American Gothic by Grant Wood, 1930

Adam Smith, Dead Scottish Economist

• The amount of a product or service that is available for consumers.

• High supply results in falling prices. • Low supply results in rising prices. • Too much of something results in

worthlessness.

• The desire or need consumers have for a product or service

• High demand results in rising prices.

• Low demand results in lower prices.

• Supply and demand are related. • If supply increases, demand decreases. • If supply decreases, demand increases. • If demand increases, supply decreases. • If demand decreases, supply increases.

Supply

Demand

When supply and demand are equal, prices of goods stabilize.

• The economy moves in cycles. • Boom - It expands when business

grows and money is easily available. • Bust - It contracts when business

declines, people lose jobs, and money is harder to earn.

• Most economic cycles are relatively small.

Business Cycle

A slow economic period characterized by high

unemployment, homelessness, business failure, and poverty

• An average of the prices of stocks of major industries available on the market

• It indicates the health of the economy

• From Jan 1928 to Sept 1929 – the Dow had climbed from 191 to 381

• Agricultural overproduction

• Industrial overproduction

• High tariffs

• War debts

• Unequal distribution of wealth

• Over speculation in the stock market

• Financial panic

During World War I • Europeans were desperate for food

shipments from the U.S. (Demand increased)

• The U.S. govt. passed price supports, promising farmers high prices for produce.

• Farmers began overproducing.

Continued

At the end of World War I

• U.S. govt. removed price supports.

• Europeans grew more self-sufficient.

• Demand for our farm products fell.

• Farm prices fell drastically.

• Also farmers were in debt for new technology, such as tractors.

Farmer

Tractor

Boy, Am I in debt!

• Exports dropped 50% during the 1920s because of less demand after WWI

• We raised tariffs, so nations in Europe raised theirs – a “tariff war”

European nations refused to pay their WWI debts, claiming they

had already paid “in blood”

(unequal distribution of wealth)

• Disparity – unfairness, inequality

• The rich grew richer, while the poor grew poorer.

• Few “middle class”

• Most Americans were in debt for the first time in U.S. history, especially farmers.

• Over speculation

• Buying stocks on margin

Buying Stocks “on the Margin”

• You pay only a fraction of the price of the stock. If the stock increases in value, you keep the profit. If the stock decreases in value, you have to pay the broker, or sell the stock at a loss. Very risky, especially since there were no regulations on this practice.

• Thursday, October 24, 1929

• Dow Jones Average had fallen 21 points the closing hour the day before

• Investors began to sell their shares of stock before the prices fell more

• Tuesday, October 29, 1929

• Investors panicked

• 16.4 million shares were sold on the stock market (2 to 4 times the usual number of shares sold daily)

• Stock prices continued to fall

• Investors continued to dump their shares of stock at a loss

• By November, the Dow had fallen to 198.7 (down from 381 in Sept.)

• Total stock market losses were $30 billion

Record High 381 points

Record Low 199 points

Businesseslose

profits.

Investors lose

millions.

Workersare

laid off.

Consumers spend less.

Businesses cut production.

Some fail.

Banks run out of money

and fail.

Savings accounts are

wiped out.

Businesses and workers

cannot repay bank loans.

“Bank runs” occur.

• Nickname for the shanty towns built by the homeless during the Depression

• Shows the blame the people placed on President Hoover for not fixing the crisis

• Over-farming and drought in the Great Plains (Ok, Texas, Kansas)

• The topsoil began to blow away

• Dust storms dropped tons of soil hundreds of miles away

• Lasted 7 years (1931 – 1938)

• 60% of dustbowl families lost their farms – Many moved to California

• Wrote The Grapes of Wrath

• Describes the plight of farmers and workers who lost everything during the Depression

• Brings national attention to the problems facing the less fortunate

John Steinbeck

An Oscar winning movie in 1941

A Pulitzer Prize winning novel in 1939

• Photographed hundreds of migrant workers coming to California from the Great Plains and sharecroppers in the South

• Portrayed the desperation and bravery of Depression families

From Lange’s “Migrant Mother”

Series

Her name was Florence. She was 34 years old.

Migrant Workers from Muskogee, OK

Southern Sharecroppers

Refugees from

Amarillo, TX

1936

Herbert Clark

Hoover

Elected Nov. 1928

• Believed in laissez-faire - self-regulating economy with minimal government control

• Believed that business would recover on its own by adhering to voluntary controls, such as minimum wage rates

• 1930 - Highest tariff in history (about 41% overall)

• Hoover hoped it would help American businesses by raising prices of imported goods.

