The Great Depression
1929-1933
The Great Depression
In A Nutshell
The Great Depression was the worst collapse in the
history of American capitalism. Throughout the 1930s,
neither the free market nor the federal government was
able to get the country working again. The American
people endured a full decade of almost unbelievable
economic misery. While a much-feared revolution—of
either Communist or fascist persuasion—thankfully
never materialized, Americans flirted with a number of
radical alternatives to the status quo. Some of those
radical alternatives faded into memory, while others
were incorporated—in watered-down fashion—into the
New Deal, where a few remain with us even today.
3
Why Should I Care?
We Americans are, in the phrase of historian David Potter, "people of plenty." Our country is
blessed with a wealth of natural resources, and our democratic capitalist system has delivered us a
level of material affluence unprecedented in human history. For most Americans, at most times in
American history, the economy has provided real opportunity for real individual success.
But what would you do if the economy suddenly stopped providing that opportunity? If it no longer
seemed to matter how hard you worked, how smart you were, how responsibly you took care of
your money? If the system just stopped working, seemingly dooming you to a life of poverty through
no fault of your own?
Would you blame yourself?
Would you work harder, striving to prosper, against all odds, within the failing system?
Or would you try to change the system itself? And if so, what would you try to change it into?
These are the questions that faced every American through the long, lean years of the Great
Depression, which stretched mercilessly through the 1930s. Their answers might surprise you.
Causes of the Great Depression
Terms and People
•
Herbert Hoover – former Secretary of Commerce
and Republican candidate for President in 1928
•
speculation – when investors gamble that stock
prices will rise
•
Black Tuesday – October 24, 1929, the day the
stock market crashed
•
business cycle – periodic expansion and
contraction of the economy
Terms and People
(continued)
•
Great Depression – The collapse of the United
States and world economies beginning in 1929
•
Hawley-Smoot Tariff – high protective tariff
passed in June 1930 that contributed to a
worldwide depression
How did the prosperity of the 1920s
give way to the Great Depression?
During the 1920s, many Americans enjoyed what
seemed like an endless era of prosperity. But in
1929, the stock market crashed. Production fell,
unemployment rose, and the economy went into
a period of dramatic decline.
Years after the Great Depression began, periodic
contraction was seen as part of the business cycle.
In the 1928
presidential
race, the
Republican
Party was
confident.
The Republicans took
credit for the strong
economy.
Their presidential
candidate was Herbert
Hoover.
He believed in voluntary
cooperation between
business and labor.
Despite Hoover’s confidence, some saw
signs of weakness in the economy.
The agricultural sector
was in trouble. Rural
farmers produced huge
surpluses of food that
depressed prices.
Farmers could
not afford to
buy goods or
repay their
loans.
Fundamental Causes of
the Depression
• Drop in farm prices
• Massively uneven distribution of
income
• “Get rich quick” schemes in real
estate and especially in stocks
• Over-extension of credit
• Increased inventories of goods
• Immediate cause: October 1929
stock market crash
Many consumers in the
1920s bought items such
as this ironer on credit
The Day the Bubble Burst
• October 29, 1929
• More than 16
million shares
traded in one day
• Stock market lost
$30 billion
• Beginning of the
“Great
Depression”
The trading floor of the New York Stock
Exchange in 1929
Banking System Collapse
• Banks invested
heavily in the
market
• Collapse of market
led to bank
failures
• Many depositors
panicked, leading
to even more bank
failures
Worried depositors wait outside a bank
hoping to withdraw their savings
Easy credit and installment buying lead
people to purchase goods they can’t pay for.
By 1929, Americans
racked up more than
$6 billion in personal
debt — more than
double the 1921 level.
Rising wages masked an uneven distribution of
wealth.
While factory workers’
wages rose 8%, factory
output increased by 32%.
As a result, worker
incomes rose modestly,
while rich investor
incomes skyrocketed.
Until September 1929, the stock
market continued to rise.
Many people borrowed
money to buy stock,
assuming prices would
continue to go up.
Some economists
feared that stocks were
over-priced.
On October 29th, the stock
market went into a free fall as
investors tried to sell at any
price.
16 million shares were sold
on “Black Tuesday.”
Billions of dollars were lost
in a few hours.
Many who bought stocks
on margin were wiped out.
The Great Crash
was a hallmark
of the nation’s
business cycle.
The economy
periodically
grows and then
contracts.
• In growth periods,
workers are hired, wages
rise, and demand for
products increases.
