US History/Contents/Great Depression and New Deal
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Contents |
[edit] The Stock Market Crash
| Year | Month | Events |
|---|---|---|
| 1929 | October | The stock market crashes, marking the end of six years of unparalleled prosperity for most sectors of the American economy. The "crash" began on October 24 (Black Thursday). By October 29, stock prices had plummeted and banks were calling in loans. An estimated $30 billion in stock values "disappeared" by mid-November. |
| November | "Any lack of confidence in the economic future or the basic strength of business in the United States is foolish."—President Herbert Hoover | |
| 1930 | March | More than 3.2 million people are unemployed, up from 1.5 million before the "crash" of October, 1929. President Hoover remained optimistic however stating that "all the evidences indicate that the worst effects of the crash upon unemployment will have passed during the next sixty days." |
| November | The street corners of New York City are crowded with apple-sellers. Nearly six thousand unemployed individuals worked at selling apples for five cents apiece,
The bill fell to defeat in the Senate, however, 62 to 18. The vets maintained their determination to stay camped out until they got their pay. |
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| 1931 | January | Texas congressman Wright Patman introduces legislation authorizing immediate payment of "bonus" funds to veterans of World War I. The "bonus bill" had been passed in 1924. It allotted bonuses, in the form of "adjusted service certificates," equaling $1 a day for each day of service in the U.S., and $1.25 for each day overseas. President Hoover was against payment of these funds, saying it would cost the Treasury $4 billion. |
| February | "Food riots" begin to break out in parts of the U.S. In Minneapolis, several hundred men and women blew up a grocery market with some C4[citation needed] and made off with fruit, canned goods, bacon, and ham. One of the store's owners pulled out a gun to stop the looters, but was leapt upon and had his arm broken. The "riot" was brought under control by 100 policemen. Seven people were arrested. Resentment of "foreign" workers increases along with unemployment rolls. In Los Angeles, California, Mexican Americans found themselves being accused of stealing jobs from "real" Americans. During the month, 6,024 of them were deported. |
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| March | Three thousand unemployed workers march on the Ford Motor Company's plant in River Rouge, Michigan. Dearborn police and Ford's company guards attack, killing four workers and injuring many more. | |
| December | New York's Bank of the United States collapses. At the time of the collapse, the bank had over $200 million in deposits, making it the largest single bank failure in the nation's history. | |
| 1932 | January | Congress establishes the Reconstruction Finance Corporation. The R.F.C. was allowed to lend $2 billion to banks, insurance companies, building and loan associations, agricultural credit organizations and railroads. Critics of the R.F.C. called it "the millionaires' dole." |
| April | More than 750,000 New Yorkers are reported to be dependent upon city relief, with an additional 160,000 on a waiting list. Expenditures averaged about $8.20 per month for each person on relief. | |
| May | More than 300 World War I vets leave Portland, Oregon en route to Washington DC to urge Congress to pass the Bonus Bill. It took them eighteen days to reach Washington DC. | |
| June | Determined to collect their "bonus" pay for service, between 15,000 to 25,000 World War I veterans gather and begin setting up encampments near the White House and the Capitol in Washington, D.C. On June 15, the House passed Congressman Wright Patman's "bonus bill" by a vote of 209 to 176. The bill fell to defeat in the Senate, however, 62 to 18. The vets maintained their determination to stay camped out until they got their pay. |
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| July | Hoover signs a $100,000 transportation bill to assist "bonus Army" demonstrators in getting home. Hoover set a July 24 deadline for the men to abandon their encampments. On July 28, when some "bonus Army" members resisted being moved from their camps. Violence erupted, leading to the deaths of two veterans. Hoover ordered Federal troops, under the command of General Douglas MacArthur, to assist DC police in clearing the veterans. | |
| The Reconstruction Finance Corporation is authorized to lend needy states sums from the national Treasury. The money was to target relief and public works projects. | ||
| November | Franklin Delano Roosevelt is elected President in a landslide over Herbert Hoover. Roosevelt received 22,800,000 popular votes to 15,750,000 for Hoover. | |
| 1933 | March | Before a crowd of 100,000 at the Capitol Plaza in Washington DC, Franklin Delano Roosevelt is inaugurated president. FDR tells the crowd, "The people of the United Slates have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it."
