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The Great Depression
Transcript of The Great Depression
& The New Deal Key Events 1928
Herbert Hoover is elected president 1929
Stock market crashes Key People 31st U.S. president; failed to provide federal relief after Crash of 1929 and adhered firmly to laissez-faire economic policy Herbert Hoover Franklin D. Roosevelt 32nd U.S. president; elected in 1932 after serving as governor of New York Despite the booming U.S. economy of the late 1920s, Calvin Coolidge decided not to run for president again. In his place, Republicans nominated the president’s handpicked successor, popular World War I humanitarian administrator Herbert Hoover, to continue America’s prosperity. Democrats chose New York Governor Alfred E. Smith on an anti-Prohibition platform. Hoover won with ease, with 444 electoral votes to Smith’s 87 and with a margin of more than 6 million popular votes. The Election of 1928 Soon after Hoover took office, the good times and successful run of the bull market came to an abrupt halt.
Stiffer competition with Britain for foreign investment spurred speculators to dump American stocks and securities in the late summer of 1929.
By late October, it was clear that an increasing number of Americans pulled their money out of the stock market.
The Dow Jones Industrial Average fell steadily over a ten-day period, finally crashing on October 29, 1929.
On this so-called Black Tuesday, investors panicked and dumped an unprecedented 16 million shares.
The rampant practice of buying on margin (when speculators use future earnings on the stocks they own—money they do not even have yet—to buy new stocks), which had damaged Americans’ credit, made the effects of the stock market crash worse.
As a result, within one month, American investors had lost tens of billions of dollars.
Although the 1929 stock market crash was certainly the catalyst for the Great Depression, it was not the sole cause. The Crash of 1929 Ever since the turn of the century, the foundation of the American economy had been shifting from heavy industry to consumer products. In other words, whereas most of America’s wealth in the late 1800s had come from producing iron, steel, coal, and oil, the economy of the early 1900s was based on manufacturing automobiles, radios, and myriad other items that Americans could buy for use in their own homes.
As Americans jumped on the consumer bandwagon, an increasing number of people began purchasing goods on credit, promising to pay for items later rather than up front. When the economic bubble of the 1920s burst, debtors were unable to pay up, and creditors were forced to absorb millions of dollars in bad loans. Policy makers found it difficult to end the depression’s vicious circle in this new consumer economy: Americans were unable to buy goods without jobs, yet factories were unable to provide jobs because Americans were not able to buy anything the factories produced. Consumer Goods & Credit Overproduction in manufacturing was also an economic concern during the era leading up to the depression.
During the 1920s, factories produced an increasing amount of popular consumer goods in an effort to match demand.
Although factory output soared as more companies utilized new machines to increase production, wages for American workers remained basically the same, so demand did not keep up with supply.
Eventually, the price of goods plummeted when there were more goods in the market than people could afford to buy.
The effect was magnified after the stock market crash, when people had even less money to spend. Overproduction in Factories Farmers faced a similar overproduction crisis. Soaring debt forced many farmers to plant an increasing amount of profitable cash crops such as wheat. Although wheat depleted the soil of nutrients and eventually made it unsuitable for planting, farmers were desperate for income and could not afford to plant less profitable crops. Unfortunately, the aggregate effect of all these farmers planting wheat was a surplus of wheat on the market, which drove prices down and, in a vicious cycle, forced farmers to plant even more wheat the next year. Furthermore, the toll that the repeated wheat crops took on the soil contributed to the 1930s environmental disaster of the Dust Bowl in the West Overproduction on Farms Farmers, especially those in Colorado, Oklahoma, New Mexico, Kansas, and the Texas panhandle, were hit hard by the depression. Years of farming wheat without alternating crops (which was necessary to replenish soil nutrients) had turned many fields into a thick layer of barren dust. In addition, depressed crop prices—a result of overproduction—forced many farmers off their land. Unable to grow anything, thousands of families left the Dust Bowl region in search of work on the west coast. The plight of these Dust Bowl migrants was made famous in John Steinbeck’s 1939 novel The Grapes of Wrath. The