• In contraction periods,
workers are fired, wages
drop, and demand for
products falls.
The stock market crash didn’t start the Great
Depression by itself. Instead, it quickened the
collapse of the U.S. economy.
The banking system feels the effects of the
crash first. People fear that their money will be
lost so they run to the bank and attempt to
withdraw their funds.
But banks don’t
have enough of
their money on
hand as cash.
These bank runs
cause banks
to fail.
Factories closed,
causing
worker layoffs.
•
This lowered
demand for
goods.
•
By 1933, the
unemployment
rate
reached 25%.
•
Congress passed the Hawley-Smoot Tariff
to protect American manufacturers from
foreign competition.
The strategy was
a mistake. Other
nations retaliated
and raised tariffs
as well.
The resulting drop
in world trade only
made the glut of
American factory
and farm products
harder to sell.
As international trade falls, a global drop in
business leads to a worldwide depression.
There were several causes of the Great
Depression. There is still disagreement over
which are most important.
Each of the
following
contributed to
dangerous
economic
conditions:
hardships in Europe
and rural America
uneven distribution
of wealth
speculation in the stock
market
increased personal debt
While historians disagree as to the exact causes of the Great
Depression. Most scholars would include in their list:
•UNEQUAL DISTRIBUTION OF
WEALTH
•HIGH TARIFFS AND WAR DEBTS
•OVERPRODUCTION IN INDUSTRY
AND AGRICULTURE
•INCONSISTENT MONETARY POLICY
•STOCK MARKET CRASH AND
25
FINANCIAL PANIC
HIGH TARIFFS
AND WAR
DEBTS
STOCK MARKET
CRASH AND
FINANCIAL PANIC
MONETARY
POLICY
CAUSES OF
THE GREAT
DEPRESSION
UNEQUAL
DISTRIBUTION
OF WEALTH
AGRICULTURE
INDUSTRY
OVERPRODUCTION
26
THE 1920’S WAS A
PROSPEROUS TIME,
BUT THE PROSPERITY
WAS NOT SHARED.
EQUALLY
MANY PEOPLE,
LARGELY DUE TO
NEWLY INTRODUCED
INSTALLMENT BUYING,
COULD AFFORD TO
BUY CARS, RADIOS
AND OTHER NEW
PRODUCTS OF THE
1920’S. FARMERS,
HOWEVER, WERE IN A
DEPRESSION
THROUGHOUT THE
WHOLE DECADE.
27
Effects of the Depression
Terms and People
•
bread line – where charities or local agencies gave
food to the poor
•
Hooverville – term used to describe makeshift
shantytowns set up by homeless people during the
Great Depression
•
tenant farmer – rural farmers who lost their land
but stayed on to work for larger landowners
•
Dust Bowl – millions of acres in the Great Plains
that were destroyed when dust storms blew away
the soil
Terms and People (continued)
•
Okies – Great Plains farmers forced off their
land by the Dust Bowl
•
repatriation – policy whereby local, state,
and federal governments encouraged or
coerced Mexican immigrants—some of them
U.S. citizens—to return to Mexico
How did the Great Depression affect the
lives of urban and rural Americans?
The stock market crash signaled the end of boom
times and the economy staggered into the Great
Depression. Desperate poverty gripped the
nation, leaving a permanent impression on those
who lived through it.
Tested by extreme hardship, this generation
forged a strong character and will to restore
prosperity.
Few Americans
understood
the causes
of the Great
Depression, but
everyone felt the
impact.
Between 1921–1929,
the unemployment
rate never rose above
4 percent. By 1933,
however, it was near
25 percent.
Those who managed
to keep their jobs
had their wages and
hours cut.
For many, the only food
available came from
public soup kitchens or
bread lines run by
charitable organizations.
People sold their
property to buy food.
The homeless lived in empty railroad cars, in
cardboard boxes, or in shacks built on public land
or in empty lots.
Hoovervilles
appeared in
major cities
across the
country.
Hoovervilles
• Settlements of
shacks inhabited by
transients and
unemployed
• Derisively named
after President
Hoover
• Many cities and
towns had at least
one
“Hoovervilles”, homeless camps
37
Between 1930
and 1934, nearly
a million farmers
lost their farms,
homes, and farm
equipment
because they
could not pay
their mortgages.
Bankers sold the land
and equipment at
auction. Some
farmers became
tenant farmers,
working for bigger
landowners. Others
decided to leave in
search of work
elsewhere in the
United States.
The remaining
farmers on the
Great Plains
suffered a terrible
drought, which led
to the Dust Bowl.
