- Farm prices
dropped by 55 percent between 1929 and 1932 (this resulted in defaults on loans and reduced buying power). Foreclosures occurred
for about 1/3rd of the farms.
output fell by over one half between 1929 and 1932—the auto industry by over 3/4th.
- In industrial
cities such as Detroit,
Toledo, and Cleveland more than half
of the blue-collar workers were unemployed.
(Republicans) believed strongly that stimulation of businessmen’s confidence, together with his program for financial
stability, held the key to recovery and strongly resisted proposals for large spending from the federal treasury for public
works and unemployment relief despite their great popular appeal.” (Himmelberg 11). The Reconstruction Finance Corporation
(RFC) a federal agency set up in 1932 was empowered to support financial institutions by lending them large sums, stemmed
the banking crisis for a moment.” (Himmelberg 11) It was viewed as welfare
- Under Hoover
1932, “the Reconstruction Finance Corporation (RFC) a federal agency empowered to support financial institutions by
lending them large sums, stemmed the banking crisis for a moment.” (Himmelberg 11).
- In January
of 1933 (Roosevelt took office in March) there was a run on the banks.
Governor after governor declared bank holidays. With the banks closed,
commerce and industry began to grind to a halt.
- The first
major act of Roosevelt and the Democratic Congress was the Emergency Banking Act, which reopened most of the banks.
- The Emergency
Farm Mortgage Act allowed farmers to refinance their mortgages at lower rates (passed May of 1933)
- The Agricultural
Adjustment Administration in an effort to restore fair pricing, they paid farmers not to plant. (Many landowners accepted payment, but then destroyed the crops of their tenant farmers, but failed to
share the payment. Two and one half million tenant farmers and sharecroppers
were evicted of the 8.5 million living in the south.)
- The Federal
Emergency Relief Act (signed May 1933) authorized $500 million in grants to the states.
- The Civil
works Administration in the winter of 1933-34 hired 4 million workers at $15/week.
- The U.S.
went off the gold standard. The Thomas Amendment empowered the President to inflate
- The Tennessee
Valley Authority provided flood control, electricity, and employment.
- The Civilian
Conservation Corps provided employment mostly for public works such as planting trees.
- The National
Industrial Recovery Act established National Recovery Administration (NRA) who pushed for better pay to workers. The government would allow business and industry to fix (stabilize) prices and in return raise wages of
workers and recognize their right to organize and bargain collectively. It also
called for a 35 to 40 hour workweek in exchange for $12 to $15 wage.
- The NIRA
also established the Public Works Administration (PWA) to replace the Civil Works Administration and put the unemployed to
work on long-range government projects. Among its projects was the Causeway to
Key West, the Boulder (now Hoover)
Dam, and the building of thousands of hospitals and schools.
- The NIRA
also established the National Labor Board [predecessor of the National Labor Relations Board] was established to moderate
- The Committee
for Economic Security submitted in January 1935 a plan for a combined state and federal unemployment insurance program and
a national old-age pension funded by employers, employees, and government. Congressed
passed the Social Security Act in August of 1935.
- The Wagner
act of 1935 protected unions and workers who wished to join them. (With
the social Security Act and the Wagner Act, the Democrats lured back to their party workers who might have been attracted
by Huey Long, Socialist, and radical candidates in the 1936 election.)
Utility Holding Company Act better regulated utilities.
- The Wage
and Hour Law of 1938 established a federal minimum wage and the 40-hour workweek.
Great Britain survived the depression more easily
than the other Western nations. Coal, shipbuilding, and the textile industry
remained depressed, but production increased in mechanical, electrical, and chemical products.
The British citizens did not experience the crushing poverty because unemployment insurance and welfare system had
been in place for almost ten years. British labor unions were a powerful political
force (unlike the US in the 1920s).
Because France lacked the social welfare safety
net, they were harder hit by the depression than England. In 1936 following the national election the Socialist joined the Communists to from
a coalition government led by Leon Blum. They were more moderate than socialist. Many New deal policies were adopted.
