BOOM, DEPRESSION AND RECOVERY IN

THE USA 1919 – 1939

BACKGROUND TO THE BOOM

- After the First World War, the American economy made a steady recovery, industries
increased production to high levels.
- Sales, profits and wages increased.
- There was a great variety of goods on the market e.g. radios, refrigerators, cycles,
motor cars, washing machines e.t.c
- New inventions from Henry Ford, T. Edison and the development of Hollywood film
industry made huge profits.
- The 1920s were referred to as the “Roaring Twenties” or “the Jazz Age. “

CAUSES OF THE BOOM

1. There was a climax of the great industrial expansion of the late 19th century when
America had overtaken Britain and Germany.

- The war gave America a big boost as European powers that were at war imported
from the USA.
- Use of electricity in homes led to the demand for electrical goods such as stoves
and fridges.
- America hence was the real economic victor of World War One.

2. Government policies contributed to the prosperity in the short term as import tariffs
were raised to protect home produced goods.
- Income taxes were reduced leaving people with more cash to spend.
3. Production in the motor industry stimulated expansion in a number of allied
industries e.g. roads building, tyres, batteries, petrol and service stations.
4. New industries also sprang up e.g. the construction industry was stimulated together
with related industries.
5. The war stimulated the chemical industry as they managed to produce plastic,
packaging materials needed by the growing economy.
6. Consumers were allowed to buy goods on credit.
7. USA gained most European markets as European economies were disrupted by war.

BOOM/ ROARING TWENTIES IN THE USA

FEATURES

- New machines revolutionarised the construction industry e.g. power shovels

- Improved communications e.g. dial phones and automatic switchboards
- Consumer goods industries boomed like never before
- Moderately priced goods e.g. radios, cameras and wristwatches
- Surfaced road increased
- Motor cars increased

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 - Telephones in homes
- Mass produced motor cars.
- Millions were employed
- Cinemas experience big attendances
- Hire purchase of goods
- Emancipation of woman
- Introduction of Jazz and dancing
- Smoking

SOCIAL EFFECTS OF BOOM/ ROARING TWENTIES

- For many prosperous Americans, the 1920s were a time of entertainment,

excitement, new fashions and freer behavior.
- Young people in particular wanted to relax and have fun after the horrors of
World War One.
- Young women led changes in fashion and social behaviour.
- Cheap cars, radios and gramophones changed the way people lived.
- The music and film industries expanded and helped to shaped new attitudes.
- Jazz, with its black African- American origins became the most popular of all
- Famous players included Louis Armstrong, Benny Goodman and Fats Waller
- The parents and older people objected to the openly sexual nature of some of its
songs and dances
- Films promoted new fashions and taught people new ways of behaviour
- The well- off middle and upper class young women who led the new fashions
in woman’s clothes and behavior were known as ”Flappers” because of their short
skirts.

DID USA WOMEN BENEFIT FROM THE “ROARING TWENTIES”

- There was emancipation of women

- Young women’s sexual behavior became freer especially among college students.
- Girls / women copied the on-screen behaviour of stars like Joan Crawford who
perfectly portrayed the flapper.
- Sales of cigarettes doubled.
- Women worked in factories, secretarial jobs, teaching e.t.c
- Films promoted new fashion and taught women new ways to behave
- About 100million Americans went to the cinema every week
- Dancing became a popular hobby and dance halls were opened up across the
country
- Women drove posh cars, discussed sexual issues openly and dressed in short
miniskirts.
- However, there was moral decay.
- There was too much beer drinking.
- Spread of Sexually Transmitted Infections (STIs)
- Teenage pregnancies
- Women were exposed to violence and some did not benefit from the “Roaring
Twenties.”

