The Depression and 1930s

1
The Depression and 1930s

• An Age of Despair and Idealism

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We are nearer today to the ideal of the
abolition of poverty and fear from the lives of
men and women than ever before in any land.

• Herbert Hoover - 1928

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The 1920s did not roar for everybody

• Farmers struggled during the 1920s after the boom
  of the 1900s and 1910s. Overproduction resulted
  in lower prices. Farmers planted on every
  available scrap of land to produce as much as
  possible.
• While there was greater prosperity in the 1920s,
  there were large segments of the population that
  were struggling to survive. Roughly one half of
  the population functioned at subsistence levels.
• Many could afford the homes, cars, and appliances
  only with the help of credit. By the late 1920s,
  the market for consumer goods had become
  saturated.
• From farming to aviation, there were scores of
  small, undercapitalized companies that were
  marginally profitable at best.

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Banks

• In an age when there was still a distrust of
  large corporations, national banks were suspect
  but, of course, the friendly local bank next door
  seemed just fine.
• The nation was overbanked, meaning there were
  too many small banks that did not have enough
  capital to sustain them.

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DEPOSITS BORROWS
Bank
Account Holder
Borrower
WITHDRAWS DEPOSIT PAYS BACK LOANS WITH
INTEREST
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The Stock Market

• A stocks value is based on what people are
  willing to pay for it. So long as it seems like
  a good investment, the value is high. If no one
  wants to buy it, the value declines.
• Like houses and cars, people could purchase stock
  on credit, promising to pay back loans when they
  made money off of the stock market.
• Greater numbers of average Americans were
  investing. They were new to the process and
  could be drawn to supporting risky ventures by
  seductive advertising.

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Economics and the public

• As a general rule, people act based on their
  perceptions of how the economy is doing, not
  their personal situation. If their perception is
  that the economy is doing poorly, people will act
  as if they are doing poorly even if their
  personal finances are in decent shape.

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Stock Market Crash 1929

• In October 1929, the stock market started to
  decline. On October 29, Black Tuesday, it sank
  in that this was not a temporary correction.
  People started selling off stock to preserve what
  little profit was left. Stock became worth less
  and less.

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A local affair at first.

• Everybody talks about the Crash of 29. In
  small towns out west, we didnt know there was a
  crash. What did the stock market mean to us? Not
  a dang thing. If you were in Cut Bank, Montana,
  who owned stock?
•  

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A chain reaction begins

• The Crash reinforced an already saturated
  consumer market.
• People stopped buying consumer goods.
• Manufacturing firms had to cut back on producing
  things so that their surplus of unsold goods
  would not get too large.
• As companies made fewer profits, they laid off
  workers.
• Laid off workers cut back further on their
  purchasing, making the cycle worse.

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Unemployment

• During the Great Depression, between 1/4 to 1/3
  of the working age population was unemployed.
  Hardest hit included
• Women
• African Americanswhose unemployment rate could
  be 30-60 higher than whites
• Migrant workers
• The elderly

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Meanwhile..

• People got scared about the money they had
  deposited in banks and started withdrawing their
  deposits.
• Banks did not have the money to cover those
  withdrawals and started calling in loans.
• Those who had borrowed money, such as farmers,
  did not have the money to pay back loans. Low
  crop prices meant no profits and therefore, even
  less money to pay back the banks.
• Banks started foreclosing on farms and other
  loans.

13
Panic sets in!

• People rushed to banks to take out what little
  was left of their deposits. These panics were
  called bank runs
• Smaller banks were left without any capital to
  function and so had to close.
• The news of banks closing fueled the scare.

14
An ecological disaster

• Out west, decades of overfarming had worn out the
  soil. When a drought came in, there were no
  plants to hold down the soil. Clouds of dust
  rolled across the Great Plains in what became
  known as The Dust Bowl.

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The result
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Migration

• Those out of work or who lost their farms
  searched for work where they could.
• Started a migration out west to California.
• Included Okies from Oklahoma, Dokies from the
  Dakotas, and Arkies from Arkansas. In Canada,
  they were called Hosers because they siphoned
  off fuel from farm machinery.

