Chapter 24

1. Chapter 24 The Great Depression and the New Deal, 1929-1939

2. Black Thursday and the Onset of the Depression • From 1925-1929: Market value goes from $27 billion to $87 billion • Speculators lending up to 75% on “margin” • Income-tax cuts increased the amount of money that could be speculated • Federal Reserve tried to curb this by raising interest rates- didn’t work • Speculators were willing to pay 20% to by more stock

3. Oct. 24, 1929- Black Thursday • Oct. 29, 1929- 16 million stocks changed hands • Hoover says the economy is “sound and prosperous” • By Nov. the value of stocks is at $30 billion

4. Causes • Ag. Sector remained depressed • Industrial sectors increased productivity did not generate equivalent wages • Reduced consumer spending power • 40% of the lowest received only about 12% of national income • Overproduction • Important industrial sectors (rail, steel, textiles, and mining) lagged technologically and could not attract investments • Feds tight money policies • Global issues:

5. Impact • GDP drops from $104 b. to $59 b. • Farm prices fall by 60% • By 1933 5,500 banks close • Unemployment stood at 25% (13 million workers)

6. Hoover’s Response • Early effort based on localism and private initiative • He advised municipal govts to create public works projects • Set up Emergency Committee for Employment to set up voluntary relief efforts • Persuaded larger banks to set up National Credit Corporation to help smaller banks make loans

7. Unsuccessful programs led to the Republicans losing the midterms (lose the House and 8 seats in the Senate) • He calls for a tax increase and the biggies announce wage cuts • 1932 – sets up the Reconstruction Finance Corporation (RFC) • Loans to major economic institutions and then grants to state and local govts for job creating public works • Some ideas never make it • Moratorium on war reparations and war debt payments

8. Mounting Discontent and Protest • Hoovervilles, Hoover Blankets, Hoover Valley • Suicide rates climb nearly 30% • Farm foreclosures • 1931- midwestern farmers organize the Farmers’ Holiday Association • Dairy Farmers dump milk • 1932- Bonus March • 10,000 vets descend on Washington to demand immediate payment of veterans bonuses • Congress refuses and 2,000 camp out • U.S. Army (1,000) commanded by MacArthur drive them out • American fiction- The 42nd Parallel; Young Lonigan

9. The Election of 1932 • Democrats • appeal to urban voters • call for an end to Prohibition • Appeal to farmers with support for aid programs • And to fiscal conservatives with demands for a balanced budget and cuts to federal spending • FDR from New York • Democrats have a clean sweep

10. The New Deal Takes Shape • Industrial recovery • Through business-govt cooperation and pump-priming • Agricultural recovery • Through crop reduction • Short-term emergency relief • Funneled through state and local agencies

11. Roosevelt and His Circle • “The only thing we have to fear is fear itself.” • His circle of advisors rejected laissez-faire ideas • Key people • Eleanor • Sec. of Labor Frances Perkins • Interior Sec. Harold Ickes • Treasury Sec. Henry Morgenthau • Secretary of Agriculture Henry Wallace

12. The Hundred Days • 1st- tackle the banking crisis • Bank holiday- four days • Emergency Banking Act • Healthy banks can reopen; procedures were put in place to manage failed banks; increased govt oversight; and banks had to separate savings deposits from investment funds • Federal Deposit Insurance Corporation • Insured deposits up to $5,000 • 2nd – relief • Home Owners Loan Corporation • City dwellers refinance mortgages • Farm Credit Administration • Provided loans to rural Americans • Civilian Conservation Corps • Employed jobless youth in reforestation, park maintenance, and erosion control • Federal Emergency Relief Act • $500 million to state and local relief agencies • Harry Hopkins heads this

14. Cutting production was the key to raising agricultural prices • Southern cotton farmers plowed under much of their crops; midwestern farmers slaughtered 6 million piglets and pregnant sows (PR nightmare) • Agricultural Adjustment Act (1933) • Farmers receive subsidies in return for cutting production (a tax on grain mills and other food processors – passed on to consumers) paid for this • The AAA is set up to monitor • National Industrial Recovery Act • Appropriates $3.3. billion for heavy-duty govt works projects • Sec. of Interior Harold Ickes heads this • It is run by the Public Works Administration (PWA)