In Italy, Benito Mussolini, who had been given
absolute power in 1933, adopted a state-controlled industrial system, called corporatism.
Corporatism rather than nationalize industries, closely controlled them. He
quickly achieved full employment and regulated surpluses.
Japan also adopted a highly controlled economy
like that of Italy’s.
On January 30, 1933 Adolf Hitler became chancellor of Germany. Germany adopted corporatism. During the first 4-year plan, unemployment fell from 6 million in October 1933 to
1.5 million in February of 1937. It wasn’t until the second four-year plan
that the focus shifted from domestic recovery to preparation for war.
1930 unemployment 6 million, construction down 25%, 10 million
1931. There were food riots through out the country as mobs looted stores. (Farrell 24-5)
Over 180,000 impoverished families in New
York received no relief at all because public and private charities had run out of funs. (Farrell 28)
A series of droughts started in 1933 produced dust storms
that occurred from the Texas panhandle north to the Dakotas
and east to the Allegheny Mountains.
The media income was below $1,500 per year, many skilled
factory workers were making less than 25 cents per hour, and many cities declared bankruptcy and could not pay their teachers,
firefighters, and police—Farrell 46-7
1). That the
stock-market crash brought on the Great Depression. This is sold through the
media with the blessing of the banking because the true cause would bring a popular cry for reform—as it did in during
the Great Depression, to which the Democrats responded with banking regulations. The
banking-financial system needs a total overhaul. Without it there will continue
to be the cycles of expanding and contracting credit. For an account of the power
of banking go to http://www.freedocumentaries.org/film.php?id=214
2). That the
war brought an end to the Great Depression. Actually it ended in 1937 because
of the New Deal applying Keynesian principles. When they went back to the balanced
budget and ended the work program (which created 500,000 more unemployed) and other stimulus packages the economy crashed
again. Keynesian principles were reapplied and the economy recovered.
By 1936 the support for the Democratic Party shifted to
what was called the “New Deal coalition, which comprised white southerners, minorities, and organized labor. Unfortunate many of the Democratic members of Congress had strong ties to the business community, and this
caused significant dissention in the party over New Deal legislation.
1933 was the worst year of the depression, and the recovery
was slow. Unemployment remained above 20% in 1935, and the GNP was 40% below
the 1929 level. A strong recovery occurred in 1936-7 with the GDP
returning to the 1929 lever; however, by the end of 1937 unemployment remained at about 15%.
This rate was because of growth in the size of the labor force and increased productivity. High unemployment retarded wages and thus reduced consumer spending.
The NRA administration’s symbol was the Blue Eagle. During the summer of 1933, the NRA program became a national preoccupation. Torchlight parades and other exhibitions of public support were organized in many cities, with hundreds
of thousands of marching citizen participating. Theoretically, businesses men
who failed to abide by the NRA program would be shorn of the right to display the Blue Eagle and shamed by consumers into
compliance. (Himmelberg 13).
Wages however rose little at first, so strikes blossomed
during 1934 making it the banner year in American history for labor unrest. (Himmelberg 14).
Industries controlled their worker’s lives in the
1930’s and before, especially those in the automotive, textile, steel, and mining industries. They often had to live in company housing and were required to shop in company –owned stores. The rent and cost of food was inflated to equal the amount of their wages. (Farrell
Government policy in the industrial countries was for a
balance budget; however, this changed given poverty and political radicalization of the working class. Richard Kahn, a British economist, wrote in 1931: “Employing
the idle on public works would start a kind of chain reaction: those hired would
spend their wages on goods, the producers of which would have to hire other unemployed workers, who would in turn spend their
wages on other goods, and so on. The true cost of public works would be quite
small because the government would no longer have to support so many unemployed people and because the new workers would be
paying taxes on earnings.” Farrell 71-2
The Second New Deal (1935) abandoned emphasis on regulation
of industrial production and stressed instead direct improvement of the income and security of the unemployed, blue-collar
workers, the aged, and the dependent. The second New Deal had support for
labor unions and had work relief measures as its centerpieces. (Himmelberg 15)
In August of 1937 a second slump began lasting through 1938. By early 1938 unemployment was 20%. The
conservative Secretary of the Treasury, friend and advisor Henry Morgenthau pushed for a return to fiscal responsibility. Cuts in government spending, which reduced the number of people employed by 50% the
government (the Public Works Administration almost ceased operation) and the new Social Security program which removed $2
billion of workers’ spendable income that year was the principle causes of the second economic crash.
