1 NEW DEAL EVALUATION Chapter 28 GOVERNMENT EXPANSION

1 NEW DEAL EVALUATION Chapter 28 GOVERNMENT EXPANSION ON UNPRECEDENTED LEVELS

BAD ECONOMIC TIMES = 2 Calls for government to “do something” Worth examining is what happens when government intervenes vs. no intervention…. History of U. S. is full of evidence on negative effects of govt. intervention Karl Marx “crackbrained meddling by the authorities” can “aggravate an existing crisis” First 150 years – federal government did not think it was its business to intervene when the economy experienced a downturn

3 2 CONFLICTING ASSUMPTIONS ABOUT GREAT DEPRESSION “GOVERNMENT-CENTERED” MOST POPULAR (ESPECIALLY AMONG POLITICIANS): THE MARKET FAILED, GOVERNMENT HAD TO INTERVENE TO SAVE THE ECONOMY TURN OVER TO GOVERNMENT TO SOLVE YOUR PROBLEMS; LOSE POWER/CONTROL OVER LIFE “PEOPLE-CENTERED”: MARKET WENT DOWN, WAS ON ITS WAY BACK UP, FEDERAL INTERVENTION SENT IT BACK DOWN AGAIN…. LED TO MASSIVE UNEMPLOYMENT INDIVIDUALS SOLVE OWN PROBLEMS

FACTS 4 UNEMPLOYMENT NEVER HIT DOUBLE-DIGITS IN ANY 12 MONTHS FOLLOWING STOCK MARKET CRASH OF 1929 THIS EVENT IS OFTEN BLAMED FOR MASSIVE UNEMPLOYMENT OF 1930 s UMEMPLOYMENT PEAKED AT 9%, 2 MONTHS AFTER 1929 CRASH, THEN BEGAN DRIFTING DOWNWARD

FACTS 5 JUNE 1930 – UNEMPLOYMENT DOWN TO 6. 3% JUNE, 1930 – FIRST MAJOR GOVERNMENT INTERVENTION KICKED IN (UNDER HOOVER) WITHIN 6 MONTHS, DOWNWARD TREND IN UNEMPLOYMENT REVERSED, HIT DOUBLE-DIGITS FOR FIRST TIME IN DECEMBER 1930

WHAT’S A POLITICIAN TO DO? 6 SAY, “WE MESSED UP? ”…. OR, KEEP TRYING ONE HUGE INTERVENTION AFTER ANOTHER? THE RECORD: PRESIDENT HOOVER’S INTERVENTIONS WERE FOLLOWED BY FDR’S BIGGER INTERVENTIONS END RESULT: UNEMPLOYMENT REMAINED IN DOUBLE DIGITS EVERY MONTH FOR REMAINDER OF DECADE (1930 s)

MORE FACTS 7 RECORD SET IN 1929 FOR BIGGEST STOCK MARKET DECLINE IN ONE DAY WAS BROKEN IN 1987 PRESIDENT RONALD REAGAN DID NOTHING…. AND THE MEDIA CLOBBERED HIM FOR IT RESULT: ECONOMY REBOUNDED = 20 YEARS OF SUSTAINED ECONOMIC GROWTH W/ LOW INFLATION AND LOW UNEMPLOYMENT

COUNTRY’S PLIGHT 1932 -1933 8 3 RD YEAR OF UNPRECEDENTED DEPRESSION 1932 = ¼ AMERICANS OUT OF WORK LARGE CITIES = UNEMPLOYMENT NEAR 50% ½ MILLION AMERICANS LOST HOMES/FARMS THOUSANDS OF BANKS FAILED MILLIONS LOST LIFE SAVINGS “THE SITUATION IS CRITICAL, ” AN ADVISOR TO ROOSEVELT SAID, “YOU MAY HAVE TO ASSUME DICTATORIAL POWERS”

BOLD MEASURES = NEW DEAL 9 RESULT: WELFARE CAPITALISM GOVERNMENT EXPANSION & INTERVENTION ON UNPRECEDENTED LEVELS HERBERT HOOVER (1874 -1964) FRANKLIN DELANO ROOSEVELT (1882 -1945)

FROM HOOVERISM TO NEW DEAL 10 "We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us. “ – HERBERT HOOVER "It has been twelve months of unprecedented advance, of wonderful prosperity. If there is any way of judging the future by the past, this new year will be one of felicitation and hopefulness. “ –NEW YORK TIMES EDITORIAL- JANUARY, 1929

BULL MARKET “RISING STOCK PRICES” 11 5 YEARS PRIOR TO GREAT DEPRESSION, PHENOMONAL GROWTH, INVESTMENT IN STOCK MARKET (OPPOSITE: BEAR MARKET)

BEAR MARKET 12 FALLING STOCK PRICES

6 REASONS FOR GROWTH 13 1. RISING STOCK DIVIDENDS (PROFITS) = SPECULATING ON CONTINUAL GROWTH 2. INCREASE IN PERSONAL SAVINGS 3. EASY MONEY POLICY (BANKS LOAN EASY, LOW RATES) 4. COMPANIES INVESTED OVER-PRODUCTION PROFITS IN NEW PRODUCTION 5. LACK OF STOCK MARKET REGULATION MARGIN BUYING (BORROW $ TO BUY STOCKS, BUY ON CREDIT) PSYCHOLOGY OF CONSUMPTION – CONSPICUOUS CONSUMPTION (BUY OUT OF WANT RATHER THAN NEED) + FAITH

