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					                     United States History
                     UNIT SIX READINGS
6.1

       The Great Depression in the United States
I. Introduction

Great Depression in the United States, worst and longest economic collapse in the
history of the modern industrial world, lasting from the end of 1929 until the early
1940s. Beginning in the United States, the depression spread to most of the world’s
industrial countries, which in the 20th century had become economically dependent
on one another. The Great Depression saw rapid declines in the production and sale of
goods and a sudden, severe rise in unemployment. Businesses and banks closed their
doors, people lost their jobs, homes, and savings, and many depended on charity to
survive. In 1933, at the worst point in the depression, more than 15 million
Americans—one-quarter of the nation’s workforce—were unemployed.

The depression was caused by a number of serious weaknesses in the economy.
Although the 1920s appeared on the surface to be a prosperous time, income was
unevenly distributed. The wealthy made large profits, but more and more Americans
spent more than they earned, and farmers faced low prices and heavy debt. The
lingering effects of World War I (1914-1918) caused economic problems in many
countries, as Europe struggled to pay war debts and reparations. These problems
contributed to the crisis that began the Great Depression: the disastrous U.S. stock
market crash of 1929, which ruined thousands of investors and destroyed confidence
in the economy. Continuing throughout the 1930s, the depression ended in the United
States only when massive spending for World War II began.

The depression produced lasting effects on the United States that are still apparent
more than half a century after it ended. It led to the election of President Franklin
Delano Roosevelt, who created the programs known as the New Deal to overcome the
effects of the Great Depression. These programs expanded government intervention
into new areas of social and economic concerns and created social-assistance
measures on the national level. The Great Depression fundamentally changed the
relationship between the government and the people, who came to expect and accept a
larger federal role in their lives and the economy.

The programs of the New Deal also brought together a new, liberal political alliance
in the United States. Roosevelt’s policies won the support of labor unions, blacks,
people who received government relief, ethnic and religious minorities, intellectuals,


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and some farmers, forming a coalition that would be the backbone of the Democratic
Party for decades to come.

On a personal level, the hardships suffered during the depression affected many
Americans’ attitudes toward life, work, and their community. Many people who
survived the depression wanted to protect themselves from ever again going hungry
or lacking necessities. Some developed habits of frugality and careful saving for the
rest of their lives, and many focused on accumulating material possessions to create a
comfortable life, one far different from that which they experienced in the depression
years.

The depression also played a major role in world events. In Germany, the economic
collapse opened the way for dictator Adolf Hitler to come to power, which in turn led
to World War II.

II. Causes of the Depression

It is a common misconception that the stock market crash of October 1929 was the
cause of the Great Depression. The two events were closely related, but both were the
results of deep problems in the modern economy that were building up through the
“prosperity decade” of the 1920s.

As is typical of post-war periods, Americans in the Roaring Twenties turned inward,
away from international issues and social concerns and toward greater individualism.
The emphasis was on getting rich and enjoying new fads, new inventions, and new
ideas. The traditional values of rural America were being challenged by the city-
oriented Jazz Age, symbolized by what many considered the shocking behavior of
young women who wore short skirts and makeup, smoked, and drank.

The self-centered attitudes of the 1920s seemed to fit nicely with the needs of the
economy. Modern industry had the capacity to produce vast quantities of consumer
goods, but this created a fundamental problem: Prosperity could continue only if
demand was made to grow as rapidly as supply. Accordingly, people had to be
persuaded to abandon such traditional values as saving, postponing pleasures and
purchases, and buying only what they needed. “The key to economic prosperity,” a
General Motors executive declared in 1929, “is the organized creation of
dissatisfaction.” Advertising methods that had been developed to build support for
World War I were used to persuade people to buy such relatively new products as
automobiles and such completely new ones as radios and household appliances. The
resulting mass consumption kept the economy going through most of the 1920s.

But there was an underlying economic problem. Income was distributed very
unevenly, and the portion going to the wealthiest Americans grew larger as the decade
proceeded. This was due largely to two factors: While businesses showed remarkable
gains in productivity during the 1920s, workers got a relatively small share of the


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wealth this produced. At the same time, huge cuts were made in the top income-tax
rates. Between 1923 and 1929, manufacturing output per person-hour increased by 32
percent, but workers’ wages grew by only 8 percent. Corporate profits shot up by 65
percent in the same period, and the government let the wealthy keep more of those
profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by
more than two-thirds.

As a result of these trends, in 1929 the top 0.1 percent of American families had a
total income equal to that of the bottom 42 percent. This meant that many people who
were willing to listen to the advertisers and purchase new products did not have
enough money to do so. To get around this difficulty, the 1920s produced another
innovation—”credit,” an attractive name for consumer debt. People were allowed to
“buy now, pay later.” But this only put off the day when consumers accumulated so
much debt that they could not keep buying up all the products coming off assembly
lines. That day came in 1929.

American farmers—who represented one-quarter of the economy—were already in an
economic depression during the 1920s, which made it difficult for them to take part in
the consumer buying spree. Farmers had expanded their output during World War I,
when demand for farm goods was high and production in Europe was cut sharply. But
after the war, farmers found themselves competing in an over-supplied international
market. Prices fell, and farmers were often unable to sell their products for a profit.

International problems also weakened the economy. After World War I the United
States became the world’s chief creditor as European countries struggled to pay war
debts and reparations. Many American bankers were not ready for this new role. They
lent heavily and unwisely to borrowers in Europe, especially Germany, who would
have difficulty repaying the loans, particularly if there was a serious economic
downturn. These huge debts made the international banking structure extremely
unstable by the late 1920s.

In addition, the United States maintained high tariffs on goods imported from other
countries, at the same time that it was making foreign loans and trying to export
products. This combination could not be sustained: If other nations could not sell their
goods in the United States, they could not make enough money to buy American
products or repay American loans. All major industrial countries pursued similar
policies of trying to advance their own interests without regard to the international
economic consequences.

The rising incomes of the wealthiest Americans fueled rapid growth in the stock
market, especially between 1927 and 1929. Soon the prices of stocks were rising far
beyond the worth of the shares of the companies they represented. People were
willing to pay inflated prices because they believed the stock prices would continue to
rise and they could soon sell their stocks at a profit.



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The widespread belief that anyone could get rich led many less affluent Americans
into the market as well. Investors bought millions of shares of stock “on margin,” a
risky practice similar to buying products on credit. They paid only a small part of the
price and borrowed the rest, gambling that they could sell the stock at a high enough
price to repay the loan and make a profit.

For a time this was true: In 1928 the price of stock in the Radio Corporation of
America (RCA) multiplied by nearly five times. The Dow Jones industrial average—
an index that tracks the stock prices of key industrial companies—doubled in value in
less than two years. But the stock boom could not last. The great bull market of the
late 1920s was a classic example of a speculative “bubble” scheme, so called because
it expands until it bursts. In the fall of 1929 confidence that prices would keep rising
faltered, then failed. Starting in late October the market plummeted as investors began
selling stocks. On October 29, in the worst day of the panic, stocks lost $10 billion to
$15 billion in value. By mid-November almost all of the gains of the previous two
years had been wiped out, with losses estimated at $30 billion.

The stock market crash announced the beginning of the Great Depression, but the
deep economic problems of the 1920s had already converged a few months earlier to
start the downward spiral. The credit of a large portion of the nation’s consumers had
been exhausted, and they were spending much of their current income to pay for past,
rather than new, purchases. Unsold inventories had begun to pile up in warehouses
during the summer of 1929.

The crash affected the economy the way exposure to cold affects the human body,
lowering the body’s resistance to infectious agents that are already present. The crash
reduced the ability of the economy to fight off the underlying sicknesses of unevenly
distributed wealth, agricultural depression, and banking problems.

III. Economic Collapse (1929-1933)

The stock market crash was just the first dramatic phase of a prolonged economic
collapse. Conditions continued to worsen for the next three years, as the confident,
optimistic attitudes of the 1920s gave way to a sense of defeat and despair. Stock
prices continued to decline. By late 1932 they were only about 20 percent of what
they had been before the crash. With little consumer demand for products, hundreds
of factories and mills closed, and the output of American manufacturing plants was
cut almost in half from 1929 to 1932.

Unemployment in those three years soared from 3.2 percent to 24.9 percent, leaving
more than 15 million Americans out of work. Some remained unemployed for years;
those who had jobs faced major wage cuts, and many people could find only part-time
work. Jobless men sold apples and shined shoes to earn a little money.




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Many banks had made loans to businesses and people who now could not repay them,
and some banks had also lost money by investing in the stock market. When
depositors hit by the depression needed to withdraw their savings, the banks often did
not have the money to give them. This caused other depositors to panic and demand
their cash, ruining the banks. By the winter of 1932 to 1933, the banking system
reached the point of nearly complete collapse; more than 5,000 banks failed by March
1933, wiping out the savings of millions of people.

As people lost their jobs and savings, mortgages on many homes and farms were
foreclosed. Homeless people built shacks out of old crates and formed shantytowns,
which were called “Hoovervilles” out of bitterness toward President Herbert Hoover,
who refused to provide government aid to the unemployed.

The plight of farmers, who had been in a depression since 1920, worsened. Already
low prices for their goods fell by 50 percent between 1929 and 1932. While many
people went hungry, surplus crops couldn’t be sold for a profit.

Natural forces inflicted another blow on farmers. Beginning in Arkansas in 1930, a
severe drought spread across the Great Plains through the middle of the decade. Once-
productive topsoil turned to dust that was carried away by strong winds, piling up in
drifts against houses and barns. Parts of Kansas, Oklahoma, Texas, New Mexico, and
Colorado became known as the Dust Bowl, as the drought destroyed the livelihood of
hundreds of thousands of small farmers. Packing up their families and meager
possessions, many of these farmers migrated to California in search of work. Author
John Steinbeck created an unforgettable fictional portrait of their fate in the novel The
Grapes of Wrath (1939).

