Chapter 26: The Great Depression and the New Deal, 1929-1940
Section 1: Hoover and the Crash Main Idea: After the stock market crash of 1929, the U.S. economy sank into the worst depression in its history.When Republican candidate Herbert Hoover won the presidency in 1928, the nation’s economy was strong. However, several big industries had hard times during the 1920s. In addition, many Americans barely earned enough to survive.Even so, Americans felt hopeful about the future of the economy. Stock market prices kept climbing. More and more investors speculated in stocks. This meant they bought and sold stocks in the hope of making a quick profit. They also began buying on margin. In other words, they paid a small part of a stock’s price as a down payment and borrowed the rest.This system worked when prices rose. If prices fell, however, investors took a loss and could not pay back their loans.On September 3, 1929, the value of stocks on the New York Stock Exchange reached a high point. Then prices began to drop. On October 29, Black Tuesday, investors sold millions of shares of stock. As a result, the market collapsed. This was known as the Crash of 1929.After the crash, thousands of banks closed. People stopped buying new goods. Tens of thousands of businesses went bankrupt. By 1933, the nation’s unemployment rate had reached 25 percent.President Herbert Hoover feared that if the government tried to fix the economy, it might make things worse. In time, Hoover changed his ideas. In 1932, he set up an agency to lend money for public works to states, cities, and towns. These projects included the building of roads and dams, which created jobs. In spite of this, Hoover was unpopular.2Congress had promised World War I veterans a bonus to be paid in the 1940s. Some of the veterans, called the Bonus Army, marched on Washington to ask for their money early. The government refused. Then U.S. troops used tear gas and bayonets to drive them out of town.In the 1932 election, the people elected the Democratic candidate, Franklin Delano Roosevelt.Section 2: Roosevelt and the New Deal Main Idea: After becoming president, Franklin D. Roosevelt took many actions to fight the Great Depression.Roosevelt, who was nicknamed FDR, took office in March of 1933. First, he declared a“bank holiday”—a temporary shutdown of all banks. He promised that only the banks in good shape would reopen. The President also began giving fireside chats. These were radio addresses in which he tried to calm people’s fears.During his presidential campaign, FDR had pledged a “new deal.” This phrase came to stand for his programs to fight the Depression. From March to June 1933, Roosevelt sent Congress many new bills. This session of Congress came to be known as the Hundred Days.The laws that were passed had three major goals: First was relief for the hungry and jobless. Second was recovery for agriculture and industry. Third were reforms in the way the economy worked. They became known as the “three Rs.”Some conservatives thought the New Deal went too far. They did not want the federal government to grow larger. Other critics argued that the New Deal didn’t go far enough.Most Americans, however, supported FDR and his efforts.3In 1935, Congress passed the Social Security Act. Under this act, workers and employers paid money into a special fund that would pay them an income after they retired. This actwas one of many programs passed in 1935 called the Second New Deal.Roosevelt won reelection in 1936. His presidency soon took a downward turn. Most of the justices of the Supreme Court believed that the New Deal gave the federal government too much power. As a result, they struck down many New Deal laws. In response, Roosevelt tried to add more justices to the Supreme Court, but Congress voted down the plan.Opposition to Roosevelt grew after he tried to change the court. When the economy grew worse in 1937, FDR was blamed. Critics also attacked his use of deficit spending—the use of borrowed money to pay for government programs.Section 3: Life During the Depression Main Idea: During the Depression, most Americans knew great hardship.Weather made the hard times worse. In the early 1930s, harsh dust storms damaged farms across a 150,000 square-mile region called the Dust Bowl. It included parts of Kansas,Oklahoma, Texas, Colorado, and New Mexico. Many families had to leave their farms. By1940, 2.5 million Dust Bowl refugees had moved to states on the Pacific Coast.Across the country, hungry people stood in bread lines to receive food. Many families lost their homes.One important change during FDR’s presidency was that more women had jobs with the government. When the president named Frances Perkins the Secretary of Labor in 1933,she became the nation’s first female cabinet officer. The first lady, Eleanor Roosevelt,traveled the country working to help the poor.President Roosevelt gave more African Americans jobs in government but did not back civil rights laws. He was afraid to upset Southern white congressmen.4Hard times hurt many Mexican Americans, who were given less aid than other groups. In1934, Congress passed the Indian Reorganization Act, which gave some reservation lands back to the Native Americans who had originally lived on those lands.The largest U.S. labor organization, the American Federation of Labor, was open only to skilled workers. Labor leader John L. Lewis wanted unions to include unskilled workers.Lewis and others began the Congress of Industrial Organizations. It was more open to women and minorities.The Wagner Act of 1935 allowed unions to bargain for better working conditions. Unions grew rapidly.Section 4: The Effects of the New Deal Main Idea: The Depression and the New Deal had many long-term effects on U.S.government and society.World War II ended the Depression. People found jobs in factories making guns, ships,and other war-related goods. They had more money to spend. The U.S. economy began to grow again.The New Deal changed the government. Under FDR, the White House became the government’s center. Unlike his predecessors, FDR proposed bills for Congress to consider.Roosevelt also made the federal government bigger. Because of the New Deal, the federal government became more responsible for people’s well-being. FDR used deficit spending,which has become a common practice.Some New Deal programs, such as Social Security, still exist. Other still-existing programs also include the National Labor Relations Board, which looks into disputes between management and labor, and the Federal Deposit Insurance Corporation, which insures bank deposits.5The New Deal also began the Securities and Exchange Commission, an agency that sets rules for how to trade stock fairly. Finally, the Agricultural Price Support program tries to control what crops farmers grow and pays them to raise crops for domestic use.The New Deal raised many issues that still shape U.S. politics. Democrats and Republicans still argue about the roles of federal and local government. However, both parties continue to support Social Security, even though it could run out of money sometime in the future. In early 1999, President Bill Clinton came up with a plan to add more money to the Social Security fund.
