Unit 11: Boom and Bust

Goals of this Unit:

To recognize that a prosperous, pro-business, Republican dominated 1920s pursued conservative, pro-business policies at home and economic unilateralism abroad. To be able to explain how the great crash of 1929 led to a severe, prolonged depression that devastated the American economy and spirit, and resisted Hoovers limited efforts to correct it. To understand Roosevelts New Deal helped tackle the Great Depression with massive federal programs designed to bring about relief, recovery, and reform.

President Warren G. Harding

Likeable, friendly, popular Average intelligence, easily swayed & tricked
Builds strong administration around him too strong?

Very pro-business
Supported laissez-faire economics Fordney-McCumber Tariff passed raising import tax

Enjoyed a thriving post-war economy

Presidency Scandals
Hardings administration takes advantage of him: Col. Charles Forbes embezzled $200 million while in charge of Veterans Bureau
Convicted prison sentence: two years

Attorney General Harry Daugherty accused numerous times of selling pardons and illegal liquor permits
Never convicted despite heavy evidence

Teapot Dome Scandal - Sec. of Interior Albert Fall illegally places Teapot Dome (Wyoming) under his jurisdiction after oil is discovered in region
Took bribes for drilling rights Convicted prison sentence: one year

Stress of scandal becomes overwhelming on Hardings health

Collapses and dies in 1923

President Calvin Coolidge

Very serious, calm, boring and quiet
Silent Cal

More pro-business than Harding

The man who builds a factory builds a temple and the man who works there, worships there

Rides Americas thriving economy to reelection in 1924

American public happy with economy, isolationism Democratic party lacked direction & unity in such changing times

War Debt
Coolidge and Congress demanding loaned money to Europe from WWI be repaid Germany could not afford to pay Britain and France, who could not afford to pay America Dawes Plan created in 1924: 1 - America loans money to Germany 2 Germany makes reparation payments to France & Britain 3 France & Britain repay war loans to U.S. 4 Germany eventually repays America for Dawes loan
No interest charged

Dawes Plan
What does the Dawes plan accomplish?
Financially nothing, more a matter of principle: Coolidge: They borrowed the money didnt they? England & France angered see U.S. as greedy

Dawes Plan shows little progress after 5 years Young Plan (1929) restructures loan to Germany, includes interest Would not matter by end of 1929 why?

Election of 1928
Coolidge decides not to run for reelection Republicans nominate Sec. of Commerce Herbert Hoover why?
Economic prosperity made him popular choice Hoovers slogan: Rugged individualism
America needs to return to roots of tough, self-sufficient individuals

Dems nominate Alfred Smith

Campaigning over radio major factor in election:

Likeable and sociable NY Governor

Hoover sounded better than Smiths NY accent Smith portrayed as a drinking, Irish, Catholic, city-slicker significance?

Hoover wins by a landslide

Prohibition Dems supported mostly in South Smith not popular among Southerners

President Herbert Hoover

Benefitting from economic prosperity at first Pro-business and isolationist: Support of farmers lending money, buying surpluses Hawley-Smoot Tariff proposed raises import tax to almost 60%
Full-blown isolationism Europe furious
Dangerous lack of presence in European affairs

Slowed trade America selfsufficient enough in 1920s, but

Will worsen economic conditions during the Depression

Economic Depression Hits

Americas economic prosperity in 1920s largely built on credit and investment U.S. Stock Market was growing too large, too fast problem?
Not built on physical wealth or assets Built on borrowed money and entangled investments A trigger could cause a crash, a crash could cause a dangerous chain reaction
Leading to economic depression

Black Tuesday
October 29, 1929 the U.S. Stock Market Crashes
Rumors of economic trouble in England scares stockholders Panic-selling ensues, prices plummet
Stockholders lost $40 billion by January

Crash triggered, chain reaction starts:

Frightened public becomes overlycautious with their money Panicking public pulls all their money out of banks fearing banks would go bankrupt Businesses cant attract scared customers close down As businesses close, unemployment rises

Great Depression begins

The Great Depression

Underlying causes of the Great Depression:
Trend of mass-consumerism based on credit, not real money Over-speculation in stocks Over-production in factories and farms

Became international depression struggling European postwar economies suffered Caused affected countries to dive deeper into isolationism Coincidentally, droughts dried up regions of U.S. further hurting farmers

Hoovers Initial Response

Hoover blamed for depression unfair? Many Americans looking to Hoover for help Rugged individualism being stressed Hoover slow to take action
Saw this as part of a natural business cycle
Economy has ups and downs this was a natural downturn

Unsure if government intervention would even be helpful

Hoovers solution was to wait it out unpopular decision

Hoovers Slow Reaction

Soup kitchens and shelters on the rise Newly forming shanty-towns soon to be called Hoovervilles Bonus Expeditionary Force (BEF) formed by veterans to demand bonuses for participation in WWI
Camped out in DC, forcefully evicted by Gen. MacArthur and U.S. army in Battle of Anacostia Flats
Ugly incident hurts Hoovers image further

Hoover Takes Action

Urges Congress to jumpstart economy with over $2 billion in government spending
Reconstruction Finance Corporation (RFC) passed
Lends money to finance massive government projects
Hoover Dam massive project employs 20 thousand

Would eventually fund many of FDRs New Deal projects

Hoover goes on good-will tour of Latin America to repair their tarnished relations with America
New policies call for less dollar diplomacy and troops pulled out of Haiti and Nicaragua
Laid foundation for FDRs Good Neighbor Policy

Hoovers legacy: despite slow response and tarnished image, Hoover did help America battle the Great Depression
But effects of his efforts not felt until after his presidency

