The Depression

Problems and Solutions…

Problem 1: over production

• The economy is producing more goods than can be purchased and consumed. What to do?

• Car production has been reduced from 411,000 a month in 1929 to just 89,000 a month in 1932. The average American can no longer afford a car.

• 1 billion barrels of oil were produced in 1929; this year there will be just 800,000

• Farm production was way over the demand and the price of wheat dropped from $1.37 to $0.61 a bushel in 1930. Farmers are now LOSING $1.50 on every acre they plant!

What to do?

1. The federal government should allow farmers and businesses to fail. The business cycle always has ups and downs. Eventually the economy will right itself without the government interfering.

2. The federal Government should create a planning agency, overseen by the govt., but with input from the business leaders, to better plan production goals. Farmers should be paid by the govt. to take crops out of production until farm prices are stabilized.

3. The federal govt. should oversee and plan all business and agricultural production to more closely match supply and demand.

Problem #2: Unequal Wealth

• People can’t buy things because most don’t have enough money.– 1 % of the population has 59% of the wealth. 33% of

the money is held by 12% of the people and the last 87% are left with just 8% of the money.

– 92% of American families have an income of $2,500 or less

– The wealthy spend their money on luxury items rather than necessities, so things like vacuum cleaners, refrigerators and other goods don’t sell.

What to do?

1. The federal government should do nothing about this so-called “problem”. The rich people worked hard and deserve their money.

2. The federal government should pass laws leading to higher taxes on the wealthy. The money from those taxes can go to help the poor.

3. The federal govt. should take the income and property of the rich and redistribute it so all Americans share equally.

Problem #3: Unemployment

• This problem has been growing since the stock crash. Unemployment has now reached high levels.– In 1920 only 49 per 10,000 businesses failed. In 1932

the failure rate was 159 per 10,000.– Business profits have dropped from $10 billion in

1929 to just $1 billion in 1932.

– 13 million people are out of work; many others have taken severe pay cuts.

– One man walked 900 miles looking for work.– In New York, there were 300 available jobs,

and 5,000 people applied!

What to do?

1. The federal govt. should encourage business growth so that thriving businesses can provide jobs. Loans should be given to struggling businesses. Tariffs should be put in place to encourage people to buy from American companies.

2. The federal govt. should disregard costs and immediately begin the construction of public works -- construction to provide jobs.

3. The federal govt. should take control of all businesses and industry and provide a job for every American.

Problem #4: Massive Poverty

• The depression has been hard on everyone and people are suffering.– Over 60% of Americans are technically poor– Nine million savings accounts have been

emptied since 1930.

– 273,000 families have been thrown out of their homes in 1932.

– 2 million homeless are roaming the country- farmers, women, children….

– In New York, ¼ of all children don’t get enough food.

What to do?1. The wealthy should pay less taxes, then they

will put more money into their businesses and provide jobs. The govt. should not help the poor as it will only encourage people not to look for work.

2. The federal government should immediately begin a program of direct relief to the poor. The program should include monthly payments to those without enough money, free food, and public housing.

3. The federal govt. should confiscate income and property from the wealthy and redistribute it to the poor.

3 solutions

• “ Say civilization is a tree which, as it grows, continually produces rot and dead wood. The Radical says: ‘cut it down’. The Conservative says: ‘don’t touch it’. The Liberal says: ‘let’s prune it, so that we lose neither the other trunk nor the new branches.” FDR 1932

• 1’s• 2’s• 3’s

Hoover’s failure…

• Problems continue…– 2 million homeless– Americans divided about what to do– Radicals wanted to level wealth– “Tax the rich, feed the poor”– Hoover worked 16-18 hrs/day….

• believed in hard work and perseverance• Self-made millionaire

– Many attempts… no success

A new president, a new deal…

• Election of 1932– Franklin D. Roosevelt…FDR

• “ Happy days are here again”– Promised a NEW DEAL– Country was in 4th year of

depression

• FDR background– wealthy family– N.Y.C.– Went to Harvard/

lawyer– 1921: polio-

never walked again

– Governor of NY 1928-32

• Early recovery once elected– Within one week: Congress passed two bills

• Emergency Banking Relief Act• Economy Act: balance budget

– By summer of ’33, 3/4 of all banks were back– Everyone in Congress cooperated

• wanted to end depression• FDR took advice

from everyone

What did the NEW DEAL do?

– Aid to elderly -- 65 years old and up-• Social Security

Act

– Aid to farmers• Agriculture Adjustment Act• Govt. subsidized farms to regulate production

– Government pays money not to grow crops…why???

– Direct Relief• Federal Emergency Relief Act • $50 million• local and temporary

– Insured bank deposits• Fed. Deposit Insurance Corporation (FDIC)

– maintain stability and trust with banks– guaranteed to $2,500

– Jobs Programs• Civilian Conservation

Corps– Various jobs created:

sidewalks, golf courses, trails, helping women farmers

– Public Housing• Public Works Administration

– subsidized housing– provided cheap housing– helped some pay rent

– Regulate stock market• Securities and Exchange Commission

– registered stocks, limit credit, investigate fraud (Martha Stuart)

Lasting Impact…

• Unemployment dropped every year from 1934-1939

• Business failures decreased

• Many programs still used today!

• However, only WWII and the need for increased production really helped!