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The Great Depression and the New Deal

Course Code
Dr.Liamvan Beek

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HIS271 The Great Depression and the New DealFebruary 16th 2011
What were the causes of the Great Depression?
How did Americans respond to the crisis? Did their responses change over time?
Was the New Deal a success?
The Election of 1928
1928 election between Al Smith and Herbert Hoover
Smith, Democrat, was a 4 time governor of New York, liberal in his thinking, very
urban, Catholic, decedent of German/Irish/Italian, came to embody the modern side
of the US (the side that emphasized change, difference, foreign, urban, etc.)
Hoover represented more of a traditional side, came from a rural Quaker
background, believed in industry, thrift, and self-reliance
He wanted free enterprise and small government and was what one may call a
businessmans candidate he wanted to balance federal regulation without direct
In the election itself, Hoover won by a landslide
One of the first radio campaigns
Smith, because of his background and accent, threatened the traditional American
identity and made him unappealing
The election thus reflected the split in American society urban vs. rural,
traditional vs. modern, wet vs. dry
But while Hoover won, it didnt resolve these debates
While many Americans recognized that these conflicts existed, they werent really
equipped to deal with them at that time ,and it was made worse by the market crash
of 1929
Black Tuesday
October 20th 1929, the day that the stock market crashed

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HIS271 The Great Depression and the New DealFebruary 16th 2011
Over the past previous year, Wall Street had been on a boom, but by the fall it
became clear to many traders that the market was beginning to fall
Stock prices were declining and it hit rock-bottom by October
This was followed by panic selling and further complicated by the fact that much of
the stock that had been purchased in the 20s and been purchased on loans
This worked to devalue what little was left
This wasnt the first time the States had experienced this kind of economic crisis
But, this was different
The crash of 1929 was far more severe and lasted a lot longer than anyone
The Causes
The crash undermined business confidence, it saw decreases in manufacturing
followed by job losses which then led to a decrease in consumer spending
international elements
Argued that dependence on international trade had played a significant
Since the War, there was an international decline in the demand for
American goods, meaning there were fewer markets for American
There was also a crises of debt repayment in Europe, the European
countries were having a hard time paying back America
Lack of diversification in the economy
The economy in the 1920s was dependent on a small number of large
industries, and when these industries began to struggle the decline
effected the entire economy
Over production
Part of the problem was that these big firms were overproducing more
than could be consumed
Unequal distribution of wealth

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HIS271 The Great Depression and the New DealFebruary 16 th 2011
Although the 20s is characterized as a period of prosperity, this wasnt evenly
Much of this prosperity was centralized in the cities, as well
Many Americans thus didnt have the buying power to become consumers,
feeding into the problem of overproduction
Unchecked growth of combinations and trusts
No one was checking big business
Without any kind of regulation, we begin to see things like
overproduction, the sale of items on instalment programs (basically
Consumers couldnt pay their debts
Instability in the Banks
Like Big Business, Banks werent being regulated
Throughout the 20s theyd been making risky investments, in
particular in the stock market
They made risky loans
Once the crash hit, people started emptying their savings and Banks
couldnt handle it
A lot of people lost their money
There was no one single cause, but they all shared deregulation in common
Initially, the crash only had a major impact on the upper crust of the economy, but
between 1931-33 a second financial crisis sank the nation even deeper
Ultimately, one of the problems was that at the local and state level, infrastructure
couldnt deal with this (begin to see school closures, bank closures, job loss, wage
cuts etc.)
This was followed by a national decline in income
Between 1929 and 1933, national income dropped by half
This meant that peoples wages were going down too
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