Dust Bowl Income inequality, which was greater in the late 1920s than in any other time in U.S. history, also contributed to the severity of the Great Depression. By the time of the stock market crash, the top 1 percent of Americans owned more than a third of all the nation’s wealth, while the poorest 20 percent owned a meager 4 percent of it. There was essentially no middle class: a few Americans were rich, and the vast majority were poor or barely above the poverty line. This disparity made the depression even harder for Americans to overcome. Income Inequality Reckless banking practices did not help the economic situation either. Many U.S. banks in the early 1900s were little better than the fly-by-night banks of the 1800s, especially in rural areas of the West and South. Because virtually no federal regulations existed to control banks, Americans had few means of protesting bad banking practices. Corruption was rampant, and most Americans had no idea what happened to their money after they handed it over to a bank. Moreover, many bankers capitalized irresponsibly on the bull market, buying stocks on margin with customers’ savings. When the stock market crashed, this money simply vanished, and thousands of families lost their entire life savings in a matter of minutes. Hundreds of banks failed during the first months of the Great Depression, which produced an even greater panic and rush to withdraw private savings. Bad Banking Practices At first, President Herbert Hoover and other officials downplayed the stock market crash, claiming that the economic slump would be only temporary and that it would actually help clean up corruption and bad business practices within the system. When the situation did not improve, Hoover advocated a strict laissez-faire (hands-off) policy dictating that the federal government should not interfere with the economy but rather let the economy right itself. Furthermore, Hoover argued that the nation would pull out of the slump if American families merely steeled their determination, continued to work hard, and practiced self-reliance. Hoovers Inaction Hoover made another serious miscalculation by signing into law the 1930 Smoot-Hawley Tariff, which drove the average tariff rate on imported goods up to almost 60 percent. Although the move was meant to protect American businesses, it was so punitive that it prompted retaliation from foreign nations, which in turn stopped buying American goods. This retaliation devastated American producers, who needed any sales—foreign or domestic—desperately. As a result, U.S. trade with Europe and other foreign nations tailed off dramatically, hurting the economy even more. Smoot-Hawley Tariff When it became clear that the economy was not righting itself, Hoover held to his laissez-faire ideals and took only an indirect approach to jump-starting the economy. He created several committees in the early 1930s to look into helping American farmers and industrial corporations get back on their feet. In 1932, he approved the Reconstruction Finance Corporation (RFC) to provide loans to banks, insurance companies, railroads, and state governments. He hoped that federal dollars dropped into the top of the economic system would help all Americans as the money “trickled down” to the bottom. Individuals, however, could not apply for RFC loans. Hoover refused to lower steep tariffs or support any “socialistic” relief proposals such as the Muscle Shoals Bill, which Congress drafted to harness energy from the Tennessee River. Reconstruction Finance Corporation Middle-aged World War I veterans were also among the hardest hit by the depression. In 1924, Congress had agreed to pay veterans a bonus stipend that could be collected in 1945; as the depression worsened, however, more and more veterans demanded their bonus early. When Congress refused to pay, more than 20,000 veterans formed the “Bonus Army” and marched on Washington, D.C., in the summer of 1932. They set up a giant, filthy Hooverville in front of the Capitol, determined not to leave until they had been paid. President Hoover reacted by ordering General Douglas MacArthur (later of World War II fame) to use force to remove the veterans from the Capitol grounds. Federal troops used tear gas and fire to destroy the makeshift camp in what the press dubbed the “Battle of Anacostia Flats.” The "Bonus Army" "Big Al's Kitchen for the Needy"
In an attempt to clean up his public image, gangster Al Capone opened a soup kitchen to feed Chicago's needy. The economic panic caused by the 1929 crash rapidly developed into a depression the likes of which Americans had never experienced. Millions lost their jobs and homes, and many went hungry as factories fired workers in the cities to cut production and expenses. Shantytowns derisively dubbed “Hoovervilles” sprang up seemingly overnight in cities throughout America, filled with populations of the homeless and unemployed.
