Chapter 23:
The Great Depression
Introduction:
The Great Depression – United States
o Following the 1929 crash, there was a severe/prolonged
economic crisis
o Halt borrowing and buying
o Layoffs and downward cycle
Four years later:
o Lowest points
o High unemployment rates
o Struggling farmers
o Depleted savings
o Sought public assistance
o Defaulted on debts
o Banks closed
o Attempted remedies: higher tariffs and immigration restrictions
In 1932, Franklin D. Roosevelt promised a New Deal and victory in the
presidential election
Transformation in the U.S. Government
The Origins of the Great Depression:
On Thursday, October 24th, 1929, stock market prices suddenly
plummeted
The Stock Market’s collapse did not cause the Great Depression
o Exposed weaknesses in the American Economy
Rising inequality
Declining demand
Rural collapse
Overextended investors
The bursting of a speculative bubble
The pro-business policies of the 1920s favored the wealthy, leading to
a growing wealth gap
o Speculative investments
o Speculation
, Additionally, the economy relied heavily on the production and
consumption of durable goods (long-lasting), but by the late 1920s, the
market was saturated, leading to a decline in demand
Agricultural Mismanagement
The agricultural sector also faced challenges, with declining prices and
soil exhaustion causing financial strain for farmers
President Hoover’s response to the depression, including the
enactment of high tariffs, further worsened the global economic
collapse
Smoot-Hawley Tariff of 1930: The highest global tariff in US History
to protect farmers
Bank Failures
The Federal Reserve overcorrected in its response to speculation (risky
investments) by raising interest rates (cost of borrowing money) and
tightening credit
Bank Runs
Panic and subsequent bank failures exacerbated the situation
Causes: structural flaws, speculative bubble, protectionism, and panic
Despite the problems, many Americans initially believed the economy
would recover, but were ultimately faced with the devastating reality of
the economic collapse
Herbert Hoover and the Politics of the Depression:
During the Great Depression, President Herbert Hoover and the
Republican Party faced public blame for their conservative approach
Volunteerism
Associationalism
However, private charities were overwhelmed, and the Depression’s
scale of the Depression exceeded their capacity
Associantionalism, a voluntary cooperative approach
Hoover’s Inaction
Hoover resisted direct government intervention due to his limited
government principles
Reconstruction Finance Corporation (RFC) – emergency loans to banks,
building-and-loan societies, railroads, and other private industries
The Great Depression
Introduction:
The Great Depression – United States
o Following the 1929 crash, there was a severe/prolonged
economic crisis
o Halt borrowing and buying
o Layoffs and downward cycle
Four years later:
o Lowest points
o High unemployment rates
o Struggling farmers
o Depleted savings
o Sought public assistance
o Defaulted on debts
o Banks closed
o Attempted remedies: higher tariffs and immigration restrictions
In 1932, Franklin D. Roosevelt promised a New Deal and victory in the
presidential election
Transformation in the U.S. Government
The Origins of the Great Depression:
On Thursday, October 24th, 1929, stock market prices suddenly
plummeted
The Stock Market’s collapse did not cause the Great Depression
o Exposed weaknesses in the American Economy
Rising inequality
Declining demand
Rural collapse
Overextended investors
The bursting of a speculative bubble
The pro-business policies of the 1920s favored the wealthy, leading to
a growing wealth gap
o Speculative investments
o Speculation
, Additionally, the economy relied heavily on the production and
consumption of durable goods (long-lasting), but by the late 1920s, the
market was saturated, leading to a decline in demand
Agricultural Mismanagement
The agricultural sector also faced challenges, with declining prices and
soil exhaustion causing financial strain for farmers
President Hoover’s response to the depression, including the
enactment of high tariffs, further worsened the global economic
collapse
Smoot-Hawley Tariff of 1930: The highest global tariff in US History
to protect farmers
Bank Failures
The Federal Reserve overcorrected in its response to speculation (risky
investments) by raising interest rates (cost of borrowing money) and
tightening credit
Bank Runs
Panic and subsequent bank failures exacerbated the situation
Causes: structural flaws, speculative bubble, protectionism, and panic
Despite the problems, many Americans initially believed the economy
would recover, but were ultimately faced with the devastating reality of
the economic collapse
Herbert Hoover and the Politics of the Depression:
During the Great Depression, President Herbert Hoover and the
Republican Party faced public blame for their conservative approach
Volunteerism
Associationalism
However, private charities were overwhelmed, and the Depression’s
scale of the Depression exceeded their capacity
Associantionalism, a voluntary cooperative approach
Hoover’s Inaction
Hoover resisted direct government intervention due to his limited
government principles
Reconstruction Finance Corporation (RFC) – emergency loans to banks,
building-and-loan societies, railroads, and other private industries