• Caused a tariff war

• Slowed international trade and the U.S. economy further

Representative Hawley and Senator Smoot

• Reconstruction Finance Corporation• Gave government credit to industries, RR’s,

insurance companies, and banks • The theory was that prosperity at the upper

levels of society would trickle down to all of society

• But the poor believed the government was insensitive to the common people and only helping the wealthy

The public blames Hoover for not doing enough to help.

• 1932 – 20,000 jobless WWI veterans marched on Washington, demanding their pensions early.

• Hoover called in the Army.

• Troops under Gen. Douglas MacArthur forced the protesters away from the Capitol and set fire to their camp.

• Hoover was blamed for the debacle.

Hundreds, then thousands march into

Washington peacefully

Marchers gather in front of the Capitol

Bonus Army marchers

camp on the lawn of the

Capitol

Riot breaks out between marchers and

D.C. police

Federal Troops are called in

Troops burn down Bonus Army camp

Herbert Hoover, the Incumbent - Republican

Franklin Delano Roosevelt NY Governor - Democrat

Continued

• Roosevelt promises Americans a “New Deal”

• FDR wins by a landslide of 7 million popular votes

• 1933

• Repealed the 18th Amendment

• Ends Prohibition

• FDR – “The country needs a beer.”

• FDR’s relief, recovery, and reform program for the economy

• Aggressive government action

• Characterized by hopeful optimism

• “The only thing we have to fear is fear itself.”

Radio broadcasts FDR used to calm the fears of Americans during the Depression

What is this cartoonist suggesting about the

“New Deal”?

• On his 1st day in office, FDR declares a banking holiday.

• All banks are forced to close for 8 days.

• Once the bank proved its solvency, it was allowed to reopen.

• Federal Deposit Insurance Corporation• The federal government would insure

bank deposits. • This was to prevent more banks from

failing and bolster confidence in the banks.

• Securities and Exchange Commission• Reformed and regulated the stock-

market to help prevent another crash like the one in 1929.

• It monitors the stock-market and can freeze trading when stocks drop too much too fast.

• Provides pensions, disability payments, and unemployment benefits to registered eligible recipients.

• Helps provide for those with little or no income.

• Civilian Conservation Corps

• Put young, single men to work maintaining parks, beaches, and forests to help reduce the crime rate.

• Paid $30/month

• Received free food, medical care, and lodging at camps around the nation.

CCC Camp in Michigan

More CCC Camps

Civilian Conservation Corps Workers building a road in Ohio

Civilian Conservation Corps Ludington Beach House at

Ludington State Park, Michigan

CCC cabin at Pokegon State Park in Indiana

Video: FDR Visits CCC Camp in Virginia

1:09

•Civil Works Administration

•Provided jobs in construction of roads, parks,

airports

Hobbie Airport, Houston, Texas

• Agriculture Adjustment Administration

• Farmers were paid to reduce production of certain crops and livestock.

• It was hoped that the reduction in supply would lead to an increase in prices.

• Tennessee Valley Authority

• Built hydroelectric power plants to provide cheap electricity and flood control

Douglas Dam in Construction 1942

• Works Progress Administration

• Employed people in building construction and arts programs.

• The River Walk in San Antonio was constructed under this agency.

San Antonio, Texas River Walk

San Antonio River Walk

The Rose Garden, Botanical Gardens, Fort Worth, Texas WPA 1934

Botanical Gardens, Fort Worth, Texas

Stripling Middle School, Fort Worth, Texas, 1927 Landscaped by the WPA, 1937

Arlington Heights High School, Fort Worth, Texas WPA 1936-1937

http://www.pbase.com/keith1959/downtown_fort_worth

Polytechnic High School, Fort Worth, Texas WPA 1937

I.M. Terrell Elementary School, Fort Worth, Texas WPA 1937

Alice E. Carlson Elementary School, Fort Worth, Texas WPA 1935

South Hi Mount Elementary School, Fort Worth, Texas WPA 1936

• Many of FDR’s reforms were cancelled by the supreme court.

• FDR proposed legislation to add 6 more justices to the court.

• He would then appoint justices who would allow his reforms to stay in place.

• Critics accused him of trying to “pack the court” and create a dictatorship

1941 – The U.S. enters WWII. This helps end the Great Depression by creating jobs in factories providing for the war efforts.

• Showed that only government intervention can end a major economic crisis through massive programs to create jobs and stimulate the economy.

• After the Great Depression, the public expected the government to be involved in the economy and business.