FDR announces a four-day bank holiday to begin on Monday. March 6. During that time, FDR promised, Congress would work on coming up with a plan to save the failing banking industry. By March 9, Congress passed the Emergency Banking Act of 1933. By month's end, three-quarters of the nation's closed banks were back in business. |
| On March 12, FDR delivers the first of what came to be known as his "fireside chats." In his initial "chat" he appealed to the nation to join him in "banishing fear." | ||
| April | President Roosevelt. under the Emergency Banking Act, orders the nation off of the gold standard. | |
| The Civilian Conservation Corps (CCC) is established. Designed as a relief and employment program for young men between the ages of 17 and 27, the CCC was envisioned by FDR as a kind of volunteer "army" that would work in national forests, parks, and federal land for nine-month stints. The first 250,000 young men were housed in 1,468 camps around the country- At its peak in 1935, the CCC would include 500,000 young men. | ||
| May | The Federal Emergency Relief Administration is created by Congress. President Franklin Roosevelt appointed Harry L. Hopkins as its chief administrator. By the end of his first day on the job, Hopkins had Issued grants totaling more than $5 million. | |
| The National Industrial Recovery Act is introduced into Congress. Under Title 1 of the act, the National Recovery Administration was designated to maintain some form of price and wage controls. Section 7(a) of the act guaranteed labor the right to organize and bargain collectively. As part of the act. The National Labor Board was set up to negotiate disputes between labor and management. | ||
| The Tennessee Valley Authority is created. A federally run hydroelectric power program, the TVA act was considered a huge experiment in social planning. The TVA also built dams, produced and sold fertilizer, reforested the Tennessee Valley area and developed recreational lands.
Opponents of the TVA called it "communistic to its core." |
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| June | Congress passes the Glass-Steagall Act, separating commercial from investment banking and setting up the Federal Deposit Insurance Corporation to guarantee bank deposits. | |
| August | With an eye toward organizing farmers into soil conservation districts, the federal government establishes the Soil Erosion Service. The creation of this service was made necessary by the years of drought and dust that plagued the Southwestern Panhandle states. | |
| September | In an effort to stabilize prices, the federal agricultural program orders the slaughter of more than 6 million pigs. Many citizens protested this action since most of the meat went to waste. | |
| October | The Civil Works Administration is established. Devised as a wide scale program that could employ up to 4 million people, the C.W.A was involved in the building of bridges, schools, hospitals, airports, parks and playgrounds- Additionally, C.W.A. funds went toward the repair and construction of highways and roads. Early in 1934, Congress authorized $950 million for the continued operation of the C.W.A. | |
| 1934 | May | A three-day dust storm blows an estimated 350 million tons of soil off of the terrain of the West and Southwest and deposits it as far east as New York and Boston. Some East Coast cities were forced to ignite street lamps during the day to see through the blowing dust. |
| November | Father Charles E. Coughlin establishes the Union for Social Justice. Using the radio airwaves as his pulpit. Father Coughlin railed against "predatory capitalism." His criticism of the banking industry and disdain of communism soon dovetailed into a troubling gospel of anti-Semitism. | |
| 1935 | April | FDR signs legislation creating the Works Progress Administration. (Its name would be changed in 1939 to the Work Projects Administration). The program employed more than 8.5 million individuals in three thousand counties across the nation. These individuals, drawing a salary of only $41.57 a month, improved or created highways, roads, bridges, and airports. In addition, the WPA put thousands of artists — writers, painters, theater directors, and sculptors — to work on various projects. The WPA would remain in existence until 1943. |
| Business Week magazine announces that "Depression is a forgotten word in the automobile industry, which is forging ahead in production, retail sales, and expansion of productive capacity in a, manner reminiscent of the 'twenties.'" | ||
| June | The National Youth Administration is set up to address the needs of young men and women (who were not allowed in the CCC). The NYA worked on two levels: a student work program and an out-of-school program. The student work program provided students with odd jobs that paid them enough to stay in school. The out-of-school program set young people up with various jobs ranging from house painting to cleaning local parks, and eventually came to include vocational training. | |
| July | FDR signs the Wagner National Labor Relations Act. The goal of the act was to validate union authority and supervise union elections. | |
| August | The Social Security Act of 1935 is signed into law by FDR. Among the most controversial stipulations of the act was that Social Security would be financed through a payroll tax. Historian Kenneth S. Davis called the signing of the act "one of the major turning points of American history. No longer could 'rugged individualism' convincingly insist that government, though obliged to provide a climate favorable for the growth of business profits, had no responsibility whatever for the welfare of the human beings who did the work from which the profit was reaped." |
The US stock market crash occurred in October of 1929. The value of common stock and shares dropped by 40%, resulting in a global depression.
