US Ch 4

• Chapter 4: The Great Crash, the Depression and the New Deal Policies, 1920-41
• Learning objectives

  • find out the causes of the greatest economic crisis to affect the United States in its history and how it affected the people and institutions of the country
  • learn how and why United States governments between 1929 and 1941 reacted to, and tried to deal with, this terrible crisis
  • examine the effectiveness of the policies advocated by Presidents Hoover and Roosevelt to deal with the economic crisis
  • consider why there was opposition, and the effectiveness of that opposition, to the attempts by governments to solve the crisis and help the millions that suffered as a result of it
• Chapter 3: The Gilded Age and the Progressive Era, 1870s-1920
• The period between 1919 and 1941 was traumatic and distressing for the USA and its people
• The 1920s were a period of remarkable economic growth and social change, often known as the 'boom years'
• Prosperity came to a sudden end in 1929
• The United States then entered an era of economic depression and high unemployment that lasted until war came in 1941
• Warren Harding (1921-23) and Calvin Coolidge (1923-29) presided over the 'boom' years
• Herbert Hoover (1929-33) and Franklin D. Roosevelt (1933-45) tried to solve the great economic and social problems which emerged after 1929, with varying degrees of success
• The most important change was in the role and responsibilities of the federal government, which went from playing a minor role in the economy to becoming a major force
• Welfare state


  A national system which is committed by law to provide financial support to any citizen during periods of poverty, such as when they fall ill, grow old, become unemployed or when their income falls below an agreed level
• GNP


  Gross National Product, which is the total value of all goods and services produced by a country in one year
• The First World War played an important role in the economic history of the United States
• The war made America the principal industrial nation in the world, and also the leading financial power
• War was a huge stimulus to the economy of the USA
• DuPont, a US company which specialised in chemicals, especially those involved in the manufacture of explosives, saw its revenues rise by 26% during the war years, while US GNP climbed by 21%
• The stock market rose by 86% in 1915 alone and stayed very high
• The war meant that the USA had gone from being a debtor nation to a creditor nation: several nations owed them a great deal of money
• Income tax in the USA rose to pay for its own involvement in the war, much of the cost of sending troops to France in 1917 was funded by the Wilson government which borrowed increasingly large sums of money
• The national debt rose from $1.2 billion in 1915 to $25 billion in 1919
• The boom years of 1915-18 came to rather a sudden end in 1919 with peace in Europe
• Unemployment rose to 12%, causing real hardship
• GNP dropped by 10% in 1919
• Prices overall fell by nearly 40% between 1920 and 1921
• Government did little to manage the transition from war to peace
• National debt


  The amount that the federal government owes the US public and other government agencies
• Federal Reserve Bank

  Created in 1913 to manage the currency, supervise banking, act as a lender of last resort in a crisis and to control interest rates for lenders
• Traditional and new industries remained important in the 1920s, but new businesses rose to rival them in importance to the economy
• Automobile manufacture possibly did most to change the face of industry in the US
• Henry Ford


  • He revolutionised both the manufacture and price of the automobile
  • He made the automobile affordable to the masses, including his employees, as he took care to pay them enough to ensure that they could afford to buy one of the cars
• The automobile industry was soon employing hundreds of thousands of men
• The automobile made commuting to work very much easier than the railway had done, and suburbs started to grow out from US towns and cities, creating a house-building boom
• The Model T replaced the horse and cart in many rural areas, and the tractor replaced the plough horse
• US industry was also more efficient and productive and had benefitted from greater investment
• GNP increased by 59% between 1921 and 1929, and incomes across the US increased by 38%
• Agriculture did not share in the economic prosperity which old and new industries such as steel and automobiles saw in the 1920s
• Prices for all farm products rose rapidly during the war, going up by as much as 300% between 1913 and 1919
• The arrival of peace in 1919 had a drastic effect, as demand dropped and prices dropped dramatically
• Farm incomes dropped and living standards declined among the 40% of the US population involved in agriculture
• African Americans were one of the most economically deprived groups, moving North by the hundreds of thousands to find work in the cities