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A global crisis

• The economic crisis was global in nature.
• There were fewer investments available for
  Germany.
• Germany could not pay the reparations to Britain
  and France.
• Britain and France stopped paying back on their
  loans from the United States.
• In 1930, the government, in an attempt to protect
  U.S. producers, raised tariffs, sparking a trade
  war with the Europeans, who raised their tariffs
  in retaliation.

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New Approaches and Alternatives

• Disillusionment with older laissez faire
  economics result in popularity of new approaches
• Fascism Includes strong central planning to
  support the nation-state, usually with a strong
  military presence
• Communism Government ownership and control of
  major industries and, depending on area, smaller
  businesses as well, usually with a strong
  socialist or communist party. Land reform favors
  collective farms instead of estates or private
  farms.
• Keynsian economics Rise of thought of John
  Maynard Keynes in favor of government as
  supportive, guiding force in economy though
  techniques such as government programs.
  Governments can go into debt if economy grows as
  a result.

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Law and Order vs. Revolution

• Fascism
• Controls society but keeps existing elites power
  structure of estates, private industry, and state
  churches
• Intensely nationalistic with strong military
  presence . Leadership operates through the
  military but may maintain the façade of monarchy
  or democracy.

• Communism
• Totally restructures society in favor of working
  classes and peasants by limiting or eliminating
  the power of elites
• Officially international, hoping an international
  working class revolution will eventually make the
  nation state unnecessary

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Meanwhile, in Mexico

• In Mexico, in the late 1920s the Institutional
  Revolutionary Party or PRI came to be the
  dominant, exclusive party of Mexican governance.
• Left-leaning sentiments popular through the
  artwork of figures such as Diego Rivera.
• After another series of power struggles, Lazaro
  Cardenas becomes president in 1934. Leftist in
  approach.

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Works by Diego Rivera (both from the Mexico City
Palace of Fine Arts)
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The Cardenas Administration 1934-1940

• Promoted communal land holdings called ejidos
  (pr. Eh-HEE-dos)
• Nationalized the oil industry and the railroads
  of Mexico.
• Served as haven for communist figures such as
  Leon Trotsky.
• Promoted a Latin American trade bloc against the
  U.S.
• As 1930s unfolded, both communist and fascist
  groups worked to establish themselves in Mexico.
  In 1940, Juan Almazan, with ties to Spanish
  fascists, ran for president. U.S. backed the
  ultimate winner, General Manuel Avila Camacho

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Meanwhile, up north

• In Canada, William Lyon Mackenzie King served
  1921-1930 (with a brief year of interruption in
  1926). A lifelong bachelor, was known for being
  moderate, pragmatic, and devoutly religious.
• Conservative R.B. Bennett was prime minister from
  1930-1935. In 1935, Mackenzie King regained
  office and served as prime minister through 1948.
  Established social programs such as old age
  pensions and welfare.
• Rise of clerical-nationalism among some
  Quebecois that celebrated a Catholic, folk
  vision of Quebec as an alternative to
  Anglophone-dominated Canada.
• Meanwhile left-leaning groups such as the
  Cooperative Commonwealth Federation form,
  especially in western Canada. Movement centered
  on the charismatic figure Tommy Douglas.

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From the Regina Manifesto of 1933

• We aim to replace the present capitalist
  system, with its inherent injustice and
  inhumanity, by a social order from which the
  domination and exploitation of one class by
  another will be eliminated, in which economic
  planning will supersede unregulated private
  enterprise and competition, and in which genuine
  democratic self-government, based upon economic
  equality will be possible. The present order is
  marked by glaring inequalities of wealth and
  opportunity, by chaotic waste and instability
  and in an age of plenty it condemns the great
  mass of the people to poverty and insecurity.
  Power has become more and more concentrated into
  the hands of a small irresponsible minority of
  financiers and industrialists and to their
  predatory interests the majority are habitually
  sacrificed. When private profit is the main
  stimulus to economic effort, our society
  oscillates between periods of feverish prosperity
  in which the main benefits go to speculators and
  profiteers, and of catastrophic depression, in
  which the common man's normal state of insecurity
  and hardship is accentuated. We believe that
  these evils can be removed only in a planned and
  socialized economy in which our natural resources
  and principal means of production and
  distribution are owned, controlled and operated
  by the people.

