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USA: Bust! (1929-39)
2. Why did the Great Depression happen?
Wall Street Crash. Share prices collapsed in October 1929: $8 billion was wiped off
the value of shares on one day alone (Tues 29th Oct). This bankrupted people who had
borrowed money `on the margin' to buy shares. As a result, demand for all sorts of goods
collapsed, closing factories and making people unemployed. 100,000 US firms closed.
Falling share prices affected banks, which held lots of shares. Bank runs made things
worse. 700 banks closed in 1929, leading to even more joblessness as lending dried up.
Overproduction. Another cause of Depression was the overproduction developing in the
late 1920s. Many markets were `saturated' with the new goods of the 1920s (fridges,
hoovers, cars etc), i.e. everyone who could afford to buy one had bought one. Thus,
companies were producing things that no-one wanted. For example, construction fell by
25% in 1928-29, which was a year before the Wall Street Crash.
Poverty. A related point is that many Americans were poor and could not buy the
products of the Boom. Half of the US population lived on less than $2000 per year.
These people were never likely to be able to buy the over-produced products of the late
1920s, which would have been needed to sustain the Boom.
Speculation. As noted above, lots of people had bought shares `on the margin' in the
1920s, many of them to speculate (gamble) on shares, selling them quickly for a profit.
However, this behaviour both inflated share prices in the 1920s, and made people
quicker to panic and sell in 1929, both helping to create the Wall Street Crash.
Tariff Policy. The US Government did not know how to respond to the Depression. Its
main response was to try to reduce imports, to prop up US business. It did this via the
Smoot-Hawley Tariff of 1930 (40% tariff). But countries retaliated with their own
tariffs, further reducing demand for US goods. Canada placed tariffs on 16 US goods.
Which factor was most important?
The Wall Street Crash had a huge impact. It ended the `Boom' as 100,000 firms and 700
banks closed, as spending dried up from banks and individuals whose share-holdings
became worthless. However, you could argue that the Crash itself was always likely,
given the gambling on shares `speculation' of the 1920s, and the overproduction which
meant company profits ­ and thus share prices - were always going to fall.
Don't forget:
·Wall Street Crash wiped $8bn off share values in 1 day. 100,000 business closed in 4 yrs.
·700 banks closed in the aftermath of the crash.
·Overproduction: construction fell by 25% in 1928-9.
·Speculation: many people bought `on the margin', and speculated (gambled) on shares.
·Smoot-Hawley Tariff (1930) ­ 40% tariff. Canada retaliated with tariffs on 16 US goods…read more

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USA: Bust! (1929-39)
3. How well did Hoover respond to the Depression?
What did Hoover say about the Depression?
Hoover angered people by claiming that `recovery is just around the corner'. He believed
in `rugged individualism' ­ the idea that people should help themselves.
How did people respond?
There was bitter criticism of Hoover, with ironic names for cardboard (`Hoover leather')
and shanty towns (`Hoovervilles'). People said `in Hoover we trusted, and now we are
busted'. Some took action. In summer 1932, around 20,000 World War One veterans
marched on Washington, demanding their 1945 war bonus early. But Hoover used
General MacArthur to disperse this `Bonus Army' violently, using tear gas and burning
their tents. 2 people were killed and nearly a thousand were injured.
What did Hoover actually do to try to help?
It is not true to say that Hoover did nothing. Efforts included:
·Smoot-Hawley tariff, which increased tariffs on imports to try to boost demand for
US goods. But countries like Canada retaliated, with tariffs on 16 US goods.
·Hoover Dam. $423 million was provided for building projects like the Hoover Dam. But
this was a small amount of money compared with the scale of the Depression.
·Farm Board, which bought surplus food to keep prices up. But it did not have enough
money to keep prices from continuing to fall.
·Reconstruction Finance Corporation, 1932. This provided $1500 million of loans to try
to get businesses going again, and to make up for collapsed bank lending. But this was
once again too little to make up for the massive falls and losses elsewhere .
Did it work?
Hoover's response was limited and piecemeal. It was better than nothing, and some of
the ideas were later picked up by Roosevelt (e.g. Hoover Dam was similar to the
Tennessee Valley Authority in the New Deal). However, too little money was spent, as
can be seen from unemployment continuing to rise throughout Hoover's presidency (8.7%
in 1930, 15.9% in 1931, 23.6% in 1932, 25% in 1933) and his loss in the 1932 election.
Don't forget:
·Hoover's beliefs: `recovery is just around the corner' and `rugged individualism'.
·Bonus Army 1932: 20,000 veterans wanted 1945 bonus early. 2 dead, 1000 injured.
·Hoover Dam ($423 million) and Reconstruction Finance Corporation ($1500m loans)
·Unemployment continued to rise, 1929-33 under Hoover (e.g. 8.7% 1930, 23.6% 1932)…read more