In 1932, Congress took the first small step in attempting to help American workers by passing the Norris–La Guardia Anti-Injunction Act, which protected labor unions’ right to strike. However, the bill had little effect, given that companies were already laying off employees by the hundreds or thousands because of the worsening economy. "Hoovervilles" When the election of 1932 rolled around, all eyes focused on the optimistic Democratic governor of New York, Franklin Delano Roosevelt. A distant cousin of former president Theodore Roosevelt, FDR promised more direct relief and assistance rather than simply benefits for big business. Republicans renominated Hoover, and the election proved to be no contest. In the end, Roosevelt won a landslide victory and carried all but six states. The Election of 1932 1933
First Hundred Days: Congress and Roosevelt establish many New Deal agencies
Twenty-First Amendment is ratified 1934
Congress creates Securities and Exchange Commission (SEC)
Indian Reorganization Act (IRA) 1932
Reconstruction Finance Corporation is created
“Bonus Army” camps out in Washington, D.C.
Franklin D. Roosevelt is elected president 1935
Works Progress Administration (WPA)
National Labor Relations Act (Wagner Act) Social Security Act 1936
Soil Conservation and Domestic Allotment Act
Roosevelt is reelected
Butler v. United States ruling British economist who believed that deficit spending during recessions and depressions could revive national economies; his theories formed the basis of Roosevelt’s New Deal approach John Maynard Keynes Americans voted for Franklin Delano Roosevelt in 1932 on the assumption that the Democrats would dole out more federal assistance than Hoover and the Republicans had.
Indeed, immediately after taking the oath of office, FDR set out to provide relief, recovery, and reform in his bundle of programs known as the New Deal.
Roosevelt drew much of his inspiration for the New Deal from the writings of British economist John Maynard Keynes, who believed that a government’s deficit spending could prime the economic pump and jump-start the economy.
With the support of a panicked Democratic Congress, Roosevelt created most of the “alphabet agencies” of the First New Deal within his landmark First Hundred Days in office. The First Hundred Days Although the New Deal sometimes comes across as a cohesive package, much of the individual legislation passed during the First Hundred Days was conceived on the fly. So many special interest groups, such as big business and organized labor, were hounding the government for change that Roosevelt and Congress often felt they were being pulled in opposite directions.
Nevertheless, the New Deal policies did much to get Americans back on their feet. They not only provided relief, recovery, and reform but also drastically changed the federal government’s role in politics and society. Roosevelt’s successful application of Keynes’s economic theories transformed the Democrats into social welfare advocates. Even decades after the Great Depression, Democratic politicians would continue fighting for more government intervention in the economy, redistribution of wealth, and aid for the neediest. Recovery Reform Much of the legislation that the Hundred Days Congress drafted doled out immediate relief for the American people that President Hoover and the Republicans had failed to provide. The Federal Emergency Relief Administration’s relief assistance, for example, provided millions of Americans with enough money to make ends meet. The Civil Works Administration put the unemployed to work, and the Agricultural Adjustment Administration, the Tennessee Valley Authority, the National Recovery Administration, and the Public Works Administration kept millions of others alive as well. Americans were so relieved by the federal government’s quick action that many became die-hard Democrats and Roosevelt fans. The president’s optimism and can-do attitude, combined with the success of his immediate relief programs, made him almost politically untouchable during his first term. Relief Many of the same programs designed to provide immediate relief were also geared toward long-term economic recovery. The Civilian Conservation Corps and the Public Works Administration put millions of men to work not only to keep them employed but also to improve the national infrastructure. When the United States finally emerged from the Great Depression during World War II, it had hundreds of new roads and public buildings, widespread electrical power, and replenished resources for industry. The third goal of the New Deal policies was to reform the banking and financial sector of the economy to curb bad lending practices, poor trading techniques, and corruption. The president’s decision to take the country off the gold standard proved to be a smart move because it boosted people’s confidence in the U.S. dollar. The Federal Deposit Insurance Corporation, created under the Glass-Steagall Act, eliminated untrustworthy banks that had plagued the country for more than a century. Once Americans became confident that their funds would be safe, the number of bank deposits surged. Likewise, the Securities and Exchange Commission in 1934, which weeded out bad investment habits, gave Americans more confidence in the stock market. Although foreign policy often got lost in the shuffle amid the domestic economic concerns of the New Deal, Roosevelt did create a major international initiative with Latin America in the Good Neighbor Policy of 1933 and 1934. As part of the initiative, Roosevelt embarked on a tour of the region; signed new, friendlier treaties with several Latin American countries; pledged to avoid military intervention in Latin America; and shunned the (Theodore) Roosevelt Corollary to the Monroe Doctrine by withdrawing troops from several countries. The Good Neighbor Policy 1937
United States Housing Authority (USHA)
Roosevelt initiates court-packing scheme Roosevelt Recession begins 1938
Second Agricultural Adjustment Act Fair Labor Standards Act Kansas governor who ran against FDR on anti–New Deal Republican ticket in election of 1936 Alfred M. Landon 1939
Congress passes the Hatch Act The Second New Deal—the legislation that Roosevelt and Congress passed between 1935 and 1938—was strikingly different from the First New Deal in certain ways. Perhaps most important, the Second New Deal legislation relied more heavily on the Keynesian style of deficit spending than the First New Deal did. Roosevelt altered his policy making in part because of complaints from critics and in part because, by 1935, it was clear that more Americans still needed federal relief assistance. Roosevelt thus aimed approximately half the Second New Deal programs and policies at long-term reform. The Second New Deal Predictably, Roosevelt’s New Deal came under attack from the right, from Republicans, conservative Democrats, bankers, and Wall Street financiers who claimed that it doled out too many federal handouts.
