THE USA IN THE 1930s

THE WALL STREET CRASH

What was the Wall Street Crash?

The Wall Street Crash of October 1929 was the sudden, dramatic event that sparked off the Great Depression in America. The “crash” was the mass selling off of shares, resulting in a collapse of the stock market and ruin for hundreds of thousands of ordinary people who had bought shares in the 20s.

Why did the Crash occur?

Unequal Distribution of Wealth The huge profits being generated in the

1920s went to only a few people – mainly the industrialists;

Most Americans, therefore, had only limited buying power because of low incomes;

By the end of the 20s, there was a ‘glut’ of consumer goods

Why did the Crash occur?

Poor Overseas Markets The American government had imposed

high tariffs on foreign goods; In retaliation, therefore, many of these

countries imposed their own tariffs on American goods;

Furthermore, the lack of American trade meant these countries’ own income was poorer, and they couldn’t buy American goods.

Why did the Crash occur?

Heavy Borrowing and Speculation The boom of the 1920s had

encouraged mass borrowing, so by the end of the decade many Americans were hugely in debt;

More and more ordinary Americans had invested in shares on the stock exchange, often by borrowing.

Mass Share Dealing

One writer remembers the atmosphere in the 20s as follows:

“Everyone was playing the market. On my last day in New York I went to the barber. As he removed the sheet, he said: ‘Buy Standard Gas. I’ve doubled. It’s good for another double.’ As I walked upstairs I reflected that if the hysteria had reached barber level, something must soon happen.”

What Actually Happened?

By summer 1929 the consumer boom was slowing down, and many investors began to sell their shares, fearful of falling profits;

On 24 October 1929, as a result of share selling, a panic hit Wall Street and a rush to sell shares occurred on that day (“Black Thursday”)

What Actually Happened?

Nearly 13 million shares changed hands on Black Thursday, with millions of others failing to find buyers;

Prices plunged; Six of New York’s richest bankers

spent $240million in the hope of restoring confidence

What Actually Happened? The worst day, however, was still to

come – Tuesday October 29th. 16 million shares were sold this day. Hundreds of thousands of investors

were ruined. Prices continued to drop over the

next few weeks, reaching their lowest levels in mid-November.

29TH. OCTOBER 1929

“October 29th., 1929, yeah. A frenzy. Suicides, left and right. People I knew. It was heartbreaking. On Wall Street, the people walked around like zombies.”

Eyewitness Arthur Robertson, quoted in “Hard Times” by Studs Terkel, 1986.

THE USA IN THE 1930s

THE GREAT DEPRESSION

How did the Wall Street Crash affect America?

The Crash ushered in a period of severe depression for America.

However, the wide-scale unemployment and poverty that were the characteristics of the Depression were evidence of serious weaknesses in the economy as a whole, rather than simply the results of the Crash

So what actually caused the Depression?

Many of the causes of the Wall Street Crash were themselves causes of the Depression that followed:

Over-production; Failure to find markets abroad; Declining industries; and, of course, The Wall Street Crash itselfwere all causes of the Depression

Were the Republican governments also to blame?

The Republican presidents of the 20s, supported by a Republican congress, had all supported the “laissez-faire” approach.

This meant that they did not believe in government help for the economy, or the unemployed.

Were the Republican governments also to blame? Herbert Hoover was President at the

time of the Depression (1929-1933). He had also been a leading cabinet

member in previous Republican governments.

He believed in “rugged individualism” – people sorting themselves out.

Many people blamed Hoover for the terrible impact of the Depression.

Were the Republican governments also to blame?

In May 1930, President Hoover said:

“I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover”

Were the Republican governments also to blame?

Nonetheless, Hoover did take some measures to try and help:

He created several agencies to deal with poverty, such as the President’s Organisation for Unemployment Relief.

In 1931, he set up the Reconstruction Finance Corporation, which lent money to banks and businesses.

However, these measures were not enough to lift America out of the Depression

How did the Depression affect the American people? Lack of investmentThe money to invest in industries and

businesses dried up. Rural PovertyLife became even harder for farmers,

who were producing food that poor city dwellers could not afford. Many lost their land through eviction.

How did the Depression affect the American people?

However, the most significant impact of the Depression was the widespread unemployment.

Unemployment was widespread across America, leading to terrible poverty, and the sight of breadlines as men queued for free food.

In Chicago, 40% were out of work. Those in work had to accept severely reduced wages.

How did the Depression affect the American people?

Unemployment often led to homelessness, as people could not pay their mortgages.

Shanty towns built up on the outskirts of big cities – these became known as “Hoovervilles”, in a bitter reference to the president.

How did the Depression affect the American people?

Many sources refer to the poverty that was seen around at the time.

Observers commented on families raiding garbage dumps for food, people living in rusted car bodies, the listlessness and shabbiness of many people’s appearance, and above all, a brokenness of spirit.

The Bonus Army

In 1932, ex-World War I veterans were demanding the early payment of a bonus that was due to them.

They marched on Washington and set up a Hooverville while they pursued their demands.

Congress agreed to pay some money.

The Bonus Army

A group of 2 – 4,000 die-hards remained, to demand the full payment.

Hoover ordered troops to drive the veterans out of Washington.

Some saw this as a very serious measure; others believed the Bonus Army had little support.