Dust storms
destroyed
millions of acres
of farmland.
Millions of tons of topsoil were blown
away in giant dust storms.
• Farmers had dug up thick prairie grasses to
plant wheat, so there was nothing to hold the
soil in place.
• Winds traveling as fast as 100 mile-per-hour
winds blew dust clouds 8,000 feet tall in
Oklahoma, Texas, New Mexico, and Colorado.
• Wildlife and farm animals suffocated in the
choking winds.
The Dust Bowl: Causes
• Overcultivation
of land in the
Great Plains
• Sustained
drought
throughout region
• High winds blew
away loose
topsoil
A dust cloud approaches the town of Stratford,
Texas, in 1935
The Dust Bowl: Impact
• More than 500,000 left
homeless
• Storms blew large
amounts of dust from the
Plains into cities such as
Chicago and Buffalo
• “Red snow” fell on towns
in New England
The Plight of the “Okies”
• Farmers from
Oklahoma fled the
Dust Bowl
• Went to California for
farm jobs
• Possibly 15 percent of
Oklahoma’s
population became
migrants
A woman and her child rest beside
their car during their trip west
Hardships
• “Camps”
unsanitary
• Wages decreased
for large numbers
• California passed
an “anti-Okie” law
A migrant camp in California
The “Migrant Mother”
• One of the most
famous New Deal–era
photos
• Shot for the
Resettlement
Administration by
Dorothea Lange
• Taken in California in
February or March
1936
Farmers who
had lost their
land, called
Okies regardless
of where they
were from, were
forced to leave.
In old trucks, farmers
moved west or to northern
cities. Before the pace
slowed, 800,000 Okies left
Texas, Oklahoma, Missouri,
and Arkansas alone. Rural
states lost population
during the 1930s.
Those who could afford
it bought distressed
neighbors’ farms at low
prices to build expanded
commercial farms.
Family life was hurt by the Great Depression.
Those who still had jobs lived in fear that their
next paycheck would be their last.
Those who were still working felt guilty because
friends and relatives were unemployed.
America’s birthrate fell to its lowest level
on record.
Some teens ran away, and families broke up.
Minorities suffered even more
during the depression.
•
Even in good times,
African Americans were
“last hired and first fired.”
•
Many were thrown off
southern farms where they
were sharecroppers.
•
As Okies moved west to
find work, Mexicans and
Mexican Americans faced
fierce competition for jobs.
•
Local governments urged
repatriation for Mexican
Americans.
Hoover’s Response to the
Great Depression
Terms and People
• localism – policy whereby problems are best
solved at the state and local level and not by the
federal government
• Reconstruction Finance Corporation – created
in 1932 to lend cash to investors to stimulate the
economy
• trickle-down economics – economic theory that
held that money lent to large banks and
corporations would in turn be invested in small
businesses which would hire more workers
Terms and People (continued)
• Hoover Dam – huge public works project on
the Colorado River that provided jobs, water for
irrigation, and power
• Bonus Army – group of World War I veterans
who marched on Washington, D.C., in 1932, to
demand early payment of a bonus promised
them by Congress
• Douglas MacArthur – supervised the forced
removal of the Bonus Army, which angered
many Americans
Why did Herbert Hoover’s policies fail to
solve the country’s economic crisis?
As the Great Depression spread misery across
America, Herbert Hoover struggled unsuccessfully
to respond to the nation’s problems.
As a result of Hoover’s failed response, in 1932
Americans would turn to a new leader and
increased government intervention to stop the
depression.
Hoover’s Response
• President Hoover
overwhelmed
• Believed that private
charity was best suited to
solve problems
• Most efforts failed
• Reconstruction Finance
Corporation achieved
some success
President Herbert Hoover
Herbert Hoover did not cause the
Great Depression, but Americans
looked to him to solve the crisis.
He tried a number of
different approaches,
but in the end he
failed to discover the
right formula for
stopping the crisis.
At the start
of the
economic
downturn,
Hoover took
a hands-off
approach.
Like most economists
of the day, he believed
that up and down
swings in the economy
were a natural part of
the business cycle.
It was thought that
strong businesses
would weather storms
without the support
of the government.
Hoover saw that he must do something.
Asked
businesses to
keep wages,
employment,
and prices at
current levels
Called for
tax cuts,
lower
interest
rates, and
public works
Asked
wealthy to
donate more
money to
charity
But volunteerism failed.
Hoover put his faith
in localism, a
policy whereby
problems are best
solved at the local
and state levels.