Many of these critics also feared that the policy and programs involved were a dangerous step toward socialism and the destruction of the American capitalist system.
Such misgivings were understandable given the political atmosphere in the 1930s, as communism was becoming a more imminent threat.
In fact, Soviet agents in the United States went so far as to launch a “popular front” campaign to actively support the president.
Moreover, an unprecedented number of people joined the American Communist Party during the decade.
Perhaps more surprising, the New Deal also came under attack from the far left.
Many socialist activists denounced the New Deal because they believed that it was too conservative and that it did not provide enough relief and assistance. New Deal Critics With the 1936 presidential election on the horizon, Republicans stood virtually no chance against Roosevelt and his party. Democrats’ efforts to provide relief, recovery, and reform were highly visible. Roosevelt had especially strong support among blacks (voting as Democrats in large numbers for the first time), unskilled laborers, and residents of the West and South. The Republican nominee was Kansas governor Alfred M. Landon, a moderate who campaigned on an anti–New Deal platform. Not surprisingly, Roosevelt won a landslide victory, with 523 electoral votes to Landon’s 8. Roosevelt’s resounding victory proved that Americans widely supported the New Deal. The Election of 1936 By 1935, New Deal critics were becoming more numerous and vocal.
Congressmen, including even some Democrats, had overcome the initial panic and were becoming more fiscally conservative as Franklin Delano Roosevelt’s deficit spending soared.
More important, aging, conservative appointees dominated the Supreme Court and had begun to strike down several key laws of the First New Deal.
In the 1935 Schechter v. United States ruling, for example, a majority of justices declared that the National Recovery Act was unconstitutional.
They argued that the act gave too much power to the president and was an attempt to control intrastate commerce.
The following year, justices also struck down the Agricultural Adjustment Administration in Butler v. United States on the grounds that it was unconstitutional and tried to exert federal control of agricultural production. A weakened New Deal Roosevelt believed that the National Recovery Act and the Agricultural Adjustment Administration were crucial to reviving the American economy and feared that any more conservative Supreme Court rulings would cripple or even kill New Deal policy entirely. In 1937, to prevent this from happening, the president petitioned Congress to alter the makeup of the Supreme Court on the pretense that the justices, old age was affecting their ability to work and concentrate. Roosevelt asked for the power to appoint as many as six new justices, bringing the total to fifteen, and to replace justices over the age of seventy. The true aim of the request was obvious: it would enable Roosevelt to effectively stack the deck to ensure that only pro–New Dealers would sit on the Court.