IV. Initial Response to the Depression

The initial government response to the Great Depression was ineffective, as President
Hoover insisted that the economy was sound and that prosperity would soon return.
Hoover believed the basic need was to restore public confidence so businesses would
begin to invest and expand production, providing jobs and income to restore the
economy to health. But business owners saw no reason to increase production while
unsold goods clogged their shelves. By 1932 investment had dropped to less than 5
percent of its 1929 level.

Convinced that a balanced federal budget was essential to restoring business
confidence, Hoover sought to cut government spending and raise taxes. But in the
face of a collapsing economy, this served only to reduce demand further. As
conditions worsened, Hoover’s administration eventually provided emergency loans
to banks and industry, expanded public works, and helped states offer relief. But it
was too little, too late.




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The epitome of a “self-made man,” Hoover believed in individualism and self-
reliance. As more and more Americans lost jobs and faced hunger, Hoover asserted
that “mutual self-help through voluntary giving” was the way to meet people’s needs.
Private giving increased greatly, reaching a record high in 1932, but charitable
organizations were overwhelmed by the enormous number of people in need. To
many, government assistance seemed the only answer, but Hoover was convinced that
giving federal relief payments would undermine recipients’ self-reliance, and he
resisted this step throughout his term.

The tension between citizens seeking government action and Hoover’s administration
came to a head in June 1932. More than 20,000 World War I veterans marched on
Washington, D.C., to ask for early payment of government bonuses they had been
promised. But the government refused, and when some members of the so-called
Bonus Army didn’t leave the capital, federal troops used tear gas and bayonets to
evict the men and their families (see Bonus March).

Hoover and most of his Republican Party firmly supported protective tariffs to block
imports and stimulate the American economy by increasing sales of American-made
products. In 1930 they enacted the Hawley-Smoot Tariff, which established the
highest average tariff in American history. This was a crushing blow to European
economies, which were already sinking into depression. Other nations retaliated by
raising their own tariffs. This action helped to worsen and spread the depression by
choking off international trade. Between 1929 and 1932 the total value of world trade
had declined by more than half.

V. International Effects of the Depression

Like Hoover, leaders of other nations around the world were determined to balance
their budgets by raising taxes and slashing government spending. Germany,
struggling to pay reparations imposed by the peace settlements after World War I,
suffered to a larger extent than any other major industrial nation. Nearly 40 percent of
the German workforce was unemployed by 1932. In these desperate economic
circumstances, large numbers of Germans began to listen to the tirades of Hitler, who
blamed the depression on Jews and Communists and promised to restore Germany to
economic and military strength. After his Nazi (National Socialist) Party became the
strongest political force in Germany, Hitler was named chancellor in January 1933.
He soon seized absolute control of the German government.

In Britain the effects of the depression were not as dramatic because the nation had
been suffering from high unemployment through much of the 1920s. Unlike the
United States, Britain already had unemployment insurance and government welfare
payments to ease the burden on the jobless. The depression took longer to hit hard in
France because it was less industrialized than the United States, Germany, and
Britain. Also, because so many French men had died in World War I, the workforce



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was very small, and it took a severe economic decline before the demand for workers
fell below the small supply.

VI. Roosevelt and the New Deal

By the election year of 1932, the depression had made Hoover so unpopular that the
election of the Democratic presidential candidate Franklin Delano Roosevelt was all
but assured. Confidence—Hoover’s elusive goal—was Roosevelt’s most abundant
quality. Declaring in his inaugural speech that “the only thing we have to fear is fear
itself,” Roosevelt quickly lifted the nation’s spirits with the rapid and unprecedented
actions of the New Deal.

Within days of his inauguration Roosevelt called Congress into a special session,
during which many pieces of emergency legislation were passed. Following the
example of many states, Roosevelt proclaimed a nationwide bank holiday, closing all
banks to stop panicky depositors from withdrawing their money. A few days later he
broadcast the first of many fireside chats on the radio, reassuring Americans that all
banks that were allowed to reopen would be safe.

The New Deal produced a wide variety of programs to reduce unemployment, assist
businesses and agriculture, regulate banking and the stock market, and provide
security for the needy, elderly, and disabled. The basic idea of early New Deal
programs was to lower the supply of goods to the current, depressed level of
consumption. Under the Agricultural Adjustment Act of 1933, the government sought
to raise farm prices by paying farmers not to grow surplus crops. Parts of the National
Industrial Recovery Act created codes for many industries that regulated competition
while guaranteeing minimum wages and maximum hours for workers.

The New Deal also tried to increase demand, pumping large amounts of money into
the economy through public works programs and relief measures. Public works
projects not only provided jobs but built schools, dams, and roads; the innovative
Tennessee Valley Authority provided electric power and improved living conditions
in an area of the southeast United States.

However, Roosevelt never embraced the new ideas of British economist John
Maynard Keynes, who argued that intentionally unbalancing the budget to a
significant degree would boost demand to the point where recovery would take place.
The U.S. gross public debt increased from $22.5 billion in 1933 to $40.44 billion in
1939, but Roosevelt was reluctant to accept any more deficit spending than seemed
absolutely necessary to prevent mass suffering. He did not create an unbalanced
budget on the scale Keynes advocated until World War II forced it upon him. Once
the government started spending at the levels Keynes had suggested, the depression
ended.




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The New Deal helped people to survive the depression, but acted as a painkiller rather
than a cure for the nation’s economic ills. Unemployment was reduced, but remained
high through the 1930s. Farm income rose from a low of $1.9 billion in 1932 to $4.2
billion in 1940. The demands of the depression led the United States to institute
social-security programs and accept labor unions, measures that had been taken
decades earlier in many European nations.

VII. Life During the Depression

The Great Depression had a substantial and varied impact on the lives of Americans.
Physically and psychologically, it was devastating to many people, who not only
lacked adequate food, shelter, and clothing but felt they were to blame for their
desperate state.

Although few people died from starvation, many did not have enough to eat. Some
people searched garbage dumps for food or ate weeds. Malnutrition took a toll: A
study conducted in eight American cities found that families that had a member
working full time experienced 66 percent less illness than those in which everyone
was unemployed.

The psychological impact was equally damaging. During the prosperity of the 1920s,
many Americans believed success went to those who deserved it. Given that attitude,
the unemployment brought by the depression was a crushing blow. If the economic
system really distributed rewards on the basis of merit, those who lost their jobs had
to conclude that it was their own fault. Self-blame and self-doubt became epidemic.
These attitudes declined after the New Deal began, however. The establishment of
government programs to counteract the depression indicated too many of the
unemployed that the crisis was a large social problem, not a matter of personal failing.
Still, having to ask for assistance was humiliating for many men who had thought of
themselves as self-sufficient and breadwinners for their families.

Because society expected a man to provide for his family, the psychological trauma of
the Great Depression was often more severe for men than women. Many men argued
that women, especially married women, should not be hired while men were
unemployed. Yet the percentage of women in the workforce actually increased
slightly during the depression, as women took jobs to replace their husbands’ lost pay
checks or to supplement spouses’ reduced wages. Women had been excluded from
most of the manufacturing jobs that were hardest hit by the depression, which meant
they were less likely than men to be thrown out of work. Some fields that had been
defined as women’s work, such as clerical, teaching, and social-service jobs, actually
grew during the New Deal.

The effects of the depression on children were often radically different from the
impact on their parents. During the depression many children took on greater
responsibilities at an earlier age than later generations would. Some teenagers found


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jobs when their parents could not, reversing the normal roles of provider and
dependent. Sometimes children had to comfort their despairing parents. A 12-year-old
boy in Chicago, for example, wrote to President and Mrs. Roosevelt in 1936 to seek
help for his father, who was always “crying because he can’t find work [and] I feel
sorry for him.” The depression that weakened the self-reliance of many adult men
strengthened that quality in many children.

The depression’s impact was less dramatic, but ultimately more damaging, for
minorities in America than for whites. Since they were “born in depression,” many
blacks scarcely noticed a change at the beginning of the 1930s. Over time, however,
blacks suffered to an even greater extent than whites, since they were usually the last
hired and first fired. By 1932 about 50 percent of the nation’s black workers were
unemployed. Blacks were frequently forced out of jobs in order to give them to
unemployed whites.

Yet the depression decade was one of important positive change for blacks. First lady
Eleanor Roosevelt and several leading New Deal figures were active champions of
black rights, and most New Deal programs prohibited racial discrimination. These
rules were often ignored in the South, but the fact that they were included at all was a
major step forward. Blacks were sufficiently impressed with the New Deal to cause a
large majority of black voters to switch their allegiance from the Republican to the
Democratic Party during the depression years.

Other minority populations had experiences similar to those of blacks during the
depression. Native Americans were even less likely than blacks to notice a downturn
when the depression began; they already fared poorly by virtually every social or
economic indicator. But Native Americans, like blacks, were brought into New Deal
relief programs that in theory did not discriminate, and an attempt was made, through
the Indian Reorganization Act, to enable tribes to reestablish their identities and
cultural practices. In industrial cities such as Detroit, Gary, and Los Angeles and in
agricultural regions such as California’s San Joaquin Valley, Mexican Americans
were seen as holding jobs that should go to whites. Repatriation (meaning
deportation) programs were instituted to persuade Chicanos to return to Mexico, often
through intimidation.

Groups of white Americans also faced discrimination during this era. Poor farmers
evicted from their land or fleeing the Dust Bowl were often despised and abused
when they arrived in California and other western states. They were commonly
labeled “Okies,” whether they came from Oklahoma or other states.




