Economic Systems

  Children of Depression
Children of the Great Depression
[audio] Warning Signs

  • After World War I, Americans wanted a good economy and freedom from war. The Republicans wanted to support business interests to keep a strong economy. They also wanted to stay out of European affairs to avoid war.
  • Some warning signs of the Great Depression: many Americans did not have a very good standard of living. Some farmers were losing their farms, and costs for products were getting low. There was less international trade because of high tariffs.

The Crash

  • A stock market sells small pieces of big companies to many different people.
  • People started to sell stock, because they knew that the economy was struggling. Stocks were starting to cost less, and more people were selling their shares. The market crashed when almost every stock dropped greatly in price.

[audio]The Effects of the Crash

  • When people lost money on the stock market, they stopped buying products, causing businesses to fail. Businesses fired many of their workers, and more than 12 million people lost their jobs.
  • About 50 million people in 1932 were in poverty.
  • City and state governments could not collect enough taxes to pay workers such as teachers and policemen.
  • The Great Depression was different from the other American depressions because it was more than 10 years long. Also, there were many goods, such as food and clothing, but many people could not afford to buy them.

People help themselves

  • People decided to trade goods and services to other citizens. A doctor, for example, might give medical help in exchange for food.

Decreased spending

  • A deficit is a debt that occurs when a group or a person spends more than it earns.
  • Roosevelt was afraid that the increasing government debt would cause more problems with the economy, so he cut back on New Deal spending. As businesses had more trouble getting loans and government spending decreased, unemployment rose (3 million more people out of work).

[audio]New Deal Recovery


  • Banks had trouble because:
    1) businesses took out loans that they could not repay,
    2) people took their money out of the banks, thinking they would close.
  • The Emergency Banking Relief Bill loaned money to banks that were not collapsing.
  • The Emergency Banking Relief Bill, the banking holiday, and the fireside chat helped people trust banks again. Many people put their money back in banks, and many banks reopened.


  • In the 1920's, farmers were getting less money for their crops, while they had to pay more to run their farms. Many farmers could not pay back their loans. By 1933, farmers were threatening banks that were foreclosing on their farms.
  • The government tried to limit crop production so farmers could get more for their crops.
  • The parity payments were meant to help farmers have middle-class incomes. They helped farmers who could not get a fair price for their goods.
  • The Agricultural Adjustment Act caused crop prices to rise, and greatly increased farmers' incomes.


  • Under the National Industrial Recovery Act, the industry owners addressed prices for goods. They decided how to divide the market. They also discussed wage and minimum wage requirements.
  • The NIRA allowed workers to form unions and to discuss salaries and working conditions with managers.

Rural areas

  • The New Deal built dams in rural areas to prevent flooding, provide water, create electricity, and make fertilizer.

[audio] Effects of the New Deal

  • Under the New Deal Legislation:
    1) unemployment dropped from 13 to 9 million in 1936.
    2) wages paid to workers doubled.

African-American Perspective

  • In general, African Americans did not benefit directly from the New Deal.
  • 1) Most programs in the rural South aided land owners. Most African Americans did not have land.
    2) Much of the aid given to the South was not distributed among the African Americans.
    3) Many African Americans held jobs as janitors, farm workers, hospital aides, and restaurant and kitchen workers. Social Security did not apply to these jobs.
  • Most New Deal programs were segregated. The Civilian Conservation Corp, for example, segregated workers. Federal housing programs also separated African Americans from white people.
  • Many African Americans liked Roosevelt because he invited African-American professionals to the White House, asked their opinions, and assigned them high-ranking positions in agencies. Eleanor Roosevelt was an advocate for African-American rights.

[audio] Mexican -American Perspective

  • Migrants travel around different towns and states, mostly to harvest crops.
  • Mexican Americans did not get much help from the New Deal. Unions saw them as competition. Many were deported, and many left for Mexico.

Native-American Perspective

  • Relief efforts that dealt with farming, industry, and social security did not really affect Native Americans, because they mostly lived on reservations.
  • The Indian Reservation Act (IRA)
    1) said that tribes did not have to sell their land.
    2) tribes would arrange their reservations into districts and elect tribal councils.
    3) the tribal councils formed tribal companies that rented and leased property that belonged to the tribes.
    4) tribes would have more input in what was taught in reservation schools.
  • The IRA said that the federal government would encourage respect for tribal governments.

[audio]Non-Union Workers' Perspective

  • For many non-union workers, the union relief was only enough to keep them from starving. Many non-union workers were not covered under the new minimum wage.


  • Wealthy people benefited as the economy got better. Stocks and corporate profits rose.

Union Member Perspective

  • The New Deal helped industries borrow money, and thus increased production. As industries produced more, more workers got jobs.
  • The American Federation of Labor (AFL) established different unions for workers of different skills. The Congress of Industrial Organizations (CIO) united all the workers of an industry or factory, even if they had different skill levels.
  • A sit down strike: the workers stop their work and stay in the factory, so owners can't produce anything.

[audio]Second New Deal Recovery Acts


  • Erosion made some farmers leave wheat fields unplanted. In the 1930's, there wasn't enough rain, and the unplanted fields became dust. They couldn't be farmed. This area was called "the Dust Bowl."
  • The 2nd Agricultural Act encouraged farmers to be efficient.
    1) It paid farmers to plant crops such as alfalfa, which conserved soil.
    2) It paid farmers to rotate crops.
    3) It paid farmers to use methods that prevented erosion.
    4) It said that farmers could store crops in government warehouses if they couldn't get a good price for them. They could then take a loan from the government. Once they sold the crops, they could pay back the loan.

Some people say that the New Deal was not more effective because it did not create enough jobs. If more people could have purchased more products, the economy would have gotten stronger.