The court-packing scheme backfired. Rather than win over Democrats and New Dealers in Congress, Roosevelt shocked supporters with his attempt at misusing his executive powers. The president’s blatant disregard for the cherished separation of powers stunned even the American people. Roosevelt repeatedly denied charges that he was trying to bend the entire federal government to his will and defended his belief that aging justices were often incapable of performing their duties. The court-packing debate dragged on for several months before Congress and Roosevelt reached a compromise. Congress made minor reforms in the lower courts but left the Supreme Court untouched. Roosevelt's Court Packing Scheme The court-packing scheme took a severe toll on Roosevelt’s popularity and marked the beginning of the end of the New Deal. Politicians and regular Americans alike were keenly aware that the federal government under the tight control of a single individual would be nothing more than a dictatorship, no matter how benevolent or well intentioned the leader happened to be. Roosevelt’s clumsy attempts to disguise his intentions had the effect only of making him look guilty. As the public grew suspicious of “dictator” Roosevelt, fellow Democrats in Congress began to vote more conservatively, and the chances of any more significant New Deal legislation being passed became slim.
Ironically, the court-packing scheme may have helped Roosevelt in one way. Supreme Court Justice Owen Roberts, who had notoriously struck down New Deal laws in the past, mysteriously began to vote in favor of the Wagner Act and the Social Security Act after Roosevelt announced his plan to replace six justices. Historians are still uncertain as to why Roberts suddenly looked favorably upon the New Deal, but few believe it was mere coincidence. Consequences In 1937, Roosevelt began to scale back deficit spending, because he believed that the worst of the Great Depression had passed and because he was receiving pressure from conservatives in Congress (and even from ardent New Dealers in his own cabinet). The size of the Works Progress Administration, for example, was severely reduced, as were agricultural subsidies.
This decision to cut back spending turned out to be premature, however, as the economy buckled again, resulting in what became known as the Roosevelt Recession. The stock market crashed for a second time in 1937, and the price of consumer goods dropped significantly. Contrary to conservative beliefs, the economy simply had not pulled far enough out of the depression to survive on its own. The embattled Roosevelt only made himself look worse by trying to place the blame on spendthrift business leaders. The American people were not convinced, and as a result, Democrats lost a significant number of seats in the House and Senate in the 1938 congressional elections. This return of Republican power effectively killed the New Deal. The Roosevelt Recession Republicans in Congress further weakened Roosevelt’s executive powers with the Hatch Act of 1939. The act forbade most civil servants from participating in political campaigns and public office holders (i.e., Roosevelt and New Dealers) from using federal dollars to fund their reelection campaigns. The bill also made it illegal for Americans who received federal assistance to donate money to politicians. Conservatives hoped that these measures would divorce the functions of government from the campaign frenzy and ultimately dislodge entrenched New Dealers who preyed on a desperate public for votes. The Hatch Act Despite the numerous positive effects that the New Deal had, it failed to end the Great Depression. Millions of Americans were still hungry, homeless, and without jobs as late as December 1941, when the United States entered World War II. Many historians and economists have suggested that the New Deal would have been more successful if Roosevelt had put a greater amount of money into the economy, but this conclusion is debatable. Only after the surge in demand for war-related goods such as munitions, ships, tanks, and airplanes did the economy finally right itself and begin to grow. No End to the Depression A billboard proclaiming a message of 1920s prosperity stands next to the decaying buildings of Depression-era Birmingham, Alabama. The Great Depression caused people to lose their jobs, businesses, and homes. Some people resorted to building their own shelters and living in makeshift homes in squatter camps. What do you see? What type of business do you think is this?
What might the people be doing?
This bank is failing. What might cause a bank to fail?
How do you think bank depositors feel if they believe the bank is unable to pay them their money?
How might bank failures affect the nation? The disastrous stock market crash on October 24, 1929, set off a frantic burst of selling that sent stock market prices plummeting. This set off a chain of events that led to the economic instability and widespread bank failures that characterized the Great Depression. This photograph shows depositors gathering outside of a bank that has closed. Did You Know? On March 3, 1931, President Herbert Hoover signed a law that made "The Star-Spangled Banner," based on an 1814 poem by Francis Scott Key (1779-1843), America's national anthem. The stock market crash and the problems of farmers were two of the many reasons the economy sank into a depression. Another problem was that millions of families had been left out of the prosperity of the 1920s. They didn’t have the money to buy the products that factories were turning out. Still another problem was that banks had loaned huge sums of money to foreign nations that could not afford to repay those debts. These and other factors combined to plunge the economy into depression. The economic downturn was so deep and lasted so long that people called it the “Great Depression.” Even healthy banks suffered as panicky depositors withdrew their money. When banks ran out of cash, they closed their doors. In 1930, more than 1,000 banks went out of business.