With the European war starting in 1939, U.S.
exports rapidly rose, that along with U.S. war preparations
finally pushed the GNP well above its 1929 level.
The primary cause of the worldwide failure to admit Jews from Nazi Germany was related
to unemployment. Nations adopted in general tight immigration policies.
history as told by the U.S. makes Japan seem dastardly in their attack
on Pear Harbor, there was the provocation of the
oil cut off, and the U.S. preparation for war. In July 1941, after Japan occupied the remainder of Indo-China, he cut off the sales of oil. Japan thus lost more than 95% of its
Post-polio syndrome (PPS) is a condition that affects survivors of poliomyelitis, a viral infection of the nervous system, after recovery from
an initial paralytic attack. Typically the symptoms appear 20-40 years after the original infection, at an age of 35
to 60. Symptoms include new or increased muscular weakness, pain in the muscle, and fatigue. The mechanism of the physical
and often intellectual decline at this date remains unknown. PPS along with cigarette smoking are the causes for
the rapid decline in Roosevelt’s
health during the war.
Democratic Party under Obama has a window of opportunity, depending on the results for Congress for to undo the right-wing
propaganda machine and to re-establish its links with working-class Americans. They must remove the power of the globalizers
and this will require a re-establish the unions/labor movement, the re-establishing of the airwaves as a public trust, and
pass campaign reform which will limit corporation donations to the political parties.
The immediate cause of the cyclical depression is the failure of the government to manage
the economy. Their inaction permitted economic cycles with shrinking GDP, of which over 20 have occurred since 1800. Sound
management has been opposed by the business community which seeks ever increasing short-term profits. Stockholders review management’s performance based upon short-term (quarterly) returns.[i] Each sector of the economy (banking, pharmaceutical, steel, auto makers, retail
merchants) uses their considerable influence to promote government policies that promote this goal[ii]. Until the voice of the masses both recognizes what policies ought to be in
place and successfully organized to force government to adopt sound long-term economic policies, history will repeat itself.
Turned free, business and banking seeks ever increasing short-term profits. This has led to period of contractions where banks fail, businesses close, and the stock market crash. In the 1920s expansion of funds by the Federal Reserve resulted in a reduction of
the credit requirements. This brought about various speculative bubbles, including
those in housing and the stock market. With bank failures and tightening credit,
losses in the stock market, reduced business and consumer confidence, rising unemployment, and the same collapse occurring
in other industrial countries, the downward spiral was both longer and deeper than those that came before. The loss of surplus funds for investments coupled with the collapse of banking entailed that even at bargain
prices, the business community could not respond to opportunities. This slowed
the recovery. By 1937 the GDP equaled that of 1929. However, new taxes (social
security and unemployment) plus the ending of work programs resulted in a second crash.
It wasn’t until 1940 based upon war preparation rose again to the level of 1929.
A new era was born based upon the demonstration at home and abroad that the government manipulation of the economy
The lessons of
the New Deal, however, were not learnt by the business community which is, as it was, driven by short-term performance goals. Following WWII, they used their considerable influence to undo the changes and return
again to the robber baron era. A key factor has been corporate media which has
been their control of the very process of learning about economics and social justice.
The road to an informed electorate lies at the start of the path to sound fiscal policy. Until the media is removed from corporate control, there will be never be an effective, enlightened voice
for the masses.
