The Great Depression

1929-1939

  • Stock market crash
  • Didn’t realize the effect it would have
  • No money to replenish what was borrowed
  • Many found being broke humiliating

The Roaring 20’s

  • The new concept of “credit”
  • People were buying:
    • Automobiles
    • Appliances
    • Clothes
  • Fun times reigned
    • Dancing
    • Flappers
    • Drinking

Why was this bad?

  • Credit system
    • People didn’t really have the money they were spending
  • WWI
    • The U.S. was a major credit loaner to other nations in need
    • Many of these nations could not pay us back

Easy Money (Credit)

  • Interest rates on loans were too low =
  • Too much borrowing interest rates on saving were too low =
  • Too much spending (inflation) excessive real estate construction =
  • OVERSUPPLY
  • Time payments begin in the 20’s!

Causes of Depression

  • Buying on Credit
    • Borrowing money
    • 80% of radios & 60% of cars were on credit

Wealth is Distributed Unevenly

  • Corporate profits 65% during the ‘20s.
  • The rich became much richer during this time, while the workers’ conditions only improved slightly.

1920s and 30s Salaries

  • Bus driver: no power steering or brakes
    • $1300 or $0.43/hr
  • Teacher
    • $1227
  • Waitress
    • $520 or $0.20/hr
  • Farmhand
    • $216 or $0.07/hr
  • First minimum wage under FDR
    • $0.25/hr
  • Highest paid production workers in the 1920’s → Ford Motor Company
    • $5.00/day or $0.48/hr
  • Farm Prices: Potatoes, Cotton, Pork
    • $0.01/pound potatoes
    • $0.05/pound cotton
    • $0.05/pound pork

Uneven Distribution of Wealth

  • Many poor and very few rich!
  • Workers earned so little that they couldn’t buy the products they produced.
  • Wages were as little as 20-25 cents per hour!
  • Even the best employer Ford Motor Company paid only $5.00/Day for a 6am-6pm shift!

Causes of Depression

  • Uneven Distribution of wealth
    • Rich got richer

The Stock Market

  • People bought stocks on margins (credit)
    • If a stock is $100 you can pay $10 now and the rest later when the stock rose
  • Stocks fall
    • Now the person has less than $100 and no money to pay back

And then…

  • Investors panicked about their money and tried to sell their stocks
    • This leads to a huge decline in stocks
    • Stocks were worthless now
  • People who bought on “margins” now could not pay
  • Investors were average people that were now broke

Causes of Depression

  • Stock Speculation
    • Buying on margin
    • Black Tuesday

What about the people?

  • Farmers were already feeling the effects
    • Prices of crops went down
    • Many farms foreclosed
  • People could not afford luxuries
    • Factories shut down
    • Businesses went out
  • Banks could not pay out money
  • People could not pay their taxes
    • Schools shut down due to lack of funds
  • Many families became homeless and had to live in shanties

Agricultural Overproduction

  • Increased technology
  • Good growing conditions
  • Supply greater than demand

The Great Dust Bowl

  • Over use & Over grazing
    • No crop rotation
  • No soil conservation
  • No wind breaks
  • Loss of natural grasses and animals
  • Climatic change- the drought of the ‘30s

Causes of Depression

  • Great Dust Bowl
    • Overproduction, over-grazing, drought

Overspeculation

  • “Get rich quick syndrome”
  • Margin buying
  • Lack of govt. regulation
  • Panic selling
  • ‘29 Market Crash
    • Black Friday → Oct. 24, 1929

Run on Banks

  • The crisis in confidence frightened depositors who feared for their money.
  • Millions tried to withdraw their money because they feared the banks losing it.
  • 1929 → 641 banks failed
  • 1930 → 1350 banks failed
  • 1931 → 1700 banks failed

Causes of Depression

  • Banks Collapse
    • “Runs” on banks

President Hoover

  • Conservative President: Herbert Hoover
  • Philosophy: Rugged Individualism
  • What He Did: Nothing
  • People looking for help and no solution were coming

Laissez-Faire Economic Policy

  • Prior to the Great Depression the U.S. Government ignored the business cycles of the US economy.
  • The government believed that the American economy could fix itself.

The Business Cycle

  • Boom/prosperity/peak
  • High and demand for more profits = greater investment = more production = higher employment = more demand = higher prices (inflation)

Poor Monetary Policy

  • Fed reserve increased interest rates which made money/borrowing more expensive & saving more attractive instead of lowering interest rates to give the economy a “jump start”.

