SEM 4 (History)

*HOOVER
5(A)(B)

*GREAT
DEPRESSION - RIDDHI JOSHI
VISITING FACULTY (HISTORY)
 The Appearance of Prosperity
Strong Economy
• Between 1922 and 1928 the U.S.
gross national product, or
total value of all goods and
services, rose 40 percent.
• Though farmers and some other
workers didn’t benefit, the overall
economy performed well,
especially for automakers and
those who made auto parts.
• Overall unemployment remained
low, averaging around five
percent between 1923 and 1929.
• Union membership slowed as
employers expanded welfare
capitalism programs, or
employee benefits.
• This feeling of prosperity
encouraged workers to buy new
products and enjoy leisure
activities such as movies.
Strong Stock Market
• The stock market, where people
buy stocks, or shares, in
companies, performed very well
in the 1920s, with stock values
sharply increasing each month.
• The value of stocks traded
quadrupled over nine years.
• The steep rise in stock prices
made people think the market
would never drop, and more
ordinary Americans bought
stocks than ever before.
• The number of shares traded
rose from 318 million in 1920 to
over 1 billion in 1929.
• Business leaders said everyone
could get rich from stocks.
 HOOVER WINS
1928 ELECTION
• Republican Herbert Hoover ran
against Democrat Alfred E.
Smith in the 1928 election
• Hoover emphasized years of
prosperity under Republican
administrations
• Hoover won an overwhelming
victory
Young Hoover supporter in 1928
 The Election of 1928
•When Coolidge didn’t run for reelection in 1928, the Republicans
easily chose Herbert Hoover.
•Hoover had been on Harding and Coolidge’s cabinets, had
overseen America’s food production during World War I, and had
an outstanding reputation as a business-like administrator.
•Hoover’s opponent was New York governor Al Smith, an outgoing
politician with a strong Brooklyn accent, whose support came
mostly from cities.
•Smith was the first Catholic to run for president. He faced
prejudice because of his religion, and because of his opposition
to Prohibition.
•Hoover easily won the election, but the race clearly
demonstrated the conflicts dividing the nation in that era.
 Twenties Prosperity
• During the 1920s, many Americans believed that the U.S. was a
place of unlimited growth, opportunity, and achievement.
• Americans were earning more money than ever – national income
rose from $61 billion to $87 billion
• Many economic analysts and business executives felt that the
stock market was the key to prosperity and urged American
citizens to invest as much as possible
• Consumerism: spending more money than they were saving
 Depression foreshadowed
• By late 1929, cracks were beginning to show in the U.S.
economy…unemployment was on the rise, farmers were losing
their land, and stock prices were dropping.
• Five key factors:
1. Unchecked stock speculation
2. Weak and unregulated banking institutions
3. Overproduction of goods
4. The decline of the farming industry
5. Unequal distribution of wealth
 Speculation and
“Buying on Margin”
• The practice of speculation-in which a person or organization
makes a risky investment in the hope of making a quick, large
profit-was widespread in the 1920s.
– Many investors speculated on real estate
• Purchasing stock on margin: paying a fraction of its worth with a
promise to pay the rest once the stock was sold…aka borrowing
money to purchase stocks
– People overextended themselves to buy cars, homes, and
stocks
• This works if the stock price goes up, but is disastrous if the stock
price falls
-Many speculators of the 1920s borrowed 90% of the stock’s value

(If a stock cost $100, you would borrow $90. If the stock price began to
fall, you would then have to pay back the money you borrowed-which
many speculators didn’t have!)
 2. Stock Market Crash/
Banking Industry Collapse
• Analysts’ warnings that the bull market (a market in which
prices are constantly rising) could not continue indefinitely
made some investors nervous.
• Oct 28, 1929, investors rushed the stock exchange and sold
their stocks at a loss of over $4 billion. On Oct 29, known as
“Black Tuesday” orders to sell at any price swamped over the
stock market.
 STOCK PRICES RISE
THROUGH THE 1920s
• Through most of the
1920s, stock prices
rose steadily
• The Dow reached a
high in 1929 of 381
points (300 points
higher than 1924)
• By 1929, 4 million
Americans owned
stocks New York Stock Exchange
 SEEDS OF TROUBLE

