ECONOMIC CONDITIONS IN THE UNITED STATES (1919-1929)

• Economic Boom:
  • Known as “The Roaring Twenties,” characterized by significant growth and innovation.
• Factors Contributing to Growth:
  • Post-war production advantages, abundant natural resources, and technological advancements in industry.
  • A robust consumer market bolstered by lower taxes and high tariffs on imports to protect local industries.

PROTECTION OF AMERICAN INDUSTRIES

• High Tariffs:
  • The introduction of tariffs in 1922 aimed to shield American industries from foreign competition.
• Tax Reductions:
  • Lower income taxes allowed consumers to spend more on domestic products, further driving economic growth.

The Great Economic Depression (1929-1932)

Overview

• Occurred during President Herbert Hoover’s term.
• Characterized by high unemployment, bank failures, reduced trade, food scarcity, and firm closures.

Causes of the Great Depression

1. Overproduction of Agricultural Goods
   • War-induced production increases led to falling prices post-war.
   • Key reasons:
     • Johnston’s Act of 1921: Reduced immigration, limiting consumer growth.
     • Increased Car Ownership: Shifted demand away from horse-related goods.
     • Changing Eating Habits: Less meat consumption reduced demand for meat products.
     • Declining External Demand: European countries turned to local production.
2. Impact of American Tariffs
   • High tariffs on foreign goods led to retaliatory tariffs from Europe, harming U.S. industry.
3. Mal-distribution of Resources
   • Wealth concentrated among the rich reduced general purchasing power, widening the economic gap.
4. European Economic Recovery Challenges
   • Post-war devastation in Europe affected trade and recovery; bank failures led to defaults on loans.
5. Domestic Over-production of Industrial Goods
   • Excessive production led to stockpiling and layoffs, diminishing purchasing power and trade with Europe.
6. Speculation
   • Encouraged risky investments in stocks, leading to the 1929 market crash on “Black Thursday.”

Impact of the Great Depression

1. Bank and Industry Closures
   • Bank failures led to industrial shutdowns; from 25,000 banks in 1929, only 15,000 remained by 1933.
2. Loss of Savings
   • Ordinary citizens lost their bank savings due to bank collapses.
3. High Unemployment Rates
   • Unemployment rose significantly; nearly 14 million Americans unemployed by 1933.
4. Inflation and Declining Living Standards
   • Currency devaluation increased living costs; many relied on soup kitchens.
5. Impact on European Countries
   • Countries reliant on U.S. loans suffered as financial aid ceased.
6. Political Changes
   • Leadership changes in Britain, Germany, and Japan; rise of dictators like Hitler and Stalin.

Hoover Administration Responses

1. Charity Encouragement
   • Urged organizations to provide relief for the impoverished.
2. Work Hard for Survival
   • Promoted self-reliance and effort among citizens.
3. Financial Assistance
   • Lent money to banks and industries via the Reconstruction Finance Cooperation.
4. War Debt Moratorium
   • A one-year freeze on war debts for France, Britain, Belgium, and Germany.
5. Public Works Initiatives
   • Initiated projects like dam and road construction to create jobs.
6. Tax Cuts and Wage Stabilization
   • Encouraged business leaders to maintain wages.

Franklin D. Roosevelt’s Solutions

Background

• Roosevelt became president in 1932, advocating for the New Deal to combat the Great Depression.

The New Deal (1933-1939)

• An economic program aimed at relief, recovery, and reform.

Key Strategies:

1. Direct Relief
   • Provided food, shelter, and clothing to the impoverished.
2. Agricultural and Industrial Support
   • Financial assistance and laws to stabilize these sectors.
3. Social Projects
   • Initiated public works to address social and economic issues.
4. Crime and Corruption Reduction
   • Implemented reforms to combat corruption and instill moral values.
5. Social Security Initiatives
   • Introduced pensions and support for the elderly and disabled.

Achievements of the New Deal

1. Relief for the Poor
   • Provided basic necessities and job opportunities.
2. Infrastructure Development
   • Established lasting public services and utilities.
3. Worker Rights Improvements
   • Enhanced labor rights and working conditions.
4. Prevented Revolutions
   • Maintained democracy and stability compared to totalitarian regimes.
5. Employment Opportunities
   • Mitigated socioeconomic problems through job creation.
6. Increased Agricultural Production
   • Stabilized farm income and output.
7. Infrastructure Construction
   • Built roads, hospitals, and public buildings.

Challenges to the New Deal

1. Business Opposition
   • Resistance from industrialists to union growth and worker rights.
2. Congressional Backlash
   • New Deal critics elected in 1938 hindered progress.
3. National Debt Increase
   • Heavy borrowing to fund programs raised national debt and taxes.
4. International Threats
   • Global conflicts shifted focus away from domestic issues.
5. Supreme Court Rulings
   • Key New Deal programs declared unconstitutional in 1935.
6. Unintended Job Losses
   • Some programs reduced overproduction but displaced farm laborers.