THE GREAT

1
THE GREAT DEPRESSION AND THE NEW DEAL
Cause of Depression
2
CAUSES OF THE GREAT DEPRESSION
Historians disagree as to the causes of the Great
Depression. Most scholars would include

• UNEQUAL DISTRIBUTION OF WEALTH
• HIGH TARIFFS AND WAR DEBTS
• OVERPRODUCTION IN INDUSTRY AND AGRICULTURE
• INCONSISTENT MONETARY POLICY
• STOCK MARKET CRASH AND FINANCIAL PANIC

3
STOCK MARKET CRASH AND FINANCIAL PANIC
MONETARY POLICY
INDUSTRY
AGRICULTURE
4
THE 1920S WAS A PROSPEROUS TIME BUT THE
PROSPERITY WAS NOT SHARED EQUALLY
MANY PEOPLE, LARGELY DUE TO NEWLY INTRODUCED
INSTALLMENT BUYING, COULD AFFORD TO BUY CARS,
RADIOS AND OTHER NEW PRODUCTS OF THE 1920S.
FARMERS, HOWEVER, WERE IN A DEPRESSION THROUGHOUT
THE WHOLE DECADE.
5
RURAL POVERTY IN THE 1920S
6

• UNEQUAL DISTRIBUTION OF WEALTH
• Although the nation's total realized income rose
  from 74.3 billion in 1923 to 89 billion in 1929
  it was not distributed evenly.
• In 1929 the top 0.1 of Americans had a combined
  income equal to the bottom 42. That same top
  0.1 of Americans in 1929 controlled 34 of all
  savings
• 80 of Americans had no savings at all
• The top 1 received a 75 increase in their
  disposable income while the other 99 saw an
  average 9 increase in their disposable income.