Businesses lost their deposits when banks closed. Others found banks no longer willing or able to make loans. Without funds to help them through rough times, thousands of businesses failed.
Banks that served farmers had special problems. These banks had been in trouble beginning in the 1920s. As prices for farm products like cotton and wheat fell, farmers with debts could not repay their loans. The Depression Begins By 1933, about 85,000 businesses had failed. Many more were barely surviving. Businesses that did stay open needed fewer employees. At Ford Motor Company, employment dropped from 128,000 to 37,000, while “hundreds of half-finished automobile bodies gathered dust.”
Even people with jobs were earning less. Secretaries who once received $40 per week settled for $10. Many cities couldn’t afford to pay their employees. As fewer people were able to afford consumer goods, factories fired their workers. By 1933, more than 12 million Americans had lost their jobs.
When workers couldn’t find jobs, they spent their savings and then sold what they owned. Finally, they had no way to pay their bills. By the beginning of 1933, almost 1,000 families per day were losing their homes. For the first time, homelessness became a major problem in America. Losing Jobs and Homes “All of a sudden we had to move,” remembered one child. “My father lost his job and we moved into a double garage.” Homeless families often built shacks out of scraps of wood, tin, and tar paper. Little “towns” of such shelters grew up around cities and were called “Hoovervilles,” after President Hoover. As the economy collapsed further, some people simply slept under newspapers on the streets.
Unable even to buy groceries, families scrounged for food in garbage cans and alleys. One boy said, “Every now and then my brother or Dad would find some sort of odd little something. Then . . . we’d go wild over food. We’d eat until we were sick.”
Under such stresses, families started breaking up. Jobless young people sometimes hopped onto freight trains to other cities and begged for food. Some families placed their children in orphanages—homes for children without parents—to keep them from starving. Losing Jobs and Homes Homeless people built towns of shacks made from tarpaper, cardboard, and scrap material. These towns were called “Hoovervilles” as a criticism of President Hoover, whom many blamed for the Great Depression. Here, a man stands outside a shack in a Hooverville in Ohio in 1938. Such dwellings had no running water or electricity. The crash of the stock market was a dramatic sign that America’s good times had come to a sudden end. By the time the stock market stabilized a bit in November, businesses and investors had lost more than $30 billion, an amount that surpassed the total cost of the United States’ participation in World War I. Newspapers told of ruined investors leaping to their deaths off skyscraper ledges. In Kansas City, a man with big stock losses called out, “Tell the boys I can’t pay them what I owe them,” and shot himself.
The stock market crash affected millions of Americans, some right away, some over the years to come. Many banks had invested heavily in the stock market, or loaned money on margin. After the crash, they didn’t have enough money to pay depositors—people who kept their money in the bank. They went bankrupt, or closed down without paying off debts. Depositors lost their life savings. The Depression Begins Hysteria on the Street
On the day of the collapse, the exchange lost $14 billion in value, ten times the annual budget of the federal government at that time. Black Thursday
Selling was triggered in part by a huge sell-off the preceding Thursday. Despite the efforts of brokers the following day (when this photo was taken) shares continued to decline, a trend dramatized by the newspapers in their weekend editions. Trading Floor
As the slide continued, trading increased. Over 16 million shares were traded, a record not broken until 1969. During the panic, clerks worked for 48 straight hours. Headlines
Despite the optimistic headline, the news from Wall Street would not get any better. Run on the Bank
Panicked by the collapse of the market, customers of a bank in New Jersey race to Passaic to claim their deposits. What do you see in this photograph?
How are people dressed?
What might they be doing?
