrial Relief • Nat’l Industrial Recovery Act (NIRA) • = Economic recovery + public-works projects • 1. Sec. of Interior Harold Ickes (PWA) • Gov. buildings, highways, flood control • Private contractors vs. gov. workers • 2. Nat’l Recovery Admin. (NRA) • Hugh S. Johson • Industry-wide codes, wages = no competition  stability • Purchasing power to consumers • Industry committees set codes, 40-hr workweek, wages ($13), age limit (16)

44. Business owners see codes as restraints • Large-companies dominated code making, want chance to compete • Didn’t apply to ag or domestic workers • Schechter v. the U.S. ‘35 • Unconstitutional

45. Regional Planning • Tennessee Valley Authority (TVA), ‘33 • Electricity & jobs • Dams, “Great Lakes of the South,” opened rivers to barges, soil conservation, forestry, labor unions, schools/libraries • “I want to sit here and look out over these hills.” –TN woman •  success @ generating power consumption, cheap utilities to mass consumer markets

47. Social Costs • Hardships Continue • ‘39- 17% unemployed • Petty theft, begging, prostitution • Effect on families • Divorce rate down, birthrate down • Dust Bowl Migrants • From S, SW to CA • “Okies”in jalopies • To LA, San Fran, Frisco, San Joaquin Valley (AG) • Competition w/ Asians/Hispanics • Tents, cabins, migrant camps • Prejudice, WASP, “country”