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THE PROHIBITION OF 1919

- Prohibition was introduced by the Volstead Act of 1919

- It was the banning of the manufacture, import and sell of all alcoholic Liquor
throughout the USA.
- The Act also prohibited the transportation of alcoholic drinks.
- It was added to the American Constitutions as the 18th Amendment.
- It was the result of the efforts of a well- meaning pressure group which believed
that a ”dry” America would mean a more efficient and moral America.
- Prohibition led to the creation of shebeens and illicit brew and toxic brandy.
- It proved impossible to eliminate boot leggers (manufacturers of illegal liquor),
who protected their premises from rivals with hired gangs who shot each other in
gunfights.
- Selling points were given different names e.g. “speakeasies” or “bootleggers”
- The law was flouted, racketeers and gangsters flourished.
- In Chicago, gang violence became part of the American Scene i.e. Al Capone and
his thugs grew rich from the proceeding of bootlegging.
- Alcohol trade was driven underground.
- The row over Prohibition was one aspect of a traditional American conflict
between the country side and the city.
- Many country people believed that city life was sinful and unhealthy while life
in the country was pure, noble and moral.

SUCCESS/FAILURE OF USA GOVERNMENT IN ENFORCING PROHIBITION

- Prohibition proved difficult to enforce.

- Alcohol was illegally brewed, imported and drunk in “speakeasies.”
- Outlawing liquor boosted its popularity.
- Drink was smuggled into the country by powerful gangs e.g. Al Capone in
Chicago.
- The law was flouted and gangsters found a carnival of crime
- In the age of Jazz, miniskirts and changing moral standards, the government was
bound to fail.
- Legally, the USA was dry but in reality it was the wettest period in America.

THE GREAT DEPRESSION OF 1929

BACKGROUND TO THE GREAT DEPRESSION

- Not everyone benefited in the general prosperity of USA e.g. Farmers especially
in the 1920s experienced a fall/decrease in the price of their produce.
- European agriculture was picking up and stiff competition was coming from
Canada, Russia and Argentina.
- Farmers were producing more than what could be consumed
- The black population was left out of the prosperity especially in the south

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 CAUSES OF THE GREAT DEPRESSION

- In September 1929, the buying spree on the stock exchange in Wall Street, New
York slowed down with indication that the boom was coming to an end.
- There was panic selling of shares before prices fell too far (Panic by
shareholders).
- By October 24, prices fell dramatically and those who bought shares when prices
of shares were still high were ruined.
- This disaster is generally remembered as the WALL STREET CRASH
- Overproduction of goods leading to oversupply of the market.
- Slowing down of trade i.e. foreign trade.
- Lack of confidence in the stock market.
- Uneven distribution of wealth.
- Speculation i.e. panic buying and selling of shares. Overvalued shares.
- USA goods were too expensive
- Under- consumption due to low income.

EFFECTS OF THE GREAT DEPRESSION/ WALL STREET CRASH ON

AMERICA

- Debt and bankruptcy spread in all directions.

- There was lack of confidence in the stock exchange
- Value of shares had little direct relation to the industries they represented.
- Large volumes of withdrawals from banks.
- Some banks and financial houses closed down.
- Fewer goods were sold in shops thereby leading to closure of factories.
- Great unemployment figures were recorded as a result of low demand for goods.
- By 1931, the USA had almost 8million people unemployed.
- There was a recession in trade.
- Squalid living conditions and demand for government aid were also experienced.
- Charity soup kitchens, tenants failing to pay rentals, farmers lost all their
property, bread queues and near starvation of many became the order of the day.
The “Great American dream” of prosperity for all had failed.
- People with savings in banks lost their money.
- There was a rise in suicide cases.
- City homeless people lived in camps nicknamed “Hoovervilles” after the
president who was blamed for the depression.
- Many countries outsides USA especially Germany were affected too because
their prosperity depended on loans from the USA. By 1931, Europe was in the
same plight as America.
- Stock market crash ruined millions of investors who had paid high prices for their
shares.
- The Depression had political results as countries such as Germany had right wing
governments that came to power.

WHO WAS TO BLAME FOR THE DEPRESSION?

- It was easy and fashionable to blame President Herbert Hoover at the time though
the Republican Party is to be blamed as well.

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 - The government could have encourage overseas countries to buy more
American goods by lowering tariffs instead of raising them, increasing wages,
encouraging big businesses to lower prices and limiting credit which allowed
speculation on the stock market.

