The Great Depression


*The 1920s were a period of prosperity for America.  Americans bought goods on the instalment plan and speculated in stocks bought on margin, expecting to pay off their debts as stocks rose in value.  America’s factories turned out goods at a rate previously unimagined and paid wages more than double those known in the past.

*In 1928, Herbert Hoover ran for president with a promise of 'a chicken in every pot and a car in every garage.'  His opponent was the Democrat Al Smith of New York, known as the Happy Warrior.  Smith had problems, however.  He was a Catholic, which made many Americans, particularly Southern Baptists and German-American Lutherans, distrusted him:  once elected, after all, he might take orders directly from the Pope.  He was also against prohibition (making him unpopular with many fundamentalists) and against lynching (making him unpopular with many Southern Democrats).  Hoover defeated him in a landslide, and Americans expected the prosperity of the Jazz Age to continue unabated.

*There were already problems, though.  Farmers were poor due to falling food prices, people had bought as much as even installment plans would let them do:  60 per cent of cars and 80 per cent of radios had been bought on the installment plan.  Factories had to cut production or build up huge surpluses, partly because high tariffs made it hard to sell American products overseas.

*As factories could no longer sell goods, the value of their stocks fell.  People began trying to sell their stocks before they lost too much value, but with many sellers and few buyers, stock prices fell to almost half their peak value for good companies and to almost nothing for weaker ones.  This began on 23 October, 1929, and despite efforts by some large investors (like J.P. Morgan & Company) to stop it, on Black Tuesday, 29 October, 1929, the stock market crashed completely, wiping out fortunes and leaving many speculators with huge debts to pay off and no way to do so.  This was the beginning of the Great Depression.

-Crash Course video:


*Initially the Crash only hurt people who invested in the stock market.  Unfortunately, many banks had invested, and all were tied into the nationwide financial system.  Loans banks had made to stock speculators could not be paid back, investments banks had made in stocks were often worthless, people worried about the crash withdrew all their money (more than banks had on hand), and many banks collapsed, taking with them the life savings of many Americans.  The Federal Reserve System might have lent some of these banks money to keep them afloat or might have printed more money to put into circulation, but was unwilling to do so.  Within two years, over 4,000 banks had failed.

*Businesses began to close and unemployment shot up--the Ford Motor Company alone laid off 75,000 workers.  In 1933, unemployment reached 25%, and many of those who were employed were underemployed, not making as much money as they really wanted. 


*Americans had to cut back:  milk was replaced by water and meat completely vanished from most meals.  Even those who had money learnt to save it carefully, because they might lose their jobs at any moment, and many of those who had jobs were working fewer hours for lower wages, bringing home pay checks that might have been reduced by a third or more.  It seemed that the American Dream was over.


*Many people had their homes foreclosed upon or could not pay their rent, and ended up homeless, sometimes living in cardboard or plywood shacks grouped together in shanty-towns called Hoovervilles.  Others took to the rails and became hoboes, only stopping occasionally in ‘hobo jungles.’  People who could, stood in bread lines or went to soup kitchens where food was given away free by charities.

*In the South, as crop prices fell further and further, farmers lost their farms to bank foreclosures and became tenant farmers or sharecroppers. Others moved west looking for work, but even Western farmers were in trouble, as a long drought had dried up the soil on many Western farms.  Eventually dams were built out west that created reservoirs to make droughts less destructive, but in the 1920s and early 1930s, there was no such help.

*In the 1930s (mostly between 1930-1936), the dry, barren soil was blown away in windstorms, destroying the land.  Some soil was blown from the Dakotas to points as far east as New England, where it stained the snow red.  The part of the country stripped of its topsoil and impoverished was called the Dust Bowl. 


*In combination with low crop prices, these terrible conditions caused about 60% of families in the area to lose their farms.  These farmers moved west, too, looking for work picking oranges or doing other work in California.  Although they went there from all parts of the country, so many came from Oklahoma that farmers who went west looking for work were called Okies. 


*Their story was told most famously by John Steinbeck in his novel The Grapes of Wrath.


*Indeed, as food crop prices had been falling ever since the end of the Great War, some farmers did not even notice when the Depression began in the rest of the country; others felt fortunate, because at least they could grow their own food at a time when people in the cities were starving.

