Chapter 22
The Great Depression Begins
SIGNS OF TROUBLE
Industries in trouble
• Key basic industries which had been the
backbone of the American economy barely made
profits
– Railroads gave way to new types of transportation
(cars, trucks, buses)
– Mining & lumbering no longer in demand after the
war, new forms of energy like electricity become
popular
– Automobiles, construction & consumer goods
weakened as people went further in debt
– The housing market declined (therefore, so do related
industries
Four Causes of the Depression
1. Tariff & war debt policies cut down on the
foreign market for American goods
2. There was a crisis in the farm sector
3. There was availability of easy credit
4. There was an unequal distribution of
income
1. Tariff & war debt policies cut down on the foreign
market for American goods
• Fordney McCumber Tariff (1922)
– Raised tariff 60% percent to protect US businesses
after the war
• Hawley-Smoot Tariff (1930)
– Raised tariff to new heights to protect US
businesses
– Actually
• Reduced the flow of goods into the US
• Prevented other countries from buying American goods
2. Crisis in the Farm Sector
• During the war prices & demand for crops
soared so farmers took out loans for land &
equipment
• After the war, demand & prices fell 40-60%
• Farmers could not repay their loans
– Banks foreclosed (took) their farms
– Because farmers defaulted (didn’t pay) on their
loans, rural banks failed
Congress tries to help the farmers
• McNary-Haugen Bill
• Called for federal price-supports for key
products
– Government would buy the surplus of crops at
guaranteed prices, and sell them on the world
market
– Coolidge vetoed the bill 2x
3. The Availability of Easy Credit
• Although people appeared prosperous, they
were living beyond their means
• People acquired HUGE debts & couldn’t pay
them off
• So they stopped spending money
• This led to overproduction
4. Unequal Distribution of Income
• Rich Richer, Poor Poorer
– Income of wealthiest 1% rose by 75%
– Income of 99% rose by 9%
– More than 70% of families earned less than the
standard for decent living ($2,500 per year)
Black Tuesday
• October 29, 1929
• Stock prices fell sharply
• By November investors
had lost 30 billion
Impact of Black Tuesday
• Banks Fail
– Banks invested in stock
markets & lost people’s
money
• 600 banks closed in 1929
• 11,000 of 25,000 banks
closed by 1933 (almost
½!)
– Government did not
insure bank accounts
• Businesses Failed
• From 1929-1932
– The Nation’s total output of goods & services was
cut nearly in half
– 90,000 businesses bankrupt
– Unemployment went from 3%-25%
Unemployment
Purchasing Power
Productivity
Worldwide Impact
• The stock market crash was felt all over the
world
• Americans could no longer buy European
goods
• Hawley-Smoot Tariff prevented the sale of
American goods abroad
• Trade falls 40%
Hardship & Suffering during the
Depression
Ch. 22.2
Depression in the Cities
A. People lost their jobs, were evicted from
their homes and ended up living in the
streets.
B. Shantytowns: towns consisting of shacks
The homes were made out of scrap metal and
garbage (Hoovervilles)
C. People begged for food or went to soup
kitchens and breadlines to get free or low
cost food in order to survive. Charitable
organizations ran these operations.
Families
• Family stood as a source of strength
• People believed in traditional values and
family unity
• With no money, people stayed home and
played board games, like Monopoly, and
listening to the radio
Fathers
• Depressed that couldn’t support families
• Many fathers left and became transients, or
people that wander
• 300,000 “hoboes” wandered the country
Mothers
• Canned food, sewed clothes, managed
budgets
• Became targets of resentment
– If men can’t find jobs, married women should not
be working!
Children
• Poor diets, lack of healthcare led to
malnutrition and diet-related disease
• Schools closed or shortened
– 300,000 students were out of school
– Thousands went to work
• Road the rails
– “Hoover tourists”
African Americans
A. While the national unemployment rate
lingered between 23-33%, Unemployment
for African Americans was 50%
Quote
“The Negro was born in depression. It didn’t
mean too much to him, The Great American
Depression…The best he could be is a janitor
or a porter, or a shoeshine boy. It only
became official when it hit the white man.”
Treatment of Minorities
A. Latinos and African-Americans had an
especially difficult time because they earned
less wages to begin with and had to deal
with daily discrimination.