GOVERNMENT RESPONSE

- Hoover’s government tried to solve the problem by:

i) Encouraging employers not to reduce wages and lay off workers.
ii) Lending money to banks.
iii) Encouraging lowering of prices.
iv) Introducing work schemes to bring employment.
v) Declaring a one year moratorium on war debts.
- This meant that foreign governments could miss one installment of their debts to
the USA in the hope that they would use the money saved to buy more American
goods.
- However, this made little impact as American exports in 1932 were less than
third of the 1929 total.
- Furthermore, most banks and factories remained closed.
- Unemployment figures remained high and there was a rise in suicide cases.
- Laissez- Faire(non- interference policy) policy adopted by Hoover also
contributed to the Great Depression

How did government’s Laissez – Faire policy Contribute to the Great Depression?

- The republicans and pro-business did nothing to limit the growth of the super-
corporations.
- The government failed to control the economy as manufactures were not prepared
to reduce prices or increase wages.
- It failed to address labour issues.
- Government’s failure to buy farmers’ surplus crops.
- However, there were other factors which contributed to the Great Depression such
as too many goods for the home market to absorb, introduction of import tariffs
against American goods by many European states and the great rush of
speculation on the stock market.

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 THE NEW DEAL

- It was introduced by President Franklin Delano Roosevelt.

FACTORS THAT PROMOTED ROOSEVELT’S RISE TO POWER

- Promises of the New Deal.

- Hoover’s failure to combat the depression.
- A swing away from the republican belief in a free economy (laissez- faire)
- The great slump
- Continued suffering
- Unemployment

AIMS OF THE NEW DEAL.

1. Relief à to give direct aid to poverty – stricken people i.e. those without food and
shelter.
2. Recoveryà to reduce unemployment, stimulate demand for goods and get the
economy moving again.
3. Reformà to take whatever means/ measures to prevent a repeat of the economic
disaster from ever happening again.
- It was obvious that drastic measures were needed; Roosevelt’s measures were a
complete change from those of the laissez- faire Republicans. Roosevelt was
prepared to intervene in economic and social affairs as much as possible and to
spend government funds to pull the country out of the depression.

ROOSEVELT’S HUNDRED DAYS MEASURE

- These were a series of laws extending the powers of the federal government and
providing for extensive measures of reform and relief of suffering.

1. Emergency Banking Act of 1933 (EBA)- aimed at regulating the activities of

banks and the stock exchange.
- It ensured people’s deposits in banks were insured against losses caused by
public panic
- Before the new deal, people felt it was safer for them to keep all their money at
home than in banks where it could be lost on the stock market.

2. Securities Exchange Commission of 1934 – reformed the stock exchange and

insisted that buyers pay 50% down payment instead of 10%.

3. Farmers Relief Act of 1933- Government paid compensation to farmers who

produced low output to increase prices (also known as Agricultural Adjustment
Act [AAA])

4. Civilian Conservation Corps of 1934 (CCC) à provided outdoor work for

thousand of jobless young men in conservation project.

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- By 1940, about 2,5million young men had “enjoyed” a six month spell in the
CCC, which gave them a small wage of $30 a month as well as food, clothing and
shelter.

5. National Industrial Recovery Act of 1933à this was the most important part of the
programme.
- Tried to get people back to work permanently, so that they would be able to buy
more.
- This would stimulate industry and help the economy function normally.
- The Act also introduced the Public Works Administration and the National
Recovery Administration.

6. Public works Administration (PWA)à Organized and provided cash/ funds for the
building of useful infrastructure such as dams, bridges, roads, schools, creating
several million extra jobs.

7. National Recovery Administration (NRA)à abolished child labour, introduced a

maximum eight hour working day and a minimum wage.
- Although these rules were not compulsory, employed were pressurized to accept
them and those who did were privileged to uses an official sticker on their goods
showing a blue eagle and the letters NRA.
- The public was encouraged to boycott firms which refused to co- operate.
- The response was tremendous, with well over 2 millions employers accepting the
new standards.

8. Federal Emergency Relief Administration à provided 500million dollars for soup

kitchens. Gave money to states to help unemployed and homeless people.

