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THE START OF THE DEPRESSION
BIG IDEA: Poor economic decisions in the 1920s led to a financial crisis in 1929, and poor decisions by government officials made the problem worse and turned the crisis into the Great Depression.
President Hoover had been a popular public servant during the 1920s. He was the third Republican president during the 1920s and it seemed like he would be popular as president as well.
When the stock market was doing well in the 1920s, people thought that prices would only go up. To cash in on the opportunity to make money, some investors borrowed money to buy stocks, thinking that they could pay back the money later when the stock price went up. Eventually stock prices fell and these investors lost all their money. Although participation in the stock market increased during the 1920s, only 10% of all Americans had purchased stock. The failure of the stock market in 1929 made the Great Depression worse, but did not cause the Great Depression.
The 1920s was not a good decade for farmers. They had taken out loans to buy new equipment and open up new land for farming during World War I, and when demand fall after the war, they could not pay back their loans.
Some banks began to fail. They made loans that borrowers could not pay. Sensing that a bank was in trouble, people who had depositors ran to a bank to withdraw all their savings. This sort of bank run ruined both well-run and poorly-run banks. When bank failures spread to New York City, the economy failed.
The real cause of the disaster was a failure of the Federal Reserve to respond to the crisis. Instead of supplying banks with funds to continue operation, the Fed held back and the nation fell into the Great Depression.
LIFE IN THE DEPRESSION
BIG IDEA: The Great Depression was the worst economic disaster in the nation’s history and life was hard for all Americans, especially minorities. In the end, people turned to Franklin Roosevelt who promised new ideas.
The Great Depression affected everyone. Even people who did not lose their jobs usually had their pay lowered. Hungry, jobless, homeless people became a common sight on the streets of American cities. Even the government struggled. With fewer people working, fewer people were paying taxes, and politicians struggled with hard decisions about how to solve the crisis.
Farmers who had bad loans from the 1920s lost their farms as banks foreclosed. In the middle of the country, a drought and poor farming techniques combined to form the Dust Bowl. People whose farms had been ruined by the dust fled to California and elsewhere looking for a chance to start over.
The Depression was especially hard for African Americans. The few jobs that were available were given to Whites first. In some places, anger and frustration boiled over and African Americans were targeted. Lynching increased. In one famous case, the Scottsboro Boys were tried for a crime that never happened. The experience of surviving the Great Depression inspired African Americans to begin the community organizing necessary for the later Civil Rights Movement.
Organized labor suffered during the Depression. In Detroit, hungry workers marched to a Ford factory and clashed violently with police.
Millions of Americans were left homeless. Many rode the rails looking for work. Among these, tens of thousands were teenagers. It was a dangerous life.
Families were hit especially hard. Divorce and separation increased. Birth rates fell. More women began looking for work in order to support their families. Many children dropped out of school.
During the Depression, Americans loved going to the movies. It was a chance to escape the hardships of daily life.
President Hoover tried to address the crisis by encouraging businesses not to raise prices or lower wages. In order to help the millions who were suffering, he encouraged churches and other civil groups to operate shelters and soup kitchens. This failed to solve the problem, simply because the problem was so large.
In Washington, DC, an army of World War I veterans gathered to demand early payment of a bonus. President Hoover ordered their camp cleared. It was a decision that cemented his unpopularity.
In 1932, Democrat Franklin D. Roosevelt won the presidential election. He promised voters a new deal.
THE FIRST NEW DEAL
BIG IDEA: FDR tried to deal with the immediate problems facing the country by creating many new government programs. These stabilized the banking system, gave people jobs and addressed food shortages.
President Franklin Roosevelt told Americans the only thing they had to fear was fear itself. He implemented many new programs to try to solve the problem. Most involved spending large amounts of government money to jumpstart the economy.
His programs became known as the New Deal. In the first 100 days of his presidency, FDR implemented programs to help solve the banking crisis, to give people jobs, and to support farmers. Many of the New Deal programs are known by their acronyms. (FDIC, FHA, CCC, WPA, AAA, etc.)
FDR was an excellent communicator. He was known for his speeches on the radio in which he explained his ideas in simple terms that regular Americans could understand.
Part of the New Deal were laws to fix the banking system. One program gives insurance to people who deposit money in banks so they will not lose it if their bank fails. This program prevents bank runs. Other financial programs provided regulation for the stock market.
New government programs helped people get loans to buy houses.
To help people find jobs, FDR created programs building roads, bridges, dams, parks, trails, painting murals, writing, acting, and much more.
For farmers, FDR signed laws paying farmers to grow less. This stabilized food prices. The New Deal also included programs to provide electricity to rural areas.
THE SECOND NEW DEAL
BIG IDEA: Later in the 1930s, FDR tried to fix long-term problems such as chronic poverty, security for seniors and racial inequality. Although the New Deal was generally popular, it didn’t solve all of the problems of the Depression and there were critics of FDR and his ideas.
FDR supported unions. The Wagner Act guaranteed the right of unions to organize. It was the first time that government firmly sided with workers in their struggle with company owners. The 1930s was a time of growth for labor union membership and power.
Social Security is the most important program to come out of the New Deal. It provides benefits for retired Americans. The money is taken from working younger people and redistributed to the elderly.
Not everyone liked the New Deal. Some liberals thought that it did not do enough to redistribute wealth down to the lower classes. Republicans thought that too much government intervention in the economy and in people’s lives would stifle entrepreneurship, innovation, and self-reliance.
The Supreme Court ruled that many of the New Deal programs were unconstitutional because the Constitution did not give the government the authority to intervene in the economy by dictating prices, wages, etc. FDR tried to add justices to the Court, but was blocked by Congress, which correctly saw it as an attempt by one branch of government to inappropriately influence another.
Native Americans and African Americans were helped by the New Deal. FDR had a group of African American advisors, and the Indian New Deal ended a policy of assimilation that was destroying Native American culture and communities.
Women also benefited from the New Deal. First Lady Eleanor Roosevelt especially championed civil rights and women’s rights while her husband was in office.
Ultimately, the New Deal did not end the Great Depression, but it helped. It also gave the federal government more power and gave Americans the idea that it is the job of their government to look out for the people and protect them from economic hardship.