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USA: Bust! (1929-39)
4. Why did Roosevelt win the 1932 Election?
Who were the candidates in the election?
Herbert Hoover was the President and a Republican who believed in `rugged
individualism'. He was an example of this ­ a self-made mining millionaire who had been
an orphan. In 1928, he had been elected, promising `two cars in every garage and a
chicken in the pot'. Franklin D Roosevelt was the challenger from the Democrat party.
He had a privileged background (Harvard) but was paralysed by polio at 39. He had been
a Senator and Governor of New York, where he had organised help for the unemployed.
Why did Roosevelt win so convincingly?
Roosevelt won all but six states, and got 7 million more votes than Hoover. This was the
biggest victory ever recorded in a US election, to that point. This is for several reasons
The Great Depression made Hoover unpopular. He had been President since 1929, and so
the Wall Street Crash and subsequent Depression was blamed on him. Under his
Presidency, unemployment had rise from 3.2% to nearly 24%. Hoover was certainly
blamed for it, as shown in the ironic names for shanty towns (`Hoovervilles').
Hoover's inadequate response to the Depression also put people off. For example, his
Reconstruction Finance Corporation had just $1500 million behind it. He only built one
dam (Hoover dam). He also responded violently to peaceful protests like the Bonus Army
Roosevelt's policies were also more appealing. He offered a `New Deal' involving
government job schemes, poverty relief and protection for workers. He could base this
claim on the fact that he had been the first State Governor (in New York) to offer help
to the poor. In contrast, Hoover claimed that `prosperity is just around the corner'.
Roosevelt's propaganda was effective. He used sarcasm like his poster showing a
`smilette' and saying the Republicans wanted to smile the Depression away. He also
visited many places and had staged photos with `ordinary people' like miners.
Conclusion. It is hard to escape the idea that the Depression gave Roosevelt the victory.
It made Hoover look heartless and ineffective (e.g. `Hoovervilles') and unemployment
rose tenfold under his Presidency. Roosevelt's propaganda (e.g. `smilettes') depended
almost totally on Hoover's reputation for doing nothing about the Depression.
Don't forget:
·Unemployment rose from 3.2% to nearly 24% under Hoover (nearly eightfold rise).
·Hoover just built a dam (Hoover dam) in response, and attacked the Bonus Army in 1932
·Roosevelt: `a New Deal', Hoover: `prosperity is just around the corner'
·Roosevelt organised the first State help for the poor in the Depression as NY Governor.…read more

