The Great Depression started when Wall Street crashed on October 29, 1929, which is also known as Black Tuesday. It lasted for ten years and ended in 1939 as World War II started. The worst year of the Great Depression was 1933 when the unemployment rate was twenty five percent (25%). Over 12 million people were unemployed. This meant that 1 in every 4 people in the United States was unemployed at the peak of the Great Depression.
The Great Depression was caused by many different reasons including a false sense of prosperity in US, the 1929 Stock Market Crash, bank failures, lack of credit, bankruptcies, unemployment, decline in purchasing, American economic policies and failures by the Federal Reserve, loss of exports, drought conditions and the Dust Bowl. All of these factors started what would be one of the worst times in American history.
It all started in the 1920’s, which had been an exciting time in the United States with new inventions, technical advances and changing lifestyles. Then all of a sudden the feeling of enthusiasm and security was almost gone overnight, when the 1929 Wall Street Crash occurred and the economic collapse in the United States began. It was named the Great Depression because it reflected both the long and hard recession in the American economy and the feelings of hopelessness and obvious depression experienced by the American people.
When Wall Street crashed in October 1929, it had been just six months that Republican President Herbert Hoover had been inaugurated as President of the United States. His sense of optimism, shared by so many Americans before the economic collapse, was shared in one of his campaign speeches on the future of America on the ever greater economic prosperity.
‘We in America today are nearer to the final triumph over poverty than ever before in the history of any land. We shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation.’
During the boom of the early 1920’s many of the once ‘thrifty and prudent’ American public adopted the modern philosophy of ‘Live now, pay later’ and bought expensive products, like automobiles, on easy credit terms. Regular middle class Americans had invested in the stock market. By 1929 nearly four million Americans (about 10% of US households) had invested in the stock market. They were ‘Buying on Margin’ which meant that they were buying shares with loans. The high levels of debt effected the ability of many Americans to survive the effects of the Great Depression. The number of suicides jumped to an alarming 18.9 per 100,000 in 1929, the year of the Wall Street crash.
There was an uneven distribution of income in America. Lower class, poor Americans were in the majority (60%). These people were already suffering even before the Great Depression and had limited spending income. The Americans who had money and remained ‘thrifty and prudent’ also suffered. They had placed their money in banks to keep their money safe but many were small banks, who had also recklessly invested in the stock market and lent money to stock market investors. Back then the federal government did not insure bank deposits. So if a bank collapsed for any reason its customers also lost all their savings. During 1929-1931, over three thousand (3,000) banks went bankrupt. That’s over 10% of the nation’s total and more followed as the Great Depression continued.
People were very desperate to get their money out of failing banks which led to a series of banking panics called Bank Runs. There were numerous Bank Runs at the same period of time which led to more financial crisis and more bankruptcies. Rumors would start that a bank was about to go under. People would scramble to withdraw their money. As a bank run progressed, it generated its own momentum in a kind of self-fulfilling prophecy. As people withdrew their money, even more people made withdrawals. The bank would run out of cash and become bankrupt. It was a crazy time.
On Monday October 25, 1929, as the stock market was going into freefall, President Hoover tried to stop the fears of the American people and made the following statement: ‘The fundamental business of the country, that is, production and distribution of commodities, is on a sound and prosperous basis.”
Four days after the statement, the stock market crashed and the Great Depression followed. The credibility and word of the President was lost. At the time when strong leadership was so very important to the American people, confidence in the president was lost and Americans felt President Hoover was to blame for much of the Great Depression. His reputation was damaged even more as he failed to see the seriousness of the situation, was thought to be unsensitive, and failed to take the proper steps to address the problems facing the US.
As part of the recovery effort President Hoover and the federal government passed the many Acts and Tariffs, like the 1930 Hawley-Smoot Tariff which created protective tariffs for taxes and increased rates on imported goods. The 1931 Federal Home Loan Act was passed creating the Home Loan Board which was when banks started to handle home mortgages. The Federal Home Loan Banks received $125 million in capital. In October 1931, the National Credit Corporation was created to help the big banks in the country establish lending agencies to lend money to small banks on the brink of foreclosure, that could be used for loans. Also in 1931, the Wagner-Graham Stabilization Act was passed to set up the Federal Stabilization Board to start public works such as dams and highways.
In 1931, the Keyes-Elliott Acts was also created to give an additional $330 million for Federal buildings and construction projects in order to aid employment. Congress also passed the Emergency Relief and Construction Act of 1932 to create the Reconstruction Finance Corp. (RFC). The RFC was designed to give out loans to banks, railroads, and companies in order to pump money back into the economy. Then the Emergency Committee for Employment was set up August 19, 1931 in an attempt to mobilize private charity and encouraged states and cities to increase public works spending. But it ended on June 30, 1932 because the government was not willing to help the agencies with the aid of money. Public Works Programs were also initiated, such as the construction of the Hoover Dam.
The Great Depression also triggered civil unrest and a series of Hunger Marches by World War 1 veterans. On December 5, 1932, almost 2000 people marched to Capitol Hill in Washington chanting ‘Feed the hungry, Tax the rich’. They were soon broken up but their actions inspired other veterans to also march to Washington later in the year.
The Bonus Army March took place in the summer of 1932 as World War 1 veterans marched to Washington to lobby Congress to pass legislation authorizing the early payment of $1,000 veterans’ bonuses. The bill was not passed. Some veterans, with nowhere else to go, stayed in Washington living in unoccupied building and makeshift camps. The government called in the army to remove the veterans. The US Army, under Douglas MacArthur, used extreme and violent tactics to remove the veterans.
