Wall Street Crash
On Black Thursday share prices plummeted.
On Thursday 24th October 1929 around 13 million shares were sold. Confidence in the value of shares began to be lost.
On the 28th and 29th, a series of sharp falls began in the vallue of shares -
Some stocks lost three quarters of their value.
Prices continued to fall for years.
Efforts to shor eup prices failed - Leading financiers used money to buy shares in an attempt to restore confidence but this just led to panic selling.
Underlying Economic problems led to the crash -
Many people had run up large debt or had already bought everything there needed, production was bigger than demand.
This situation was made even worse for a number of reasons;
Wealth wasn't distributed evenly
Banks were largely unregulated
When the stock market crashed, investors could not pay back their loans.
Consequences of the Wall Street Crash
Depression hit all walks of life -
20,000 US businesses folded in 1932 alone.
The national income fell by half between 1929-933.
Price of goods continued to fall, wages fell and workers were laid off. A quarter of the workforce were unemployed.
Farm product prices fell by 60%
Depression caused terrible poverty -
Poverty led to undernourishment
Thousands made homeless
Many people moved to find work
Marriages delayed and birth rate fell.
Attempts were made to help people;
Private charities and religious groups provided temporary homes and shelter
state government supplied food and clothes, bread lines and soup kitchens
Election of Roosevelt (FDR)
Hoover's action on the economy didn't go far enough
He tried to reduce tax, expanded 'public work', created a 'homes loans act' to help with mortgages, persuaded europe to buy more goods
Some people thought this was too little too late. He believed in every man for himself and so he refused to offer any financial relief to individuals - very unpopular.
Some things Hoover did even damged the economy for example high tariffs on forgein goods led to other countries doing the same thing and so less people bought goods from America.
FDR was elected in 1932. He was a popular governer and ran his own business supported by bankers. He won the election with 22 million votes and hoover received 15 million.
FDR had three main aims
Relief - Help improve lives of people
Recovery - Begin to rebuild US industry
Reform - Change conditions to ensure future progress.
the New Deal
Confidence had be restored in banking and finance.
There was a four-day bank holiday closure and healthy, sound banks reopened.
Stock market was to be monitored more closely
Bank failures fell - deposits rose - confidence began to return.
The 'Hundred Days' launched many new measures
this was the first period of Roosevelt's term in office, during which he introduced many new acts. Alphabet agencies were created to make more jobs. Here are a few important ones -
FERA - used to give direct assistance to the poor for dole payments and food.
CCC - provided work for thousands of men in forestry, water and soil conservation projects.
PWA- provided jobs for men to build roads, houses and bridges etc.
AAA - paid farmers to limit production which raised prices and increased incomes.
Economy strengthen a bit but problems remained
Agencies gave out money too slowly
Some farmers continued to suffer
Severe drought and heat led to erosion of topsoil in large areas.
But fall in prices was halted. Employment rose and, despite criticisms that FDR was not good enough, his measures were very popular.
The Tennessee Valley Authority (TVA)
Tennessee valley was one of the poorest regions in the country. The land had been eroded so it could not be farmed upon, industry was almost non-existant.
TVA brought construction projects
TVA built large numbers of dams to prevent flooding , trees were planted to prevent more soil erosion and they constructed power stations which brought electricity.
This provided jobs and the economy of the area increased. Agriculture began to prosper.
Second New Deal
The Second New Deal focused on social welfare
It began in 1935 and took the new ideas about social welfare and the responsibilities of the state, measures that would benefit the sick, the old and the unemployed.
Social security Act - People over the age of 65 received a state pension.
This also set up a plan for unemployed benefit, employers paid a little bit of money and incase they become unemployed they will receive that money.
Wagner Act - This gave workers the right to join a trade union. Companies were now forced by law to allow their employers to become members of a trade union.
The Works Progress Administration - This is similar to the PWA, but it also provided jobs for actors, artists and photographers. USA lagged behind other countries in social welfare provision.
opposition to the New Deal
Some thought the New Deal had not gone far enough -
Senator Huey Long wanted to plan an act called 'share our wealth'. Which taxed the rich and was given to the poor, he claimed every family would receive 5000 a year. Hueg Long was going to stand against FDR in the 936 elections but he was assassinated in 1935.
Another critic was DR Francis Townsend. He recommended a plan that gave everyone over 60 years ago 200 per month on condition that they spent the lot within one month. He said this would boost the economy.
Some thought the New Deal had gone too far -
Roosevelt's critics said that the New Deal made people too dependant on the Government. Individuals should support themselves.
Business people were angry that the New Deal allowed trade union into the workplace.
Some thought it was 'socialist' and 'un-American'
Some thought it was wrong to tax the rich more than the poor.
Opposition even from the supreme court - they declared that some measures were illegal. Roosevelt asked the Congress to put six democrats so this wouldn't happen again but people thought it was a violation, he was forced to back down.
How successful was the New Deal?
The New Deal had considerable success in its main areas -
Give aid to the needy; The FERA did a good job in helping the needy with aid
From 935 onwards, the element of a basic welfare state were established.
Restore stability to America's banking and finance -
Roosevelt successfully resolved the banking crisis which restored peoples confidence in the banks and people put their money in them once again.
Reduce unemployment -
The New Deal created millions of jobs through the alphabet agencies
Although the New Deal took the unemployment rate down from 15 million to 8 million, there were only 1.5 million unemployed before 1929 so it didn't bring it down completely.
In 1937, another depression rose and unemployment rose in 1938 again so the New Deal wasn't successful there.
WW2 solved unemployment problems - America produced military equipment to Britain, so more people were working in factories. When America entered the war, people signed up to the army which decreased unemployment rates.