Poor Fiscal Policy

  • Hoover administration & Congress cut spending & raised taxes to balance the budget instead of increasing spending & cutting taxes to “jump start” the economy.
    • Ex: temporary deficit spending

High Tariffs

  • We taxed foreign imports to protect our products under Hoover the Hawley Smoot Tariff (1930) is passed- the highest protective tariff in US history!!! Foreign nations taxed imports from the US in retaliation.
  • Higher prices Fed under consumption
  • Nations stopped paying WWI debts to the US

Lack of Gov. Help

  • Laissez-Faire Policy
  • Economy will fix itself

The Dust Bowl

  • Southern plains were covered with short grass prairie
  • Enlarged Homestead Act in 1909 created more farmers in the region replacing cattle ranching
  • Wheat market boomed in WWI (93 cents in 1914 to $2.50 in 1919 for a bushel of wheat [60 lbs])
  • Lack of rainfall and poor farming techniques caused the soil to blow away
  • Over 3 million plain farmers left their farms during their time
  • One of the worst environmental disasters in US history

Hoover’s Response to the Great Depression (1929-1930)

  • Hoover was guided by his strong beliefs shared by leading economists of the time.

  1. Rugged Individualism: Hoover believed government involvement to solve economic problems would actually lead to more instability. Hoover called on business leaders to maintain production and employment. He also relied on the American people to help each other out during hard times.

    1. In November 1929, Hoover invited business leaders to the White House and secured promises to maintain wages. Hoover believed financial losses should impact profit, not employment or wages.

  2. No Direct Relief: Hoover believed if the government provided direct relief to the American people, states, industry, and “American neighbors” would no longer take the initiative to help. Felt government aid would destroy neighborly good will and self-motivation to “pull yourself up from the bootstraps”.

    1. Asked Congress for a $160 million tax cut & to double spending on federal works program.

  3. Supporting Industry: Hoover abandoned laissez-faire policies of the 1920s and “bailed out” big businesses, the railroad, the banks, by creating the Reconstruction Finance Corporation.

    1. Secured promises to speed up the pace of large scale construction programs to aid employment by 1930.
    2. Signed the Hawley-Smoot Tariff to protect American agricultural and industrial sectors. Backfired- European nations raised prices.

  4. Trickle Down Economics: Hoover believed if the government supported industry, industry could remain operational and keep Americans employed. He believed the benefits of prosperous businesses would benefit the public. Hoover relied on industry to share their prosperity with their employees.

  5. Regarding the Continued Employment (1930): To address the growing unemployment, Hoover created the President’s emergency Committee for employment to coordinate state & local relief program. The PECE saw limited success due to lack of overall coordination. Hoover called on the Federal Reserve to extend more credit and persuaded Congress to transfer agricultural surplus to the American Red Cross for relief efforts.

    In 1931, PECE transitioned to the President’s organization for Unemployment Relief (POUR) & raised millions for unemployment benefits, but could not meet the increasing needs as unemployment continued to increase.

Other Effects of the Depression

  • Shantytowns (also known as Hoovervilles), soup and bread lines, and men wandering the streets looking for work were common.
    • Some men abandoned their families and became hoboes who were transient men who lived off the rail and country.
  • Conditions for Latinos and African Americans were especially rough during the Great Depression.
    • Unemployment was higher than whites
    • Racial violence increased
    • 24 lynchings in just 1933 alone
    • Many Mexican Americans were deported from the US
  • Women raised families, made their own clothes, canned food, and suffered greatly so their kids wouldn’t suffer.

Pop Culture: Music

  • Wide range of musical genres characterized the decade
    • Jazz, Swing, Blues, Gospel
  • Upbeat tempo, catchy tunes and lyrics enticed people to get up and dance
    • “Can’t be sad if you’re dancing”
  • Popular musicians:
    • Duke Ellington, Count Basie, Glenn Miller, Benny Goodman

Pop Culture: Radio/Movies

  • The radio was a lifeline for the American people during the Great Depression
    • Much like today’s TV
  • The radio provided news and entertainment to the American people
    • Soap operas, crime dramas, music, fireside chats, etc.
    • Popular shows included The Green Hornet, The Lone Ranger, the Shadow
  • Even though movies were pricey, many families enjoyed a night out to escape the reality of the depression.