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Herbert Hoover

• Hoover believed that voluntary action on the part
  business to maintain wages and jobs would
  eventually bring the U.S. out of the Depression.
  By 1930, this clearly was not the solution.
• Meanwhile, progressive Democrats started getting
  elected to Congress in 1930 to challenge the
  Republican Hoover.
• Late in his administration, Hoovers
  administration started setting up programs help
  with financing and loans. Seemed too little, too
  late.

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An image problem gets worse

• In June 1932, a group of 12-14,000 out of work
  veterans marched on Washington, D.C. Members of
  this Bonus March, demanded immediate payment of
  full veterans benefits. Set up shantytown in
  Washington D.C. A riot occurred and the military
  was called in to preserve order. Leading the
  crackdown was Douglas MacArthur.
• Over time, unemployed and migrants across the
  nation started calling the shantytowns that they
  lived in Hoovervilles.
• Labor unrest added to the tensions as capitalism
  itself seemed incapable of resolving the crisis.

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What would you do?

• Since so much of public behavior rests on
  perceptions of the state of the economy, how do
  you improve public confidence?
• Should the government intervene in the economics
  of the nation or let the market take its course?
  If so, how?
• Should things be left up to the states instead of
  the federal government? If so, how do you
  encourage the states to comply?
• Is this a natural up and down of the economic
  cycle that is necessary to cull out the
  inefficient? If so, how do you convince people
  of that?
• Should people spend more to boost the economy or
  save more so that they have reserves to fall back
  on?
• What would you do to ensure that the electorate
  votes in people who favored your recommended
  program?

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Taking it to the states

• In California, author Upton Sinclair (same one
  who wrote The Jungle) ran for governor under his
  End Poverty in California or EPIC plan in
  which the state of California would run factories
  and farms as cooperatives.
• Huey Long in Louisiana espoused a populist
  rhetoric while maintaining a powerful political
  machine.
• Governors in Oklahoma and Texas called in the
  national guard to shut down their states oil
  fields to curb overproduction

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One commentary

• Is that, my friends, giving them a fair shake
  of the dice or anything like the inalienable
  right of life, liberty, and the pursuit of
  happiness, or anything resembling the fact that
  all people are created equal when we have today
  in America thousands and hundreds of thousands
  and millions of children on the verge of
  starvation in a land that is overflowing with too
  much to eat and too much to wear? -- Huey Long

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Enter Franklin Delano Roosevelt (president from
1933-1945)

• From a wealthy New York background
• Distant relative of Theodore Roosevelt
• Assistant Secy of the Navy in 1910s.
• An attack of polio in 1921 left him largely
  paralyzed from the waist down.
• His wife, Eleanor, and others encouraged him to
  get back into politics.
• Elected governor of New York in 1928.
• Wins presidency in race against Hoover in 1932.

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The New Deal Coalition

• White southerners and westerners
• Northeastern intellectuals
• Labor
• Immigrants
• African Americans and Latinos (Both groups
  switched from being loyal Republicans to loyal
  Democrats during this time.)

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Excerpts from FDRs first inaugural speech, March
4, 1933

• So first let me assert my firm belief that the
  only thing we have to fear is fear
  itselfnameless, unreasoning, unjustified terror
  which paralyzes needed efforts to convert retreat
  into advance.
• The measure of restoration lies in the extent to
  which we apply social values more noble than mere
  monetary profit. Happiness lies not in the mere
  possession of money it lies in the joy of
  achievement, in the thrill of creative effort.
• It (restoration) can be helped by the unifying
  of relief activities which today are often
  scattered, uneconomical and unequal. It can be
  helped by national planning for and supervision
  of all forms of transportation and of
  communications and other utilities which have a
  definitely public character.

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Help along the way

• FDR did not do this by himself. He had help
• A committee of advisors and agency heads called
  the Brains Trust helped shape a lot of New Deal
  policy. These included Rex Tugwell, Harry
  Hopkins, and Harold Ickes.
• Eleanor Roosevelt provided commentary and support
  through her column My Day and other venues.
• Congress was made up of sympathetic Democrats.
• State governments tended to have leadership that
  was supportive of the New Deal. Many programs
  used federal funds but had the state governments
  implement the actual programs.
• FDR tried to cultivate good relationships with
  the press.

