Notes on the Great Depression and the Stock Market Crash of 1929

Overview of the Great Depression

Definition: The Great Depression was a severe worldwide economic downturn that lasted throughout the 1930s, beginning in the United States with the stock market crash in 1929.

The collapse began in October 1929, with a significant sell-off of stocks.
New York Stock Exchange: Buying stocks equates to purchasing pieces of companies, an investment with inherent risks.
Stock Prices:
- October 1929 saw high stock prices initially, followed by declines due to fear and rumors prompting panic selling.
- Notable dates:
- October 24, 1929: Initial sell-off began (known as Black Thursday).
- October 28, 1929: Further declines occurred.
- October 29, 1929: Black Tuesday - massive drop in stock prices (e.g., stocks valued at $40 fell to pennies).
Impact: Many investors lost their savings, leading to a decade-long economic depression in the U.S.

Described as "cracks" in the economy rather than a single precipitating event.
Agriculture: Farmers experienced falling prices, taking on debt owing to declining revenues.
Industries:
- Textile and steel industries were weakening and overproducing.
- Automobile sales fell by the late 20s; sufficient cars existed in households.
Overproduction: Industries produced more goods than buyers could consume, causing prices to plummet.
Banking Mismanagement: Misuse of credit led to bad loans; banks failed as borrowers defaulted on loans, initially observed in the 1920s.
Consumer Confidence: The public’s trust in the economy diminished, leading to reduced spending, further compounding the economic downturn.

Not limited to the U.S.; a global crisis affecting numerous countries, particularly in Europe.
International ramifications:
- Worldwide trade decreased by 30%.
- Many European countries owed debts to U.S. banks from World War I, worsening their situations as American banks demanded repayment.

Hoover's Background: A self-made millionaire and he presented himself as capable due to his wealth and experience in business.
Election: Hoover won in 1928, shortly before the economic decline.
Public Sentiment: Many blamed Hoover for the Great Depression due to perceived inadequate response to the crisis.
Major Statistics:
- Manufacturing declined by 60% between 1929 and 1933.
- Unemployment reached 25% in 1933, significantly higher than the Great Recession's peak of approximately 11%.
- Nominal salaries decreased by 40% during this period.
- Over 9,000 banks failed in the U.S. between 1930-1933.

Increase in the number of bankruptcies and homelessness.
Social dynamics shifted:
- Decline in marriages and birth rates due to economic hardships.
- Increase in divorce rates as financial stress strained familial relationships.
- Rise of child labor as children left school to contribute to family income.

Local governments initially took action before federal responses emerged.
- Example: Chicago's assistance to 700,000 citizens in 1932, not sufficient to resolve the crisis.
Hoover’s Economic Policies:
- Advocated laissez-faire policies, avoiding direct government aid to citizens, believing in self-reliance and the natural recovery of the economy.
- Hoover suggested that private charities should provide aid, which proved insufficient given the scale of the crisis.
Programs Implemented by Hoover:
- Reconstruction Finance Corporation (RFC): Provided loans to banks but was ineffective due to the crisis severity.
- Agricultural Marketing Act: Attempted to stabilize farm prices by encouraging lower production, but farmers largely ignored it.

A group of World War I veterans demanded early payment of bonuses promised to them, resulting in protests in Washington D.C.
Tensions escalated when Hoover sought military intervention, leading to violent clashes and a damaged public image, ultimately affecting his re-election prospects.

FDR's campaign promised a "New Deal" to help Americans cope with the Great Depression.
In his first 100 days in office, key actions included:
- Emergency Banking Relief Act: Provided for bank holidays and a safety net for depositors.
- Fireside Chats: Direct communications with the public via radio to build trust and inform citizens.
- Homeowners Loan Act: Helped homeowners prevent foreclosures.
- Agricultural Adjustment Act: Similar to Hoover’s, but mandatory and more effective.

Established various agencies to reduce unemployment and promote public works:
- Public Works Administration (PWA): Funded large-scale construction projects.
- Civilian Conservation Corps (CCC): Employed young men for environmental projects.
- Civil Works Administration (CWA): Short-term public works jobs for unemployed.
WPA (Works Progress Administration): A significant job Program assisting around 3.5 million with both public works and cultural programs.

The Great Depression did not end with the New Deal; it continued through the 1930s, exacerbated by global events such as World War II, which ultimately helped resolve employment and economic issues.
Criticism of the New Deal emerged from various factions: some felt it made people dependent, while others believed it did not do enough or proposed more radical solutions.
Landmark legislation during FDR’s administration included the Wagner Act (supporting labor unions) and the Social Security Act, which aimed to protect vulnerable populations.

FDR won re-election against Alfred Landon, affirming public support for his policies and the effectiveness of the New Deal initiatives, signalizing a shift in federal responsibility for economic recovery.