• By the late 1920s,

problems with the
economy emerged
• Speculation: Too many
Americans were engaged
in speculation – buying
stocks & bonds hoping for
a quick profit
• Margin: Americans were
buying “on margin” –
paying a small percentage
of a stock’s price as a
down payment and
borrowing the rest

The Stock Market’s bubble was about to break

 THE 1929 CRASH

• In September the Stock Market

had some unusual up & down
movements
• On October 24, the market took
a plunge . . .the worst was yet to
come
• On October 29, now known as
Black Tuesday, the bottom fell
out
• 16.4 million shares were sold
that day – prices plummeted
• People who had bought on
margin (credit) were stuck with
huge debts
By mid-November, investors
had lost about $30 billion
 THE GREAT DEPRESSION
• The Stock Market crash
signaled the beginning of
the Great Depression
• The Great Depression is
generally defined as the
period from 1929 – 1940
in which the economy
plummeted and
unemployment
skyrocketed
• The crash alone did not
cause the Great
Alabama family, 1938 Photo by Walter Evans Depression, but it
hastened its arrival
 Unregulated Banking Institutions
• The stock market crash triggered a collapse of the
U.S. banking industry, which had grown
increasingly unable over the course of the 1920s.
This instability was due in part to banks’ over-
extension of credit to stock investors and brokers.
• Bank reserves depleted quickly and as the
Depression deepened, many banks had no assets,
no cash reserves, and no new money coming in.
• Hundreds of banks immediately closed their
doors after the market crashed, and by 1932 one
fourth of the nation’s banks had closed—almost
6,000 banks
 3. Overproduction
• Before 1929, American industrial production seemed
to parallel the course of the stock market: it kept going
up.
– Consumer demand for goods was very high after WWI.
– Newly invented machines allowed U.S. factories to
produce more goods in less time.
– American industrialists believed in unrestricted capitalism
and unrestricted growth (facilities expanded, increased
production, flooded the market with goods)
• By 1929, many companies had more plants than they
actually needed, and the market was saturated with
goods that few Americans could afford to buy
 4. Underconsumption
(Toll on Farming Industry)
• During the 1920s, farmers borrowed heavily
from banks to pay for new, technologically
advanced equipment.
– As farmers failed to sell their surplus crops, they
became unable to repay their bank loans,
including their mortgages.
– As a result, many farmers defaulted on their loans
and some lost their farms due to bank
foreclosures
• Farmers situations grew worse….Dust Bowl
 5. Unequal Distribution of Wealth
• While statistics showed that Americans were
more prosperous than ever during the 1920s,
most of the country’s wealth remained in the
hands of a few people at the top of the economic
pyramid.
• As the decade went on, the gap grew wider and
the distribution of wealth grew increasingly
unequal – the prosperity & wealth of the 1920s
was not experienced by all.
• 1929, the Federal Trade Commission reported
that 1% of the American population possessed
over 59% of the country’s wealth
OTHER CAUSES OF THE
GREAT DEPRESSION
• Tariffs & war debt
policies
• U.S. demand low,
despite factories
producing more
• Farm sector
crisis
• Easy credit
• Unequal
distribution of
income
 FINANCIAL COLLAPSE
• After the crash, many
Americans panicked and
withdrew their money
from banks
• Banks had invested in
the Stock Market and lost
money
• In 1929- 600 banks fail
• By 1933 – 11,000 of the
25,000 banks nationwide
had collapsed