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FDRs New Deal

• Relief Helping soothe the current suffering of
  people.
• Recovery Getting the society back to prosperity
  again.
• Reform Changing features of society to address
  certain issues. May or may not have be directly
  related to the economic crisis.

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Three main phases

• The First New Deal 1933-1934
• The Second New Deal 1935-1937
• Aftermath 1938-1941

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The First New Deal 1933-1934

• A flurry of activity and legislation known as the
  First 100 Days.
• Compared to the Second New Deal, tended to be
  more moderate in scope.
• FDR tended to use a lot of trial and error,
  coming up with lots of different policies to see
  what would work.

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Banking and Finance

• Emergency Banking Act Closed all banks for a
  temporary holiday. Ones that were stable were
  allowed to reopen.
• Glass-Steagall Act or Banking Reform Act
  Promoted sound banking practices including the
  creation of the FDIC as federal insurance on
  deposits.
• Securities and Exchange Commission Promoted
  sound practices in the stock market.

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Agriculture

• Emergency Farm Mortgage Act Through the Farm
  Credit Administration, helped farmers refinance
  mortgages and borrow money.
• Agricultural Adjustment Act Set up a system of
  crop subsidies to pay farmers to grow less and
  stabilize agricultural prices.

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Natural Resources

• Civilian Conservation Corps/CCC Put young men to
  work on construction projects, especially in
  national and state parks and forests.
• Tennessee Valley Authority/TVA A program to
  create dams and artificial reservoirs along the
  Tennessee Valley in the upper south. Provided
  flood control, electrification, and water-based
  recreation.
• Although work began on the Hoover Dam in Arizona
  during the 1920s, most of the construction took
  place under the New Deal. The dam was completed
  in 1936. Shown here is the Parker Dam, another
  New Deal project along the Colorado River.

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Business and Labor

• The National Industrial Recovery Act/NIRA
• National Recovery Administration/NRA (no, not the
  National Rifle Association) Established a series
  of voluntary codes of wages and prices.
• Section 7a Gave labor the right to organize and
  engage in collective bargaining.
• Public Works Administration/PWA An early public
  works program.

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Other programs

• Civil Works Administration/CWA An early public
  works program.
• Federal Emergency Relief Administration/FERA The
  only direct relief program that simply allocated
  money for needs rather than be through public
  works programs.
• Home Owners Loan Corporation Provided home
  loans.
• Indian Reorganization Act Reconstituted tribal
  governments.

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Foreign Policy Case Study Cuba

• Growing nationalist sentiment.
• In September 1933, a military junta gave way to a
  new civilian govt. under Grau San Martin that
  resisted the restrictions of the Platt Amendment
  and pushed for land reform and labor reform.
• The Roosevelt admin debated whether to invade.
  Decided to try to weaken the new San Martin
  administration, which collapses in early 1934.
  Head of the army, Fulgencio Batista, put his
  support behind Carlos Mendieta. By the late
  1930s, Batista was in power, officially becoming
  president in 1940. The military, through groups
  like the Civic-Military Institute, became an
  organizing presence in Cuba.

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U.S. in the Caribbean

• Virgin Islands Establishes civil government in
  1931 (had been run by U.S. Navy). FDR extended
  relief to the islands. Universal suffrage in
  1938.
• Puerto Rico Relief to islands through New Deal.
  Rise of nationalist movement that desired
  complete independence as well as an opposing
  movement that wanted statehood.
• Haiti U.S. forces occupied in 1914, making the
  nation a virtual U.S. protectorate. With the
  help of U.S. support, government of Stenio
  Vincent comes to power in 1930. U.S. forces out
  by 1934.

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The Second New Deal 1935-1937

• Tended to be more reform-oriented.
• FDRs administration is reacting against critics
  on both the right, for being too socialist, and
  on the left, for not doing enough.
• National figures such as Father Coughlin or Huey
  Long suggested that they could do even more than
  FDR.

