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Explore the causes of the Great Depression, Hoover's failed strategies, FDR's successful approach, and the implementation and impact of the New Deal during this tumultuous economic period in American history.
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Agricultural overproduction Industrial overproduction Unequal distribution of wealth Over-extension of credit The Great Crash War debts, reparations, and tariffs Causes of the Great Depression
How Herbert Hoover Dealt with the Crisis • At first, he played the game of confidence economics. • He just continued saying: “Prosperity is just around the corner.”
Voluntary Measures • Hoover eventually established two privately-funded organizations: • The National Credit Association provided $1/2 billion to businesses for emergency loans, but it was too under-funded to do much good. • The Organization for Unemployment Relief was a clearing house for relief agencies. However, state and local governments were already in too much debt to benefit from it.
Limited Government Intervention • In the end, Hoover resorted to government intervention: • The Reconstruction Finance Corp gave $1-1/2 billion in federal loans to banks, insurance companies, and industry to prevent bankruptcies, but it was too little, too late. • The Home Loan Bank Act provided federal loans to homeowners to prevent foreclosures, but got bogged down in red tape.
Why was Hoover ineffective? • Hooverthought business should be self-regulating. • He had a mania for a balanced budget. • He believed in self-reliance over all else. Direct aid would weaken that for the American people. • He lacked political skills.
Why F.D.R.? • In 1932 presidential election, FDR was perceived as a man of action. • Hoover was viewed as a “do-nothing president.” • F.D.R. had a successful track record combating the Depression as gov. of N.Y. • Results: a landslide for Democrats and a mandate to use government as an agency for human welfare.
A New Deal? • At the Chicago Democratic Party convention in 1932, F.D.R. pledges a “new deal for the American people.” • What did he mean by that statement?
Situation When FDR Entered Office • In March 1933, the country was virtually leaderless and the banking system had collapsed.
FDR Restored Confidence • In his inaugural address, he said “The only thing we have to fear is fear itself….” • He promised vigorous leadership and bold action, called for discipline and cooperation, expressed his faith in democracy, and asked for divine protection and guidance.
FDR’s Personal Qualities • He was a practical politician who practiced the art of the possible. • He was a charismatic person who exhibited a warmth and understanding of people. • He knewhow to handle press by focusing attention on Washington. • He provided leadership in a time of crisis. • He was willing to experiment
Goals of the New Deal • Relief: to provide jobs for the unemployed and get the needy food, clothing, and shelter. • Recovery: to get the economy back into high gear, “priming the pump” to stimulate consumption. • Reform: To regulate banks, business, and agriculture so this never happened again. • Overall objective: to save capitalism from itself
Sources of New Deal Ideas • Brain Trust: specialists and experts, mostly college professors, idea men • New Economists: government spending, deficit spending and public works, government should prime economic pump • Built off the ideas of British economist John Maynard Keynes
Bank Holiday - First Step • Closed banks for four days to reorganize. • Those that were healthy could remain open. Those that weren’t had to close • President explained plan in a “fireside chat” . Explains FDIC will be there to protect their deposits. • Confidence is restored.
Glass-Steagall Act • Made it illegal for savings banks to invest in stock market, or lend money to people to invest in stock market • Created to Federal Deposit Insurance Corporation (FDIC) to protect peoples money in banks. • FDIC guarantees if a bank closes you’ll get a portion of you money back. • Today the FDIC insures deposits up to $250,000 per account. Paid thru taxes.
First New Deal: 1933-1934(The First 100 Days) • Objectives: higher prices for agriculture and business, help the needy • Beneficiaries: big business, agricultural, and ordinary people
National Recovery Administration (NRA) • Purpose: recovery of industry • Created a partnership of business, labor, and government to attack the depression • Any business could become a member • Put in place price controls, minimum wages, and codes of fair competition • Ruled unconstitutional by the Supreme Court
The Dust Bowl The 100th Meridian
What caused the Dust Bowl disaster? • Over-plowing/over- cultivation by farmers (high demand during WWI) • Severe drought (no rain) • High winds • All these conditions destroyed the grasses that held the soil in place • These storms were called “Black Blizzards” • Parts of the Great Plains became known as the Dust Bowl
Who did the drought hit the hardest? • Migrant workers • Poor farmers from Oklahoma and Arkansas headed west to escape the Dust Bowl • Many moved to the west coast to find jobs on farms • They were not welcomed by locals • Locals feared that the migrants would take local jobs • Migrant workers lived in poor conditions (tents, no water or electricity)
First Agricultural Adjustment Act (AAA) • Purpose: the reform and recovery of agriculture • Paid farmers who agreed to reduce production of basic crops such as cotton, wheat, tobacco, hogs, and corn • Money came from income and business taxes. • DECLARED UNCONSTITITIONAL BY THE SUPREME COURT!
