The Great

Depression and
the New Deal
The Americans, Chapters 14 and 15

The Stock Market Crash

It is often assumed that the

Great Depression was caused
by the Great Crash in the fall
of 1929, but this is an
oversimplification.
The stock market crash was
just one of the causes.
There were other serious
weaknesses in the U.S.
economy.

Bank Failures

Thousands of bank
failures
contributed to
the
Great Depression.
Rumors often led bank
customers to panic and
withdraw all their funds.
This is called a run on the bank.
When the bank ran out of funds, the other depositors
lost all their money and the bank went bankrupt.

Business Failures

90,000 businesses went bankrupt

between 1929 and 1933.
One reason for this was that many
industries had failed to adjust their
high production rates to the declining demand in the late 1920s.
This was especially true with what are called durable goods,
things that last a long time, like refrigerators, washing machines,
and automobiles.
These surplus goods were already being stockpiled in company
warehouses before the depression hit. Without buyers, companies
could not afford to make more of these items. Factories had to
close down.

Unemployment

The closing of factories led to millions of lay-offs.

This sharp increase in the unemployment rate was
the most obvious symptom of the Great Depression.
Many industries that were able to stay open were
forced to decrease their overall production. They
often had to turn full-time employees into part-time
employees or lay off a portion of their workforce.
The resulting unemployment or under-employment
had a profound impact on the American economy.

Income and Spending

Consider this . . .
Cuts in
production
lead to
lay-offs

The decline in
consumer spending
forces businesses
to cut production

Unemployment
decreases
buying power

In this manner,
the U.S. economy
became steadily
worse between
1929 and 1933.

World Wide Depression

Throughout the 1920s, while the American

economy was booming, European countries had
been suffering economic hard times. They were
still trying to recover from the impact of WWI.
Also, the U.S. passed high tariffs on imported
goods to give an advantage to American
industries, which restricted international trade.
When the depression hit the U.S., our trading
partners around the world could not help us.

The Farming Crisis

Before the Great Depression, U.S farmers

had been suffering from a depression in the
farm economy due to overproduction.
The resulting low prices for farm
products made it hard to make a profit.
They became deeply in debt and
many farms were repossessed and
sold at auction.
In the early 1930s, farmers in parts
of the U.S. were hit by a severe
drought that came to be called the . . .

How many states

were partially in the
region most affected
by the Dust Bowl?

The Geographic Impact of the Dust Bowl

Lack of rain led wells to dry up

and trees to die.
High winds carried off the
loose topsoil, damaging the
land for future farming.
This would lead many farmers
in the region to give up their
farms and move to states on
the west coast seeking work.

How should the government help?

Pres. Herbert Hoover

Republican
In Office 1929-33

Pres. Franklin D. Roosevelt

Democrat
In Office 1933-45

Dealing with the Great Depression

Herbert Hoover

Between 1929 and 1932, the

Hoovers administration was
unable to bring about a real
improvement in the economy
The public blamed Hoover
for the worsening situation.
They elected FDR in 1932.
He promised Americans a
New Deal.

F. D. Roosevelt

The New Deal

Roosevelt declared a bank

holiday, closing U.S. banks
temporarily to restore public
confidence and prevent
further bankruptcies.
Congress cooperated with
the president to pass many
reform measures aimed at
relieving the symptoms of
the Great Depression.

TVA (Tennessee Valley Authority)

Series of Dams
Controls flooding
Generates hydroelectric power for rural areas
Created many federal jobs

TVA (Tennessee Valley Authority)

Lasting Impact of the New Deal

The New Deal expanded the governments role in

the economy.
Federal Deposit Insurance Corporation (FDIC)insures banking accounts
preventing bank failures

Security and Exchange Commission (SEC)regulates and stabilizes the stock market
The Social Security Administration provides:

pensions for the elderly

aid to families with dependent children
unemployment compensation
assistance for the handicapped

Ending the Great Depression

New Deal programs like the PWA, the WPA, the NYA
and the CCC were primarily aimed at putting people
to work. This would theoretically prime the pump
by increasing spending, which should increase
production and, ultimately, create more jobs.
Historians suggest that these programs, while they
served to improve public morale, were insufficient to
really turn the economy around.
The Great Depression was finally ended by the
beginning of World War II and the full employment it
provided.