Depression and the New Deal: the USA, 1929-41

Key Questions
How serious were the effects of the Depression on the American people? How did Roosevelt deal with the Depression? How far was the New Deal successful in ending the Depression in the USA?

How serious were the effects of the Depression on the American people?
The effects of the Wall Street Crash Unemployment and its effects Struggling farmers The attempts of Hoovers government to deal with the Depression The unpopularity of Hoover and the election of Roosevelt

Background
The 1920s boom in America ended in 1929 with the Wall Street Crash By 1932 nearly one quarter of the workforce was unemployed In 1933 the new President, Franklin D Roosevelt, promised a New Deal The US government provided millions of jobs, but this meant that recovery was dependent on government money The US Supreme Court declared the New Deal unlawful The US economy only fully recovered because of its involvement in World War Two

The effects of the Wall Street Crash

The New York Stock Exchange collapsed on Black Thursday 24 October 1929 when 1.3 million shares were sold Prices continued to fall for three years until shares lost, on average, 80% of their value 100,000 companies went bust between 1929 and 1933 Banks failed because of bad debts; the Depression followed

Unemployment and its effects

12 million Americans were out of work in 1932 Investors lost their money; those who had bought shares on the margin (on credit) were also in debt to banks Weekly manufacturing wages fell from $28 to $22 by 1933 The unemployed would sit on street corners selling apples or set themselves up as shoeshine boys; others just begged

Struggling farmers
Farm incomes dropped by 60% from 1929 to 1933 The goods farmers needed to buy fell in price by only 15% Many farmers sold up and left A further problem was the dustbowl where over farming, drought and wind blew away fertile top soil

Struggling farmers
Many farm labourers drifted around as hoboes, riding he railroad in search of work By 1933 a million people were travelling around The homeless set up home in makeshift camps called Hoovervilles after the then President, Herbert Hoover

The attempts of Hoovers government to deal with the Depression

Hoover was elected in 1928 and assumed office in 1929 He, like many Americans, favoured a laissezfaire (leave business alone to sort itself out) approach to the crisis This had been the traditional response to cyclical economic trends It was job of charities, not government, to assist those in need, he said

The attempts of Hoovers government to deal with the Depression

He did offer $4 billion for major construction projects like the Hoover Dam The Smoot-Hawley Tariff of 1930 (tax of 40% on imports) was intended to discourage imports However, other countries retaliated which affected the US export market Farmers were then left with huge surpluses

The attempts of Hoovers government to deal with the Depression

In 1932 Hoover was forced to approve the Emergency Relief Act which provided $300 million to states to help the unemployed In 1932 Hoover set up the Reconstruction Finance Corporation (RFC) which provided loans of $1.5 billion to businesses to help them recover

The unpopularity of Hoover and the election of Roosevelt

Hoover was unfairly blamed for the Depression because he didnt intervene on a large scale He followed policies such as laissez-faire (leave business alone) and rugged individualism (stand on your own two feet) However, he did expand government lending and he did encourage public work schemes

The unpopularity of Hoover and the election of Roosevelt

He said: Economic depression cannot be cured by government action. Economic wounds must be healed by the producers and consumers themselves Only later in the 1930s did economists like Keynes argue that direct government action was necessary Hoovers reaction to the demands of the Bonus Army were, however, a serious miscalculation

The unpopularity of Hoover and the election of Roosevelt

WW1 veterans asked for their war bonus early; it was not due until 1945 In June 1932 20,000 camped outside Washington The House of Representatives (like our House of Commons) voted in favour; the Senate (like our House of Lords) overruled it because of cost

The unpopularity of Hoover and the election of Roosevelt

Hoover offered $100,000 for the Bonus Armys travel home Hoover used troops under General Douglas MacArthur to clear the camps using tanks and tear gas Two babies died from the effects of gas Hoover was blamed

Roosevelt
As Governor (like being President on an individual state) of New York from 1928-32 FDR had intervened in the economy For example, he increased state tax to provide $20 million of emergency relief in the winter of 1931-2 FDR use the radio effectively and appealed to the forgotten man; in the 1932 election he won in 42 out of 48 states

How did Roosevelt deal with the Depression?

Roosevelts fireside chats The New Deal Banking Agriculture Industry Public Works Social Security

Roosevelts fireside chats

The first was March 1933; his voice was reassuring and he helped people to believe that everything was going to be alright FDR invited ordinary people to write to him with their problems; a staff of 50 was needed to handle the mail

Banking
Within his first 100 days in office FDR began a range of programmes to bring about relief, recovery and reform Many banks had failed because businesses and individuals were unable to pay their loans FDR closed every bank for 4 days to give time for new laws to be passed The Emergency Banking Act allowed only financially sound banks to reopen; the GlassSteagall Act separated investment from commercial banking

Farming: the Agricultural Adjustment Act, May 1933

FDR aimed to end overproduction in farming; this would be achieved by farming less and finding jobs for displaced workers Destroying food when millions of Americans were short of it, however, was controversial Between 1932 and 1935 total farm income rose from $4.5 to $6.9 billion As an emergency measure the AAA worked

