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The Depression Decade
1929-1939
October 24, 1929 = Black Thursday
October 29, 1929 = Black Tuesday
Causes of the Depression
1. Unequal income distribution
 Limited the number of people who could purchase
consumer products.
 Wages did not keep pace with the booming economy.
 Consumer debt skyrocketed.
2. Over-production of products
3. High protective tariff
4. Weakness in other sectors of the economy (coal
mining, farming, & textile industry.)
5. Banking practices were irresponsible
 Banks loaned people money to buy stock on credit.
 Stock was used as collateral.
 When stock prices decreased, the collateral was
worthless.
6. Germany stopped paying its war debts.
Effects of the Stock Market Crash
• People lost everything because the crash affected
all areas of their lives.
– People lost their jobs or had their wages reduced
• no money to pay bills or
• disposable income to afford their wants or needs
(eating out, buying new clothes, etc.)
– Houses went in foreclosure.
– People couldn’t pay their credit accounts b/c they had
no money (no more credit meant no more spending.)
• People’s investments were worthless.
• Banks failed.
– 800 bank failures that affected 9 million accounts
– Banks had made risky investments & lost client’s money
• Unemployment rose to 24%.
– U.S. Steel laid off 225,000 workers.
– 16 million people unemployed in 1933
• Wages fell 42%.
- 4 million families with no means of support.
“Sick” Industries
• Industries that didn’t share in the economic
prosperity of the 20s.
– Coal mining
– Cotton & woolen textiles
– Farming (cotton, wheat & other grains)
• Coal had stiff competition from oil & natural gas to
produce electricity.
• Cotton & wool had competition from new synthetic
textiles (rayon.) & there was a glut on the world
market.
• Thousands of coal miners & textile workers were
laid off because of the decline in business.
• Farmers were no better off than these workers.
– Europeans didn’t need American farm products (not
like during the war.)
– Prices fell while farmer’s costs stayed the same or
increased.
• Congressmen from farm states created the Farm
Bloc in1921 to help the farmers.
– A bloc is a common interest group
– Their purpose was to unite congressmen from farm
states behind favorable agricultural legislation.
 They were able to push a bill thru Congress providing
subsidies;
 The federal gov’t. would buy their surplus crops and
give the money to the farmers.
• Coolidge vetoed the bill.
– He believed that the gov’t. shouldn’t be helping people
with a handout.
– Basically, the federal government shouldn’t be helping
sick industries (laissez-faire economics).
The Crash
• The national climate of the country actually
contributed to the stock market crash in 1929.
– “Get-rich-quick” attitude
• People who had once been conservative investors
were caught up in the frenzy of the booming
market.
• Many became paper millionaires & everyone
thought that there was no end in sight.
• HOWEVER, there were indications of trouble that
people just ignored.
1. Decrease in farm prices
2. Overall deflation
3. Unequal balance of trade
4. Speculation on the stock market & real estate market
5. Rising interest rates
6. People buying on credit (installment plan)
– The market reached its peak in September, 1929.
• In September, 1929 people started selling off their
holdings while the prices were still high.
• Eventually it turned into a selling frenzy as people
wanted to get the highest price for their stock.
• October 24, 1929: sellers began the day unloading
stock; sellers out numbered buyers & stock prices
plunged.
• 6 powerful banks stepped in to prop up the market;
Hoover assured the public that all was well.
“BLACK TUESDAY”
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•
•
October 29, 1929
The market bottomed out.
This begins the Great Depression.
It will become a world wide event.
Government Response
Pres. Herbert Hoover (R)
• Hoover really was not insensitive to the condition of
the unemployed.
• Hoover’s belief:
– the market would correct itself and
– no government intervention was needed.
• Many people in federal gov’t. were opposed to
social programs that would give people money.
• States had social programs to help the poor but
were overwhelmed by the number of people who
needed assistance.
• State & city treasuries could not meet the demand
for assistance.
– $2.39 a week for a family in some areas.
– 7 ½ cents a day in some places.
• When the states ran out of money, they appealed to
the federal government for help but federal
government said NO.
• Churches & charities opened soup kitchens & bread
lines to deal with the huge numbers of hungry,
unemployed people.
– It really was up to charities to help the people since the
government was unable to.
Hoover’s Plan
• Optimism: the market just needs to correct itself.
• Told businesses to keep producing products, don’t
layoff workers, maintain the status quo.
• Told workers don’t demand higher wages or go on
strike; just keep on working.
• Got Congress to spend money on public works.
– But he didn’t want to increase the federal deficit
• Protected farmers with a tariff on imported goods
(Hawley-Smoot Act)
• Farm Board could make loans to farmers & buy
surpluses.
