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					 Chapter 33 continued

 I. Dealing with the problems in the economy
 Causes (Problems) that led to the great depression—explain how these causes led to the
 economic depression of the 1930’s.
     1. overproduction and deflation
     2. easy credit and speculation
     3. global recession triggered by economic protectionism (Hawley Smoot Tariff)

 Massive unemployment (25-29%; one out of every five workers were unemployed)
 Financial crisis (bank failures, Stock market crash, October 1929)
 Mortgages/debt could not be paid; foreclosures on businesses, factories and homes
 Producers (steel & coal producers, manufacturers, farmers, etc.) caught in a cycle of
 overproduction, falling prices and increasing debt

 II. What should the government do? “New Deal” & the changing role of the government
 **Key Concept: Roosevelt tackled the problems brought on by the Great Depression by
 changing the role of government in society. Instead of protecting citizens from a powerful
 government, he increased the power of the government to protect citizens from the
 devastation caused by the depression. By extending the power and scope of the federal
 government, he redefined the American idea of “liberalism”.

Traditional “Liberalism” (Laissez-faire, small New Deal “Liberalism” (federal government
government, “rugged individual” self-reliance) intervenes politically and economically to
                                               protect citizens)
Should it be “hands-off” in regards to the     Should it regulate the economy? Intervene?
economy?                                       How much? In what circumstance?
                                               (should it be a referee? Coach? Player?)
Should it be pro-business?                     Should it be anti-business or pro business?
Should it provide money to those who can help Should it provide relief to those who cannot
themselves (ie. subsidies to businesses)?      help themselves, (money directly to the
                                               unemployed and impoverished?)
Should it be committed to individualism,       Should it protect individuals from ruthless
competition and self-determination in society? competition by creating a more even playing
                                               field & providing welfare, healthcare,
                                               education and security to average citizens?
Roosevelt’s “solutions” : Relief, Recovery and Reform

In regards to “relief”, keep track of how the following federal legislation affected millions of
unemployed workers, women, African-Americans, homeless, consumers and farmers.
Unemployed Federal Emergency Relief Act (FERA, 1933)
workers         CCC (Civilian Conservation Corps, 1933)
                PWA (Public Works Administration, 1933)
                WPA (Works Progress Act, 1935)
                Significance: All of these agencies (except social security) provided jobs in
                the public sector in return for relief. These agencies provided a precedent for
                the type of acceptable “welfare” Americans were willing to accept in society
                (“work for welfare” instead of receiving dole). The government did provide
                funds to state agencies that gave out welfare “dole” to the unemployed. But
                most of the time, the federal government created public sector jobs (paving
                roads, building large public projects such as the Grand Culee Dam, creating
                trails in national parks, etc.) so that the unemployed could find a way to make
                a living.

Women,         Social security: disability check, old age pensions and unemployment
elderly,       insurance
disabled,      Significance: Social security is by far the most important legislation that
Unemployed     outlasted the Great Depression because it was designed to protect people from
               future depressions by providing a “safety-net”. It also segregated the
               “deserving poor” from the “undeserving poor”, providing money to those who
               could not help themselves. **pro: safety-net; insurance against poverty in old
               age or when disabled **con: it burdens the workers who are currently
               contributing to the economy
Homeless       Frazier-Lemke Farm Bankruptcy, 1934: suspension of mortgage foreclosures
               Resettlement Administration: helped remove farmers to better land
               Home Owners’ Loan Corporation
               National Housing Act & the Federal Housing Administration (FHA)
               **Significance: The US government wanted to insure that people had a place
               to live. How? By providing immediate relief to those who could not make
               their mortgage payments and were losing their homes/farms or granting small
               loans to those who wanted to build new homes or improve existing ones.
       Recovery and Reform
       Roosevelt’s “experiment” focused on three of the largest sectors of the US economy—
       Industries, Agriculture and Finance. As you read about the various legislation passed under
       the “New Deal”, think about how these sectors of the economy were affected.
                              Industry (manufacturers and workers)
                              Agriculture (farmers)

Industry:      Purpose: introduce order, harmony and coordination to US industries.
The National   How: NRA: each industry would run like a cartel/monopoly, in which businessmen would
Recovery       meet to set production quotas, minimum price of goods, workers’ hours and wages, number
Act (NRA)      of workers employed, etc. Yet, it was not like a cartel because the government intervened
               and allowed for all interests, labor unions, small and large businesses and government
               agencies to be involved. They collectively determined “fair competition” codes that set rules
               on everything from business codes, hours, wages, and factors that etc.
               Significance: NRA promoted government-business cooperation similar to the War
               Industries Board of 1918. Roosevelt believed that cooperation and coordination in industries
               would bring about positive change for the economy.
               Result: Failed. Why did the NRA fail?
                   1. Too many strong interest groups made cooperation impossible. Labor and
                        management could not agree; Large companies would often control and set “fair
                        competition” codes that were “unfair” to small companies or workers. NRA codes
                        often led to lower production and higher prices when the exact opposite was needed
                        to generate consumer demand.
                   2. Supreme Court declared the NRA unconstitutional in the Schecter v. US (Sick
                        Chicken) case because the federal government could not regulate local commerce,
                        only interstate commerce; also, the president could not make laws.
Agriculture:   Purpose: introduce order, harmony and coordination to US farming sector
Agricultural   How: Farmers (including large and small acreage farmers or even tenant farmers and
Adjustment     sharecroppers) would collectively set production quotas, receive money not to farm, be able
Act (AAA)      to sell their crops at an equitable price or “parity” price.
               Significance: AAA allowed the government to protect farmers’ interests by giving them
               subsidies not to farm (prevent overproduction) and paying them “equitable” prices for food
               they produced.
               Result: Success (even though the Supreme Court shut down the AAA, it was revived again
               in 1938). Why? Large farming businesses were strong enough to override objections by
               small-time farmers, tenant farmers, etc. Farmers wanted help from the govt-they couldn’t
               make it without government subsidies.
Finance:       Purpose: measure provided greater government regulation over the banking industry. The
Glass-         government insured individual deposits, prevent bank runs and bank failures
Steagall       Significance: Greater government interference/regulation in the economy
Banking        Result: successful. Made a lasting impact on the financial industry.
         Reform: How did the New Deal affect particular social groups?
Workers      Fair Labor Standards Act (Wages and Hours Bill)
             Industries had to set up minimum wage and maximum hour levels (ie. Forty cents/hour and forty-
             hour week).
             Wagner Act and the National Labor Relations Board
             Recognized labor unions’ right to organize workers and bargain collectively through
             representations of their own choice (ended “yellow dog” contracts)
             Led to the organization of unskilled workers, minority workers, and women under the leadership
             of John Lewis & the Congress of Industrial Organizations (CIO)
             Social Security Act: provided disability & unemployment insurance as well as old-age pensions
             to all citizens
African-     Fair Labor Standards Act (Wages and Hours Bill) excluded agriculture, service, and domestic
Americans workers, meaning that blacks, Mexican Americans, and women could not benefit from the
             restrictions set by this act.
             Mary McLeod Bethune, dir. Of Office of Minority Affairs in the National Youth
             Administration made sure that New Deal Programs benefited African Americans.
Women        Frances Perkins, 1st woman cabinet member, secretary of labor
             Social Security was provided to head of household (male); women did not qualify for relief
             unless she was a widow or single mother.