Trouble Brewing Overseas

1931 Japan invades Manchuria region of China
Violates all idealistic agreements forbidding imperialism made after WWI League of Nations respond with hollow threat of universal trade boycott against Japan not effective, why?
Depression forces need for some nations to trade with Japan

Failure of League of Nations to enforce its rules was a dangerous precedent why?
Displays the Leagues policy of appeasement Aggressive nations could take over weaker nations without penalty or interference First steps toward WWII taken

Election of 1932
Hoover runs for reelection
Argued he had helped the economic situation and the worst has passed

Dems nominate Franklin Delano Roosevelt or FDR

NY Governor with peoples touch
Always smiling, good speaker with a sense of caring for the common person

Eleanor Roosevelt very proactive in politics as well Confidence his catchphrase and Happy Days Are Here Again his campaign song

Hoover had no chance, FDR wins by a landslide

Hoover humiliated even loses in home state of CA

Election of 1932
Voting trends change: Black voters overwhelmingly switch from supporting Rep party to Dem party why?
Great Migration of the 1920s massive movement by blacks from rural South the urban North New, competitive industrial labor and racism led to inequality for black workers
Last hired, first fired

Reps had become big business-minded

Sided with business owners

Dems more progressive

President Franklin Delano Roosevelt

Takes office at worst point of Great Depression
Unemployment (25%) and bankruptcies at all-time high Only thing we have to fear is fear itself meaning?
Americans should stop being fearful of:
Spending until economy improves Putting their money in banks

Stressing confidence fear and panic is only making things worse

FDRs platform: The Three Rs

Relief: Was for immediate action food, shelter Recover: Was for a year or two climb out of Depression Reform: Was for after Depression ensured to never allow this to happen again

The New Deal

The New Deal FDRs plan for pulling America out of the Great Depression FDR had support of overwhelmingly Demcontrolled Congress
First 100 Days passes numerous bills into law

Gained public support:

Fireside Chats series of radio segments talking to Americans about problems faced and progress made

The New Deal: Managing Money

Emergency Banking Relief Act sets up bank holidays Federal Deposit Insurance Corp (FDIC) insured up to $5,000 of peoples money in the bank FDR orders Federal Reserve to create inflation so debts can be repaid faster
Lenders happy to be paid back, upset its at a lesser value

The New Deal: Job Creation

FDR uses federal money on programs and projects to help jumpstart economy
Based off Hoovers RFC

Civilian Conservation Corps (CCC)

Hired young men to improve national forests Very popular and effective

Workers Progress Administration (WPA)

$11 billion spent for public facilities and infrastructure
Hired federally-paid, unskilled workers to build smaller projects Criticized by some as boondoggling

The New Deal: Industry

Agricultural Adjustment Act (AAA) tried to help farmers by paying them not to farm why?
Less spending oversupply of product prices fall product sells for very little or not at all farmers go bankrupt Farmers by law destroy excess crops, slaughter excess livestock Effect: Farmers incomes did rise, but so did farmer unemployment

National Recovery Administration (NRA)

Aimed to help industry, labor, unemployment Relied on fair competition
Spreads work out among more people due to increased hours, decreased wages

Government forcing businesses to abide was unconstitutional dismantled

Public Works Administration (PWA)

Similar to WPA, but gave private firms contracts to hire skilled workers Worked on larger-scale projects building public works and infrastructure
Bridges, dams, hospitals, schools, etc

One of the most successful programs created in New Deal

New Deal: Reform

FDR vowed to reform to prevent future crashes Stock market reform:
Federal Securities Act companies must report honest financial numbers for investors Securities Exchange Commissions (SEC) set up to investigate and watch over stock market activities

Housing reform:
Federal Housing Authority (FHA) low interest on homes
Created shelter, economic bump, and employment

Social Security Act sets up payment plan for senior citizens, handicapped, etc
Funded by taxes on business and personal income Receives criticism from Republicans socialism

Unions gain strength, numbers, and influence during Depression:

Norris-La Guardia Act outlaws anti-union contracts (AKA yellow dog contracts) Wagner Act legalizes union organization and collective bargaining Fair Standards Act minimum wage, maximum working hours, set working age at 16

The Dust Bowl (1933)

Causes:
System of dry-farming used in plains for decades creates loose topsoil Long drought in lower plains region Heavy wind storms of 1933

Oklahoma, Texas, Kansas farmland destroyed Many farmers migrate west to California looking for work
Grapes of Wrath by John Steinbeck

Government relief programs help relocate farmers, improve soil, plant trees as windbreaks (CCC)

Election of 1936
Reps nominate Alfred Landon
Gov of Kansas, criticized FDRs massive spending Hurt by record of past support of FDRs spending, weak campaign, weak radio voice

Immensely popular FDR wins by an overwhelming landslide

The Court-Packing Scheme (1937)

FDR still had Democrat dominated Congress, but a conservative Supreme Court FDR proposed to increase Supreme Court to 15 justices and that justices over 70 be removed
FDR can appoint liberal justices

Congress shocked and upset with FDRs scheme for increased power
Proposal fails, FDR accused of trying to become a dictator Effect was less cooperation from Congress

New Deal Effective?

By 1937 Progress stalls, effects inconclusive
Unemployment dropped from 25% to 15% in first term Roosevelt Recession in 1937 caused by policies like the Social Security tax on incomes
Less income, less spending, less economic activity

FDRs overspending and socialist policies gaining criticism

Debt had doubled from $20 to $40 billion Government becoming too much of a handout state
Americans not working towards recovery, but being given it instead

Legacy of FDRs New Deal

Both heavily supported and criticized FDR took over in a chaotic time and made big changes while keeping peace and order
Other nations (Germany, Italy) did not succeed in keeping peace and order during this economic turmoil

The New Deal helped, but did not pull U.S. out of Depression What did?
World War II