In America Essay, Research Paper
The Causes and Effects of
The Great Depression
In America
Few Americans in the first months of 1929 saw any reason to question the strength
and stability of the nation’s economy. Most agreed with their new president that the
booming prosperity of the years just past would not only continue but increase, and that
dramatic social progress would follow in its wake. “We in America today,” Herbert
Hoover had proclaimed in August 1928, “are nearer to the final triumph over poverty than
ever before in the history of any land. The poorhouse is vanishing from among us.”1
In mid-October, 1929, the average middle-class American saw ahead of him an
illimitable vista of prosperity. I newly inaugurated president, Herbert Hoover, had
announced soberly in the previous year that the conquest of poverty longer a mirage: “We
have not yet reached our goal, but given a chance to go forward with the policies of the
last eight years, and we shall soon with the help of God be within sight of the day when
poverty will be banished from the nation.” This was the economic promise interwoven
with what a popular historian would call the American Dream. More complacently,
Irving Fisher and other economists in the confidence of Wall Street assured the citizen
that he was dwelling upon “a permanently high plateau” of prosperity.2
Only fifteen months later, those words would return to haunt him, as the nation
plunged into the severest and most prolonged economic depression in its history. It began
with a stock market crash in October 1929; it slowly but steadily deepened over the next
three years until the nation’s economy (and, many believed, its social and political
systems) approached a total collapse. It continued in one form or another for a full
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decade, not only in the United States but throughout much of the rest of the world, until
war finally restored American prosperity.3
In the autumn of 1929, the market began to fall apart. On October 21, stock prices
dipped sharply, alarming those who had become accustomed to an uninterrupted upward
progression. Two days later, after a brief recovery, an even more alarming decline began.
J. P. Morgan and Company and other big bankers managed to stave off disaster for a
while by conspicuously buying up stocks to restore public confidence. But on October 29,
all the efforts to save the market failed. “Black Tuesday,” as it became known, saw a
devastating panic. Sixteen million shares of stock were traded; the industrial index
dropped 43 points; stocks in many companies became virtually worthless. In the weeks
that followed, the market continued to decline, with losses in October totaling $16 billion.
Despite occasional hopeful signs of a turnaround, the market remained deeply depressed
for more than four years and did not fully recover for more than a decade.4
The sudden financial collapse in 1929 came as an especially severe shock because it
followed so closely a period in which the New Era seemed to be performing another
series of economic miracles. In particular, the nation was experiencing in 1929 a
spectacular boom in the stock market.5
In February 1928, stock prices began a steady ascent that continued, with only a few
temporary lapses, for a year and a half. By the autumn of that year, the market had
become a national obsession, attracting the attention not only of the wealthy but of
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millions of people of modest means. Many brokerage firms gave added encouragement to
the speculative mania by offering absurdly easy credit to purchasers of stocks.
It was not hard to understand why so many Americans flocked to invest in the
market. Stocks seemed to provide a certain avenue to quick and easy wealth. Between
May 1928 and September 1929, the average price of stocks rose more than 40 percent.
The stocks of the major industrials the stocks that are used to determine the Dow Jones
Industrial Average doubled in value in that same period. Trading mushroomed from 2 or
three million shares a day to more than five million, and at times to as many as 10 or 12
million. There was, in short, a widespread speculative fever that grew steadily more
intense. A few economists warned that the boom could not continue, that the prices of
stocks had ceased to bear any relation to the earning power of the corporations that were
issuing them. But most Americans refused to listen.6
The depression of the stock market impressed the general public with the idea that it
would depress general business. Because of a psychological consequence, it did, but it
should not have. There are 120,000,000 persons in the country and at the maximum not
more than 10,000,000 were involved in stock market transactions. The remaining
110,000,000 persons suffered no loss.
The bulk of the population may not have suffered the loss of stock investments, but
there were plenty of other ways to calculate loss, and by the end of 1929, with
unemployment rising, with shops and factories ornamented by closed or out of business
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signs, and, perhaps most terrifying of all, the closing of the nations banks, taking with
them millions of dollars in deposits.7
More than 9,000 American banks either went bankrupt or closed their doors to avoid
bankruptcy between 1930 and 1933. Depositors lost more than $2.5 billion in deposits.8
256 banks failed in the single month of November 1930, and further yet on December 11,
when the United States Bank, with deposits of more than $200 million, went under. It
was the largest single bank failure in America history up to that time, and contributed no
little portion to an economic hangover in which, in the words of banker J. M. Barker,
“cupidity turned into unreasoning, emotional, universal fear.9 The misery of the Great
Depression was, then, without precedent in the nation’s history.10
The most searing legacy of the depression was unemployment, which mounted
steadily from the relatively low levels experienced between 1922 and 1929. The
percentage of the civilian labor force without work rose from 3.2 in 1929 to 8.7 in 1930,
and reached a peak of 24.9 in 1933. The estimates of unemployment amongst non-farm
employees, which include the self-employed and unpaid family workers are even higher.