BLACK THURSDAY 14 24 OCTOBER 1929 : PEOPLE BEGAN DUMPING STOCKS AS QUICKLY AS POSSIBLE BULL MARKET SHIFTED TO BEAR MARKET BY EVENING…J. P. MORGAN & OTHER FINANCIERS BOUGHT STOCK TO STOP PANIC AND KEEP MARKET AFLOAT FRIDAY RELATIVELY STABLE OVER WEEKEND, AVG. PEOPLE DECIDED TO SELL MONDAY, 28 TH: ANOTHER WAVE OF SELL ORDERS

PANIC SET IN… 15

FOLLOWED BY… BLACK TUESDAY 16 29 OCTOBER 1929 – GREATEST LOSS IN STOCK MARKET UNTIL 1987 STOCK MARKET – CHIEF INDICATOR OF ECONOMY FOR MOST AMERICANS BETWEEN 29 OCT. AND 13 NOV. , OVER $30 BILLION DISAPPEARED FROM AMERICAN ECONOMY…AMOUNT EQUAL TO U. S. EXPENDITURES ON FIRST WORLD WAR

HOOVER NOW… 17 “THIS COUNTRY IS NOT IN GOOD CONDITION” STILL, AMERICAN OPTIMISM PREVAILED J. D. ROCKEFELLER SAID, “"These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again. “ AMERICAN ECONOMISTS AND POLITICIANS: PREVIOUS ECONOMIC DOWNTURNS CALLED PANICS (1873, 1893) HOOVER CALLED SITUATION A DEPRESSION, RATHER THAN PANIC…THE NAME STUCK

WIDESPREAD DEPRESSION 18 ECONOMIC PROBLEMS STRUCK ALL INDUSTRIALIZED NATIONS OF WORLD GERMANY, BRITAIN, FRANCE GERMANY: HAD HUGE REPARATIONS PAYMENTS UNDER TREATY OF VERSAILLES THESE PAYMENTS TRIGGERED SEVERE INFLATION IN GERMANY, FURTHER CRIPPLED THEIR ECONOMY

SOCIAL PROBLEMS 19 UNEMPLOYMENT & POVERTY BREAKDOWN OF FAMILIES SOARING HIGH SCHOOL DROP-OUT RATES (2 -4 MILLION) HOMELESSNESS ORGANIZED PROTESTS “HOOVERVILLES” “HOOVER BLANKETS” “HOOVER FLAGS” FARMERS ARMED W/ GUNS, PITCHFORKS MARCHED ON BANKS TO PREVENT FORECLOSURES

BONUS EXPEDITIONARY FORCE 20 A group of WWI veterans who had been denied their pensions organized the first march on Washington in protest. In 1932, twenty thousand men set up a tent city, vowing to stay until they got their money. President Hooverreacted and sent in the army (led by future war heroes Douglas Mac. Arthur and Dwight D. Eisenhower) to break up this peaceful demonstration.

21 "Bonus Army" WWI Veterans protesting unpaid pensions Copyright 1997 State Historical Society of Wisconsin

"Bonus Army" WWI Veterans making camp in Washington, D. C. , to protest unpaid pensions 22

23 HANDPAINTED SIGN, “WE’VE DONE A GOOD JOB IN FRANCE, NOW YOU DO A GOOD JOB IN AMERICA. ”

IMAGES OF DEPRESSION 24 BREADLINES HOBOES HOPPING FREIGHT TRAINS COLLEGE GRADS BECOMING GAS STATION ATTENDANTS SKYROCKETING RATES OF SUICIDE AND MENTAL ILLNESS FORMER BUSINESSMEN SELLING APPLES/PENCILS ON STREET CORNERS “OKIES” AND “ARKIES” – OKLAHOMA FARMERS ESCAPING THE DUST BOWL FOR MIGRANT FARM WORK IN CALIFORNIA, FORMER PORTRAYED IN JOHN STEINBECK’S NOVEL “THE GRAPES OF WRATH”

BEYOND STEREOTYPES 25 TWO ASPECTS HIT MOST AMERICANS UNEMPLOYMENT INABILITY TO SELL GOODS AND SERVICES FARMERS HIT ESPECIALLY HARD MANY IN DEBT FOR MACHINERY/LAND COULD NOT MAKE PAYMENTS GREAT DROUGHT HIT MIDWEST/SOUTH IN 19311932: DUST BOWL AT LEAST FARMERS COULD STILL EAT

ESCAPISM 26 GO FOR A DRIVE HAVE A CIGARETTE GO TO A MOVIE SALES OF OIL, GAS, CIGARETTES, MOVIE TICKETS ALL WENT UP Humorist Will Rogers remarked, "We're the first nation in the history of the world to go to the poorhouse in an automobile. "

3 BLAMES OF CRASH & DEPRESSION 27 BANKERS BROKERS BUSINESSMEN

FRANKLIN DELANO ROOSEVELT 28 B. 1882 TO WELATHY FAMILY NEW YORK EARNED DEGREES FROM HARVARD, COLUMBIA LAW SCHOOL MARRIED DISTANCE COUSIN, ANNA ELEANOR ROOSEVELT SERVED IN NY SENATE, NY GOVERNOR 39 – CONTRACTED POLIO; LEFT HIM PERMANENTLY DISABLED ELECTED 1932 ONLY PRESIDENT TO SERVE 4 TERMS (RE-ELECTED 3 X)