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VIII. End of the Depression

Although economic conditions improved by the late 1930s, unemployment in 1939
was still about 15 percent. However, with the outbreak of World War II in Europe in
September 1939, the U.S. government began expanding the national defense system,
spending large amounts of money to produce ships, aircraft, weapons, and other war
material. This stimulated industrial growth and unemployment declined rapidly. After
the United States entered the war in December 1941, all sectors of the economy were
mobilized to support the war effort. Industry greatly expanded, and unemployment
was replaced by a shortage of workers.

IX. Legacy of the Depression

The impact of the Great Depression and the programs of the New Deal dramatically
altered the relationship between the American people and their government. The
federal government expanded its role in many social and economic areas, becoming
larger and more powerful. Americans came to accept government involvement and
responsibility in caring for society’s most needy members and regulating many
aspects of the economy.

The New Deal’s social programs reflected a shift in American values created by the
shared hardships of the depression era. The depression experience discredited the
extreme individualism and pursuit of self-interest that characterized the 1920s, and
revived an emphasis on community, cooperation, and compassion. These values were
reflected in the popular culture of the day and in political and labor movements that
developed and expanded during the 1930s.

One of the most far-reaching New Deal measures, the Social Security Act of 1935,
guaranteed government help to citizens who were unemployed or disabled, to older
Americans, and to mothers and children. The National Labor Relations Act (1935)
provided protection for union activity, which contributed to the rise of labor unions in
mass-production industries such as steel and automobile manufacturing. Unions and
racial minorities, who had benefited from the New Deal, were among the groups who
became staunch supporters of the Democratic Party, changing American politics for
decades to come.

The literature, films, and art of the depression era demonstrated the desire for a more
cooperative, less fiercely competitive way of life. Many celebrated the common
people, who were contrasted with greedy, powerful interests. Examples included
films such as Mr. Smith Goes to Washington (1939), directed by Frank Capra, and
Stagecoach (1939), by John Ford; paintings by Norman Rockwell; songs by folk
singer Woody Guthrie; and novels by such writers as John Steinbeck.

While many conservatives believed the New Deal was turning the United States
toward socialism, other Americans felt it did not go far enough and sought more

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revolutionary change. Political movements to the left of the New Deal enjoyed
considerable support during the 1930s. Among them were the Minnesota Farmer-
Labor Party, which offered radical proposals challenging the capitalist system, and
the unsuccessful campaign by novelist Upton Sinclair to be governor of California in
1934, proposing essentially socialist programs to “End Poverty in California.” By
alleviating some of the worst effects of the depression, the New Deal helped defuse
tensions and preserve a democratic, capitalist system at a time when other nations
turned to fascism or socialism.

The return of prosperity during and after World War II revived some of the forces that
divided society and promoted self-interest in the 1920s. But the experience of the
Great Depression left a lasting mark on the United States in the forms of a much
greater role for the federal government, a new political alignment in which Democrats
would retain the support of a majority for most of the next half century, and a general
feeling that the free market must be regulated in order to avoid another such economic
catastrophe.




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6.2

           Main Causes of the Great Depression
The Great Depression was the worst economic slump ever in U.S. history, and one
which spread to virtually the entire industrialized world. The depression began in late
1929 and lasted for about a decade. Many factors played a role in bringing about the
depression; however, the main cause for the Great Depression was the combination of
the greatly unequal distribution of wealth throughout the 1920's, and the extensive
stock market speculation that took place during the latter part that same decade. The
maldistribution of wealth in the 1920's existed on many levels. Money was distributed
disparately between the rich and the middle-class, between industry and agriculture
within the United States, and between the U.S. and Europe. This imbalance of wealth
created an unstable economy. The excessive speculation in the late 1920's kept the
stock market artificially high, but eventually lead to large market crashes. These
market crashes, combined with the maldistribution of wealth, caused the American
economy to capsize.

The "roaring twenties" was an era when our country prospered tremendously. The
nation's total realized income rose from $74.3 billion in 1923 to $89 billion in 1929.
However, the rewards of the "Coolidge Prosperity" of the 1920's were not shared
evenly among all Americans. According to a study done by the Brookings Institute, in
1929 the top 0.1% of Americans had a combined income equal to the bottom 42%.
That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80%
of Americans had no savings at all. Automotive industry mogul Henry Ford provides
a striking example of the unequal distribution of wealth between the rich and the
middle-class. Henry Ford reported a personal income of $14 million in the same year
that the average personal income was $750. By present day standards, where the
average yearly income in the U.S. is around $18,500, Mr. Ford would be earning over
$345 million a year! This maldistribution of income between the rich and the middle
class grew throughout the 1920's. While the disposable income per capita rose 9%
from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75%
increase in per capita disposable income.

A major reason for this large and growing gap between the rich and the working-class
people was the increased manufacturing output throughout this period. From 1923-
1929 the average output per worker increased 32% in manufacturing. During that
same period of time average wages for manufacturing jobs increased only 8%. Thus
wages increased at a rate one fourth as fast as productivity increased. As production
costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit
of the increased productivity went into corporate profits. In fact, from 1923-1929
corporate profits rose 62% and dividends rose 65%.




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The federal government also contributed to the growing gap between the rich and
middle-class. Calvin Coolidge's administration (and the conservative-controlled
government) favored business, and as a result the wealthy who invested in these
businesses. An example of legislation to this purpose is the Revenue Act of 1926,
signed by President Coolidge on February 26, 1926, which reduced federal income
and inheritance taxes dramatically. Andrew Mellon, Coolidge's Secretary of the
Treasury, was the main force behind these and other tax cuts throughout the 1920's. In
effect, he was able to lower federal taxes such that a man with a million-dollar annual
income had his federal taxes reduced from $600,000 to $200,000. Even the Supreme
Court played a role in expanding the gap between the socioeconomic classes. In the
1923 case Adkins v. Children's Hospital, the Supreme Court ruled minimum-wage
legislation unconstitutional.

The large and growing disparity of wealth between the well-to-do and the middle-
income citizens made the U.S. economy unstable. For an economy to function
properly, total demand must equal total supply. In an economy with such disparate
distribution of income it is not assured that demand will always equal supply.
Essentially what happened in the 1920's was that there was an oversupply of goods. It
was not that the surplus products of industrialized society were not wanted, but rather
that those whose needs were not satiated could not afford more, whereas the wealthy
were satiated by spending only a small portion of their income. A 1932 article in
Current History articulates the problems of this maldistribution of wealth:

We still pray to be given each day our daily bread. Yet there is too much bread, too
much wheat and corn, meat and oil and almost every other commodity required by
man for his subsistence and material happiness. We are not able to purchase the
abundance that modern methods of agriculture, mining and manufacturing make
available in such bountiful quantities.

Three quarters of the U.S. population would spend essentially all of their yearly
incomes to purchase consumer goods such as food, clothes, radios, and cars. These
were the poor and middle class: families with incomes around, or usually less than,
$2,500 a year. The bottom three quarters of the population had an aggregate income
of less than 45% of the combined national income; the top 25% of the population took
in more than 55% of the national income. While the wealthy too purchased consumer
goods, a family earning $100,000 could not be expected to eat 40 times more than a
family that only earned $2,500 a year, or buy 40 cars, 40 radios, or 40 houses.

Through such a period of imbalance, the U.S. came to rely upon two things in order
for the economy to remain on an even keel: credit sales, and luxury spending and
investment from the rich.

One obvious solution to the problem of the vast majority of the population not having
enough money to satisfy all their needs was to let those who wanted goods buy
products on credit. The concept of buying now and paying later caught on quickly. By


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the end of the 1920's 60% of cars and 80% of radios were bought on installment
credit. Between 1925 and 1929 the total amount of outstanding installment credit
more than doubled from $1.38 billion to around $3 billion. Installment credit allowed
one to "telescope the future into the present", as the President's Committee on Social
Trends noted. This strategy created artificial demand for products which people could
not ordinarily afford. It put off the day of reckoning, but it made the downfall worse
when it came. By telescoping the future into the present, when "the future" arrived,
there was little to buy that hadn't already been bought. In addition, people could not
longer use their regular wages to purchase whatever items they didn't have yet,
because so much of the wages went to paying back past purchases.

The U.S. economy was also reliant upon luxury spending and investment from the
rich to stay afloat during the 1920's. The significant problem with this reliance was
that luxury spending and investment were based on the wealthy's confidence in the
U.S. economy. If conditions were to take a downturn (as they did with the market
crashed in fall and winter 1929), this spending and investment would slow to a halt.
While savings and investment are important for an economy to stay balanced, at
excessive levels they are not good. Greater investment usually means greater
productivity. However, since the rewards of the increased productivity were not being
distributed equally, the problems of income distribution (and of overproduction) were
only made worse. Lastly, the search for ever greater returns on investment lead to
wide-spread market speculation.

Maldistribution of wealth within our nation was not limited to only socioeconomic
classes, but to entire industries. In 1929 a mere 200 corporations controlled
approximately half of all corporate wealth. While the automotive industry was
thriving in the 1920's, some industries, agriculture in particular, were declining
steadily. In 1921, the same year that Ford Motor Company reported record assets of
more than $345 million, farm prices plummeted, and the price of food fell nearly 72%
due to a huge surplus. While the average per capita income in 1929 was $750 a year
for all Americans, the average annual income for someone working in agriculture was
only $273. The prosperity of the 1920's was simply not shared among industries
evenly. In fact, most of the industries that were prospering in the 1920's were in some
way linked to the automotive industry or to the radio industry.

