The Great Depression

1929-1941

Prosperity ENDS• By the late 1920s, many Americans

were involved in stock market trading

• Problems had been showing that the economy was in trouble, but most people ignored these warnings

• But some events in late 1929 would forever change the daily lives of all Americans and most of the world

October 1929• During 1929 stock prices continued to

climb – by Sept the Dow Jones Industrial Average – an average of the stock prices of major industries – had reached an all-time high

• In Oct, however, stock prices began to fall slightly, causing some banks to “call in” their loans

• Worried investors began to sell, prices fall

The Great Crash• President Hoover assured the nation

that the problem was not serious, but many investors got scared and sold huge amounts of stocks – driving down prices

• On Black Tuesday, Oct 29, the stock market collapsed as millions of stocks were sold

• This truly was the Great Crash!!

Ripple Effect• By Nov., the Dow Jones had fallen

from 381 to 198.7 – losses totaled $30 billion and this “contraction” period was only part of the nation’s business cycle – a span in which the economy grows then contracts

• Stock owners were the first to suffer, but the ripple effect quickly carried throughout the economy and impacted daily life for all Americans

Daily Lives Affected• So how did the Great Crash affect all

Americans?? – only a few million were involved in stocks

1. Risky loans hurt banks – businesses couldn’t pay – banks didn’t receive $

2. Consumer borrowing – consumers borrowed to buy stuff and couldn’t repay their loans

Daily Lives Affected3. Bank runs – fear drove millions to

run to their local bank to withdraw – banks had to “call-in” loans to get $$ but people couldn’t pay – banks failed

4. Bank failures – when no $$ from loans and bank runs, thousands closed – by 1932 over 5500 closed

Daily Lives Affected5. Savings wiped out – bank failures

wiped out $$ -- by 1933, money of 9 million savings account were gone

6. Cuts in production – businesses could not borrow $$ to produce more and few people had $$ to buy

7. Rise in unemployment – business had to cut back on production – laid off workers – by 1932, 25% no work

The Great Depression7. Further cuts in production – as

unemployment grew and incomes shrank, consumers bought less

• Small businesses and factories closed, and farm prices plummeted

• The Great Depression, the worst economic downturn in the nation’s history, would last from 1929 to 1941

• A ripple effect would spread all over the world

Impact on the World• In August 1931, Henry Ford was forced

to shut down and fired over 75,000 – This was a sign that bad times were definitely here to stay

• When the US economy collapsed, the ripple affected other nations that relied on the US for $$ (Germany)

• The Crash did not cause the Depression, both were results of other serious problems

Causes of Great Depression1. An Unstable Economy – national

wealth was unevenly distributed and industry produced more than could be bought

2. Overspeculation – speculators bought large amounts of stock with borrowed collateral – an item used by a borrower as payment for a loan – the market boom was based on borrowed $$ and optimism

Causes of Great Depression3. Government Policies – the Federal

Reserve limited the money supply to discourage lending – no $$ to help banks or consumers

• Many Americans thought the Depression would not last – they were wrong and society suffered greatly – especially those who had NOT been involved in stocks

Hoovervilles• Although many professionals lost

their jobs, those at the bottom of society were hardest hit

• Unemployment and homelessness increased – some homeless built shanty towns called Hoovervilles – mocking President Hoover for not solving the problems

Farmers Hit Hard• Farm prices hit bottom by 1932 and

many farmers lost their farms when they could not repay bank loans

• In the South, sharecroppers and tenant farmers were thrown off the land and in the Midwest, farmers suffered one of the worst environmental disasters of the 20th century – the Dust Bowl

Dust Bowl• Prolonged drought and dust storms

combined with BAD farming practices helped create the Dust Bowl

• Plowing methods had ripped up the grass that held the soil in place, and when it turned to dust, it blew away

• Thousands fled from the Midwest, migrating to California in search of work – relief wouldn’t arrive until 1940s

Stresses on Families• The poverty of the GD strained

American society as families crowded together in poor living conditions to save $$