These are horrifying figures: millions of American families were left without a bread-
winner and faced the very real possibility of destitution.11
Within a few months after the stock market collapse of October 1929,
unemployment had catapulted from its status of a vague worry into the position of one of
the country s foremost preoccupations. Unemployment increased steadily, with only a
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few temporary setbacks, from the fall of 1929 to the spring of 1933. Even a cursory
reference to the several existing estimates of unemployment will amply show the rapidity
with which unemployment established itself as an economic factor of the first order of
importance.12
By 1932 a quarter of the civilian labor force was unemployed and the number was
still rising. State and local relief agencies lacked sufficient funds to meet the demands of
families for bare sustenance. Discouraged by continual turn-downs, the unemployed had
stopped looking for jobs. On good days in the great cities the jobless sat on park benches
reading discarded newspapers, and many who had lost their homes slept in the parks.
While some families managed to stay in their homes and apartments, even though
they failed to pay the rent or mortgage interest, others were evicted. To keep some
semblance of a home, families built shelters from discarded crates and boxes on vacant
land or in the larger parks. Municipal authorities, unable to provide adequate help, were
forced to adopt a tolerant attitude against these squatters. As time passed the structures
became more elaborate and habitable, but older children were inclined to wander away
and look for opportunities elsewhere.13
Fifty years after his presidency and twenty after his death, Herbert Clark Hoover
remains the person most Americans held responsible for the economic calamity that
struck after 1929. Few of our political leaders have been more ridiculed and vilified
during their tenure in office. By 1931, new words and usages based on his name had
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entered the country’s cultural vocabulary:
- “Hooverville”: a temporary bivouac of homeless, unemployed citizens.
- “Hoover blankets”: the newspapers used by people to keep warm at night while
sleeping in parks and doorways.
- “Hoover Flags”: empty pants pockets, turned inside out as a sign of poverty.
- “Hoover wagons”: any motor vehicle being pulled by a horse or mule
-In the heat of the 1932 election, hitchhikers displayed signs reading “If you don’t give
me a ride, I’ll vote for Hoover.”14
From the New York Times, October 22, 1932
Fifty-four men were arrested yesterday morning for sleeping or idling in the arcade
connecting with the subway 45 West Forty-second Street, but most of them considered
their unexpected meeting with a raiding party of ten policemen as a stroke of luck
because it brought them free meals yesterday and shelter last night from the sudden
change in the weather.
From the New York Times, September 20, 1931
Several hundred homeless unemployed women sleep nightly in Chicago’s parks, Mrs.
Elizabeth A. Conkey, Commissioner of Public Welfare, reported today.
She learned of the situation, she said, when women of good character appealed for
shelter and protection, having nowhere to sleep but in the parks, where they feared they
would be molested. “We are informed that no fewer than 200 women are sleeping in
Grant and Lincoln Parks, on the lake front, to say nothing of those in the other parks,”
said Mrs. Conkey. “I made a personal investigation, driving park to park, at night, and
verified the reports.”
The commission said the approach of winter made the problem more serious, with only
one free woman’s lodging house existing, accommodating 100.
These are just two of the many stories that came of the poverty of the depression.15
Not quite three and a half years had passed since the stock market crash, had
plunged the United States, and most of the world, into the worst economic debacle in
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Western memory. Industrial output was now less than half the 1929 figure. The number
of unemployed, although difficult to count accurately, had mounted to something between
13 and 15 million, or a recorded high of 25 per cent of the labor force-and the
unemployed had 30 million mouths to feed besides their own. Hourly wages had hourly
wages had dropped 60 per cent since 1929, white-collar salaries 40 per cent. Farmers
were getting less than 50 cents a bushel for wheat.
