|The Great Depression and The New Deal
(notes from Chapters 7 and 8 of Who Built America? (1992)
Freeman et al. New York, Pantheon Books)
|March- October 1929
Economic contraction follows
five years of rapid industrial growth. Declining
consumer spending results in reduced production and
layoffs. From September to October the stock market
declines and then collapses. A severe economic slump
People believed that the economic downturn was just a
normal part of the business cycle, but by mid-1931 the
economic slide had accelerated and by early 1933,
fifteen million people, nearly one third of the work
force, were unemployed.
- GNP down 29%
- Construction down 78%
- Manufacturing down 54%
- Investment down 98%
Cities went broke and could not provide social
services. Breadlines and soup kitchens sprang up;
malnutrition and disease set in.
What caused the Great Depression?
- The boom psychology of the 1920's led to over
production and over investment in capital
improvements for many industries. Many companies
carried huge debt.
- The market for manufactured goods was saturated.
- Speculation in the stock market had been
financed on margins (10% of cost)
- Under consumption was, in part, due to a huge
and growing gap between rich and poor.
- The spread of the depression around the world
led to the imposition of import tariffs among the
- In the agricultural sector of the economy,
prices plummeted, farms failed, banks failed, and a
public run on banks ensued. Disaster!
Deflation: Demand goes down, prices go down, and the
consumer holds on to his or her money because its value
is increasing. (Mild inflation is good for an economy
because as prices go up, the consumer feels the urgency
to buy now, and the economy is stimulated.)
- Joblessness at levels of 25-33% reached into the
middle class, provoking malaise among the the people
most invested in the American Dream.
- Even those with jobs worked shorter hours and
received lower pay.
- Discrimination against women, Hispanics and
blacks increased. (Scottsboro Case 1931)
- Radical political ideologies (both left and
right) found receptive audiences.
- Farm incomes plummeted and banks foreclosed on
loans and auction properties. At the same time, a
terrible drought turned much of the Midwest into a
President Herbert Hoover's response:
- Republican, pro-business, laissez-faire
- Treasury Secretary Mellon urged the public to
keep a 'stiff upper lip' and preached that the
temporary downturn would promote discipline despite
the belt tightening.
- Hoover reassured people that the economy would
rebound. He encouraged voluntary wage and price
controls (which were ignored) and even considered
some direct federal action to stimulate the economy:
public works projects, bank credits and farm aid.
- However, Hoover refused to allow the federal
government to aid states whose social services had
been overwhelmed (emergency financial relief,
housing, medical care.)
Union and Community Activism:
- Without government help, communities responded
to the burden of caring for the poor, frequently
organized by leftist activists.
- Union dues were used to support the unemployed
- Unions also facilitated theft from companies.
- Neighborhood groups organized rent parties and
- Communist Party organizers created "Unemployed
Councils" which led demonstrations, petition drives
and hunger marches which demanded government aid for
local relief and unemployment compensation
legislation. They also organized disruptions of farm
1932 "Bonus March" on Washington: WWI veterans who
had been promised bonuses for their military service
took up residence in tents and shanties erected on the
Mall in Washington. When the demonstrators were forcibly
evicted by army troops, a national uproar ensued.
1932 Presidential Election:
- Hoover vs. FDR
- Business leaders, fearing the growth of leftist
political movements, urgeed national economic reforms.
- FDR carried all but six states promising a "New
Deal" for the American people.
- FDR took office at the lowest point of the
Depression amid a new wave of bank failures.
- Inaugural Address: "The only thing we have to
fear is fear itself."
- FDR regularly addressed the nation on radio in
First 100 Days:
|FDR pushes repeal of Prohibition and then repeals
Special session of Congress passes
a flood of legislation providing immediate relief,
economic recovery programs, and new government
regulation of the economy:
- FERA (Federal Emergency Relief
Administration): direct cash payments to
the needy are now managed by the federal
government, not local or private
- CCC (Civilian Conservation Corps):
three million jobs in national parks
- TVA (Tennessee Valley Authority):
massive public works project of dams and
hydroelectric plants to bring
electricity to the rural South.