9. Federal theatre Project - Created jobs for playwrights, artists, actors, musicians as
well as increasing public appreciation of the arts.

10. Social Security Act of 1935 àintroduced old age pensions and unemployment
insurance schemes which were to be financed by federal and state governments,
employers and workers.

11. The Wagner Act of 1935àThis was the work of Senator F. Wagner of New York.
- It gave trade unions a proper legal foundation and the right to bargain for their
members in any dispute with management.
- It also set up the National Labour Relations Boards where workers could appeal
against unfair practices by management.

12. The Fair Labour Standards Acts of 1938à introduced a maximum 45 hour working
week as well as a minimum wage in certain lowly paid trades.

13. Tennessee Valley Authority à provided water and electricity for people in
Tennessee and Alabama states
- Hundreds of jobs were created.
- In 1933 the Democratic Administration headed by President Franklin Delano
Roosevelt introduced a bill creating the TVA. The bill was adopted by the U.S.

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 Congress and signed by the president in May 1933. The TVA achieved striking
successes almost from its inception.
- During World War II (1939-1945), TVA power and manufacturing facilities made
significant contributions to the national defense effort. At Oak Ridge, Tennessee,
a key atomic-energy installation was operated largely with TVA-produced
electricity. TVA plants also produced significant quantities of munitions materials
and fertilizers.

14. Farm Credit Administration (FCA) and the Home Owners Loan Corporationà
Used Federal funds to help people pay off mortgages so that home owners would
not loses their homes

15. Soil Conservation Act of 1935- Replaced the AAA programme and enabled
government to continue subsidizing farmers who cut their production.

EVALUATION OF THE NEW DEAL.

- FERA gave help to people in need

- FERA also provided soup kitchens.
- The CWA gave work to more than 2 million people who earned a wage instead of
nothing.
- Schools, roads and airports were built. Thousands of writers, actors and artists
were employed on creative projects
- Social welfare guaranteed help to the old and needy.
- Overproduction ended and prices rose in agriculture through the AAA.
- TVA provided work in factories, industries and agriculture.
- TVA, SSA are still existent today
- When something that was instituted so long ago is still viable and functioning
well, it is a sure sign of its success.
- Banks were rejuvenated through the EBA.
- Credit restrictions were eased.
- Farm finances were regulated together with production and prices.
- However, unemployment was not completely solved.
- Wages were too low.
- Blacks did not benefit much from these measures.
- Government was criticized for paying farmers to produce less.
- Reduced production in farms left people without jobs/work especially the blacks
- Many people were put to work on projects of little value.
- SSA was not a great success at the time because payments were usually not very
generous and there was no provision for sickness insurance.
- . Furthermore, the TVA program was the target of bitter attacks by business
spokespersons, who considered its program a socialistic, unconstitutional threat to
competing private industries. Private industries objected particularly strongly to
one part of the program, a government plan to use the cost of TVA-produced
power as a yardstick for measuring electricity rates charged by private utility
companies.
- Some problems of the Depression remained for years to come.

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OPPOSITION TO THE NEW DEAL

i) Businessmen objected strongly to the growth of trade unions, regulation of

working hours and wages and increased taxation.
ii) The Supreme Court claimed that the president was assuming too much
power and that the NRA was unconstitutional.
iii) Some state right groups/ state governments resented the extent to which
the federal government was interfering in what they considered to be
internal state affairs.
iv) Socialists felt that it was drastic enough and left too much power in the
hands of big businesses.
v) Republicans resented the wide variety of new organizations known by
their initials.

Despite the opposition, Roosevelt was tremendously popular with millions of

ordinary Americans, the “Forgotten Men” as he called them, who had benefited
from his policies. He had won the support of trade unions, many farmers and
black people. Although the opposing groups tried their best to remove him in 1936
and 1940, Roosevelt won a crushing victory in 1939 and another comfortable
one in 1940.

AMERICAN PRESIDENTS BETWEEN 1900 AND 1933

- Woodrow Wilson
- Herbert Hover
- Calvin Coolidge
- Franklin Delano Roosevelt
- Theodore Roosevelt
- William Howard Taft
- Warren Harding