Relief: the Federal Emergency Relief Administration, May 1933

FERA offered $500 million to those in dire need; it was headed by Harry Hopkins However, there were delays distributing relief, while southern racist states denied African American any help at all That said, FERA did establish the idea of the Federal (national) government giving funds directly for relief

Relief: the Civil Works Administration, November 1933

The CWA was set up to provide emergency relief during the winter of 1933-4 It provided work on public projects such as sewers, schools, playgrounds and airports

Relief: the Civilian Conservation Corps, March 1933

Unemployed men from 17-24 were recruited to work in national forests and parks 3 million were involved for 6 months at a time Workers lived in camps and received a small wage most of which was sent home to family 1.3 billion trees were planted and 65,000 miles of telephone lines were laid to remote areas

Welfare: the National Recovery Administration, June 1933

The NRA set out to improve working conditions in industry and outlawed child labour It set out fair wages and enabled employees to join a Trade Union (an organisation which protects workers from their bosses) Each industry was encouraged to adopt a code of practice; 557 were set up though the Supreme Court declared NRA unconstitutional

Recovery: the Public Works Administration, June 1933

PWA was intended to kick start the economy (known as priming the pump) $3.3 billion was spent on roads, dams, hospitals and schools to stimulate the economy Harold Ickes was in charge PWA was responsible for 50,000 miles of road and 13,000 schools

Recovery: the Works Progress Administration, 1935

WPA was created as part of a second wave of alphabet agencies and became a major employer People were employed for one year on jobs that private companies didnt want 1,000 airport landing fields 8,000 schools 12,000 playgrounds

Recovery: the Tennessee Valley Authority, May 1933

Recovery: the Tennessee Valley Authority, May 1933

The Tennessee river ran through 7 of the poorest states in the USA The aim was to construct 20 dams to control occasional floods and address the problems of the dustbowl In addition hydroelectric power was harnessed It also increased tourism

Relief: the Home Owners Loan Corporation, 1933

HOLC gave new loans to home buyers Mortgage rates were low to prevent home buyers losing their homes 300,000 loans were given out

Relief: the Social Security Act, 1935

Old-age pensions for over-65s and unemployment benefit It was self-financing: paid for by employees and employers Pensions were based on previous contributions and started in 1940 Unemployment benefit was a maximum of $18 a week for 16 weeks

How far was the New Deal successful in ending the Depression in the USA?
The effectiveness and the limitations of the New Deal Criticisms and opposition to the New Deal Supreme Court opposition The impact of the Second World War on American economic recovery

The effectiveness and the limitations of the New Deal

Between 1933 and 1935 unemployment fell and the economy started to recover However, criticism came both from those who thought FDR had gone too far, and those who thought FDR had not gone far enough A Second New Deal in 1935 attempted to maintain the momentum of the First New Deal from 1933

The effectiveness and the limitations of the New Deal

However, in 1937, with unemployment at 6 million, FDR became concerned at the extent of government spending and debt, and cut back on some of the New Deal programmes The result was the Roosevelt recession; the country plunged back into depression By the winter of 1937-8 there were over 10 million unemployed; government spending was therefore increased again

The effectiveness and the limitations of the New Deal

In 1939 business was still 25% less than it had been in 1929 and unemployment still stood at 10 million On the eve of war the New Deal had stalled

Criticisms and opposition to the New Deal: not enough

Southern states did not benefit; blacks in particular Southern critics included Senator Huey Long of Louisiana who said FDR favoured big business over ordinary people Long wanted all Americans with over $3 million to have their wealth confiscated and redistributed amongst the poor

Criticisms and opposition to the New Deal: not enough

Father Charles Coughlin had an influential radio show which regularly attracted an audience of 30-40 million He too argued that not enough was being done to help the very poorest in US society

Criticisms and opposition to the New Deal: too far

Republicans (right-wing) criticised FDR (Democrat, left-wing) because of the extent of government intervention in the economy FDR, they said, was behaving like a dictator High taxes, they said, encouraged people not to work hard, handouts encouraged people to be lazy

A popular joke in the 1930s

Socialism: If you own two cows you give one to your neighbour Communism: You give both cows to the government and the government gives you back some of the milk Fascism: You keep the cows but give the milk to the government, which sells some of it back to you New Dealism: You shoot both cows and milk the government

Criticisms and opposition to the New Deal: the Supreme Court

The Supreme Court ruled that New Deal agencies such as the NRA were unconstitutional We are of the opinion that an attempt to fix the hours and wages of workers was not a lawful use of government power FDR planned to pack the Court with his own supporters and increase its size from 9 to 15; his plans came to nothing

Opposition to the NRA

The impact of the Second World War on American economic recovery

In 1939, with the outbreak of war in Europe, FDR increased spending on defence In 1940 FDR gave Britain 50 destroyers (naval vessels) in return for the use of British military bases In March 1941 Congress (American parliament) agreed the Lend-Lease Programme which allowed Britain to obtain materials from USA without cash payment

The impact of the Second World War on American economic recovery

In December 1941 the Japanese attacked Pearl Harbour bringing USA into WW2 Between 1939 and 1941 the US economy began to recover because of the stimulus of war materials being ordered The New Deals contribution to the recovery is hotly debated, though the New Deal certainly restored Americans confidence in their own country