 GNP DROPS,
UNEMPLOYMENT SOARS
• Between 1928-1932, the
U.S. Gross National
Product (GNP) – the total
output of a nation’s goods
& services – fell nearly
50% from $104 billion to
$59 billion
• 90,000 businesses went
bankrupt
• Unemployment leaped
from 3% in 1929 to 25% in
1933
• The U.S. was not the only HAWLEY-
country gripped by the
Great Depression SMOOT TARIFF
• Much of Europe suffered
throughout the 1920s
• In 1930, Congress passed
the toughest tariff in U.S.
history called the Hawley-
Smoot Tariff
• It was meant to protect
U.S. industry yet had the
opposite effect
• Other countries enacted
their own tariffs and soon
world trade fell 40%
 THE COURSE
• After the stock market crash, economic flaws helped the nation
sink into the Great Depression, the worst economic downturn
in history.
• The stock market collapse strained the resources of banks and
many failed, thus creating greater anxiety.
• In 1929 banks had little cash on hand and were vulnerable to
“runs,” or a string of nervous depositors withdrawing money.
• A run could quickly drain a bank of all its cash and force its
closure.
• In the months after October 1929, bank runs struck nationwide
and hundreds of banks failed, including the enormous Bank of
the United States.
• Bank closures wiped out billions in savings by 1933.
 Farm Failures
• The hard times farmers faced got worse during the Great Depression,
when widespread joblessness and poverty cut down on the demand for
food as many Americans simply went hungry.
• By 1933, with farmers unable to sell food they produced, farm prices had
sunk to 50 percent of their already low 1929 levels.
• Lower prices meant lower income for farmers, and many borrowed
money from banks to pay for land and equipment.
• As incomes dropped, farmers couldn’t pay back their loans, and in the
first five years of the 1930s, hundreds of thousands of farms went
bankrupt or suffered foreclosure.
 Unemployment
• The year following the crash of October 1929 saw a sharp drop in
economic activity and a steep rise in unemployment.
• Such negative trends are not uncommon in times of economic downturn,
but the extent and duration of these trends made the Great Depression
different.
• By 1933 the gross national product dropped over 40 percent from its pre-
crash levels.
• Unemployment reached a staggering 25 percent, and among some groups
the numbers were even higher:
– In the African American neighborhood of Harlem, for example,
unemployment reached 50 percent in 1932.
 PROBLEMS DURING
DEPRESSION
• The Great Depression
brought hardship,
homelessness, and
hunger to millions
• Across the country,
people lost their jobs,
and their homes
• Some built makeshifts
shacks out of scrap
material
• Before long whole
shantytowns (sometimes
called Hoovervilles in
mock reference to the
president) sprung up
 Hoboes
•Hoboes were mostly men, but included teens and
women.
•Boarding trains was hard and illegal, and railroads
hired guards to chase hoboes away.
•Finding food was a constant challenge, because
people had little to spare and rarely shared with
hoboes.
•Hoboes developed a system of sign language to
warn of possible dangers or opportunities.
 THE DUST BOWL
• A severe drought gripped
the Great Plains in the
early 1930s
• Wind scattered the
topsoil, exposing sand
and grit
• The resulting dust
traveled hundreds of
miles
• One storm in 1934 picked
up millions of tons of
dust from the Plains an
carried it to the East
Coast Kansas Farmer, 1933
Dust storm approaching Stratford, Texas - 1934
Dust buried cars and wagons in South Dakota
in 1936
Storm approaching Elkhart,
Kansas in 1937
HARDEST HIT
REGIONS

