The Great
Depression
1929 - 1933
The Stock Market Crash and
the Great Depression
http://www.youtube.com/watch?v=aPtbekTh
2qo
Today’s Lecture
Herbert Hoover: 31st President of the United States
Lead up to the Crash
The Wall Street Crash
Why did the Stock
Market Crash?
The Great Depression
- Causes
- Effects
Rural America
Farming Crisis
Conclusion
Herbert Hoover
 Part of the intellectual elite; Engineer;
Self-made millionaire.
 Made his political name during WWI
organising food relief for Belgium.
 Progressive sympathiser who intended
to follow in the footsteps of T.
Roosevelt
 Defeated Democratic Governor of
New York, Albert E. Smith, in a
landslide in November 1928.
 Was the first President to use a telephone in the Oval Office,
but the last to dress for dinner every evening with his wife
 March 1929: Herbert Hoover sworn in as President.
Herbert Hoover
 “We want to see a nation built of home owners and farm owners.
We want to see their savings protected. We want to see them in
steady jobs. We want to see more and more of them insured against
death and accident, unemployment and old age. We want them all
secure”.
 “We have not yet reached the goal, but given a chance to go
forward with the policies of the last eight years and we shall soon,
with the help of God, be within sight of the day when poverty will be
banished from the nation” – Hoover’s acceptance speech for the
Republican Nomination, 1928. - Hoover repeated these words in a speech
delivered at Madison Square Garden in October 1932, the depths of the depression.
 “Little had been done by the Federal government in the fields of
reform or progress during the 14 years before my time. By 1929
many things were already 14 years overdue. I... had high hopes that I
might lead in performing the task”.
Herbert Hoover
 Devoted his presidency to a variety of social, economic and
environmental reforms.
 Feared a ‘welfare-dependent state’ and believed in private plans
for social relief . Promoted indirect relief through public works
projects and loans to states over direct federal relief to the
unemployed
 He continued with this belief even through
the worst years of the Great Depression.
 Smoot Hawley Tariff Act (1930)
 His programs failed, and the number of
unemployed in the USA rose from
7 million in 1931 to 11 million when he
left office.
Lead up to the Crash
The decade had been characterised by investment
fever, and ventures became increasingly risky as
people tried to make a ‘quick buck’.
March 1929 - stocks plunged, but on this occasion
they rallied back.
Business began to slow
down in mid summer.
Stock market was abused
by insider trading and
margin trading.
Kolster Radio scam.
It’s 1929 and All’s Well…
The Hoover Economic Committee issued a report in May
1929 which claimed “that there seems to be no limit to the
US consumer to consume”.
"I know of nothing fundamentally wrong with the stock
market or with the underlying business and credit
structure” - the President of NY's National City Bank
(1929)
September 1929: Stock Market reaches an all time high:
 The contract to build the Empire State Building is awarded
The Crash
October 24th 1929: Black Thursday. 12,894,650 shares
were sold, with a loss of over $9bn
October 29th 1929: Black
Tuesday
- 13,000,000 shares are
sold off in a wave of panic
By mid- November the
stock market had lost 1/3
of its value.
General Electric’s share price dropped from $403 per
share to just $168.
Standard Oil’s shares fell from $83 to $48
Why did the Stock Market Crash?
“A reaction from an orgy of reckless speculation” – Alexander
Dana Noyes (Financial writer, NY Times).
By 1929, commercial bankers were loaning more money for stock
market and real estate investments than for commercial ventures.
Easy access to credit in the 1920s left the American Economy in a
very precarious position
Business activity steadily subsided in the late 1920s, but the stock
market continued to rise
“it seemed as though Wall Street were by way of devouring all
the money of the entire world” – John Kenneth Galbraith
- Investors were, more often than not, big corporations and banks, rather
than individual investors – less than 2.5% of Americans actually owned
stock.
The crash had little direct immediate effect on the majority.
The Great Depression: Causes
Overconfidence in the stock market, overuse of credit
and the subsequent Wall Street Crash
Downturns in both the housing and automobile market.
A decade of agricultural stagnation
Distribution of income
Untrustworthy banking
system
International situation.
- War reparations,
international economic
ties and Britain’s
abandonment of the
Gold Standard
The Great Depression
 Hoover’s short term fixes:
- “I am convinced we have passed
the worst and with continued effort
we shall rapidly recover” – Spring 1930
 An agreement was reached with
industrialists that wage rates would
be maintained – “The first shock must fall on profits, not on wages”.
- This was intended to ensure the well being of the workforce, and that
purchasing power remained high.
 Government money was used to attempt to revitalise the
construction industry, thereby creating jobs and stabilising the
economy.
 This belief that the depression would not be severe prevented
Hoover from taking more serious action to combat the downturn
The Great Depression: Effects
12,830,000 unemployed by 1933, almost 25% - up from
3.2% in 1929 and 8.7% in 1930
- Worse for women and African Americans – in Pittsburgh, blacks
made up 8% of the population but 40% of the unemployed.
Those who kept their jobs often did so with shorter hours
and/or reduced pay
- In September 1931 US
Steel became the first
Corporation to break the
1929 pact with Hoover.
50% of America’s ‘work
power’ went unutilised
The Great Depression: Effects
Unemployment created bread lines, Hoovervilles, Hoover
flags and ‘depression pork’.
Birth-rate dropped to the lowest in American history, but
the suicide rate rose to the highest.
Those who had houses, food and clothing often did not
have enough for everyone and difficult choices had to be
made.
African Americans’ experience.
The effect on women.
Many remained untouched.
Rural America
“The vast obscurity beyond the city” –F. Scott Fitzgerald
44% of American’s were considered to be rural at the start
of the 1930s
Most had no indoor plumbing and almost none had
electricity
More than 1 in 5 working Americans worked on the land
The farming economy was in
trouble before the Depression.
Boom in US farming economy
during WWI.
Farming Crisis
1920s saw plummeting prices
and high unemployment
Agricultural Marketing Act, 1929
- Government agreed to
purchase surplus crops
The Federal government established co-ops between
farmers that were intended to prevent overproduction of
crops
The government could not
sustain the program after the
depression intensified
Conclusion
Hoover signed the Relief and Reconstruction Act on
July 21st, 1932.
 This Act allowed $1.5 Bn for ‘self-liquidating’ public works and
$300 million in loans to the States for relief purposes.
Democratic opposition, Franklin Delano Roosevelt,
declared that “relief must be extended by the
government, not as a matter of charity, but as a matter
of social duty”.
FDR won the 1932 election
in a landslide and began to
put in to motion the programs
which, collectively, would be
known as the ‘New Deal’
Next Week…
The New Deal
The Government Response