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Concerns

• You cannot solve these things through these
  various and sundry alphabetical codes. You can
  have the N.R.A. and P.W.A. and C.W.A. and the
  U.U.G. and G.I.N. and any other kind of
  dad-gummed lettered code. You can wait until
  doomsday and see 25 more alphabets, but that is
  not going to solve this propositionGod told you
  what the trouble was. The philosophers told you
  what the trouble was and when you have a country
  where one man owns more than 100,000 people.,you
  know what the trouble is. Huey Long, Share Our
  Wealth

• When fascism comes to America it will be
  wrapped in the flag and carrying a cross. -
  Sinclair Lewis

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Reform legislation

• Rural Electrification Administration Brought
  electric power to rural areas.
• Housing Act Provided low cost housing in cities.
  
• National Youth Administration To keep youth in
  school and out of labor market.
• Soil Conservation and Domestic Allotment Act
  Promoted better farming techniques to save the
  soil and water.

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WPA

• Works Progress Administration/WPA Public works
  program that hired a wide range of people, from
  artists to academics, from laborers to social
  workers, to develop a wide range of projects.

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Social Security

• Created a pension system to supplement the income
  of the elderly.
• Intended to encourage the elderly to retire so
  that younger people could stay in the job market.
• Although sold akin to a retirement investment
  system, the current generation of workers
  contributes the money that current retirees use.

50
Labor troubles

• A rift between skilled and unskilled workers
  results in the unions for unskilled workers
  leaving the AFL to form the Congress of
  Industrial Organizations (CIO) in 1937.
• One of the largest strikes of the era took place
  in late 1936/early 1937 when the United Auto
  Workers/UAW organized a sit-down strike at
  General Motors Fisher Body plant that shut down
  the facility. General Motors eventually agreed to
  many of the UAWs demands.
• UAW leaders conducted a similar strike against
  Chrysler and the company agreed to similar
  demands.
• An attempted strike at Ford was less successful.

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Trouble with the courts

• The Supreme Court consisted of conservatives who
  felt that many New Deal programs were
  unconstitutional.
• Struck down the NIRA because it gave the
  president powers over interstate commerce that
  only Congress legally had. FDR and Congress had
  to come up with an alternate version of section
  7a on labors rights, ultimately called the
  Wagner Act.
• Struck down AAA as well, forcing FDR and Congress
  to create a revised version.

52
Court Packing

• In the wake of his resounding success in the 1936
  election, FDR felt he had a mandate to go after
  that thorn in his side The Supreme Court.
• There is no mention in the Constitution as to how
  many Supreme Court justices there had to be.
• FDR proposed adding six new justices as well as
  replace about fifty other federal judges in the
  judicial system. This would ensure a sympathetic
  court system.

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Backfire!

• FDR did not consult Congressional leadership on
  this.
• Even FDR supporters felt that it was an attempt
  to consolidate power. In a time when Hitler was
  increasing his influence in Germany, this was not
  a pleasant thought to contemplate.
• The bill never made it through Congress, several
  of the older justices retired shortly thereafter
  but FDRs once solid relationship with Congress
  and even the public was tarnished from then on.

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Aftermath

• The New Deal Coalition starts breaking down, a
  trend that eventually lead to white southerners
  and westerners breaking from the Democratic
  Party.
• Although not as far reaching as some hoped, civil
  rights for African Americans and support for
  organized labor confirmed those groups long ties
  to the Democratic Party.

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The Result

• The New Deal did not get the United States out of
  the Depression. World War II did that.
• However, many historians believe that FDRs
  efforts prevented a revolution along communist or
  fascist lines from coming to power.
• Many parts of the New Deal such as state parks,
  hydroelectric dams, electricity in rural areas,
  farm subsidies, and Social Security are still
  part of society today.

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Historians debate

• Some historians argue that FDR was a progressive
  visionary who dramatically reformed society,
  moving the United States away from laissez faire
  capitalism.

• Others argue that in spite of his reform
  rhetoric, FDR was basically seeking to make
  enough changes to maintain the existing
  capitalist system without changing the underlying
  structure.