B. Mexican-Americans were specifically
targeted in the Southwest. Even Latinos who
had been born in America.
Mexican-Americans
C. Some Mexican Americans voluntarily
returned to Mexico and others were forced
out by Federal agents.
Example: 1.5 million Chicanos in US at the
outset of Depression. 100,000 lived in L.A.
and 13,000 were deported back to Mexico.
Depression in Rural Areas: DUST BOWL
A. Severe drought
B. Overproduction during the 1920’s destroyed
the soil on American farms which hindered
the growing of crops.
C. The wind caused dust to be scattered across
the country. Region hit the hardest was
called the Dust Bowl
Dust Bowl
D. Kansas, Oklahoma, Texas, New Mexico,
and Colorado. People from these states
often picked up and headed west to CA
to find and find work as migrant workers.
Their nickname was “Okies.”
On the fourteenth day of April of nineteen thirty five,
There struck the worst of dust storms that ever filled the sky:
You could see that dust storm coming the cloud looked deathlike
black,
And through our mighty nation, it left a dreadful track...
This storm took place at sundown and lasted through the night,
When we looked out this morning we saw a terrible sight:
We saw outside our windows where wheat fields they had
grown
Was now a rippling ocean of dust the wind had blown.
It covered up our fences, it covered up our barns,
It covered up our tractors in this wild and windy storm.
We loaded our jalopies and piled our families in,
We rattled down the highway to never come back again.
Health
• Emotional Health
– Suicide rate rose more than 30%
– 3x as many people were admitted into state
mental institutions
• Physical Health
– People stopped going to the dr. or dentist because
they couldn’t afford it
• Young people gave up dreams of college,
getting married, & having children
President Hoover’s Response
RUGGED INDIVIDUALISM
People needed Help
• Direct Relief
– cash payments or food provided by the government to
the poor
• Price Supports for Farmers
– McNary-Haugen Bill
– Government would buy the surplus of crops at
guaranteed prices, and sell them on the world market
– Coolidge vetoed the bill 2x
• He relied on charities & local organizations to pitch in
and help care for the less fortunate
How does Hoover respond to the
Depression?
• “Any lack of confidence in the economic
future…is foolish.”
• Rugged Individualism
– People should succeed through their own efforts,
Take care of themselves & their families rather
than depend on the government to bail them out
• Hoover rejected the notion of Direct Relief,
thought that it would weaken people’s self
respect.
Mid term election of 1930
• As economy worsened, people became more
dissatisfied with Hoover’s government
• Called shantytowns Hoovervilles”,
Newspapers they covered themselves with
“Hoover blankets”, empty pockets“Hoover
flags”
• Democrats won more seats in Congress
– How is this a reaction to Hoover?
Hoover Backs Cooperatives
• A Cooperative is a group of people or businesses
who join together to meet an economic, social or
political goal
• Federal Farm Board
– Group of farmers intended to raise crop prices by
helping members buy crops & keep them off the
market temporarily until prices rose
• National Credit Cooperation
– Loaned money to smaller banks to hold off
bankruptcy
Direct Intervention
• With the 1931 Presidential election looming, Hoover takes
action
• Federal Home Loan Bank Act
– lowered mortgage rates for homeowners and allowed farmers
to refinance their farm loans and avoid foreclosure
• Glass Steagall Act
– (after Hoover’s time in office is over) separated investment from
commercial banking – hopefully will prevent another crash
• Reconstruction Finance Corporation
– authorized $2 billion for emergency financing for banks, life
insurance companies, railroads and other large businesses
Building Boulder Dam
• Supported his belief that the federal government
can encourage cooperation
– Proposed to finance the project by using profits from
sales of the electric power that the dam would
generate
– Negotiated agreement on water rights among 7 states
(CA, CO, NV, NM, UT, WY)
• Provided electricity and flood control, also
provided a regular water supply to CA, which
enabled the growth of CA massive agricultural
economy
– Provides water for LA & Las Vegas
Gassing the Bonus Army
• Further damaged Hoover’s image
• Patman Bill – authorized government to pay a
bonus to WWI veterans who had not been
compensated adequately for service
• Didn’t Pass