PROSPERITY DEPRESSION THE NEW DEAL American History II

PROSPERITY, DEPRESSION, & THE NEW DEAL American History II - Unit 4 Ms. Brown

Review • What was the Great Migration? • 1910 -1930 – mov’t of blacks to northern cities looking for jobs and escaping the Jim Crow South • What did Marcus Garvey encourage blacks in America to do? • Return to Africa, help native people throw off white colonial oppressors, and build independent nations • What was the Harlem Renaissance? • 1920 s literary and artistic mov’t celebrating African American culture • What were themes expressed by artists and authors in during the Harlem Renaissance? • Pride in African American heritage • Emphasized the trials of being black in a white dominated world

4. 5 – CAUSES OF THE GREAT DEPRESSION

4 Main Economic Causes of the Great Depression Decline of key industries Unequal distribution of wealth Great Depression Overuse of credit Farming crisis

Decline of Key Industries • 1920 s - key industries suffered • railroad and steel industries - rise of newer private forms of transportation • coal mining - competition from new forms of energy (hydroelectric power, fuel oil, and natural gas) • late 1920 s - previously booming industries began to decline • automobile - decline in demand production • lumber - decline in lumber demand = weakening housing market (key indicator of economic health)

Farming Crisis • 1920 s - agriculture industry suffered the most • during WWI - farmers took out loans for land equipment to produce food for the war effort • post-WWI - demand fell and crop prices declined by over 40% • Farmers boosted production in hopes of selling more → prices fell more.

Overuse of Credit • End of 1920 s - Americans buying less • rising prices • overproduction of goods • stagnant wages • Increasing number of goods bought on credit - consumers agree to buy now and pay later for goods/services • ex: installment plans • increased consumer debt and decreased spending of actual money

Unequal Distribution of Wealth • 1920 s - rich got richer, poor got poorer • >70% of American families made less than $2, 500/year • most American families could not fully participate in the economic advances of the 1920 s

Election of 1928 • Republican - Herbert Hoover • Sec of Commerce under Harding and Coolidge • never run for public office • quiet and reserved • had the advantage of being in the prosperous 1920 s Republican administrations • Democrat - Alfred E. Smith • 4 term NY governor • open and outgoing • 31 st POTUS = Hoover • Continued “prosperity” with Republicans

The Republican-Democrat Shift Begins… • Smith (Democratic candidate) – Irish Catholic turned off many southern voters who traditionally voted Democratic some voted Republican • Smith’s campaign “supported” civil rights some northern blacks aligned with the Democrats • The issue of civil rights will be more pervasive from this point, and ultimately leads to a shift in party beliefs/platforms.

Investing in the Stock Market • By 1929, Americans still maintained faith in gaining riches through investing in the stock market - the most visible symbol of a prosperous American economy • Dow Jones Industrial Average - a measure of the stock market’s health based on the stock prices of 30 representative large firms on the NY Stock Exchange • barometer of the stock market’s health

Investing in the Stock Market • a stock is a piece of ownership of a company • investors buy stocks and make money when the company makes money • 1920 s - stock prices rose steadily as businesses prospered → DOW high 381 • “bull market” - period of rising stock prices, 3% of Americans owned stocks • rich investors and average Americans hoping to strike it rich

Investing in the Stock Market • Problems with investing in the stock market • speculation - buying stocks on the change of a quick profit while ignoring risks • buying on margin - paying a small percentage of the stock’s price as a down payment and borrowing the rest • unrestrained buying and selling + little gov’t regulation/restrictions = market’s upward growth • Rising prices did not reflect companies actual worth → as the value of stocks declined, people who bought on margin couldn’t pay off loans

Crash of the Stock Market • Early September 1929 - prices peaked and quickly fell → confidence in the stock market started to waver, and some investors quickly sold their stocks • October 29, 1929 - “Black Tuesday” - market dove down, shareholders frantically tried to sell stocks before prices fell further, people who bought stocks on credit were stuck with huge debts, many lost savings • Mid-November 1929 - investors lost about $30 B (how much the US spent in WWI)

The Great Depression • the collapse of the stock market signaled the beginning of the Great Depression - period between 1929 -1940 in which the economy plummeted and unemployment skyrocketed • depression - long-term period of economic decline • recession - a brief period of economic decline

Bank and Business Failures • After the crash, many Americans withdrew money from banks, banks didn’t have enough money to pay withdrawals, banks couldn’t pay back loans taken out to invest in the stock market→ collapse of banks • 1929 -1932 - gross national product (nation’s total output of goods) dropped from $104 M to $59 M • 90, 000 businesses went bankrupt • 25% unemployment, workers faced pay cuts and longer hours

Worldwide Implications • The Great Depression affected Europe as they struggled to pay WWI debts. • The US could no longer import European goods and Europeans could not afford to buy US goods crippled global economy • 1930 – Hawley-Smoot Tariff Act – established the highest protective tariff in US history. • Designed to protect US manufacturers and farmers from foreign competition • Opposite effect: Countries passed similar tariffs in return, American goods not sold abroad, increased unemployment due to loss of European market