- FDIC (Federal Deposit Insurance
Corporation): insurance for savings
accounts and federal regulation of the
- AAA (Agricultural Adjustment
Administration): federal government
regulates prices and production by
paying subsidies to farmers for not
growing specific crops.
- NIRA (National Industrial Recovery
- major public works
(bridges, dams, roads)
adminstered by the PWA
Administration) and CWA
- codes designed to
regulate business practices
(eliminate over production,
increase efficiency, raise
prices and wages)
- Section 7a: legalizes
collective bargaining by
allowing workers to organize
and to select
representatives to negotiate
Organized Labor Revives:
- United Mine Workers (UMW)
- Movement to organize urban industrial workers
(conflict with AFL, rise of CIO)
- Major Strikes lead to National Organizations:
- Toledo Auto Workers
- Minneapolis Teamsters
- San Francisco Longshoremen
- Socialists and Communists defy conservative AFL
leaders and take direct action.
- Despite FDR's New Deal legislation, the economy
did not revive.
- FDR was criticized on the left by radicals demanding
action to end the Depression.
- FDR was criticized on the right by business leaders for going too
- Populists like Huey Long organized national
campaigns to direct redistribution of wealth.
- The Supreme Court ruled the NIRA unconstitutional.
Second New Deal (1935)
- WPA (Works Progress Administration)
- Government financed production and
employment on an unprecedented scale:
building schools, libraries, airports,
parks, playgrounds, waterworks, sewage
plants, hospitals and roads.
- Government also employs artists
(painters, sculptors, writers, actors,
singers, dancers) to bring the arts to
new and broader audiences.
- Social Security Act: creation of a partial
welfare state by mandating contributions of employer
and employee to old age pensions.
- Wealth Tax Bill: inheritance taxes and capital
gains taxes (stocks)
- Wagner Act: grants workers the right to
organize, bargain and strike. It also makes illegal
unfair labor practices such as company unions, black
listing, and spying. (1938 Fair Labor Standards Act
prohibits child labor, sets minimum wage, and
establishes forty hour work week.) (Both acts
exclude agricultural and service workers as well as
1936 Presidential Election:
- FDR vs. Alf Landon (Kansas)
- FDR campaign stresses New Deal social welfare
programs and union rights.
- FDR carries all states except Maine and Vermont.
- Democrats control 3/4ths of House and 4/5ths of
- New Democratic Coalition: based on labor, urban
masses, immigrant families, blacks
1936 Organization of Steel Industry
- UAW sitdown strike in Flint Michigan Ford Auto
plant protesting layoffs, speed of assembly line and
arbitrary actions against union organizers.
- Strikers demand minimum wage, time and 1/2
overtime pay, slower assembly line.
- Victory leads to creation of CIO: nationwide
organization of the steel industry
WPA Arts Projects:
|Artists create works which support New Deal
policies, stoke working class patriotism.
Purposely multi-ethnic and markedly left wing
Federal Theatre Project (1935)
|Sinclair Lewis' It Can't Happen Here!
(about an attempted fascist coup in US.)
Orson Welles' Macbeth (staged as if
in African culture)
"living newspapers": social commentaries
ripped from the headlines dramatizing
political issues. Ex. One Third of a
Nation about NYC housing crisis.
Writers and social historians fan out around the
country to discover the nation's folk heritage: folk
songs, oral histories (ex-slaves), local histories
Photojournalism: Farm Security Administration hires
photographers like Dorothea Lange and Arthur Rothstein
to create photo essays about the plight of farm workers
in the Dust Bowl. Walker Evans' photo-essay about
Woody Guthrie's Folk Music
John Steinbeck's novels: Of Mice and Men and
The Grapes of Wrath
Frank Capra's Films: Mr. Deeds Goes to Town
and Mr. Smith Goes to Washington