The Great
Depression
http://www.youtube.com/watch?v=
JDcR-ZS5fyw
Historians disagree as to the causes of the Great
Depression. Most scholars would include:
MONETARY
POLICY
HIGH TARIFFS
AND WAR
DEBTS
STOCK MARKET
CRASH AND
FINANCIAL PANIC
CAUSES OF
THE GREAT
DEPRESSION
UNEQUAL
DISTRIBUTION
OF WEALTH
INDUSTRY
OVER
PRODUCTION
AGRICULTURE
• Lack of Diversification
– Prosperity of 1920s had been based largely
upon certain industries (automobiles and
construction) that were starting to decline
• Construction fell from $11 billion to $9 billion from
1926 to 1929
– Newer emerging industries (petroleum,
chemicals, plastics, consumer) had not
developed enough to combat decline of
others
• Misdistribution of
Wealth
– Vast majority of wealth
and increase in income
in upper 1%
– Half of families lived at
or below minimum
subsistence level
80
70
60
50
TOP 1%
BOTTOM 99%
40
30
20
10
0
1929
Chart showing wages of unskilled workers. Notice how
little the wages changed during the supposed prosperity
of the 1920’s.
700
600
500
400
300
200
100
0
1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941
• Overproduction of goods
and food products and
decline in purchasing
power
– Extra manufactured goods
mean cause layoffs, which
make the recession more
severe
– Newer technology helped
caused massive increases
in farm production,
causing vast decreases in
prices of crops
Table shows the sharp decline in the prices of
various products from American farms
Agricultural
product
1912-1913
1932-1933
Corn (per bushel)
0.56
0.20
Wheat (per bushel)
0.88
0.41
Oats (per bushel)
0.34
0.17
Butter (per lb)
0.21
0.13
Butterfat (per lb)
0.25
0.16
Wool (per lb)
0.24
0.10
Hogs (per cwt)
7.50
3.80
Milk (per cwt)
1.79
0.90
• Consumer debt and
the credit culture
– Buying on credit
throughout 1920s
caused great
expansion of debt
– Farmers were deeply
in debt from farm crisis
in the 1920s
• International trade and debt structure
– Debt structure from World War I disrupted
world economy
• Allies struggled to pay back United States since
Germany/Austria also unable to pay
• US made new loans to Allies to pay older debts,
furthering debt cycle
– Fordney-McCumber Act in 1922 put high
tariffs on industrial goods
• Other countries used retaliatory tariffs
• Decrease in foreign demand for US goods
• Stock Market Crash
– Sept. 1929 stock prices
had peaked, rising over
40% since May 1928
– On Oct. 21 and 23, 1929
thousands of stocks were
sold, which caused stock
prices to fall
– Black Tuesday: Oct. 29,
1929 the bottom drops
out of the market
• Stocks lost $10-15 billion
dollars that day
• The crash brought an end
to the prosperous 1920’s
• Speculation and the margin
• Speculation-buying stocks at great risks hoping for
prices to rise
• Many banks invested unwisely in the stock market
• Margin-investors purchase stocks by only making
small initial payment and taking out loans for the
rest
– Margin call-banks could call in loans at anytime forcing
quick sales of stocks and often inability to pay
– http://www.youtube.com/watch?v=DXFAfV9Qpk&safety_mode=true&persist_safety_mode=1
• Stock Market Crash
– Many of causes already in existence, but acts
as catalyst for further chain of events
• Poor banking practices and policies
– Over 9000 banks go bankrupt or close their
doors to avoid bankruptcy between 1930 and
1933
• Money in the bank was not guaranteed and many
experience runs on the bank that help force
closures
• Banks unable to loan more money due to losses
from loans to speculators
– Federal Reserve
• Federal Reserve before Depression keeps interest
rates very low which encourages more speculation
• After Depression starts, Federal Reserve raises
interest rates making it harder to pay
• Collapse of American economy
– Gross national product declines from $104
billion in 1929 to $76.4 billion in 1932
– Capital investment decreased from $16.2
billion in 1929 to around $350 million in 1933
– Consumer price index declined 25%
– Gross farm income dropped from $12 to $5
billion
Vast unemployment
– Unemployment statistics
• Roughly 25% of workforce was unemployed
• 1/3 of workers experienced cuts in wages or hours
• Unemployment averages 20% for 1930s
• Conditions for unemployed
– Unemployment viewed as
personal failure, shame, and
challenge to masculinity
– State and local relief agencies
unable to serve vast numbers
– Charities attempt to support,
but struggle
– Nearly 2 million take to the
roads and rails
Conditions for minorities and women
• Often excluded from relief programs
• Racist hiring practices in the South lead to 50%
African-American unemployment
– Many blacks move north, but economic conditions
little better
• Hispanics in west displaced from jobs, many
deported and given little access to relief or
services in the Southwest
• Chinese and Japanese in West are displaced
and attempt assimilation efforts
• Many women discouraged from working if
married, but female employment actually
increases by 20%
– Jobs held by women were less effected and men
often less interested in the positions
Farming Crisis and the Dust Bowl
– Farmers already struggling and 1/3 lost land
– Drought known as the “Dust Bowl” began in the Great
Plains in 1930 from Texas to the Dakotas
• Sweeping winds carried soil away or buried beneath dust
• Grasshoppers destroyed many remaining crops
• Many abandoned farming to move to California in search of
jobs (the Okies)
– Okies portrayed in Grapes of Wrath
– Malnutrition and hunger become increasing problems
due to financial and farm crises
– http://www.history.com/shows/america-the-story-ofus/videos/the-hoover-dam#america-black-blizzard
States Affected by Dust
Politics of Hoover
• Hoover was elected in
1928 after overseeing
growth of economy as
Secretary of
Commerce
– Believed US economy
was strong and could
recover, initially without
much government aid
• Hoover opposed deficit
spending, fearing it would
make the economy
recover more slowly
• Hoover also opposed
direct relief (money) going
from the federal
government to the
impoverished
• http://www.history.com/sh
ows/america-the-story-ofus/videos/the-hooverdam#the-hoover-dam
"I do not believe that
the power and duty of
the General
Government ought to
be extended to the
relief of individual
suffering. . . . The
lesson should be
constantly enforced
that though the people
support the
Government the
Government should not
support the people."