At about 1970 the ever expanding in size financial sector resulted in their absorbing the
gains in increased productivity in manufacturing and farming. This resulted in
stagnation and then decline in the standard of living of the masses. In particular
it was the financial group (banks, brokerages, insurance companies, and like) that became an ever-increasing largest burden,
which by the 90s was joined by the medical-pharmaceutical industry that first brought about stagnation and then decline in
the standard of living of the masses. Growth during the post WWII era was also
contributed to by the spread of U.S. corporations though the non-socialist world and the resulting flow of funds and employment into the U.S. By the 1970s U.S. global manufacturing and finance took decidedly un-American turn—for
the sake of profits of course. The outsourcing of jobs, the off shoring of corporate
head quarters and division of corporations, the breaking of unions, and the flood of illegal workers all contributed to the
stagnation and decline of purchasing power for the masses. Further decline came
through Reaganomics that reduced the tax burden on corporations and the top 5% by increasing the burden carried by the masses. Failure to manage banking and other industries (principle health care) took an ever
large chunk of the worker’s pay (such as through interest and insurance payments).
Economic prosperity is built not upon the purchasing power of the wealthy, but of the masses. Finally, the portion of the federal budget squandered on the military is another burden born by the masses.
Finally, after the entitlement programs, the second biggest item in the budget
is interest payments on the federal debt. This flow of tax funds does little
to stimulate the economy. It is
not the expansion of dollars (and thus debt) , the size of our military, but the changes in the standard of living of the
masses that is the best measure of the performance of a government and economy,
Switching the blame: The corporate media rather
than face the socialist analysis on the weakness of the capitalist marketing & banking systems and expose in a way to
promote corrective action these problems, the corporate media essentially ignores these problems are gives mislead and false
commentaries. They blame irresponsible homeowners for the housing bubble, and
are repeatedly telling us of the greedy CEOs, thereby making it seem as though the system is sound, and the fault is a moral
one. Alternative they blame the Democrats and their interference in the free
market. They miss the fundamental cause of the depression the financial bubble
created by the Federal Reserve’s 10% fractional borrowing policy and the declining purchasing power of the working class
through falling wages, trade imbalance, and out sourcing of employment. The corporate
media is a tool of those who brought about the depression. They are the main
source of misinformation thereon—jk.
More on the Great Depression, a continuation, at http://skeptically.org/crash/id27.html
The Great Depression, Jacqueline Farrell, Lucent Books, San Diego, CA, 1996
The Great Depression: An inquiry into the causes, course, and consequences
of the world-wide depression of the nineteen-thirties, as seen by contemporaries and in the light of history; John Garraty, Harcourt Brace Jovanovich, 1986
The Great Depression and the New Deal, Robert F. Himmelberg, Greenwood Press, Westport Connecticut, 2001
The Great Depression: America in the 1930s, T. H. Watkins, Little Brown and Company, New York, 1993
Wikipedia.org: articles on FDR, Great Depression, immigration, and Federal
[i] No CEO has lost his job when there
is ever increasing returns, but they have when they have adopted conservative long-term policies. There is a classic case of a highly respected manager of a mutual fund in England
who recognized the upcoming collapse of the stock market due to the tech bubble, and adopted an appropriate strategy which
enclosed a large uninvested reserve. To defend his position he wrote of the impending
collapse, which was published in various financial news publications. Soon he
got the nickname of “Mr. Doom.” Unfortunately his actions were in
1997. In 2000 his mutual fund was rated 66 of 67.
In 2001, just months before the bubble broke, he was forced into early
retirement. The tech bubble broke in 2001.
[ii] Adam Smith saw that the actions of special interest always had a net effect of
driving up prices of the commodity which thus resulted on a greater burden upon the improvised masses. Based upon this then political reality, he recommended lassie fare capitalism.
Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens
of the United States must effectively control the mighty commercial forces which they have themselves called into being. There
can be no effective control of corporations while their political activity remains."
Don’t miss the collection of Pod Cast links
I have seen is better at explaining in a balanced way the development of the national-banking system (Federal Reserve, Bank
of England and others). Its quality research and pictures used to support its
concise explanation set a standard for documentaries--at http://www.freedocumentaries.org/film.php?id=214. The 2nd greatest item in the U.S. budget
is payment on the debt.