Events Leading to the Great Depression

stock market crash

• black thursday

• october 24, 1929

• concern > panic

• black tuesday

• october 29, 1929

• full-scale panic

• "day the bubble burst"

1. overproduction: american industries overexpanded

2. surplus of goods

3. eventually reduce production + lay off workers

4. underconsumption: consumer buying drops

5. consumer confidence declines

6. farmers → had low incomes after wwi

7. workers → wages failed to keep up with increased productivity

8. overspeculation: investors playing the stock market

9. "buying on margin" = 10% → margin calls: couldn't pay broker

10. speculators bid up the price of stocks + real estate → "paper fortunes"

11. worth of businesses → based on stock sold, actual worth inflated

12. banks: made unsound loans → resulted in bank failures

13. excessive borrowing of $ + investing in the stock market

14. international trade declines → us cutbacks + tariff policies

15. wwi hurt europe's economy

16. $ spend on rebuilding countries + paying off debts

17. european nations introduced tariff policies in reaction to us policies

differences from earlier depressions

• worldwide

• us urbanization + industrialization

• no "safety valves"

• natural disasters

• midwest: dust bowl

• south: droughts

immediate effects

• value of stock continued to fall — wall street

• small investors - lost savings / "nest egg"

• new rich: "paper fortunes" → suicides

• old rich: "deflation" - survived

• run on the banks — get savings → panic

• badly weakened → surplus cash invested in stock market

• 6000 banks closed

• 10 million savings accounts lost

• people broke; no money

• business/industries closed — no customers

• 100,000 failed

• corporate profits fell — $10 billion, $1 billion

• gnp cut in half

• unemployment rose — not sudden but gradual

• by 1933 25% (1/4th of workforce unemployed)

• women + minorities forced out

• many workers underemployed

• farmers → farm prices dropped 60% (product declined 6%)

• unrest: destroyed crops, dumped milk, killed animals

• threatened bank agents → foreclosure

personal impact

• song: brother, can you spare a dime

• hard times → making do, maintaining self respect, keeping up appearances, normality

• invisible scar → private despair, would not accept handouts

• soup line - bread lines - selling apples or pencils

• poverty → humiliation + shame (especially hit the men), blamed themselves

• hoovervilles - hoboes - sisters of the road (latter two - train hoppers, going west)

• legacy of fear → losing control of their lives

• demographic trends:

• marriage rates fell

• birth rates fell (birth control)

• divorce rates dropped

hoover's response

America didn’t have time for "eventually"

beliefs

• government: NO direct aid, laissez-faire

• individuals: rugged individualism

• businesses: voluntary program of cooperation (keeping factories open)

actions

• government spending: public projects eg. Hoover Dam

• agricultural marketing act + farm board: helping farmers by buying up surpluses

• reconstruction finance corporation (RFC)

• "pump priming" - government lending bank, indirect relief

• insurance companies, banks, agricultural agencies, etc.

• local + larger-scale governments

protests against hoover

• hoover's unpopularity - unable to act effectively

• heartlessness - "great humanitarian"

• fed belgium + fed pigs but not people

• hostile congress → democrats

• won control by promising economic assistance

• rfc → "millionaire's dole" (welfare)

• only helped wealthy + corporations

• failed to improve the economy — not enough relief

• bonus army - march on washington dc

• wwi veterans

• hoover called out the army → macarthur + eisenhower

presidential election of 1932

• republican party: president hoover

• praised republican anti-depression policies

• claimed that the worst was past + prosperity was just around the corner

• reaffirmed faith in american free enterprise

• attacked fdr + democrats as socialist

• democratic party: franklin delano roosevelt

• results of electoral vote — fdr 472 + hoover 59