• Even with these interventions, the economy
continued to decline.
• Hoover knew that drastic action was needed, but he
just didn’t know what to do.
– His chief handicaps were his rigid outlook & lack of
imagination.
– Hoover assure the public it was just part of a business
cycle.
– The country had seen economic depressions before &
they had always worked themselves out.
– Everybody kept thinking it would get better but things
only kept getting worse.
Reconstruction Finance Corp.
• January, 1932
• Federal agency that loaned money to troubled
banks, railroads, & corporations.
• Ineffective: not enough money in the program.
• The program released only 20% of its budget.
• Only the healthiest institutions could qualify for the
loans.
• The RFC did restore some public confidence &
eased the financial crisis to a point.
Bonus Army
June/July 1932
• 20,000 unemployed veterans marched on
Washington demanding a bonus payment that
wasn’t scheduled for payment until 1945.
• Hoover vetoed one proposal & the Senate killed
another.
• Most of the vets returned home, but some stayed &
set up a shanty town outside of the Capitol.
• Hoover thought there was going to be trouble, so
he barricaded himself in the White House & orders
the army to drive the vets out of the city.
• Gen. Douglas McArthur used extreme force to drive
the vets out of Washington & destroy the shanty
town.
• People saw newsreels of the incident & were
horrified at the way these WWI vets were being
treated.
• This situation made Hoover more unpopular with
voters.
The Dust Bowl
• Years of over-farming in the Plains states had worn
away the topsoil.
• Drought, high temperatures, & huge waves of
grasshoppers left no vegetation to keep the soil in
place.
• There was a mass internal migration in the country.
– People went around the country looking for work, food,
or just anything better than what they had.
– The preferred method of travel was the railroad.
• The farming families of the mid-West left to find
prosperity elsewhere; most went to California.
• “Okies” comes from the people who left Oklahoma or
the Midwest to move West.
• “Okies” was a derogatory term to describe anyone
affected by the Dust Bowl.
• The term originated in the John Steinbeck novel, The
Grapes of Wrath which describes one family’s journey
to California.
Hoover’s Response to the Dust Bowl:
• Things will work themselves out.
• No government intervention is necessary.
Things Hoover did to help……..
• Hoover urged Congress to lower taxes so people
would have more money to spend on goods &
services.
• He also urged Congress to spend money on public
works to put jobless people back to work.
• Congress passed the measures, but they were too
limited in their scope to make a difference.
• Many people in the government were against
handouts or “welfare.”
• The belief was that people wouldn’t work if they
received help from the government.
• “Welfare” also sounded a lot like socialism &
communism which were against the American
form of government.
• Hoover & his people believed that the gov’t
should not increase its authority just because
times were hard.
• The problem with this idea was that the GD was
such an unprecedented occurrence in it severity &
scope.
• By 1932, Hoover becomes the most unpopular
man in the U.S.
– 1932 is an election year.
• He becomes the butt of many jokes because he
just couldn’t handle the situation
• The jokes included
– Hoovervilles: shanty towns where the homeless &
unemployed people lived.
– Hoover blankets: newspapers people used to cover
themselves when they sleep outside.
– Hoover flags: empty pockets.
– The unofficial national motto was
“Brother, can you spare a dime?”
• Hoover continued to be optimistic even as
conditions worsened.
• Hoover continued to believe that national
prosperity lay in a healthy business community.
• He consistently opposed & vetoed measures aimed
at providing public assistance to the needy.
• He believed in giving a farmer money to buy pig
feed, or seed, or a new tractor, but he opposed
giving them money to feed their children.
1932 Presidential Election
• The Republicans nominated Hoover with
Charles Curtis as his VP running mate
• The Democrats chose Franklin D. Roosevelt,
governor of New York.
• His running mate was John Garner.
• FDR was a charismatic leader with charm &
intelligence.
• His best asset was he wasn’t Hoover.
• FDR won the presidential election with largest
margin of votes in the nation’s history (for the time
period.)
– 57% of the popular vote
– 472 to 59 Electoral College votes
– Demos also won large majorities in both houses.
– FDR’s program for ending the Great Depression was the
“New Deal.”
• Hoover is blamed for the GD since it started under
his administration, but this is a rather unfair
assessment of his presidency.
• The GD would have occurred no matter who was
president.
Summary
• The Great Depression did not affect the extremely
wealthy people of the country.
• The Depression would last for at least 10 years.
• No one will know if the Depression was just a
market correction b/c the New Deal intervened in
the market to help end the Depression.