The automotive industry was the driving force behind many other booming industries
in the 1920's. By 1928, with over 21 million cars on the roads, there was roughly one
car for every six Americans. The first industries to prosper were those that made
materials for cars. The booming steel industry sold roughly 15% of its products to the
automobile industry. The nickel, lead, and other metal industries capitalized similarly.
The new closed cars of the 1920's benefited the glass, leather, and textile industries
greatly. And manufacturers of the rubber tires that these cars used grew even faster
than the automobile industry itself, for each car would probably need more than one
set of tires over the course of its life. The fuel industry also profited and expanded.
Companies such as Ethyl Corporation made millions with items such as new "knock-


                                                                                     14
free" fuel additives for cars. In addition, "tourist homes" (hotels and motels) opened
up everywhere. With such a wealthy upper-class many luxury hotels were needed. In
1924 alone, hotels such as the Mayflower (Washington D.C.), the Parker House
(Boston), The Palmer House (Chicago), and the Peabody (Memphis) opened their
doors. Lastly, and possibly most importantly, the construction industry benefited
tremendously from the automobile. With the growing number of cars, there was a big
demand for paved roads. During the 1920's Americans spent more than a $1 billion
each year on the construction and maintenance of highways, and at least another $400
million annually for city streets. But the automotive industry affected construction far
more than that. The automobile had been central to the urbanization of the country in
the 1920's because so many other industries relied upon it. With urbanization came
the need to build many more apartment buildings, factories, offices, and stores. From
1919 to 1928 the construction industry grew by around $5 billion dollars, nearly 50%.

Also prospering during the 1920's were businesses dependent upon the radio business.
Radio stations, electronic stores, and electricity companies all needed the radio to
survive, and relied upon the constant growth of the radio market to expand and grow
themselves. By 1930, 40% of American families had radios. In 1926 major
broadcasting companies started appearing, such as the National Broadcasting
Company. The advertising industry was also becoming heavily reliant upon the radio
both as a product to be advertised, and as a method of advertising.

Several factors lead to the concentration of wealth and prosperity into the automotive
and radio industries. First, during World War I both the automobile and the radio
were significantly improved upon. Both had existed before, but radio had been mostly
experimental. Due to the demands of the war, by 1920 automobiles, radios, and the
parts necessary to build these things were being produced in large quantities; the work
force in these industries had been formed and had become experienced.
Manufacturing plants were already in place. The infrastructure existed for the
automotive and radio industries to take off. Second, due to federal government's
easing of credit, money was available to invest in these industries. Thanks to pressure
from President Coolidge and the business world, the Federal Reserve Board kept the
rediscount rate low.

The federal government favored the new industries as opposed to agriculture. During
World War I the federal government had subsidized farms, and payed absurdly high
prices for wheat and other grains. The federal government had encouraged farmers to
buy more land, to modernize their methods with the latest in farm technology, and to
produce more food. This made sense during that war when war-ravaged Europe had
to be fed too. However as soon as the war ended, the U.S. abruptly stopped its
policies to help farmers. During the war the United States government had paid an
unheard of $2 a bushel for wheat, but by 1920 wheat prices had fallen to as low as 67
cents a bushel. Farmers fell into debt; farm prices and food prices tumbled. Although
modest attempts to help farmers were made in 1923 with the Agricultural Credits Act,
farmers were generally left out in the cold by the government.


                                                                                     15
The problem with such heavy concentrations of wealth and such massive dependence
upon essentially two industries is similar to the problem with few people having too
much wealth. The economy is reliant upon those industries to expand and grow and
invest in order to prosper. If those two industries, the automotive and radio industries,
were to slow down or stop, so would the entire economy. While the economy did
prosper greatly in the 1920's, because this prosperity wasn't balanced between
different industries, when those industries that had all the wealth concentrated in them
slowed down, the whole economy did. The fundamental problem with the automobile
and radio industries was that they could not expand ad infinitum for the simple reason
that people could and would buy only so many cars and radios. When the automotive
and radio industries went down all their dependents, essentially all of American
industry, fell. Because it had been ignored, agriculture, which was still a fairly large
segment of the economy, was already in ruin when American industry fell.

A last major instability of the American economy had to do with large-scale
international wealth distribution problems. While America was prospering in the
1920's, European nations were struggling to rebuild themselves after the damage of
war. During World War I the U.S. government lent its European allies $7 billion, and
then another $3.3 billion by 1920. By the Dawes Plan of 1924 the U.S. started lending
to Axis Germany. American foreign lending continued in the 1920's climbing to $900
million in 1924, and $1.25 billion in 1927 and 1928. Of these funds, more than 90%
were used by the European allies to purchase U.S. goods. The nations the U.S. had
lent money to (Britain, Italy, France, Belgium, Russia, Yugoslavia, Estonia, Poland,
and others) were in no position to pay off the debts. Their gold had flowed into the
U.S. during and immediately after the war in great quantity; they couldn't send more
gold without completely ruining their currencies. Historian John D. Hicks describes
the Allied attitude towards U.S. loan repayment:

In their view the war was fought for a common objective, and the victory was as
essential for the safety of the United States as for their own. The United States had
entered the struggle late, and had poured forth no such contribution in lives and losses
as the Allies had made. It had paid in dollars, not in death and destruction, and now it
wanted its dollars back.

There were several causes to this awkward distribution of wealth between U.S. and its
European counterparts. Most obvious is that fact that World War I had devastated
European business. Factories, homes, and farms had been destroyed in the war. It
would take time and money to recuperate. Equally important to causing the disparate
distribution of wealth was tariff policy of the United States. The United States had
traditionally placed tariffs on imports from foreign countries in order to protect
American business. However these tariffs reached an all-time high in the 1920's and
early 1930's. Starting with the Fordney-McCumber Act of 1922 and ending with the
Hawley-Smoot Tariff of 1930, the United States increased many tariffs by 100% or
more. The effect of these tariffs was that Europeans were unable to sell their own
goods in the United States in reasonable quantities.


                                                                                      16
In the 1920's the United States was trying "to be the world's banker, food producer,
and manufacturer, but to buy as little as possible from the world in return." This
attempt to have a constantly favorable trade balance could not succeed for long. The
United States maintained high trade barriers so as to protect American business, but if
the United States would not buy from our European counterparts, then there was no
way for them to buy from the Americans, or even to pay interest on U.S. loans. The
weakness of the international economy certainly contributed to the Great Depression.
Europe was reliant upon U.S. loans to buy U.S. goods, and the U.S. needed Europe to
buy these goods to prosper. By 1929 10% of American gross national product went
into exports. When the foreign countries became no longer able to buy U.S. goods,
U.S. exports fell 30% immediately. That $1.5 billion of foreign sales lost between
1929 to 1933 was fully one eighth of all lost American sales in the early years of the
depression.

Mass speculation went on throughout the late 1920's. In 1929 alone, a record volume
of 1,124,800,410 shares were traded on the New York Stock Exchange. From early
1928 to September 1929 the Dow Jones Industrial Average rose from 191 to 381.
This sort of profit was irresistible to investors. Company earnings became of little
interest; as long as stock prices continued to rise huge profits could be made. One
such example is RCA corporation, whose stock price leapt from 85 to 420 during
1928, even though it had not yet paid a single dividend. Even these returns of over
100% were no measure of the possibility for investors of the time. Through the
miracle of buying stocks on margin, one could buy stocks without the money to
purchase them. Buying stocks on margin functioned much the same way as buying a
car on credit. Using the example of RCA, a Mr. John Doe could buy 1 share of the
company by putting up $10 of his own, and borrowing $75 from his broker. If he sold
the stock at $420 a year later he would have turned his original investment of just $10
into $341.25 ($420 minus the $75 and 5% interest owed to the broker). That makes a
return of over 3400%! Investors' craze over the proposition of profits like this drove
the market to absurdly high levels. By mid 1929 the total of outstanding brokers'
loans was over $7 billion; in the next three months that number would reach $8.5
billion. Interest rates for brokers loans were reaching the sky, going as high as 20% in
March 1929. The speculative boom in the stock market was based upon confidence.
In the same way, the huge market crashes of 1929 were based on fear.

Prices had been drifting downward since September 3, but generally people where
optimistic. Speculators continued to flock to the market. Then, on Monday October
21 prices started to fall quickly. The volume was so great that the ticker fell behind.
Investors became fearful. Knowing that prices were falling, but not by how much,
they started selling quickly. This caused the collapse to happen faster. Prices
stabilized a little on Tuesday and Wednesday, but then on Black Thursday, October
24, everything fell apart again. By this time most major investors had lost confidence
in the market. Once enough investors had decided the boom was over, it was over.
Partial recovery was achieved on Friday and Saturday when a group of leading
bankers stepped in to try to stop the crash. But then on Monday the 28th prices started


                                                                                      17
dropping again. By the end of the day the market had fallen 13%. The next day, Black
Tuesday an unprecedented 16.4 million shares changed hands. Stocks fell so much,
that at many times during the day no buyers were available at any price.

This speculation and the resulting stock market crashes acted as a trigger to the
already unstable U.S. economy. Due to the maldistribution of wealth, the economy of
the 1920's was one very much dependent upon confidence. The market crashes
undermined this confidence. The rich stopped spending on luxury items, and slowed
investments. The middle-class and poor stopped buying things with installment credit
for fear of loosing their jobs, and not being able to pay the interest. As a result
industrial production fell by more than 9% between the market crashes in October and
December 1929. As a result jobs were lost, and soon people starting defaulting on
their interest payment. Radios and cars bought with installment credit had to be
returned. All of the sudden warehouses were piling up with inventory. The thriving
industries that had been connected with the automobile and radio industries started
falling apart. Without a car people did not need fuel or tires; without a radio people
had less need for electricity. On the international scene, the rich had practically
stopped lending money to foreign countries. With such tremendous profits to be made
in the stock market nobody wanted to make low interest loans. To protect the nation's
businesses the U.S. imposed higher trade barriers (Hawley-Smoot Tariff of 1930).
Foreigners stopped buying American products. More jobs were lost, more stores were
closed, more banks went under, and more factories closed. Unemployment grew to
five million in 1930, and up to thirteen million in 1932. The country spiraled quickly
into catastrophe. The Great Depression had begun.