15. The law also set up the National Recovery Administration • Brought businesses together to draft codes of “fair competition” • Set production limits • Prescribed wages and working conditions • Forbade price cutting and unfair competitive practices • Aim was to promote recovery by breaking the cycle of wage cuts, falling prices, and layoffs • Symbol of business-government collaboration • It banned child labor and affirmed workers’ right to organize unions and to bargain collectively

16. Reconstruction Finance Corporation • Spillover from the Hoover era • Let billions to banks, insurance companies and new business ventures (probusiness) • Federal Securities Act (regulatory) • Corporations must inform the Federal Trade Commission on all stock offerings and made executive liable for any misrepresentation • Set up the Securities and Exchange Commission • Tennessee Valley Authority

19. Failures and Controversies Plague the Early New Deal • NRA • Personality of Hugh Johnson • Corporate America chafed under the regulation • Code violations increased; small businesses complain; bogged down in trivial codes • Declared unconstitutional in 1935 • President did not have that regulatory power • It regulated commerce within states

20. AAA • 1933-37: farm income increased by 50% • But it didn’t help farm laborers or migrants • Crop reduction payments hurt southern tenants and sharecroppers when growers remove acreage (banking subsidy checks) • Then the Dust Bowl • Okies (3.5 million flee the Great Plains)

22. 1. What did the Federal Securities set up to regulate Wall Street? • 2. How much did the FDIC cover when it was established? • 3. Who was the head of the PWA?

27. Harry Hopkins convinced Roosevelt to support direct federal relief programs • Civil Works Administration (CWA) • More than a billion dollars on short-term work projects (late 1933-34 over winter) • It was abolished in spring • FDR did not want to create and underclass living on welfare payments

29. Federal agencies were competing for federal dollars • Ickes and the PWA competed with Hopkins and the CWA • Ickes was “honest” and checked every detail; Hopkins wanted to pay people to shovel dirt, rake leaves, and collect litter

30. 1934-1935: Challenges from Right and Left • In 1934 national income rose about 25% above 1933 levels • 2,000 strikes took place that year from many different occupations all over America (many Communist led) • Business leaders (joined by Al Smith) formed the anti-New Deal American Liberty League • However, FDR did remain popular

31. Socialists and Communists claimed he didn’t go far enough • Waiting for Lefty • Charles Coughlin • Detroit priest calls for the nationalization of banks • Frances Townsend • California physician called for all retired to receive $200 per month (required to spend it in 30 days); stimulates the economy and encourages retirement • Huey Long • Gov. and Senator from Louisiana whose Share the Wealth Program

32. Cap personal fortunes at $50 million each — equivalent to about $600 million today (later reduced to $5 - $8 million, or $60 - $96 million today) • Limit annual income to one million dollars each (about $12 million today) • Limit inheritances to five million dollars each (about $60 million today) • Guarantee every family an annual income of $2,000 (or one-third the national average) • Free college education and vocational training • Old-age pensions for all persons over 60 • Veterans benefits and healthcare • A 30 hour work week • A four week vacation for every worker • Greater regulation of commodity production to

33. The New Deal Changes Course, 1935-1936 • The veer left during the Second New Deal • FDR begins to criticize the wealthy and the business class • Six intitiaves • Expand public works • Assistance to the rural poor • Support for organized labor • Benefits for retired workers and other needy groups • Tougher business regulation • Heavier taxes on the well-to-do

34. Expanding Federal Relief • Emergency Relief Appropriation Act (1935) - $5 billion • Works Progress Administration (Hopkins in charge) • Assistance directly to individuals but providing work, not handouts • Lasted 8 yrs. – employed 8 million; pumped $11 billion into the economy; constructed/improved thousands of roads, bridges, schools, post offices, etc.

42. Federal Writers’ Project; Federal Music Project; Federal Theater Project; Federal Arts Project • Public Works Administration (Ickes) • $4 billion over its life span; 34,000 projects

48. Aiding Migrants, Supporting Unions, Regulating Business, Taxing the Wealthy • The Resettlement Administration (1935) – loans to help tenant farmers buy land or move • Rural Electrification Administration (1935) – low-interest loans to utility companies and farmers’ cooperatives to extend electricity to rural America • AAA declared unconstitutional • Soil Conservation Act paid farmers to plant grasses and legumes

50. NIRA is ruled unconstitutional (including the section protecting union members rights) • The Wagner Act (National Labor Relations Act) • Guaranteed collective-bargaining rights • Permitted closed shops • Outlawed blacklisting • Created the NLRB to supervise shop elections and labor-law violations