Over 20,000 companies and business went bankrupt and closed at the start of the Great Depression. People were laid off work and there were no opportunities for new employment. Between 1929 and 1932 construction projects fell by eighty percent (80%) contributing to the high levels of unemployment. By 1933, the number of unemployed Americans reached unbelievable new heights of 12 million, which was 25% of the population at the time. 70,000 factories had shut down by 1933.
People had no jobs, no money and many went hungry. There was no benefits system and people were literally starving. Americans were forced to join ‘Bread Lines’ for free handouts of food, which only provided bread. There were so many poor people that the Bread Lines sometimes were several blocks long. Others went to Soup Kitchens for food. Soup Kitchens were created by charities, where food was served to the poor and hungry.
Due to unemployment Americans could not pay their bills. Many unlucky tenants were evicted by bailiffs. Homeless Americans had no choice but to set up shacks on empty or public lands. These were called Shanty towns or Hoovervilles. The photograph below of the kids living in a 1930’s shantytown shows the horrible living conditions forced on American citizens who had been made homeless, through no fault of their own, during the Great Depression. Nearly 50% of children did not have adequate food, shelter, or medical care.
Many men and young boys became hobos during the Great Depression. Many left their families in search of jobs anywhere in the country. Many unemployed men felt they were a burden consuming scant food rations available to their families. The easiest way to travel around the country was by train and hobos would ride on open boxcars or in freight trains to each new destination. Shantytowns, called ‘Hobo Jungles’ started up by railroad stations.
Farmers had already been experiencing a difficult time in the 1920s. It got worse in the 1930s. In 1932, a terrible drought hit the farmers in North and South Dakota, Nebraska, Kansas, Oklahoma, and New Mexico. With no rain the soil turned to dust. Strong winds whipped the dry soil creating horrible dust storms. The dust got everywhere, crops were ruined and farm animals were killed. Farmers lost their lands and homes to the foreclosures by the banks. The dust bowl and the dust storms destroyed 100 million acres of land. Over 3 million poor people became homeless and many had no choice but to move west to California away from the damage of the prairie states.
The Los Angeles Police Department started the ‘Bum Blockade,’ an illegal way to try to block immigrants from the Dust Bowl from crossing the California border. During this time author John Steinbeck wrote ‘The Grapes of Wrath’ and ‘Of Mice and Men’ about the lives of the people living in the Prairies states and the horrible effects of the Dust Bowl.
Americans tried to escape the horrors of the Great Depression by listening to the radio or spending a dime to go to the movies. 60-80 million Americans went to the movies every week. The biggest hit song of 1932 was ‘Brother, Can You Spare a Dime?’ by Bing Crosby. The most popular films during the era were ‘Gone with the Wind’, ‘Snow White and the Seven Dwarfs’, ‘King Kong’, the ‘Wizard of Oz’ and ‘Mr. Smith goes to Washington’.
Crime increased during the Great Depression. Amongst the Americans, who followed in the path of Al Capone, turned to crime during the period were Bonnie and Clyde, John Dillinger, ‘Baby Face’ Nelson, Machine Gun Kelly, Pretty Boy Floyd and the Ma Barker gang.
By 1932 industrial stocks had lost 80% of their value since 1930. The Wall Street Crash had impacted across the globe sending other countries into recession. This, and the high tariffs on imported goods to America led to a massive fall in International trade. Between 1929-1932 international trade fell by a massive 70%.
The top rate of tax was raised from 25% to 63% but this measure was seen as too little, too late. The Great Depression peaked between 1932 and 1933 when things slowly started to improve. To no ones surprise Herbert Hoover did not win re-election and on March 4, 1933 the Democrat, Franklin D. Roosevelt, was inaugurated as the new president of the United States with new ideas to beat the recession and a plan to redistribute wealth from the rich to the poor, boldly stating that: ‘..the only thing we have to fear is fear itself – nameless, unreasoning, unjustified terror’.
The period in American history known as the New Deal was about to begin. In the first 100 days the Roosevelt presidency began with intensive legislative activity and Congress passed 15 important acts to combat the economic crisis – these actions were referred to as the ‘First New Deal’ encompassing his policies of Relief, Recovery and Reform.
President Roosevelt’s New Deal Programs would become the biggest, most expensive government initiatives introduced by any American President. His first goal was to stabilize the banking system. The Emergency Banking Relief Bill brought all banks under federal control.
President Roosevelt realized that he had to win back the confidence of the American people. He used the power of communication via the radio and established a weekly broadcast called the ‘Fireside Chats’ to speak directly to Americans.
The Second New Deal emerged in 1935 – 1936 which started more radical and reforming policies. These included the Works Progress Administration, the Rural Electrification Administration and the National Labor Relations Act. The federal organizations that were created to provide practical were nicknamed “Alphabet Agencies,” such as the TVA, NRA, CCC, AAA and PWA.
World War 2 broke out in 1939 and the United States entered the conflict on December 7, 1941. At this point the economic output in America surged and unemployment fell and so the Great Depression came to an end. Funny enough after all the suffering during this long period of time, America came out on top, became stronger and better than ever before. So from much tragedy and suffering came the triumph of our wonderful nation. Which shows no matter how terrible things can be, one must be strong, move forward, be innovative and never give up. God Bless the USA.