The stark statistics gave no real picture of the situation-of the pitiful men selling
apples on city street corners; of the long lines of haggard men and women who waited for
dry bread or thin soup, meager sustenance dispensed by private and municipal charities;
of the bloated bellies of starving children; of distraught farmers blocking the roads to
dump milk cans in a desperate effort to drive up the price of milk. “They say blockading
the highways illegal,” said an Iowa farmer. “I says, Seems to me there was a Tea Party in
Boston that was illegal too.’”16
The suffering extended into every area of society. In the industrial Northeast and
Midwest, cities were becoming virtually paralyzed by unemployment. Cleveland, Ohio,
for example, had an unemployment rate of 50 percent in 1932; Akron, 60 percent; Toledo,
80 percent. To the men and women suddenly without incomes, the situation was
frightening and bewildering. Most had grown up believing that every individual was
responsible for his or her own fate, that unemployment and poverty were signs of personal
failure; and even in the face of national distress, many continued to believe it.
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Unemployed workers walked through the streets day after day looking for jobs that did
not exist. When finally they gave up, they often just sat at home, hiding their shame.17
An increasing number of families were turning in humiliation to local public relief
systems, just to be able to eat. But that system, which had in the 1920s served only a small
number of indigents, was totally unequipped to handle the new demands being placed on
it. In many cities, therefore, relief simply collapsed. New York, which offered among the
highest relief benefits in the nation, was able to provide families an average of only $2.39
per week. Private charities attempted to supplement the public relief efforts, but the
problem was far beyond their capabilities as well. As a result, American cities were
experiencing scenes that a few years earlier would have seemed almost inconceivable.
Bread lines stretched for blocks outside Red Cross and Salvation Army kitchens.18
Thousands of people sifted through garbage cans for scraps of food or waited
outside restaurant kitchens in hopes of receiving plate scrapings. Nearly 2 million young
men simply took to the roads, riding freight trains from city to city, living as nomads.
The economic hardships of the Depression years placed great strains on American
families, particularly on the families of middle-class people who had become accustomed
in the 1920s to a steadily rising standard of living and now found themselves plunged
suddenly into uncertainty. It was not only unemployment that shook the confidence of
middle-class families, although that was of course the worst blow. It was also the
reduction of incomes among those who remained employed.
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Economic circumstances forced many families, therefore, to retreat from the
consumer patterns they had developed in the 1920s. Women often returned to sewing
clothes for themselves and their families and to preserving their own food rather than
buying such products in stores. Others engaged in home businesses taking in laundry,
selling baked goods, accepting boarders. Many households expanded to include more
distant relatives. Parents often moved in with their children and grandparents with their
grandchildren, or vice versa.19
The public did not understand the causes or solutions of unemployment, but people
could judge polices by results. They had little tolerance for anyone who said current
polices were working when, in fact, more jobs were being lost. One indication of how
desperate the situation was came in June when Chicago mayor told one House committee
that it still had a choice: it could send relief, or it could send troops.20
With local efforts rapidly collapsing, state governments began to feel new
pressures to expand their own assistance to the unemployed. Most resisted the pressure.
Tax revenues were declining along with everything else, and state leaders balked at
placing additional strains on already tight budgets. Many public figures, moreover, feared
that any permanent welfare system would undermine the moral fiber of its clients.21
People never enjoy paying taxes. With the lower incomes of the depression came
widespread demand for retrenchment and lower local taxes. Indeed, many local citizens
and property owners were quite unable to pay their taxes at all.
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Since a large part of the revenues of local government is spent for public
education, it was perhaps inevitable that the tax crisis should produce cutbacks in schools.
Many communities decreased their school spending severely. In effect, they passed the
burden on to the teachers, the students, or both. No one will ever be able to calculate the
cost to American civilization that resulted from inadequate education of the nation’s
children during the Great Depression.
The colleges’ problems were somewhat different. Although the budgets of almost
all colleges, public and private, were not what they should have been, a greater problem
was that of students who were destitute. Rare was the college that did not have several
cases of severe student poverty. Thousands of students in the 1930’s made important
sacrifices to stay in college. Because the students of the depression constituted, on the
whole, a hungry campus generation they gave college life a new and earnest tone. The
goldfish gulpers may have got the big headlines in the late 1930’s, but they were not
typical depression undergraduates.22
During the first two years of the depression the schools did business about as
usual. By September, 1931, the strain was beginning to tell. Salary cuts were appearing
even in large towns, and the number of pupils per teacher had definitely increased.