7
THE CHART ABOVE SHOWS THAT IN 1929 THE TOP 1/10TH
OF 1 OF THE POPULATION EARNED AS MUCH MONEY AS
THE BOTTOM 42 OF THE POPULATION. THE SECOND TWO
BARS SHOW THAT THE TOP 1 OF THE POPULATION SAW A
75 INCREASE IN THEIR INCOME WHILE THE OTHER 99
SAW ONLY A 9 INCREASE IN THEIR INCOME IN THE
1920S.
8
TOTAL REALIZED INCOME ROSE FROM 74.3 BILLION IN
1923 TO 89 BILLION IN 1929
9
CHART SHOWING WAGES OF UNSKILLED WORKERS. NOTICE
HOW LITTLE THE WAGES CHANGED DURING THE SUPPOSED
PROSPERITY OF THE 1920S
10
HIGH TARIFFS AND WAR DEBTS
AT THE END OF WORLD WAR ONE, EUROPEAN NATIONS
OWED OVER 10 BILLION (115 BILLION IN 2002
DOLLARS) TO THEIR FORMER ALLY, THE UNITED STATES.
THEIR ECONOMIES HAD BEEN DEVASTATED BY WAR AND
THEY HAD NO WAY OF PAYING THE MONEY BACK. THE
U.S. INSISTED THAT THEIR FORMER ALLIES PAY THE
MONEY. THIS FORCED THE ALLIES TO DEMAND GERMANY
PAY THE REPARATIONS IMPOSED ON HER AS A RESULT OF
THE TREATY OF VERSAILLES. ALL OF THIS LATER LED
TO A FINANCIAL CRISIS WHEN EUROPE COULD NOT
PURCHASE GOODS FROM THE U.S. THIS DEBT
CONTRIBUTED TO THE GREAT DEPRESSION. IN 1922 THE
U.S. PASSED THE FORDNEY-MC CUMBER ACT WHICH
INSTITUTED HIGH TARIFFS ON INDUSTRIAL PRODUCTS.
OTHER NATIONS SOON RETALIATED AND WORLD TRADE
DECLINED HELPING BRING ON THE GREAT DEPRESSION.
11
OVERPRODUCTION IN INDUSTRY FACTORIES WERE
PRODUCING PRODUCTS BUT WAGES WERE NOT RISING FAST
ENOUGH. TOO FEW WORKERS COULD AFFORD TO BUY THE
FACTORY OUTPUT. THE SURPLUS PRODUCTS COULD NOT
BE SOLD OVERSEAS DUE TO HIGH TARIFFS AND LACK OF
MONEY IN EUROPE.
.
12
FARM OVERPRODUCTION
DUE TO SURPLUSES AND OVERPRODUCTION FARM INCOMES
DROPPED THROUGHOUT THE 1920S. THE PRICE OF FARM
LAND FELL FROM 69 PER ACRE IN 1920 T0 31 IN
1930. AGRICULTURE WAS IN A DEPRESSION THAT
BEGAN IN 1920 LASTING UNTIL THE OUTBREAK OF WORLD
WAR II IN 1939. IN 1929 THE AVERAGE ANNUAL INCOME
FOR AN AMERICAN FAMILY WAS 750, BUT FOR FARM
FAMILIES IT WAS ONLY 273. THE PROBLEMS IN THE
AGRICULTURAL SECTOR HAD A LARGE IMPACT SINCE 30
OF AMERICANS STILL LIVED ON FARMS.
13
DECLINE IN FARM PRICES IMPACTED FARMERS INCOME
14
HERBERT HOOVER ELECTED PRESIDENT, 1928
"We in America today are nearer to the final
triumph over poverty than ever before in the
history of any land. The poorhouse is vanishing
from among us. 1928
"I do not believe that the power and duty of the
General Government ought to be extended to the
relief of individual suffering. . . . The lesson
should be constantly enforced that though the
people support the Government the Government
should not support the people." (1930)
15
HERBERT HOOVER RAN ON A PLATFORM OF CONTINUED
PROSPERITY
16
ONE OF HOOVERS FIRST ACTS WAS DEALING WITH THE
FARM CRISIS
Candidate Hoover "The most urgent economic
problem . . . is agriculture. It must be solved.
17
The net income of American farmers plummeted from
7 billion in 1929 to only 2.5 billion in 1932.
Few farmers had electricity or running water and
many lived in primitive and isolated conditions.
Farm tenancy rose sharply again in the early
1930s with new waves of foreclosures because of
farmers' inability to pay their taxes and
mortgages. By 1933, banks were foreclosing on
some 20,000 farm mortgages monthly, and thousands
of small, undercapitalized country banks failed,
while thousands were barely surviving. As the
Great Depression worsened, farmers experienced
abandoned homesteads, collapsing prices, longer
working hours, buildings and equipment in
disrepair, a lack of cash or credit, and a rising
wave of political discontent.
FARM INCOME IN BILLIONS OF DOLLARS
18
AGRICULTURAL PRICES 1919 -1932 UNITED STATES
DEPARTMENT OF AGRICULTURE YEARBOOK OF
AGRICULTURE, 1934
NOTE THE DECLINE IN PRICES THROUGHOUT THE 1920S
19
MANY FARMERS LOST THEIR FARMS. BELOW IS ONE OF
THOUSANDS OF FARM FORECLOSURE SALES.
20
STOCK MARKET CRASH AND FINANCIAL PANIC
WALL STREET ON THE DAY OF THE CRASH, OCTOBER 1929
21
MILLIONS OF AVERAGE AMERICANS BEGAN SPECULATING
IN THE STOCK MARKET IN THE 1920S
22
REASONS FOR THE STOCK MARKET CRASH STOCKS WERE
OVERPRICED DUE TO SPECULATION MASSIVE FRAUD AND
ILLEGAL ACTIVITY MARGIN BUYING FEDERAL RESERVE
POLICY
23
Review

• There was no magic bullet that created the Great
  Depression
• The safest way to say it is that Business and
  consumer greed (keeping up with the Jones) with
  no control by the government lead to the initial
  disaster
• Failure to see the markets closing down
• Overpricing in the market on things that were not
  worth what they were charging

24

• An economy where the wealthiest 3 keep getting
  richer and the poor did not reap the benefits of
  the 1920s boom
• These were all reasons for the Depression
• Tomorrow we will look at what the President did
  to respond to the problems and what he and his
  aids believed.