How did the Great Depression in the USA bring about a crisis of capitalism?

Background and focus

It is important to understand that the focus of THIS section is almost in direct contrast to the previous topic.

Previously, learners were required to understand how the USSR had developed. WE now look at Capitalism and

its development in the US. Learners MUST understand that this topic, along with the previous one, will set them

up for studying the bipolar nature of the globe in Grade 12. So, pay attention, and make notes for next year.

Having looked at socialism (and the USSR) in the previous topic, we now investigate capitalism as it developed

in the USA.

We study the crisis of capitalism that occurred as a result of the Great Depression. At the time of conception,

Roosevelt’s New Deal was criticised by some for bringing in socialism. Learners must analyse these criticisms,

which relate to the New Deal Programmes that were set up to bring about relief, recovery and reform.

Could Roosevelt’s form of state intervention to create jobs, as well as the welfare system he set up, be

considered socialist reform, and did he thereby undermine the capitalist system in the USA?

There was a list of conditions that existed in 4 phases:

1.     The growth of Capitalism during the 19 and 20 centuries in the US.

2.     The conditions that led to the Great Depression.

3.     The policies that attempted to address the Great Depression.

4.     The criticisms of the New Deal.

This section includes the following:

the nature of capitalism in the USA

Online Resource:[Accessed: 10/02/2015]


 - entrepreneurial and competitive; with rugged individualism; free market; and with minimal state control over business;

”¢the American dream of individual possibilities - ‘rags to riches’;

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Ӣ capitalist boom of the 1920s: strengths and weaknesses in the US economy;

Ӣ USA society in the 1920s;

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Ӣ Wall Street crash of 1929: reasons for and economic and social impact;

Black Tuesday – 29 October 1929

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Causes of the Great Depression

1.Credit boom

2.Buying on the margin

3.Irrational exuberance

4.Mismatch between production and consumption

5.Agricultural recession

6.Weaknesses in the Banking Sector


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Ӣ Election of Roosevelt: offering a New Deal;

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The New proposed by Franklin D Roosevelt encompassed the following:[Accessed: 10/02/2015][Accessed: 10/02/2015][ Accessed: 10/02/2015]

The Acts

Emergency Banking Act 1933

The Federal government insured people's deposits in banks against losses caused by public panic. This helped restore the public's confidence in the nation's banking system

National Industrial Recovery Act '33

This act had three parts to it. It set up the Public Works Administration (PWA) to manage public works projects; The PWA spent $7 billion and employed millions of men. 

It set up the National Recovery Administration to set up codes of practices for such things as hours worked, wages, unfair competition and outlawing child labour. 16 million workers were covered by these codes and child labour was outlawed. Workers went on to an 8 hours week and a minimum wage of $1.25 was introduced. 

The third strand of the NIRA was to give trade unions the legal right to bargain with employers. Membership of trade unions increased after the introduction of this act.

NIRA was declared unconstitutional in 1935.

Agricultural Adjustment Act 1933

This act paid farmers to limit the amount of crops they grew or simply to dig back into the ground crops already grown. The federal government bought farm animals and then slaughtered then to raise the price of farm products.

Between 1933 and 1937, farm prices doubled but in 1936 the AAA was declared unconstitutional.

Tennessee Valley Development Act '33

This set up the Tennessee Valley Authority (TVA). Its sole task was to re-develop the Tennessee Valley which encompassed 7 states and 40,000 square miles.

HEP stations were built, flood control was introduced as was soil conservation. The valley was regenerated.

National Labour Relations Act '35

This act forced employers to deal with trade unions. Workers were also given the right to form and join trade unions and to take part in collective bargaining. A board was set up to investigate and punish those companies’ bosses who did not abide by the rules of the NLRA.

In 1935 trade union membership stood at 3.6 million. By 1941 it was 8.6 million. In 1935 the CIO (Congress of Industrial Organisations) came into being. 

Social Security Act 1935

This act set up the first national old age pensions scheme. Workers and employers had to pay into a federal pension fund. Each state was also expected to work out a plan for unemployment insurance.

This one act covered 35 million people despite opposition from Republicans who felt the whole idea smacked of socialism.

Soil Conservation Act 1936

The federal government paid subsidies to farmers who agreed to leave land fallow or planted crops that put nitrogen back into the soil. The federal government also financed research into soil conservation.

Fair Labour Standards Act 1938

The FLSA sort to cut the maximum hours someone could work and to raise the minimum wage for those who worked in inter-state trade.

This act gave protection to over 13 million people. It introduced a 40 hour week and a minimum wage of 40 cents an hour.

Agricultural Adjustment Act 1938

The act introduced the Federal government subsidising the price of many farm products. The aim was to gradually increase the subsidy until farm prices reached their pre-1914 figure to give all farmers a guaranteed minimum income.

The Agencies

Civilian Conservation Corps of 1933

This employed jobless single men between the ages of 18 and 25. They worked for 6 months in mountains and forests where they were taught forestry, flood control and fire prevention. Nearly 3 million men took part in the scheme which ran from 1933 to 1941.

Works Progress Administration of 1935

The WPA coordinated all public works schemes. It spent over $10.5 billion of Federal money and employed 3.8 million men from 1935 to 1941. It had built 77,000 bridges, 24,000 miles of sewers, 664,000 miles of road, 285 airports, 122,000 public buildings and 11,000 schools.

Reconstruction Finance Corporation

This agency loaned money to state and local governments to assist the poor. It also lent money to firms which were in debt or wanted to invest.

Farm Credit Administration

This agency used Federal money to pay off farm creditors and save farmersfrom bankruptcy.

Home Owners Loan Corporation 1933

This agency used Federal money to pay of mortgages so that home owners did not lose their homes.

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