Pop Culture: Entertainment/Fads

  • Board Games (Monopoly)
    • Provided cheap entertainment that could be used multiple times
  • Dance Contests
    • Contestants received free meals for the duration of the contest
  • Soapbox Car Racing

Clothing/Fashion

  • Industry fashion promoted glamour and better times
  • Many Americans put off new shoes and clothing to save money
    • Patched old clothes, used old fabric to make new items, etc.
  • Flour sack dresses: Marketing technique by flour producers.
    • Flour sacks were made from patterned cloth and could be made into anything
    • More “bang for your buck” when you get free fabric with your flour

Meals/Eating

  • Food shortages in urban areas = limited options for meats and fresh produce.
  • Creative meal planning to stretch the dollar and still provide a filling meal for the entire family.
  • Popular Dishes:
    • Macaroni, chili, stews, carrot pie, “garbage plate”, etc.

Additional Book Notes

The Coming of the Great Depression

  • Bull Market:
    • Increase in stock prices: 1928- September 1929: stocks increased by 40%
  • October 29, 1929 (Black Tuesday):
    • Stock market crash
    • Buying on “margin”
  • Causes of the Depression:
    • Prosperity based on a few industries
    • Unequal distribution of wealth
    • Almost half of families living at or below minimum subsistence level
    • Credit
    • Farmers deeply in debt
    • Production outweighed demand
    • High protective tariffs
  • Dawes Plan:
    • Not to be confused with Dawes Severalty Act
    • Rescheduled German reparation loans
    • US banks loans $ to Germany → pays Britain and France → pays loans back to US Treasury
    • Simply a circle of $ - ends with stock market crash of 1929
  • Bank Crisis:
    • 9,000 banks closed between 1930 and 1933
    • Money supply decreased by 1/3

The American People in Hard Times

  • Industrial North was hard hit
    • Ohio unemployment was 50%
  • Many Americans associated unemployment with failure
  • Charities and other relief organization couldn’t keep pace
  • Dust Bowl:
    • Area of land from eastern Colorado to western Missouri, Texas- North Dakota
    • Causes
    • Drought, wind, human cultivation
    • The Grapes of Wrath: a story about Dust Bowl
  • “Black Blizzards” - dust storms
  • “Okies” - families that moved from the Dust Bowl to other areas, especially California
  • African Americans
    • Especially hard hit - 50% in south were unemployed
    • Segregation and discrimination were still rampant
    • Scottsboro Case:
    • Nine African Americans were accused or rape
    • All-white jury found them guilty, 8 sentenced to death
    • Eventually, all were released from jail, though many years later
  • Other Minorities:
    • Mexican Americans:
    • 2 million people of Mexican descent, mostly farmers
    • Some Mexicans forced out of the country
    • Asians:
    • Fought to have laws protecting Japanese from discrimination
    • Women:
    • Pressure for women to not work, especially if husband does
  • Many minorities did not benefit from relief programs
  • Marriage and birth rates declined during Depression

The Depression and American Culture

  • Art in the Depression:
    • Dorothea Lange:
    • Photographed Depression families
    • John Steinbeck:
    • Grapes of Wrath - story about Dust Bowl
  • Radio:
    • Source of entertainment
    • “Fireside chats” - FDR
    • Soap operas, plays, news
  • Spanish Civil War (1936-1939)
    • Some Americans supported the republican government
    • Fascist government of Francisco Franco had support of Hitler and Mussolini

The Unhappy Presidency of Herbert Hoover

  • Hoover
    • Urged volunteerism
    • Similar to WWI
    • Feared deficit spending
  • Hawley-Smoot Tariff:
    • High protective tariff- led to high European tariffs in return
  • “Hoovervilles”
    • Name for shanty towns that developed
  • Reconstruction Finance Corporation:
    • Meant to provide loans to banks, RRs, and businesses
    • Largely a failure - never provided enough $
  • WWI Veterans were hit hard during Depression
    • “Bonus Expeditionary Force” (BEF)
    • Descends upon D.C. in hopes of receiving their bonuses
    • Set up “Hoovervilles”
    • Hoover ordered army (led by MacArthur) to break up “Bonus Army”
    • Bonus Army eventually leaves, taints Hoover even more
  • Election of 1932:
    • Hoover (R) v. FDR (D)
    • FDR won in a landslide, pledged a “New Deal” for Americans
  • FDR was inaugurated on March 4, 1933, in the midst of a banking crisis…