Boy covers his mouth to avoid Photographer Dorothea Lange captures a family
dust, 1935 headed west to escape the dust storms
 Devastation in the Dust Bowl

• Nature delivered another cruel blow. In 1931 rain stopped falling across
much of the Great Plains region.
• This drought, or period of below average rainfall, lasted for several
years, and millions of people had fled the area by the time it lifted.
• Agricultural practices in the 1930s left the area vulnerable to droughts.
• Land once covered with protective grasses was now bare, with no
vegetation to hold the soil in place.
• When wind storms came, they stripped the rich topsoil and blew it
hundreds of miles. The dust sometimes flew as far as the Atlantic Coast.
• Dust mounds choked crops and buried farm equipment, and dust blew
into windows and under doors.
• The storms came year after year, and the hardest hit areas of Oklahoma,
Kansas, Colorado, New Mexico, and Texas eventually became known as
the Dust Bowl.
 The Emotional Impact of the Depression

• The Great Depression’s worst blow might have been

to the minds and spirits of the American people.
• Though many shared the same fate, the
unemployed often felt that they failed as people.
• Accepting handouts deeply troubled many proud
Americans. Their shame and despair was reflected
in the high suicide rates of the time.
• Anger was another common emotion, because many
felt the nation had failed the hardworking citizens
who had helped build it.
 HOOVER
STRUGGLED WITH
THE DEPRESSION
• After the stock market
crash, President
Hoover tried to
reassure Americans
• He said, “Any lack of
confidence in the
economic future . . . Is
foolish”
• He recommended
business as usual
HOOVER TAKES ACTION:
TOO LITTLE TOO LATE
• Hoover gradually softened his
position on government
intervention in the economy
• He created the Federal Farm
Board to help farmers
• He also created the National
Credit Organization that
helped smaller banks
• His Federal Home Loan Bank
Act and Reconstruction
Finance Corp were two
measures enacted to protect
people’s homes and
businesses
 BONUS
ARMY
• A 1932 incident further
damaged Hoover’s image
• That spring about 15,000
World War I vets arrived
in Washington to support
a proposed bill
• The Patman Bill would
have authorized Congress
to pay a bonus to WWI
vets immediately
• The bonus was scheduled
to be paid in 1945 --- The
Army vets wanted it NOW
 BONUS ARMY
TURNED DOWN
• Hoover called
the Bonus
marchers,
“Communists
and criminals”
• On June 17,
1932 the Senate
voted down the
Putnam Bill
 BONUS MARCHERS CLASH
WITH SOLDIERS
• Hoover told the Bonus
marchers to go home–
most did
• 2,000 refused to leave
• Hoover sent a force of
1,000 soldiers under
the command of
General Douglas
MacArthur and his aide
Dwight Eisenhower
 AMERICANS SHOCKED AT
TREATMENT OF WWI VETS

• MacArthur’s 12th infantry gassed more than 1,000 marchers, including

an 11-month old baby who died
• Two vets were shot and many were injured
• Americans were outraged and once again, Hoover’s image suffered
Hoover had little chance to be re-elected in 1932
 Hoover’s Response
• President Herbert Hoover's response to the economic
crisis was tardy.
• A believer in minimal government intervention, he
considered direct public relief character-weakening.
• He did eventually start spending and launched lending and
public works projects.
• Still, according to many economists, it was too little, too
late.
 Further Complications
• Congress obliged with the United States Tariff Act of
1930, aka the Smoot-Hawley bill, which raised tariffs on
foreign products by about 20%.
• Multiple countries retaliated with their own tariffs on US
goods. The inevitable result was a trade melt-down. In the
next two years, US imports fell 40%.
• No markets abroad. No demand at home. Small wonder
that economic activity ground to a standstill.
 Worsened Life of the People
• At the peak of the Depression, 25% of workers(one out of four ) were
unemployed. Thus, many families could not pay the mortgage or buy food and
clothes for the family.
• Families unable to pay the mortgage lost their homes and farms. As a result,
about 250,000 young people were homeless in the early years of the
Depression. Many became nomads, traveling the highways and railways.
• 20% of America's children were hungry and without proper clothing.
• In some coal mining regions, the percentage of malnourished children reached
as high as 90%.
• Children went without shoes and warm clothes for the winter.
• Thousands of schools had to close down because they lacked the money to stay
open.
• About 3 million children between the ages of 7 and 17 had to leave school,
many to go to work.
 Effects on the American Economy
• In the United States, where the Depression was generally worst.
• Industrial production between 1929 and 1933 fell by nearly 47 percent
• Gross Domestic Product (GDP) declined by 30 percent
• Unemployment reached more than 20 percent.
• Because of banking panics, 20 percent of banks in existence in 1930 had failed
by 1933.
• It caused steep declines in output, severe unemployment, and acute
deflation and led to extreme human suffering and profound changes in
economic policy.
• The Depression touched nearly every country of the world after first
arising in the United States, where its social and cultural effects were
especially profound.
 Impact on the World Economy
• Development of Keynesian economics
• End of the international gold standard by the late 1930s
• Expanded influence of labour unions and organized labour through legislation
such as the Wagner Act in the U.S.
• Implementation of the New Deal in the U.S. and welfare-state policies
internationally
• Increased government oversight of financial markets by the U.S. Securities
and Exchange Commission and other new regulatory agencies
• Precipitous decline in standards of living around the world
• Up to 25% unemployment in industrialized countries in the early 1930s
 Impact on the World Economy
• Economic crisis spread from the United States to the rest of the world as
international trade declined.
• Abrupt decline in standards of living occurred around the world.
• As demand for goods and services fell, many companies were forced to shut
down, increasing unemployment. Unemployment rates as high as 25 percent in
industrialized countries were reached in the early 1930s.
• In the United States industrial production dropped by nearly 47 percent, the
gross domestic product (GDP) decreased by 30 percent, and unemployment
climbed past 20 percent.
• By 1933, 20 percent of banks failed because of the banking panics.
 Impact on the World Economy
• Recovery from the Great Depression by the late 1930s was greatly helped by
the abandonment of the gold standard.
• Expansion of the welfare state as well as labour unions and organized labor
occurred in the United States and elsewhere.
• Franklin D. Roosevelt’s New Deal in the United States was implemented to
provide economic relief and reforms, increasing the federal government’s role.
• The U.S. Securities and Exchange Commission (SEC) and other regulatory
agencies were established for increased government oversight of financial
markets.
 The Election of 1932