*Throughout America, the Depression did not just affect people’s incomes, it affected how they felt about themselves and their place in society.  Men who had once been their families’ breadwinners felt worthless.  Women sometimes became breadwinners, going to work at odd jobs, often doing sewing work.  Children could tell their parents were depressed, even if they often did not understand why.  While these shared hardships brought some families closer together, some families broke up under the stress.

*Things were particularly hard for minorities, particularly the African-Americans who had moved north in the Great Migration.  Due to prejudice, they were often the last men hired and the first ones fired.  In 1932, the black unemployment rate was about 50%

*Mexican-Americans faced discrimination in the Southwest, where many Anglo-Americans demanded their repatriation:  return to Mexico (by force, if necessary), and hundreds of thousands did voluntarily return to Mexico.  Nonetheless, many more remained in the Southwest.


*In desperation, some people turned to crime, including one of the most infamous crimes of the Twentieth Century.  In 1932, the son of the most famous man in America was kidnapped and held for ransom, and the search for the Lindbergh Baby, and the Trial of the Century for the man accused of kidnapping and murdering him, gripped Americans for years (until the Most Hated Man in the World, the German immigrant Bruno Hauptmann, was finally electrocuted in 1936).  Afterwards, kidnapping across state lines was declared a Federal crime.

*Herbert Hoover insisted that prosperity was just around the corner, and he tried to bring America out of the Great Depression (he first used the term depression, thinking it sounded better than the 19th century terms ‘crash’ and ‘panic’).


*To try to prop up the value of American goods, Congress passed the Hawley-Smoot Tariff in 1930, the highest tariff in American history.  It made foreign goods completely unable to compete in American markets, but foreign countries then raised their tariffs even higher in response, reducing American exports further.

*As American businesses failed and the Hawley-Smoot Tariff and other countries’ responding tariffs destroyed international trade, depressions began in many European countries, and as America could no longer lend money to Germany under the Dawes Plan and the Young Plan, Germany could no longer pay reparations and support its people, leading to a complete collapse of the already weak German economy into a depression far worse than America’s.

*Hoover tried to keep the government from giving direct aid, feeling that was not the Federal Government’s role.  He tried, instead, to encourage volunteerism, asking businesses to keep employing the same people at the same wages and asking workers not to demand more.  He asked the rich to give more to charity.    Volunteerism had worked during and after World War I, but it was not enough to correct the Great Depression (even though many more people did give to charity and volunteer in soup kitchens and other charities).

*Hoover did want the government to cut taxes, lower interest rates, create public works programmes, and even eventually began to lend money to large corporations through the Reconstruction Finance Corporation, hoping this would allow them to keep their workers employed, but for the most part it did not.  One of the few successes was the construction of Boulder Dam, later renamed Hoover Dam. 


*Although Hoover's attempts to bring America out of the Depression were radical for their time--lending $2 billion dollars to industry through the Reconstruction Finance Corporation would have shocked any earlier presidents--it was not enough to address a worldwide depression on this scale.  

*For one thing, Hoover had faith in localism, and expected local governments to solve local problems, knowing that if enough local governments could solve their problems, eventually all the country’s problems could be solved.  However, the country was now so interconnected by roads, railroads, and communication that each area’s problems affected many others, and local governments were not up to the task.  For another thing, Hoover did not understand the public mood, and, despite being a very compassionate man, he came off as being cold and uncaring, and perhaps even unaware of the nation's problems.

*Some people wanted radical solutions.  Some communists wanted a socialist revolution that would make the government take care of the people.  Some fascists wanted a strong national government that would force people to work together.  Most Americans, though, still had faith in progress and democracy—the American Dream.

*The most radical movement during the Depression was the creation of the Bonus Army.  In 1924, Congress had promised to pay all World War I veterans a lump sum pension in 1945.  However, as the Depression got worse, 20,000 unemployed veterans marched on Washington in 1932, demanding early payment of those pensions.  When they reached Washington, they set up camp outside town, and rioted when the police tried to force them to leave.

*Hoover sympathised with the Bonus Army, but he did not want them threatening the government, so he sent Douglas MacArthur to run them off.  He used excessive force, though, with the cavalry pulling their sabres, tear gas being fired into the camp, and US soldiers marching against ragged veterans with bayonets.  As Americans saw pictures of this and heard reports of hundreds of veterans being wounded or killed, Hoover’s popularity, already low, fell further, and, although he ran for re-election in 1932, had no real chance of winning.

This page last updated 2 November, 2018.
Powered by Hot Air