Chapter 24 Notes

I. The Great Depression

A. The Stock Market Crashes

1. On Black Thursday (10/24/29) and Black Tuesday (10/29/29), the stock market collapsed
2. The ’29 crash lasted 71 days and dropped the Dow Jones Industrial Average (DJIA) from 381 to 198 for a staggering 48% loss
3. The market recovered in the first half of 1930 then began to decline again
4. The 1930-32 bear market lasted 813 days, dopping the DJIA from 294 to 41 points, a whopping 86% loss
5. In the 30’s the market was unstable- major crashes in ‘37-3’8 and ‘39-‘42
6. The DJIAA would not recover to 1929 levels until 1954!
7. Unlike earlier stock crashes, the declines in 1929 affected an unprecedented number of people
8. Sensationalist press coverage led to national panic

B. Underlying causes of the depression
1. Overproduction caused by new assembly line methods
2. Deminshed demand- people who could already 9wned new products, others couldn’t afford them (wages had not kept up with corporate profits)
3. Credit purchases (too much borrowing) and lack of savings
4. Agricultural economy was already depressed during the 20s
5. High interest rates choked off money supply, keeping companies from investing in more infrastructure and employees
6. Weakened by WWI and debt payments, European economies also collapsed thus compounding the problem

C. Effects of the Depression
1. Widespread bank failutes (5,500 banks closed by 1933) many customer deposits were lost
2. Bankruptcies and reduced production in all industries shrank GNP and caused massive layoffs
3. Increased hours and lower wages led to strikes
4. Unemployment rose to 25% nationwide, as high as 80% in some areas
5. Commodity prices declines as much as 60%; unable to pay mortgages, farmers lost their land to banks or abandoned their farms.
6. Unemployed who couldn’t pay their debts also lost assets (homes, cars, etc)
7. Rampant homelessness (Hoovervilles) and hunger (Soup kitchens)
8. Unused farmland in the Midwest and Great Plains exacerbated “dust bowls” effect
9. Suicides increased by 32%


II. Government Response

A. Hoover Administration
1. Unlike past presidents, hoover believed that governement should intervene
2. However, he felt that the federal government should focus on assisting business while direct relief for people should be managed by local initiatives
3. to increase employment, he encouraged local governments to undertake public work projects. Established the Emergency Committee for Employment (1930) to coordinate these efforts.
4. National Credit Corporation (1931)- private agency to help smaller banks.
5. Reconstruction Finance Corporation (1923)- federal agency that would make loans to banks and insurance companies as well as grant money to local governments for public works
6. Hoover’s rrough handling of protest (particularly against WWI vets in Washington DC) together with his optimistic notion that recovery was “just around the corner” and perceived friendliness toward big business caused him to lose the election in 1932.

B. Roosevelt Administration
1. FDR was a relief-orientated governor of NY and was viewed as less polarizing than the Democrat’s 1928 nominee Al Smith.
2. Offering no clear program but exuding confidence and stressing the need for bold experimentation and assisting the poorest, FDR won a landslide victory. The Democrats also won strong majorities in Congress.
3. FDR and his “brain trust” established far-reaching legislation between 1933-1939, known as the New Deal
4. The New Deal comprised of legislation focusing on FDR’s 3 Rs- Relief, Recovery, and Reform. Early measures tended to stress relief and recovery while later measures generally focused on reform
5. The New Deal is viewed as a major upheaval for the American economy- leading to a shift from laissez-faire, market regulated economy to unprecedented government involvement and regulation. The New Deal also shifted the focus of government to direct involvement in people’s welfare and assimilated many “Socialistic” principles.