• The depression’s worst year, 1932,

was a presidential election year
• Republicans re-nominated Herbert
Hoover
• Democrats nominated NY Governor
Franklin D. Roosevelt for president
Franklin Deleano Roosevelt
 Early Political Career
• 1910- New York State Senate
– Reelected for second term in 1912
– Resigns March 17, 1913
Became ill with polio in 1921 – forced him to
use a wheelchair
• Appointed Assistant Secretary of the Navy
– By Woodrow Wilson (1913)
– Developed longtime affection for the navy
• Ran for Vice President in 1920
– Lost and retired to a New York law practice
Governor of New York

• 1928-1932
• Reform governor-
– New social programs
• Created relief programs
– Gathered advisors
1932 Presidential Election

• America was in the midst of the Great

Depression
– Unemployment raises to 25% (1 out of 4)
• “I pledge you, I pledge myself, to a
New Deal for the American people”
– Creates “New Deal” concept of getting
America out of depression through social
programs
 Election of 1932
• The only real issue was the depression, and
which candidate—Hoover or Roosevelt—
could do a better job of ending the hard
times
• Almost 60% of them concluded that it was
time for a change
 Presidential Election Electoral Map (1932)

Democratic Party- FDR 472

electoral votes (88.9%)
Republican party- Herbert
Hoover 59 electoral votes
(11.1%)
 Election of 1932
• New President—Franklin D
Roosevelt
• Congress—both houses
Democratic majorities
• Defeated Hoover in the election of
1932 and became the 32nd
President of USA
• Cousin of Teddy Roosevelt
• 1st Pres. to use the radio regularly
– “Fireside Chats” – explained his
plans and programs to the people
Instilled a New Hope

“The country needs…bold,

persistent experimentation.
It is common sense to take a
method and try it. If it fails,
admit it frankly and try
another. But above all try
something.”
~Franklin Roosevelt, 1932
• “This is a day of national consecration. And I am certain that on this day my fellow Americans expect
that on my induction into the Presidency I will address them with a candor and a decision which the
present situation of our people impels. This is preeminently the time to speak the truth, the whole truth,
frankly and boldly. This great Nation will endure as it has endured, will revive and will prosper. So,
first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless,
unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every
dark hour of our national life a leadership of frankness and vigor has met with that understanding and
support of the people themselves which is essential to victory. And I am convinced that you will again
give that support to leadership in these critical days.”
• Addressed all the problems “… Only a foolish optimist can deny the dark realities of the moment.”
• “Yet our distress comes from no failure of substance. We are stricken by no plague of locusts.
Compared with the perils which our forefathers conquered because they believed and were not afraid,
we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied
it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply.”
• “...in the event that Congress shall fail to take these courses and in the event that the national emergency
is still critical I shall not evade the clear course or duty that will then confront me. I shall ask the
Congress for the one remaining instrument to meet the crisis—broad executive power to wage a war
against the emergency, as great as the power that would be given to me if we were in fact to be invaded
by a foreign foe.”
~FDR, 1933 Inauguration
 End of the Great Depression
• Abandonment of the gold standard and currency devaluation enabled some
countries to increase their money supplies, which spurred spending, lending,
and investment.
• Fiscal expansion in the form of increased government spending on jobs and
other social welfare programs, notably the New Deal in the United States,
arguably stimulated production by increasing aggregate demand.
• In the United States, greatly increased military spending in the years before the
country’s entry into World War II helped to reduce unemployment to below its
pre-Depression level by 1942, again increasing aggregate demand.
• In most affected countries, the Great Depression was technically over by 1933,
meaning that by then their economies had started to recover.
• Most did not experience full recovery until the late 1930s or early 1940s.
• The United States is generally thought to have fully recovered from the Great
Depression by about 1941.