American     Indian Reorganization Act, 1934: Reversed the Dawes Severalty Act, 1887, by encouraging
Indians      tribes to establish local self-government and preserve their native traditions.

Children     Wagner Act made child labor illegal
Second New Deal (1935-1939)
Works Progress     This act, passed in 1935, created useful jobs for the unemployed giving
Administration     states money to create jobs. State agencies employed workers in public
(WPA)              projects such as building bridges, public buildings, roads, etc. Even actors,
                   writers, musicians were employed under this act. Result: 9 million people
                   were given jobs.
                   Significance: Government spent money to stimulate the economy by
                   providing jobs (“Keynesian economics”) and shows a significant departure
                   from laissez faire economic policies
Social Security    Purpose: This act passed in 1935 provided disability & unemployment
Act                insurance as well as old-age pensions to all citizens
                   Significance: Provided a government sponsored economic and social safety
                   net for all US citizens; this act demonstrated
                       1) the American citizens’ willingness to depend on the government for
                           future security and
                       2) the change in the government’s role in assuming responsibility for
                           the welfare of its citizens
Federal Housing    FHA provided small loans to home owners to build new homes or improve
Administration     existing ones.
(1934)             Significance: the government helped start the building industry and assist
United States      home owners
Housing Authority
(USHA)             USHA was the agency created in 1937 that extended FHA goals by lending
                   money to states or communities for low cost housing
Wagner Act         Purpose: This act created in 1935 allowed workers to form unions and
(1935)             bargain with business managers regarding their working conditions &
                   Significance: a milestone legislation in business-labor movement; it led to
                   creation of the Congress of Industrial Organization (CIO), a union for
                   mostly unskilled workers and minority workers shut out from AFL
National Labor     This agency arbitrated business-labor disputes and helped administrate the
Relations Board    Wagner Act; significance: a government agency was formed to actively
                   arbitrate labor disputes and championed workers’ causes against business
Fair Labor         This act passed in 1938, also known as the Wages and Hours Bill, set
Standards Act      minimum wage and restricted working hours to 40 hours a week.
(1938)             Significance: this law boosted the power of workers against the abuses of
                   businesses and corporations exploiting its workers
Federal Securities Otherwise known as “Truth in Securities Act”, this act was passed in 1934
Act and the        to protect stock market investors from fraud, deception and insider
Securities and     manipulation of stocks. This act created a government agency that ensures
Exchange           investors are provided with adequate and accurate information.
Commission         Significance: This act created lasting government regulation (and reform) of
(SEC)              the stock market, preventing gross violations of insider trading & fraud
Public Utility     This act prevented public utility holding companies from being able to
Holding Company dominate and monopolize the public utility industry (power, gas and water
Act                to consumers) Significance: this act worked as an anti-trust legislation
                   preventing monopolies from being able to exercise tremendous power over
                   national resources, such as electricity, gas and water (public resources not in
                   private hands)
Resettlement      This act helped displaced farmers, especially hard hit from the dust storms
Administration    that ravaged Oklahoma, Kansas, Arkansas, move to better farm land
                  Significance: the government actively intervened and provided relief to
                  suffering individuals—changing the scope of government’s affairs
Second            This act, a revision of the first, paid farmers not to farm.
Agricultural      How: Farmers (including large and small acreage farmers or even tenant
Administration    farmers and sharecroppers) would collectively set production quotas,
Act (AAA)         receive money not to farm, be able to sell their crops at an equitable price or
                  “parity” price.
                  Significance: AAA allowed the government to protect farmers’ interests by
                  giving them subsidies not to farm (prevent overproduction) and paying
                  them “equitable” prices for food they produced.
Frazier-Lemke     This act, created in 1934, released farmers facing foreclosure from their
Farm Bankruptcy   debt (“moratorium on debt”) for three years
Act               Significance: the government provided active relief to farmers who could
                  not face their debt; this is a significant advancement of farmers’ cause
                  (compared to 1893 when farmers voiced their discontent through the
                  Populist Party to get help from the Cleveland administration)
TVA               This authority produces and distributes electricity. This authority was
                  controversial because the government was not only regulating and
                  participating in the industry.

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