                                                                                   18
6.3
          The Great Depression & the New Deal
LEARNING OBJECTIVE

Understand the causes of the Great Depression.

In October, 1929 the collapse of the values on the New York Stock Exchange caused
a world-wide chain reaction leading to the most severe economic depression in
history, and producing disastrous social and political consequences. No single factor
contributed so heavily to the triumph of totalitarianism.

Prior to World War I international prosperity came from a world market in which
goods, money, and labor moved virtually unobstructed to where they were in the
highest demand, that is, where they were the most productive. This movement had to
contend with protective tariffs, but prior to 1914 these tariff barriers were not high
enough to significantly impede the natural flow of the international economy. World
War I changed this system. All the belligerents overdeveloped their industrial sector
to produce war goods.

After the war it proved difficult to mend the broken trade links and restore the
economic balance. The immediate problem was the uneven distribution of currencies
that were internationally accepted (e.g. the dollar, pound sterling, Swiss and French
franc). Wartime purchases had siphoned off a great deal of European wealth to the
neutrals: in the 1920s the U.S. owned 40 percent of the world's gold reserve.
Convertible currency -- the lifeblood of international trade -- was in such short supply
that many European countries were unable to engage in significant trade. Their
currencies turned into tokens with a strictly internal circulation. To remedy this
situation and to stimulate trade on which the health of their own economies depended,
the capital rich countries--the U.S., Britain, and France--poured in the 1920s a great
deal of money in the form of loans and investments into the capital poor countries,
especially Germany.

A second factor that inhibited postwar trade was the steady rise of tariff barriers. In
1922 to protect its overexpanded industries from competition the U.S. began
increasing its tariffs. The 1930 Hawley-Smoot Tariff raised U.S. tariffs to an all-time
high with ad valorem rates that averaged from 32 to 40 percent. The total length of
European frontiers in 1920 was exactly double that of 1914; each new mile of frontier
represented another economic hurdle to the movement of goods. The shortage of
convertible currencies and the simultaneous increase of tariff barriers created a
vicious circle: to raise hard currency each country sought to obtain the most favorable
balance of trade. Gradually, the international economy began to move toward each




                                                                                     19
state being generally self-sufficient. In the meantime productivity was rising
everywhere.

In 1920 the ex-Allied nations owed the United States about $10.3 billion for wartime
and post armistice loans. The Europeans had spent most of these funds in America to
purchase war goods, thereby contributing to America's booming prosperity in 1917-
18. Despite the pleas from the Allied governments that they had suffered tremendous
casualties in comparison to the Americans, and that the U.S. consider the money as its
contribution to the joint war effort, the American government maintained that the
loans represented financial transactions that required repayment in full and with
interest. Reparations and the repayment of the U.S. loans were interrelated, and as
long as the U.S. government demanded its money from its ex-allies, they would
demand their reparation payments from Germany.

The steady outflow of reparations payments, as well as an adverse balance of trade,
caused a steady depreciation of German currency. In the spring of 1921 one U.S.
dollar equaled 65 marks; in September, 1923, it was worth 9 million marks, and in
November 1923, 4.2 trillion. As the mark became worthless, so did bank savings,
investments, securities and loans. The German middle class, whose livelihood
depended on such values, grew to detest the republic and they moved to the right
politically. In the fall of 1923 the Weimar Republic seemed on the verge of collapse.
In October the communists staged an uprising in Hamburg, and in November right-
wing extremists, led by, among others, Adolf Hitler, attempted a coup in Munich.
Both revolts failed, but the danger of sedition remained.

The Allies realized that it was not possible to keep on squeezing Germany without
regard to its ability to pay. In 1924 they appointed a commission headed by the
American financier Charles Dawes to draw up a plan for the economic reconstruction
of Germany. Under the Dawes's Plan a schedule of reparations payments was set up
and Germany received sizable international loans. The Germans used a part of these
loans to meet their reparations obligations, thus easing the strains on their economy.
The U.S. lent money to Germany which enabled it to pay reparations to the European
ex-allies, which enabled them to make war-debt payments to the U.S. This system
worked until the Great Depression caused U.S. financial institutions to stop making
loans to Germany. The inability of the U.S. to make the German loans helped cause
the entire world-wide economic system to collapse, and bring Adolf Hitler to power
in Germany.

In the 1920s the America economy was also in bad shape since wages lagged behind
rising productivity. Between 1920 and 1929, hourly industrial wages rose only 2
percent, while the productivity of workers in factories jumped 55 percent. Corporate
profits and dividends increased 62 and 65 percent respectively, from 1923 to 1929,
while wages and salaries on average enjoyed only an 11 percent increase in real
income. At the same time, the real income of farmers was declining because
agriculture prices were falling while taxes and living costs were rising. In 1910 the


                                                                                    20
income per farm worker was about 40 percent of the nonfarm worker, in 1930 it was
about 30 percent--in 1930, the rural population of America was 20 percent of the total
population, and their poverty helped pull down the economy of the entire nation.

The major problem in the American, and many other economies, was the
maldistribution of wealth. In 1929, 42 percent (11.5 million) of American families
made less than $1,500 a year, the government established minimum level of
subsistence. Twenty-one percent made less than $1,000 per annum. One-tenth of 1
percent (36,000) of the families at the top received an income nearly equal to the 42
percent of the families on the bottom. This maldistribution meant inadequate
purchasing power for the masses.

Eventually, factories produced more goods than people could purchase, and they
began to cut back on production. In the U.S. many people "played the stock market."
There was no government control of the New York Stock Exchange and many people
bought stocks on the margin--borrowing up to 90 percent of the price of the stock.
Often they would mortgage their home as collateral. As long as stock prices increased
as they did during the 1920s this borrowing created few problems. People bought
their stocks at low prices, held them until their loan was due, sold them at high prices,
and paid off their loan and made a profit. But in 1929 sophisticated investors realized
that many stocks were overvalued -- the value of stocks were worth more than the
value of the corporation that was selling them. With the cut back of industrial
production they began to sell their stocks, at first slowly, but on "Black Thursday,"
October, 24, 1929, a record 13 million shares were sold, and values collapsed. By the
end of October, more than $30 billion in paper values had been wiped out.

The American, and world economy, continued to decline during the next three years.
For example, United States Steel stock fell from 262 to 22, General Motors, from 73
to 8. Five thousand banks failed in the U.S. alone. In July 1932 the U.S. steel industry
was only operating at 12 percent of capacity. Twenty-five percent of the labor force in
the U.S. was out of work.

The Great Depression was unique not only for its intensity but also in its worldwide
impact. American financial houses were forced to call in their short-term foreign
loans. By 1932 world industrial production, excluding the Soviet Union, fell 36.2
percent. The maximum decline in any previous depression had been 7 percent. World
trade shrunk from $68.6 billion in 1929 to $24.2 billion in 1933. The previous
maximum drop in international trade had been 7 percent. In 1932, when the
Depression was at its worst, about 22 percent of the world labor force, or 30 million
people, were jobless.




                                                                                        21
LEARNING OBJECTIVE

Understand President Herbert Hoover's response to the Great Depression.

Few of the leaders of American business and politics, either Republican or Democrat,
had expected the crash. And when it came, very few of them understood what had
caused it or foresaw the severity of the depression it would bring -- Herbert Hoover
was not an exception. Hoover remained convinced that the economy was basically
sound and that government should not interfere with it. He did take steps to try and
prevent the spread of the depression. In a series of conferences he tried to persuade
business leaders to keep wages and prices up voluntarily. In an attempt to create jobs,
he had Congress authorize $500 million in public works (Hoover Dam is the most
famous example).

Hoover's efforts were too meager to check the contraction in private spending,
investment, and employment that followed the crash. Hoover was determined to keep
a balanced, or nearly balanced, budget, and he refused to countenance any more
government spending. The economy continued to decline; in 1931 2,294 banks with
deposits of almost $1.7 billion closed their doors. Each collapse buried the cash and
savings of depositors, most of whom had no other resources. By 1932, 25 percent of
the work force was unemployed--13 million workers with about 30 million
dependents. Average manufacturing wages fell from $25 to less than $17 a week, and
average salaries declined by 40 percent.

The depression carried a frightful burden of human suffering. Thousands of middle-
class families, their incomes dwindling, sometimes entirely gone, lost next their
savings, then their insurance, then, unable to pay their mortgages, their very homes.
Farm prices collapsed; wheat, for example, fell from $1.03 a bushel in 1929 to 38
cents a bushel in 1932. Twenty-five percent of all farm families in America had been
pushed off the land by 1933. More than one hundred thousand small businesses went
bankrupt. Laboring men could not find jobs; a rough estimate indicates that about 1.5
million of them simply moved about riding the rails, or like the Joads in the Grapes of
Wrath, moved to California looking for work.

Nothing revealed so sharply Hoover's lack of rapport with the people nor caused him
such a loss of favor as his inept handling of the Bonus Army. In the spring of 1932
about 20,000 unemployed World War I veterans converged on Washington from all
over the country. In the 1920s Congress had authorized World War I veterans a bonus
of about $1,000 to be paid in 1945 to compensate them for the high wages civilians
were drawing during the war. Responding to the economic crisis, Congress had paid
one-half of the bonus in 1931. The unemployed veterans demanded immediate
payment of the other half. They set up a shanty town near the capital and took over
some land and unused government buildings on Pennsylvania Avenue. When
Congress refused their request, most of the protesters went home, but about 2,000
stayed.