Payment plans for merchandise were usually only short term payment plans. This was put in place so that consumer debt services could absorb a greater part of the consumers income. This resulted in debt being diminished more quickly and effectively. The only negative effect of this was that it did not allow for excess purchasing capacity, which could have absorbed the surplus production more effectively.
Furthermore, the general credit structure served to weaken the economy. Farm prices were plummeting, but farmers were already in deep debt, and crop prices were too low to allow them to pay off what they already owed. Banks suffered failure as the farmers defaulted on loans. Some of the nation's largest banks were failing to maintain adequate reserves and making unwise business decisions. Essentially, the banking system was completely unprepared to combat an economic crash.
Credit also related to the stock market. Investors bought shares "on margin" while at the same time taking out a loan to pay for those shares. The investors hoped that by the time the shares were sold, they would make enough money to pay back the loan and interest, and also have some profit remaining for themselves. The practice of buying on margin led to an extremely unstable stock market. Investors' uncontrolled purchases on margin eventually led to a collapse of the stock market on October 24, 1929, also known as Black Thursday.
International influences also caused the Great Depression. Nations adopted the practice of Protectionism, under which foreign goods were subject to tariffs, or import duties, so that foreign products would cost more and local products would cost less. The reduced cost of local goods would then boost the local economy at the expense of foreign competitors. The United States enacted extremely high tariffs. However, other nations retaliated against the United States by establishing their own tariffs. Thus, American businesses lost several foreign markets.
International credit structure was another cause of the Depression. At the end of World War I, European nations owed enormous sums of money to American banks. However, these debts were rarely repaid. The smaller American banks were crippled because farmers could not pay debts, while larger banks suffered because other nations could not pay debts.
The problems of overproduction, under-consumption, inability to collect debt, and the stock market crash together had a devastating affect on the economy. The Great Depression, the largest collapse of the economy in modern history, had drastic impacts on Americans.
[edit] Depression
The Great Depression was a severe economic downfall for the United States. By 1932, unemployment had surged to twenty-five percent, while stock prices plummeted by over eighty percent. Over eighty-five thousand businesses had declared bankruptcy. Banks could not collect debt from bankrupt businesses and began to close, causing the loss of the savings of millions of Americans. This led President Franklin Delano Roosevelt to create the Federal Deposit Insurance Corporation (FDIC), which provides a hedge against this sort of loss.What is more important is that the farmers living in the South-central cities of the United States suffered almost all the kind of hardships since the first day the depression came into life. They traveled to the West, especially to California, and hope to find better opportunities in life.
In 1930, a confluence of bad weather and poor agricultural practices known as the Dust Bowl compounded the Depression's effects on farmers. Sustained drought and continued planting and harvesting over poor seasons led to the destruction of ground cover that held soil in place, hence Dust Bowl. This, along with other economic factors, reduced farm revenue by 50 percent. Many farmers were forced to move to the cities in order to survive.
[edit] The New Deal
The most important thing that Roosevelt did was to take action. The stock market crash and subsequent economic collapse had, by 1932, left America in a state of deep fear. Jobs were gone, businesses had failed and many banks were proving unsound. Families were not only losing their source of income but their life savings as well. Americans were feeling helpless in the face of this turmoil. People were desperate for a leader that would demonstrate some idea of what to do to begin to turn things around.
With this as a backdrop, strong social changes were beginning to take place in this country. While mostly confined to rhetoric, these ranged from grassroots actions by farmers facing foreclosure to sophisticated agitation by Nazi, Socialist and Communist activists. As Roosevelt remarked to John Nance Garner, his Vice President, as they rode to the inauguration in January 1933 "I had better be a good president or I will be the last one".