How might these people feel as they wait in line for food relief? Franklin Delano Roosevelt became paralyzed by polio at the age of 39. Americans living during the Depression felt he understood their suffering more than Hoover. Here Roosevelt, shown at the right, is on his way to his inauguration. Outgoing President Herbert Hoover sits beside him. During the Great Depression, many people could not afford basic necessities such as food. Private and government organizations helped distribute free food for the hungry. People waited in “breadlines” to receive food distributed at centers in towns and cities. This photograph shows people standing on a breadline outside a soup kitchen in New York City. The Civilian Conservation Corps put more than 2.5 million young men to work on environmental projects. CCC workers earned only $1 a day, but were provided with meals and camp lodging. The CCC program ran from 1933 to 1942. CCC workers built roads and trails, planted trees, and fought forest fires. The dams built by the TVA harnessed the waterpower of the Tennessee River to generate cheap electricity. The TVA also oversaw the stringing of power lines in rural areas, supplying electricity to places which had not previously been electrified. Reexamine this image, and use what you learned in to answer these questions:What might these people think of President Roosevelt? Which New Deal goal is represented in this image: relief, recovery, or reform? All over the country, New Deal construction projects put the unemployed to work. As a result, America had better roads, bridges, dams, schools, and other public buildings. These projects not only put money in people’s pockets, but also raised their spirits. As one Tennessee worker said, “I’m proud that I worked on that Crossville dam. I wasn’t afraid to tackle anything after that.”The New Deal also introduced “safety nets” for many of the nation’s needy people. Social Security and unemployment insurance still exist today, providing a major source of income for retired and unemployed workers. In later years, other welfare, training, and assistance programs were established as Americans began to accept the idea that government had a responsibility to aid those in need.Although the New Deal did help reduce poverty in America, poverty was not eliminated, and remained a problem. In addition, the New Deal made little effort to solve problems of discrimination against African Americans and other minorities. Impact on the Poor and Unemployed Legal problems slowed some efforts to assist workers and businesses. The Supreme Court declared the National Recovery Administration (NRA) unconstitutional, saying that the NRA had been given powers that were reserved only for Congress.
In response, Congress passed the National Labor Relations Act in 1935. This act gave workers the right to join unions and to bargain with employers for improved wages and working conditions. It also created the National Labor Relations Board (NLRB) to settle disputes between employers and workers. Supported by this legislation, union membership grew rapidly. The NLRB still exists today.
Another lasting effect of the New Deal was that the government became more involved in regulating the stock market and the banking industry. The Federal Deposit Insurance Corporation (FDIC) still protects bank depositors by insuring bank accounts. Laws limit margin buying, and other rules forbid banks from taking risks in the stock market with depositors’ funds. Impact on Workers and Business The WPA, a work-relief organization established in 1935, put more than 8 million Americans to work over the course of its eight-year operation. WPA workers built hundreds of thousands of bridges, public buildings, and parks. The WPA also established art projects. It hired unemployed artists to paint murals in public buildings. Charles Wells painted this mural of New Deal workers for a federal building in New Jersey. By raising crop prices and providing farmers with low-interest loans, New Deal programs helped farmers keep their farms. But not every New Deal farm program was a complete success. When the government paid farmers to plant less, they didn’t need as much hired help. As a result, many farm workers lost their jobs. Some farmers also cut production by turning sharecroppers off their rented land.
Another New Deal agency, the Rural Electrification Administration (REA), helped improve life on the farm. The REA made loans to help bring electricity to rural areas. When this program was begun in 1935, only one farm in ten had electricity. Within 20 years, nine out of ten farms were electrified. Impact on Farmers and Rural Americans The New Deal changed American attitudes toward the role of government. Many people came to believe that the government has a responsibility to help those in need. What do you see in this political cartoon?
Who are the two people in this political cartoon?
How are the two people dressed?
What might they be doing?
What do you think the phrase “Yes, you remembered me” means? By 1939, most New Deal programs had come to an end. But Roosevelt’s ambitious response to the Great Depression had permanently changed both the size and the role of the national government. In 1931, the federal government had 580,000 employees. By 1941, 1.3 million people were government employees.
Before the Great Depression, most Americans probably agreed with Thomas Jefferson that the best government was that which governs least. Roosevelt disagreed. He strongly believed that one of government’s most important duties was to care for citizens who could not provide for themselves. “That responsibility,” he declared, “is recognized by every civilized nation.”
In the coming years, Americans would continue to debate how far the government should go in meeting this responsibility, and how it should go about it. But by the end of the 1930s, most Americans were prepared to accept that government did have a responsibility to lend a helping hand to those in need.As the 1940s began, the depression still lingered. It would finally be brought to an end by a new and even greater crisis. America was about to go to war. Impact on Government