                                                                                     22
In July, 1932 Hoover ordered the eviction of all squatters from government buildings.
In the ensuing melee, two veterans were killed and several policemen injured. Hoover
and his Secretary of War were convinced that they were facing a Communist uprising
of menacing proportions, and they used this incident as a pretext for bringing in the
U.S. army under General Douglas MacArthur. Four troops of cavalry with drawn
sabers, six tanks, and a column of infantry with fixed bayonets routed the veterans
and their families, and then burned their camp to the ground. Hoover's use of armed
force against American veterans raised a storm of protest and insured his defeat in the
forthcoming election.

In the Presidential election of 1932 the Democrats nominated the governor of New
York, Franklin D. Roosevelt. Roosevelt, a distant cousin of President Theodore
Roosevelt, had been the party's Vice Presidential nominee in 1920, and Assistant
Secretary of the Navy during World War I. Roosevelt had caught polio during the
1920s and he could not walk without assistance. Roosevelt broke tradition by flying
to the convention in Chicago to accept the nomination before the convention
adjourned. In his acceptance speech he pledged a "new deal" to the American people.
The Democrats knew that unless they made a major blunder they had the election
won. Thus, during the campaign Roosevelt was often deliberately vague and he took
great pains to avoid offending any large bloc of voters. Roosevelt won over 57
percent of the popular vote and carried the Electoral College 472 to 59. The
Democrats also gained a large majority in Congress.

LEARNING OBJECTIVE

Understand New Deal during the first term of FDR.

A few days before his inauguration Roosevelt was in Miami for a public appearance.
A demented individual emptied a pistol at him, barely missing him, and killing the
mayor of Chicago who stood next to him. If the assassin's bullet had found its mark,
and if the Vice President, conservative John Nance Garner, had become President, the
history of the U.S. would be very different. As soon as he became President
Roosevelt took charge. In his Inaugural Address Roosevelt declared his "firm belief
that the only thing we have to fear is fear itself -- nameless, unreasoning, unjustified
terror . . ." The President pledged himself to ask the Congress to give him "broad
Executive power to wage a war against the emergency, as great as the power that
would be given to me if we were in fact invaded by a foreign foe." While Roosevelt
said nothing new -- his address had few specifics -- his attitude instilled hope and
courage in the people. He made clear that the time of waiting was over, that he had
the people's interests at heart, and that he would mobilize the power of the
government to help them. In the next week the White House received almost 500,000
letters; a good indication of Roosevelt's immediate impact.

Roosevelt was inaugurated on March 4, 1933. On March 5 he called Congress into
special session and he proclaimed a national bank holiday. The method that Roosevelt

                                                                                     23
used to pass the emergency banking bill illustrates the mood of the country. The
House had no copies of the bill when it was introduced on the first day of the 73rd
session shortly before 1 PM. The Speaker recited the text from the one available draft.
With a unanimous shout, the House passed the bill, sight unseen, after only 38
minutes of debate. The Senate approved the bill unamended 73-7 at 7:30 that evening
and at 8:05 that same night (March 9, 1933) Roosevelt signed it.

Within the next hundred days Roosevelt sent 14 more major bills to Congress and all
of them were enacted into law. These measures committed the country to an
unprecedented program of government-industry cooperation (National Recovery
Act); promised to distribute large sums to millions of staple farmers (Agricultural
Adjustment Act); accepted responsibility for the welfare of millions of unemployed
(Federal Emergency Relief Act, Civilian Conservation Corps); agreed to engage in far
reaching experimentation in regional planning (TVA); pledged billions of dollars to
save homes and farms from foreclosure (Home Owners' Loan Corporation);
undertook huge public works spending (Public Works Administration); guaranteed
the small bank deposits of the nation (Federal Deposit Insurance Corporation); and,
established federal regulation of the Stock Market (Federal Securities Act).

Later, in 1935, to help his reelection campaign, Roosevelt had Congress pass even
more far reaching legislation. Ninety percent of all farms in America were without
electricity. The Rural Electrification Administration was created to provide isolated
rural areas with low-cost electricity. Much of the Roaring Fork Valley received
electricity for the first time with its assistance. The National labor Relations Act
(Wagner Act) set up the National Labor Relations Board (NLRB) to arbitrate
employer-employee differences, and it upheld labor's right of collective bargaining.
Previously, in labor-management disputes the government had always sided with
management. Under the New Deal the government was at least neutral, and at times
pro-labor. Union leaders took advantage of this government attitude (workers were
told that "the President wants you to join the union") and union membership
skyrocketed during Roosevelt's administration (3,632,000 in 1930 to 14,796,000 in
1945).

In August, 1935 the Social Security Act was passed. This act insured workers against
unemployment, injury on the job, and old age. Taxes on workers and their employers
financed social security. In many respects the law was inept and conservative. In no
other welfare system in the world did the state take funds out of the current earnings
of workers. By relying on regressive taxation and withdrawing vast sums to build up
reserves, the act helped cause the recession of 1937. The law denied coverage to
numerous classes of workers. Sickness was not covered.

Yet for all its faults the Social Security Act of 1935 was a landmark in American
history. For the first time the government acknowledged that a citizen had clear-cut
social rights. It was framed in a way that withstood tests in the courts and changes of
political mood. When told that economically, employee contributions were a mistake,


                                                                                        24
Roosevelt replied: "I guess you're right on the economics, but those taxes were never
a problem of economics. They are politics all the way through. We put those payroll
contributions there so as to give the contributors a legal, moral, and political right to
collect their pensions and their unemployment benefits. With those taxes in there, no
damn politician can ever scrap my social security program."


LEARNING OBJECTIVE:

Understand the election of 1936.

Beginning in 1934 critics from the left and right began to attack the New Deal. The
American Liberty League, an organization of conservative businessmen and
politicians, offered the most active opposition on the right. Many of the nation's
wealthy hated Roosevelt. They refused to say his name, referring to him as "that man
in the White House." Terrified by the prospect of confiscatory taxation, the wealthy
viewed Roosevelt as a reckless leader. Accustomed to having their authority
unchallenged, businessmen resented the rising empires of government and labor.
Roosevelt at first thought that he could forge an all-class alliance, and he worked hard
to include businessmen in his coalition. But, by May, 1936 the right-wing attacks had
got to him. He began to use the resentment against business which had built up
because of the Depression against them.

Yet it should be pointed out that even though the New Deal encroached on traditional
business prerogatives, and that Roosevelt attacked moneyed interests for political
gain, Roosevelt and the New Deal were not anti-capitalist. Indeed, Roosevelt could
advance impressive claims to being regarded as the "savior of capitalism." In many
ways Roosevelt was deeply conservative. In the New Deal years, the government
sought deliberately, in Roosevelt's words, "to energize private enterprise." All of the
New Deal programs sought to strengthen the American system, not to destroy it.

A more serious threat to the New Deal than the Liberty League and other right-
wingers were three popular men who appealed to the same underprivileged people as
Roosevelt.

The most important challenge to Roosevelt was launched by Senator Huey P. Long of
Louisiana. Long rose from the poor farming people of northern Louisiana to educate
himself as a lawyer. As governor of Louisiana between 1928 and 1932, Long built
roads and hospitals, provided inexpensive or free textbooks and lunches for school
children; social benefits that were rare at that time. Long based his national ambitions
on a plan called "Share the Wealth," which called for a heavy tax on big incomes and
no personal incomes of more than $1 million a year. In addition, he advocated vast
public works spending, a national minimum wage, a shortened workweek, a balanced
farm program, and immediate cash payment of the World War I bonuses. At a time



                                                                                        25
when millions were destitute, Long made a deep appeal to both the northern worker
and southern farmer.

Father Charles E. Coughlin, a Roman-Catholic priest, had a national radio talk show.
By 1934 Coughlin spoke to the largest steady radio audience in the world. His mail
outnumbered the President's. Coughlin at first supported the President, but gradually
he moved away from his programs. His major complaint was that the President was
not moving swiftly enough in the direction of inflation. Finally, in November, 1934
Father Coughlin announced the formation of the National Union for Social Justice.
Convinced that capitalism was finished, he proposed a system of "social justice" to
take its place. His program was similar to that of Italian fascism.

The most benign challenger to Roosevelt was Dr. Francis Townsend. Townsend
proposed to pay a pension of $200 a month to every citizen over 60, on condition that
they spend it within one month. The pension would be financed by a 2 percent tax on
business transactions. The pension aspect of this plan caught on even though critics
pointed out that it was economically unfeasible. Roosevelt stole Townsend's thunder
by the Social Security Act of 1935, yet Townsend unleashed a new force in American
politics: old people. Buffeted by the depression, often an economic burden to their
own children, they found in the Townsend program a sense of unity with other elderly
people. West Coast politicians (Townsend lived in California) quaked at the threat of
Townsend reprisal unless they endorsed his program. On one key vote, 16 out of 20
California congressmen supported a Townsend bill.

The Republicans nominated Alf Landon of Kansas, the only Republican governor
elected in 1932 who was not defeated in the Democratic landslide of 1934.
Republican hopes rested on the possibility that a combination of Coughlin,
Townsend, and other dissident elements under the leadership of Huey Long would
draw enough votes away from Roosevelt to allow Landon to slip through. But in
September, 1935 Long was assassinated by a man angry at Long's attempt to dislodge
his father-in-law from a judgeship. Coughlin went off the deep end by calling the
President "anti-God" and a Communist. These diatribes caused the Vatican to censor
him, and Coughlin rapidly lost power as he became more and more vitriolic.