After he took office,in a program called "the Hundred Days" ,Roosevelt immediately began to take steps against the Great Depression. He had campaigned with a platform offering a [[Media:New Deal to Americans]]. The nation did not have to wait long to see what FDR had in mind. On March 6, two days after taking office as President, he issued an order closing all American banks for four days. Throughout his Presidency he would show himself a master of the use of language. Instead of calling it an "emergency bank closure," Roosevelt used the euphemism of "bank holiday." He then summoned Congress for a special session.
When Congress met, Roosevelt suggested the Emergency Banking Bill, which was designed to protect large banks from being dragged down by the failing small banks. On the day after the passage of the Emergency Banking Act, Roosevelt sent to Congress the Economy Bill. The act proposed to balance the federal budget by cutting the salaries of government employees and reducing pensions to veterans by as much as 15 percent.
Roosevelt warned that the nation would face a $1 billion deficit if the bill would fail. Like the Emergency Banking Act, it passed through Congress almost instantaneously.
To protect American farmers, Congress passed the Agricultural Adjustment Act (AAA)in May, 1933. Farm incomes, relative to the rest of the economy, had been falling for years. Most importantly, the AAA attempted to increase farm prices. Under the act, producers of seven agricultural products - corn, cotton, dairy products, hogs, rice, tobacco, and wheat - would set production limits on themselves. The AAA required the government to then tell individual farmers how much they should plant. The government rewarded farmers who complied by paying them for leaving some of their land unused. The Act was extremely controversial, however. People argued that it was inappropriate for the government to pay farmers to produce less while many people were forced to starve due to the Depression.
Congress and the President created several new government agencies to combat the Great Depression. The Civilian Conservation Corps and the Public Works Administration provided employment for many Americans; they hired people to work on roads, buildings, and dams. The Tennessee Valley Authority accomplished similar goals; it sought to build an infrastructure in the Southeast to provide electricity to rural areas. The Federal Deposit Insurance Corporation provided insurance for bank deposits. The Securities and Exchange Commission, meanwhile, provided for the regulation of the stock market in an attempt to prevent another crash like that in October, 1929.
In June, 1933, Congress addressed the problems of the industrial sector with the National Industrial Recovery Act (NIRA). The NIRA established the National Recovery Administration (NRA), which attempted to stabilize prices and wages though cooperative "code authorities" involving government, business, and labor unions.
The NRA adopted a blanket code under which the businesses would agree to a minimum wage of twenty to forty cents per hour, a workweek of thirty-five to forty hours, and the abolition of child labor. Companies that voluntarily complied with the code were allowed to display the NRA "Blue Eagle". Blue Eagle flags, posters, and stickers, with the slogan "We Do Our Part," became common across the country. In addition to blanket codes, codes specific to certain industries were also adopted.
NRA Blue Eagle
In 1935, the Congress passed the Social Security Act. The Act provided for the creation of the Social Security System, under which the unemployed and the unemployable (such as senior citizens) received welfare payments from the government. The Act also granted money to the states for use in their own welfare programs.
The efforts of the Democratic President and Congress were opposed by a conservative Supreme Court. In 1933, the Court had ruled in favor of some state New Deal programs. However, by 1935, the Court had begun to rule against the New Deal. For example, the Court ruled in a case nicknamed the Sick Chicken Case that the National Industrial Recovery Act Code relating to the sale of "unfit" poultry, as well as all other codes under the act, were unconstitutional. In 1936, the Court ruled that the Agricultural Adjustment Act was also unconstitutional.
[edit] Roosevelt's Re-election
In 1936, Roosevelt won re-election in a landslide, losing only the states of Maine and Vermont. Roosevelt and Congress proceeded by passing more New Deal legislation. This time, the Supreme Court did not oppose Roosevelt. The Second Agricultural Adjustment Act, for example, replaced the first Act. The Fair Labor Standards Act set minimum wages for workers in interstate industries. The Wagner Housing Act provided for the construction of homes for the poor.
Despite such programs, the New Deal did not end the Great Depression by itself. That task was accomplished by the Second World War, which led to the growth of jobs in industries related to war, which then led to the growth of the overall economy. However, the New Deal did provide much-needed relief to suffering Americans.