(1930)
Policies of Hoover to end the Depression
• Initially tried to downplay public fear
• Volunteerism: Got industries to pledge to
keep factories open and not cut wages,
but ultimately fails
– Initially able to use business connections
– Promises were broken by 1931 due to
economic collapse
• Use and rejection of public works projects
– Encouraged state and local governments to
use public works projects to create jobs
– Initially proposed $423 million increase in
federal spending on public works
– Abandons when economy worsens in order to
keep the budget balanced
– Proposes tax increase in 1932 to help
government avoid debt
• Agricultural Marketing
Act
– Created federally
sponsored Farm
Board to make loans
to marketing
cooperatives or
corporations to buy
surpluses
– Hawley-Smoot Tariff of
1930 increased tariffs
on 75 farm products to
attempt to protect
farmers
7
6
5
4
Farm income in
billions
3
2
1
0
1929
1932
• Reconstruction Finance Corporation,
established in 1932
– Made to provide federal loans to troubled
banks, railroads, and other businesses
• Loans generally only given to those with large
collateral
– Budgeted $1.5 billion for public works
• Did not spend much of budgeted amounts and only
really invested in projects that would eventually
pay for themselves (toll bridges, public housing)
Backlash Against Hoover
• Decline in popularity
– Democrats gain control of House in 1930
– Shanty towns established outside cities
become known as Hoovervilles
– Hoover only passes larger measures after
economy experiences large drop in 1931
– http://www.youtube.com/watch?v=sfylLnHjcu0
Family
US Hooverville
Well, Everything Helps
(1930 or 1931)
Herb Block, Chicago Daily
News
Library of Congress
As the Depression tightened its
hold on American life, avid
angler President Herbert
Hoover cast about for ways to
improve the economy. He
sometimes took working
vacations at his fishing camp
on the Rapidan River (now in
Shenandoah National Park) with
members of Congress and his
administration.
• Hunger Marches
– Organized by American Communist Party to
demand increased taxation of rich to feed
poor
• Revolts by farmers
– Farmers had large mortgages to pay for land
and equipment and had farms foreclosed
– Farmers destroy crops in attempt to raise
prices
Bonus Marchers
• US government in 1924 had
promised WWI veterans a
bonus to be paid in 1945
• Bill was in Congress to allow
early payment due to the
depression
• More than 20,000 veterans
march on Washington
forming the “Bonus Army”,
vowing to stay in Hooverville
camps in Washington until
the law was passed
• Senate votes down the bill
and many return home
• Hoover ordered the camps to
be cleared by police and two
veterans die after resisting
• Sends in US Army to clear
out camps, with tanks sent
down Pennsylvania Avenue
and the tent city burnt to the
ground
• Acts as perhaps final blow to
Hoover’s public image
•
http://www.youtube.com/watch?v=dWvCCxOUsM8&safety
_mode=true&persist_safety_mode=1
Election of 1932
• Hoover ran for reelection from
the Republican Party
• Franklin Delano Roosevelt,
governor of New York, runs for
the Democrats
– FDR popular for use of
government funds in NY to help
people and for struggle against
polio
– Emphasizes economic issues in
the campaign
– Promises a “New Deal” for the
American people, but gives few
specifics for plan
Hoover in 1928
• Roosevelt wins in a landslide (472-59)
– Democrats won majorities in both houses of
Congress
The “Interregnum” or Lame Duck period
• FDR had to wait until March 4, 1933 to take office
• Hoover attempts to get FDR to promise traditional
economic practices, FDR refuses
• Banking collapse worsens in February 1933
– Hoover asks FDR to make promises against adjusting
currency, heavy borrowing, or increase in debt, FDR
refuses
• FDR survives assassination attempt in Miami on
February 15, 1933 by Giuseppe Zangara, who
accidentally kills the mayor of Chicago during the
shooting
• FDR inaugurated on
March 4, 1933
• 20th Amendment:
Ratified on January 23,
1933
– Newly elected
presidents take office
on January 20 instead
of March 4
– Congress starts their
terms on January 3
"Brother, Can You Spare a Dime,"
Lyrics by Yip Harburg, music by Jay Gorney (1931)
They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on
the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread?
Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it's done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it's done. Brother, can you spare a dime?
Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!
Say, don't you remember, they called me Al; it was Al all the time.
Why don't you remember, I'm your pal? Buddy, can you spare a dime?
Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!
Say, don't you remember, they called me Al; it was Al all the time.
Say, don't you remember, I'm your pal? Buddy, can you spare a dime?