•
Towns and states
didn’t have the
necessary resources
to deal with the
depression.
•
Hoover did not
support direct
federal aid to
individuals.
In 1932, Hoover
urged Congress to
create the
Reconstruction
Finance
Corporation (RFC).
The RFC employed a
policy known as
trickle-down
economics.
The RFC gave billions
of dollars to banks and
large businesses.
The idea was that they
would lend to, and
invest in, struggling
businesses who would
hire workers and thus
end the depression.
The RFC failed when
businesses did not
hire more workers.
One policy that did succeed
was the construction of
Boulder Dam, (later
renamed Hoover Dam)
across the Colorado River.
Started in 1930, the huge dam
provided power for more than
a million people and irrigation
for farm land, and brought
needed jobs to the Southwest.
Many grew disillusioned during the
Great Depression.
• Some blamed Hoover and some blamed capitalism.
• Some were World War I veterans who wanted a
bonus that was promised to them.
• In 1932, those veterans formed the Bonus Army
and marched on Washington.
The Bonus Army
With the U.S. capitol visible in the
distance, shacks erected by the Bonus
Expeditionary Force burn
• Patman Bill was to
move up bonus
payments from 1945 to
1933
• Veterans camped near
the Capitol to support
the bill
• Bill failed in Congress
• Hoover’s removal of
vets made Hoover
appear heartless
In the
summer of
1932, almost
20,000
veterans set
up camps and
occupied
vacant
buildings. In
July, police
tried to evict
them and riots
erupted.
THE BONUS MARCH
MAY –JULY 1932
THE BONUS EXPEDITIONARY FORCE WAS A GROUP OF WWI VETERANS
WHO HAD BEEN DENIED EARLY BONUS PAYMENTS FOR SERVICE IN THE
WAR. THEY ORGANIZED A PROTEST MARCH ON WASHINGTON IN 1932.
TWENTY THOUSAND MEN SET UP A TENT CITY, VOWING TO STAY UNTIL
THEY GOT THEIR MONEY. PRESIDENT HOOVER SENT IN THE ARMY (LED
BY FUTURE GENERALS OF THE ARMY DOUGLAS MACARTHUR AND
DWIGHT D. EISENHOWER) TO BREAK UP THE PEACEFUL
DEMONSTRATION.
BONUS MARCHERS SET
UP CAMP IN
WASHINGTON D.C.
63
SOME BONUS MARCHERS BROUGHT THEIR FAMILIES
64
BONUS MARCHERS RALLY AT THE
CAPITOL STEPS
65
PRESIDENT HOOVER SENT THE ARMY TO
DISPERSE THE BONUS MARCHERS
66
Hoover ordered
General Douglas
MacArthur to
remove the
veterans. He used
tear gas, cavalry,
tanks, and troops
with fixed bayonets.
Press photos of
troops using
excessive force
angered the
American public.
The eviction of the
Bonus Army
doomed Hoover’s
bid for re-election.
Americans were
ready for new
leadership and a
greater role for the
government in
solving problems.
ONE VETERAN WAS KILLED, 50 PROTESTORS AND SOME POLICE
OFFICERS WERE INJURED. THE MARCHERS DISPERSED. THERE WAS
ANOTHER SMALLER MARCH IN THE NEXT YEAR. PRESIDENT HOOVER
WAS WIDELY CRITICIZED FOR HIS HANDLING OF THE SITUATION.
SHACKS OF
THE BONUS
ARMY
AFTER
THEY
WERE
FORCED
OUT
68
THE GHOST
OF LINCOLN
TRIES TO
COMFORT
HOOVER IN
THIS PRO
HOOVER
POLITICAL
CARTOON
Chapter Summary
Section 1: Causes of the Depression
• Many factors contributed to an economic collapse, including
uneven distribution of wealth, credit buying, personal debt,
agricultural over-production, government policy errors, tariffs,
and stock speculation.
Section 2: Americans Face Hard Times
• Americans lost their jobs, savings, homes, and status.
Families went without food, stood on bread lines, or lived in
“Hoovervilles.” A terrible drought turned the Great Plains into
the Dust Bowl, sending thousands of migrants called Okies
on the road.
Chapter Summary
(continued)
Section 3: Hoover’s Response Fails
• President Hoover tried several strategies to respond to
the crisis, but each came up short. Volunteerism, localism,
and a trickle-down economics approach all failed. Forced
removal of the Bonus Army from Washington D.C. ended
his chances for reelection in 1932.