The election of 1936 was not even close. Roosevelt carried every state except Maine
and Vermont, and carried huge Democratic majorities with him into Congress. The
election of 1936 forged a new political coalition that existed through the 1960s. The
base of the coalition was the urban masses in the great northern cities. While old-
stock Americans in the small towns clung to the GOP, the newer ethnic groups in the
cities swung to Roosevelt, mostly out of gratitude for New Deal welfare measures,
but partly out of delight with being granted "recognition." During the 1920s one out
of every 25 judicial appointments went to a Catholic; under Roosevelt, more than one
out of every four. Blacks abandoned the party of Lincoln and went over to the
Democratic party for the same reasons. The Wagner Act insured the union vote, and
thousands of middle-class people supported the Democratic party because its


                                                                                    26
legislative program had saved their savings, house, business, or farm. The "Solid
South" remained in the Democratic column.

LEARNING OBJECTIVE

Understand why the New Deal ended.

Five events combined to help bring an end to the New Deal after the election of 1936-
-Roosevelt's scheme to "pack" the U.S. Supreme Court; a rash of sit-down strikes by
labor; the recession of 1937; Roosevelt's attempt to "purge" conservative Democratic
congressmen; and, most importantly, World War II.

The Supreme Court, by 5 to 4 votes, had declared the first AAA, the NIRA, and state
laws establishing minimum wages unconstitutional. The Constitution does not specify
the number of justices on the Supreme Court. Congress has varied the number of
judges from 5 to 10. Since 1869, the figure has been set at nine. Roosevelt believed
that the only way that he could insure that his New Deal programs would pass judicial
review was to increase the size of the Supreme Court. In February, 1937 he asked
Congress for the power to appoint an additional judge for each judge who did not
retire on reaching seventy years of age. A public outcry broke out that Roosevelt was
attacking the principle of separation of powers. Politicians who had feared to oppose
his economic policies, because they anticipated voter disapproval, now had the
perfect justification for breaking with the President.

In March, in a 5-4 decision the Court upheld a Washington minimum-wage law
similar to a New York statute it had erased earlier. Two weeks later the Supreme
Court, again in a 5-4 vote, ruled the Wager Act constitutional. As someone said at the
time: "a switch in time saves nine." In May, one of Roosevelt's chief opponents on the
Court retired and the President now had a 6-3 majority on the Court. Yet Roosevelt
refused to give in on his court packing scheme and it was not until July, 1937 that it
was finally killed in Congress. The Court fight weakened Roosevelt politically
because his opponents learned that they could fight him and survive the next election.

Prior to 1937, when workers went out on strike the owners and managers of factories
would hire goons to intimidate the workers and use the police to break the picket line
and bring in scab labor. The CIO, under John L. Lewis, came up with the scheme of
the sit down strike. Instead of leaving factories, workers in industries such as
automobiles and rubber sat down at their machines and refused to leave. Management
could not resort to force without destroying the factories themselves, and the workers
won major victories. This action frightened many middle-class people who saw this
tactic as an attack on private property. They began to believe that the reforms of the
New Deal had gone far enough.

In the midst of the Court fight and the sit-down strikes, economic recession set in.
Roosevelt, afraid of mounting federal deficits, had cut the relief program sharply in


                                                                                        27
June, 1937. The new social security tax also took money out of the economy.
Unemployment jumped from 14 percent to 19 percent, and the per capita gross
national product fell from $846 in 1937 to $794 in 1938. It was not until April, 1938
that a new public works program took some of sting out of the recession. In addition,
Roosevelt pushed through Congress the Fair Labor Standards Act, which established
a 40 hour week and minimum wage of 40 cents an hour. These measures further
alienated conservatives. If Roosevelt could be credited for bringing the country out of
the depths of the depression, he then had to accept the blame for the recession.

In the off-year elections of 1938 Roosevelt was determined to rid Congress of several
conservative Southern Democratic congressmen who had continually opposed his
New Deal programs. Roosevelt failed in his attempts. All his major targets won and
returned to Washington prepared for vengeance. In addition, Republicans picked up
enough seats in Congress to combine with the conservative Southern Democrats to
effectively block further changes in American society.

It was World War II that ultimately ended the New Deal. In September, 1939
Germany invaded Poland and the war began. Very quickly the United States became
the "arsenal for democracy," and as Roosevelt himself said: "Dr. New Deal became
Dr. win the war." Unemployment dropped from 17.2 percent in 1939 to 4.7 percent in
1942 as war orders poured into U.S. factories.


LEARNING OBJECTIVE

Understand the impact of the New Deal on American society.

Franklin Roosevelt greatly expanded the President's legislative functions. Unlike
previous administrations, by the end of Roosevelt's tenure in the White House,
Congress looked automatically to the Executive for guidance; it expected the
administration to have a "program" to present for consideration. Roosevelt created the
Executive Office of the President in September 1939. This executive order set up an
Executive Office in the White House that in later years would include such pivotal
agencies as the Council of Economic Advisers, the National Security Council, the
Bureau of the Budget, and the Central Intelligence Agency. This action gave the
President tremendous control over the government decision-making process.

For the first time for many Americans, the federal government became an institution
that was directly experienced. More than state and local governments, it came to be
the government, an agency directly concerned with their welfare. Under the New Deal
the national government assumed the responsibility for guaranteeing every American
a minimum standard of subsistence. The programs of the New Deal consciously
sought to make the industrial system more humane and to protect workers and their
families from exploitation.



                                                                                     28
The New Deal left many problems unsolved and created some perplexing new ones. It
never demonstrated that it could achieve prosperity in peacetime. It enhanced the
power of interest groups. It did not evolve a way to protect people who had no such
spokesmen, nor an acceptable method for controlling the interest groups. The New
Deal achieved a more just society by recognizing groups which had been largely
unrepresented--staple farmers, industrial workers, particular ethnic groups, and the
new intellectual-administrative class. Yet this was still a halfway revolution; it
swelled the ranks of the bourgeoisie but left many Americans -- sharecroppers, slum
dwellers, most blacks -- outside the system.

Roosevelt and the New Dealers understood that they had come only part of the way.
Only five years separated Roosevelt's inauguration in 1933 and the adoption of the
last of the New Deal measures in 1938. As Mrs. Roosevelt said in 1939: "I believe in
the things that have been done. They helped but they did not solve the fundamental
problems . . . I never believed the Federal government could solve the whole problem.
It bought us time to think."




                                                                                  29
6.4

       Causes and Effects of the Great Depression
Causes
      Overproduction
      Laissez Faire policies that left the economy unregulated
      Fraud
      Over speculation on the stock market
      Decline in foreign trade

While we have spoken about the 20's as a time of great prosperity, it was a tad
deceptive. Problems lie under the surface that would not be dealt with by the
conservative administrations of Harding, Coolidge and Hoover.

The Great Depression did not begin in 1929 with the fall of the over inflated stock
market. In fact the Depression began ten years earlier in Europe. As the depression
raged on in Europe American's believed they would be immune to its effects.
Isolationist sentiments and conservative doctrine held that the less we had to do with
Europe the better. As a result American polices never addressed the possibility of the
United States entering a depression as well. Actually American policies actually
contributed to our entry into the depression.

The early warning signs first came in the agricultural sector. Farmers continued to
produce more and more food due to technological advances like the tractor. As
production grew farm prices dropped. It was simply a matter of supply and demand.
Framers reacted in the traditional manner and boosted production even further. Prices
plummeted. Farmers began to default on their loans and the banks foreclosed. To
make matters worse the central part of the nation was hit with a terrible drought.
Farmers were devastated. The drought turned that portion of America into what was
called "The Dustbowl."

In the 1920's American economic policy was laissez faire. Businesses were left alone
and for sometime things appeared to fine. American businesses reported record
profits; production was at an all time high. The problem was that while earnings rose
and the rich got richer, the working class received a disproportionally lower
percentage of the wealth. This uneven distribution of wealth got so bad that 5% of
America earned 33% of the income. What this meant was that there was less and less
real spending. Despite the fact that the working class had less money to spend
businesses continued to increase production levels.




                                                                                    30
Purchasing dropped internationally as well. Since Europe was in a depression people
there weren't buying as much as businesses had estimated. Then the Fordney
McCumber Tariff and the Hawley Smoot Tariff raised tariff levels to as much as
40%. Europe which was already angered at US foreign actions responded with high
tariffs of their own. International trade was at a standstill.

At this point you should be asking the question "If no one buying and companies were
increasing production levels, wasn't there going to be a problem?" BINGO!!! The
problem is known as overproduction. American businesses were producing far more
than could be consumed. The result was lost profits and eventually debts. After a
while many companies went out of business. Why would these companies continue to
overproduce? There are several reasons. Some were managed poorly. Others were
part of holding companies that placed layers and layers of companies, each relying on
the others production levels like a pyramid. If one company in the pyramid reported
lower production levels the others fell off and it looked bad. In many cases however
crooked company owners reported earnings that were higher than they were actually
were in order to drive up the stock price.

As a result of World War I America had emerged as the worlds leading creditor
nation. Foreign powers owed the United States and its companies about a billion
dollars annually. With declining trade in America, a demand for reparation from the
United States and the continuing European depression this debt went unpaid.

Throughout this period of time Americans (and it seems this included Harding,
Coolidge and Hoover.) Truly felt they would be prosperous forever. They didn't see
or were unwilling to see the warning signs. With this confidence Americans began to
increasingly invest in the stock market. The market began an unprecedented rise in
1928. By September 3rd 1929 the market reached a record high of 381. Then the
decline began. Many didn't think it would last but on October 24th panic selling began
as 12.8 million shares changed hands. Then came Black Tuesday, October 29th 1929.
The market plummeted. By July the Dow reached a low of 41.22. Millions upon
millions of dollars had been lost. Many who had bought on margin (credit) had to pay
back debts with money they didn't have. Some opened up the windows and jumped to
their deaths. The depression had arrived.