• Morale was low, as men could not provide for their families, and many women lost their jobs to men

• Discrimination also increased for minorities as they were thrown out of work to give whites jobs

Discrimination• Hard times put Americans at

competition for few jobs – this produced anger, suspicion, and violence toward minorities

• By 1932, over 56% of blacks were out of work and many whites believed blacks had no right to jobs if whites were out of work

Penny Auctions• Americans survived the GD by pulling

together and helping one another – most people were willing to help those they saw as worse off than they were

• I.E. – Farmers created what became known as penny auctions – where they bid pennies on land and machines auctioned off by banks, then sold it back to struggling neighbors

HOBOS• A large number of youths also left their

homes searching for jobs, and began “riding the rails” on trains

• They traveled across the nation (illegally) in search of jobs and $$

• These hobos sought out adventure and jobs, but lived a dangerous lifestyle with threats of arrests, shot at by farmers, and robbed by other hobos

“Funny” Times• For many Americans, despair was

relieved by turning to humor, through jokes, cartoons, radio shows, or at the movies

• The homeless slept under “Hoover blankets” (newspapers), empty pockets turned inside out were “Hoover flags”

• Humor was an escape from the problems everyone was facing

Fair Distribution of Wealth• As bad as conditions were, most

Americans did not call for major political changes – Europe saw major riots, but most Americans continued to trust in the democratic process

• Some, however, used these times to call for a fairer distribution of wealth – Socialists and Communists wished to see society based on equality

End of Prohibition• There were some signs of change in

the 1930s• The 21st Amendment repealed

Prohibition in 1933, and most people welcomed it

• Prohibition had been an experiment to change societal problems but had failed to helped and even gave more power to gangsters

Empire State Building• For many, the symbol of hope in the

GD was the new Empire State Building in NYC – the tallest building in the world at the time (102 stories) came to represent a triumph over hardship – a testament to man’s ability to overcome obstacles

• By the mid-1930s, the old era was fading away – sport hero Babe Ruth retired from baseball, crime gangster Al Capone was convicted of tax evasion and sent to prison, and former Pres Coolidge – president during the “high” 1920s – died

• With the kidnapping and murder of the Lindbergh baby in 1932, America echoed with fear of the future and needed new leadership for a new era

Hoover’s Limited Strategy• By 1932, Hoover’s strict adherence to

beliefs that wished to keep govt out of the business of helping people had limited his support from the public

• Hoover believed that voluntary controls by businesses in the US was the best way to end the crisis

• Hoover held to this voluntary action, but was unable to attract public opinion

Governmental Action• The people wanted ACTION by the

govt – they begin to want the govt involved in their lives – helping them find jobs and earn a living

• Govt responds and begins programs to help put people to work -- $$ for dams, public buildings, roads, and parks

• Boulder Dam (Hoover Dam) started in 1930

Governmental Action• In an attempt to protect industries from

foreign competition, Congress passes the Hawley-Smoot tariff – the highest import tax in history

• Europe responds with their own tariffs and international trade slows down

• Hoover set up the Reconstruction Finance Corporation (RFC), which gave govt credits to large industries and lent $$ to banks

Bonus Army of 1932• Hoover’s limited actions and his

insistence that local govts should provide relief (not federal) deepened his unpopularity

• In 1932 jobless WWI vets and their families camped in Washington, DC, demanding payment of a promised bonus – some stayed and Hoover called in fed troops, who used force to drive the Bonus Army out

A “New Deal” for America• This image of brutality and his IN-

action for daily lives, would haunt Hoover during his bid for reelection in 1932 – people wanted a change!!

• The stage is set for Franklin and Eleanor Roosevelt, a compassionate couple with valuable political experience, to offer the American people a “new deal” – active govt help

Election of 1932• The Democrats in 1932 choose

Franklin Delano Roosevelt to run against Hoover – FDR believed the govt should intervene with direct action and promised “a new deal for the American people”

• FDR easily wins the election, which was a battle between different views of govt’s role in society