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USA: Bust! (1929-39)
5. What was the New Deal?
What happened in Roosevelt's first `100 Days'?
Roosevelt wanted to make a rapid start, and he organised a special emergency session of
Congress (Parliament) to pass 13 key laws to tackle the Depression. These included:
·Emergency Banking Act: A 4 day bank holiday to assess which banks were fit to re-
open. This led to $1 billion being re-deposited in the banking system.
·Alphabet Agencies. Some of the first agencies were set up in this period, to start
spending money to create jobs, for example the Agricultural Adjustment Agency.
·Fireside chats. Roosevelt used the radio to communicate his ideas to the people. His
inaugural address (not a fireside chat) triggered ½ million grateful letters.
·End to prohibition. As well as ending criminality, this was intended to create jobs.
What was the First New Deal? (check your notes for more examples)
The main part of the 1st New Deal was to set up `Alphabet Agencies' to create jobs.
These were intended to deliver his priorities of relief, recovery and reform. Examples:
·Relief was delivered by agencies like the Home Owners Loan Corporation (HOLC) which
lent money to 1m people to help them keep their homes, and the Federal Emergency
Relief Administration (FERA) which had $500m to help starving people.
·Recovery. The Agricultural Adjustment Agency (AAA) aimed to help farm prices
recover by destroying food, e.g. 6 million piglets killed in 1933. The Tennessee Valley
Authority aimed to create jobs, electricity and tackle dust bowl by building 35 dams in 7
states. Public Works Administration (PWA) spent $7 bn on roads and bridges.
·Reform. The National Recovery Administration (NRA) drew up codes of conduct for
different industries to get better working conditions, and gave trade unions rights.
Prices were fixed for certain goods, to boost profits and wages.
Why was there a Second New Deal and what was it?
The second New Deal (from 1935) was a response to (a) legal challenges to the New Deal
and (b) a forthcoming election. Examples: Wagner Act (1935) which gave Trade Unions
more rights and the Social Security Act (1935), giving old age pensions.
Don't forget:
·100 Days: emergency session of Congress that passed 13 laws, e.g. 4 day bank holiday
·Relief: e.g. $500m for starving from Federal Emergency Relief Administration
·Recovery: e.g. 35 dams in 7 states in Tennessee Valley Administration: jobs and power
·Reform: e.g. National Recovery Administration ­ fixed prices, codes of conduct, unions
·Second New Deal from 1935, focused on reform: e.g. Social Security Act to give pensions…read more

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USA: Bust! (1929-39)
6. Who supported and who opposed the New Deal?
Who opposed the New Deal?
Opposition from the Left
Some people on the Left thought that the New Deal did not go far enough. For example
·Huey `Kingfish' Long, Governor of Louisiana, proposing `share our wealth' from 1934,
which meant confiscating wealth over $5 million to give every family $5000;
·Doctor Francis Townsend, who proposed a $200 a month pension for all over-60s.
7000 Townsend clubs grew up over the USA as a popular response to this.
·Father Coughlin the `radio priest'. 40 million Americans listened to his `Golden Hour of
the Little Flower' show, which attacked Roosevelt for doing too little for the poor.
Opposition from the Right
However, some people on the Right thought the New Deal went too far. For example:
·Republicans accused the Alphabet Agencies, and especially the RVA and NRA, as being
like the state economic planning in Communist Russia. Whilst defeated, the Republicans
still gained 16 million votes in the 1936 Presidential election.
·Some business leaders thought that Roosevelt was making the Government interfere
too much in their industries. Some formed the Liberty League in 1934 to protest.
·The Supreme Court was the most serious opposition to Roosevelt. Its nine elderly
judges had mainly been appointed under Republican Presidents (1920-32) and struck
down some of the New Deal laws as being unconstitutional (i.e. not legal). For example:
· In 1936, the AAA was declared unconstitutional because the Government
should not be interfering in farming, which was for States to deal with;
· In 1935, the `sick chicken' case ruled in favour of Schechter Poultry
Corporation, which had been fined for breaking an NRA rule on chickens.
Roosevelt responded by threatening to create 6 new Supreme Court judges. This helped
to reduce their opposition.
Who supported the New Deal?
Despite all of this opposition, there is strong evidence of support. For example,
Roosevelt won the 1936 Presidential election, after four years of the New Deal, with an
even bigger landslide than in 1932, winning 27 million votes and all but two states.
Don't forget:
·Left-wing critics included Huey Long who wanted millionaires to fund $5000 for families
·Right-wing critics included the Liberty League (1934) of business leaders.
·The Supreme Court ruled the AAA unconstitutional in 1936.
·It also criticised the NRA in the `sick chicken case' of 1935.
·Roosevelt won the 1936 election with a record 27 million votes and won all but 2 states.…read more

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