Banks that had invested heavily in the stock market and real estate lost their
depositors money. A panic ensued as people lined up at the banks to get their money.
Unfortunately for many the money just wasn't there. As the amount of money in
circulation dropped deflation hit. Money was worth more but there was little money
to be had. The fed which had the power to put more money into circulation did
nothing (laissez faire). Workers were fired as thousands of businesses closed down.
Unemployment rose to 25-35%. In Toledo Ohio fully 80% of the workers were
unemployed! Real estate investments flopped because with deflation a building that
was once worth ten million was now worth five. The mortgage and debt stayed the
same but the income was gone. Banks foreclosed on loans and took possession of


                                                                                      31
worthless properties that nobody could afford to buy. Between 1930 and 1932 over
9000 banks failed.

With all of this there Hoover announced to Americans that they should "stay the
course" that the ship would right itself. After all, Hoover was a self made man, a
rugged individualist. By the time Hoover recognized he had to do something it was
too little and much too late.




                                                                                     32
6.5

What was Franklin Delano Roosevelt's plan to end
            the Great Depression?
As we have seen the Great Depression had a devastating impact on the American
economy and the American people. President Hoover believed, basically, in waiting
things out. As result of Hoovers inactivity America turned to a new, dynamic leader:
Franklin Delano Roosevelt. Today we will discuss his basic strategy for improving
the economy.


I. Franklin Delano Roosevelt

   A. Early Years

       1. Raised in upper class family in Hyde Park N.Y.

       2. Attended Harvard and Colombia

       3. Lawyer then active in NY politics

       4. 1912 - Assistant Sec. Of Navy

       5. 1918 Narrowly won Governorship of NY,

       6. 1920 - VP Candidate with James A. Cox

       7. 1921 - Contracted Polio, lost use of legs. This deeply effected Roosevelt.
       Now he truly knew what human suffering was all about. He could identify. He
       was also a fighter and a winner. He overcame his handicap and this later
       would inspire Americans during the depression.

       8. 1930 Reelected Governor of New York State - His innovative programs
       gained national attention and were eventually called the Little New Deal - NY
       Model

       9. Ran for Pres. In 1932 - Used song: "Happy Day's Are Here Again."
       Pledged to America; "I Pledge to you, I pledge myself, to a new deal for the
       American people!"

   B. What did Roosevelt do when he got elected?



                                                                                      33
   1. Inauguration Speech: Told America "We have nothing to fear but fear
   itself!" He wanted to inspire optimism and hope. He did not want America
   paralyzed by fear. He was a man of action.

   2. Appointed the "Brain Trust" - These were a group of brilliant social,
   economic and political thinkers who comprised Roosevelt's cabinet. He
   surrounded himself with the best, not just political allies and supporters.

      -Harry Hopkins - Social Worker and the architect of much of the New
      Deal.

      -Henry Morgenthau

      -Louis Lowe

      -Cordell Hull

      -Frances Perkins - Sec. of Labor and first female in the cabinet.

      -Sam Rosenman

      -Raymond Moley

      -Rexford Tugwell

   3. First Hundred Days - For the first hundred days of his administration
   Roosevelt and his Brain Trust where a whirlwind of activity. Legislation was
   introduced and passed at a furious pace as Congress mostly acted as a rubber
   stamp. Roosevelt called Congress into session and asked for executive power
   to wage war against poverty and pessimism. He said he wanted a power "as
   great as the power that would be given me if we were in fact invaded by a
   foreign foe." At first he ordered a bank holiday, which closed every bank in
   the nation and stopped people from withdrawing all of their money. This
   ended the panic. He then signed legislation called the Emergency Banking
   Act. This closed all of the insolvent lending institution and only reopened the
   solvent ones. While many lost money at least the panic was eased.

C. What was Roosevelt's underlying philosophy?

   1. Keynesian or "pump priming" economics. Based on the beliefs of economist
   John Maynard Keynes it held that money should be invested in the people, the
   working class. Then spending would increase with new money in circulation.
   As spending increased it was expected that businesses would expand to meet
   the new demand and hire new workers. This would spur on more spending and
   more growth. This plan was the opposite of the Republican plan ascribed to by


                                                                                 34
       Hoover and earlier leaders. They had believed in supply side or "trickle down"
       economics. In this philosophy money was to be invested at top, in business.
       Then businesses would expand, hire new workers and this in turn would spur
       on spending and further economic growth.

   D. What did Roosevelt mean by relief, recovery and reform?

       1. Relief - Immediate action taken to halt the economies deterioration.

       2. Recovery - "Pump - Priming" Temporary programs to restart the flow of
       consumer demand.

       3. Reform - Permanent programs to avoid another depression and insure
       citizens against economic disasters.



           Relief                Recovery                          Reform
 Immediate action taken "Pump - Priming" Temporary Permanent programs to avoid
  to halt the economies programs to restart the flow of another depression and insure
      deterioration.         consumer demand.             citizens against economic
                                                                   disasters.
    Bank Holiday       Agricultural Adjustment Act     Securities & Exchange
  Declared so that the             (AAA)                 Commission (SEC)
panic would be stopped. Taxed food processors and    Permanent Agency set up to
                         gave the money directly to  monitor stock market activity
                        farmers as a payment for not  and ensure that no fraud or
                        growing food. This decreased  insider trading was taking
                        supply so price would go up.             place.
 Emergency Banking National Industrial Recovery Federal Deposit Insurance
          Act                   Act (NIRA)                Corporation (FDIC)
  Closed the insolvent   Created the NRA (National Permanent Agency designed to
banks and only reopened Recovery Administration) a    insure depositors money in
   the solvent ones.      consortium of businesses     savings banks. Originally
                        organized by the government     insured up to $5,000 per
                         and given the power to set       depositor today it has
                        rules and regulations for the    increased to $100,000.
                         economy. Members of the
                        NRA displayed a blue eagle.
  Federal Emergency         Home Owners Loan Corp.            Social Security
   Relief Act (FERA)       Gave loans to home owners so       Administration
 Gave immediate help to        they could pay their     Permanent agency designed to
those that needed it in the mortgages. This prevented   ensure that the older segment
 form of cash payments. people from going homeless of society always would have



                                                                                   35
                             and prevented banks from    enough money to survive. The
                                   going under.            key here is that they would
                                                            then also be able to spend
                                                              throughout their lives.
     Civil Works               Works Progress            National Labor Relations
Administration (CWA)       Administration (WPA)           Act and National Labor
Provided temporary jobs       Provided long term              Relations Board
  repairing roads and      government jobs building            (NLRA/NLRB)
        bridges.        schools and other public works     Otherwise known as the
                                   projects.            Wagner Act it helped unions
                                                       and thus helped workers. This
                                                           acted created the NLRB
                                                          (National Labor Relations
                                                        Board) which enforced labor
                                                         law and made sure that fair
                                                           business practices where
                                                                   upheld.
 Civilian Conservation      Tennessee Valley Authority       Soil Conservation Act
       Corps (CCC)                       (TVA)             Laws mandating proper soil
    Temporary jobs to       Agency created to build dams maintenance to make sure that
 unmarried single adults    in the Tennessee river valley.   another dust bowl was
  filling sand bags and      These dams provided more               avoided.
  helping out at disaster     stable irrigation and cheap
      type situations.           hydroelectric power.
   Participants lived in
 barracks type housing.

                        EARLY NEW DEAL MEASURES

FAIR LABOR STANDARDS ACT -- provided minimum wage for workers.

CIVILIAN CONSERVATION CORPS -- provided work for jobless males between 18 &
25 in reforestation, road construction, prevention of forest erosion. Ended in 1941.

AGRICULTURAL ADJUSTMENT ACT -- established principle of government price
support for farmers and guaranteed farm purchasing power.

TENNESSEE VALLEY AUTHORITY ACT -- federal construction and ownership of
power plants regional development of Tennessee Valley (7 State Area)

FEDERAL SECURITIES ACT -- required full disclosure of information related to new
stock issues.

NATIONAL EMPLOYMENT SYSTEM ACT -- created US employment service.



                                                                                    36
HOME OWNERS REFINANCING ACT -- use of government bonds to guarantee
mortgages.

BANKING ACT OF 1933 -- created Federal Deposit Insurance Corp., guaranteeing the
safety of bank deposits.

NATIONAL INDUSTRIAL RECOVERY ACT -- minimum wages and self regulation of
industry --- ended in 1935.

PUBLIC WORKS ADMINISTRATION -- appropriated funds to construct roads and
other federal projects.

SECURITY AND EXCHANGE ACT -- federal regulation of the operation of stock
exchange.

NATIONAL HOUSING ACT -- federal housing administration insured loans of private
banks and trust companies for construction of homes.

COMMUNICATIONS ACT -- federal housing administration insured loans of private
banks and trust companies for construction of homes.

HOME OWNERS LOAN ACT -- government financing of home mortgages.

NATIONAL HOUSING ACT -- construction of low cost public housing and slum
clearance.

SOIL CONSERVATION ACT -- established federal soil conservation services.

RESETTLEMENT ADMINISTRATION -- built new model communities for low
income city workers

RURAL ELECTRIFICATION ADMINISTRATION -- created and administered
program of bringing electricity to rural areas.

NATIONAL YOUTH ADMINISTRATION -- federal work relief and employment for
young people.

NATIONAL LABOR RELATIONS ACT -- encouraged collective bargaining and
formation of unions to be supervised by the National Labor Relations Board.

SOCIAL SECURITY ACT -- created Social Security System -- old age and survivors
insurance; aid to dependent children etc.




                                                                                 37

				
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