The Great Depression

By: Kelli Bergen

Causes of the Great Depression

One cause of the Great Depression was the Election on 1928. Calvin Coolidge declined to run for reelection. Republicans nominated the secretary of commerce, Herbert Hoover who also ran the Food Administration during WWI. The democrats decided to nominate Alfred E. Smith who was the governor of New York. Smith was the first Roman Catholic to win a major party's nomination for president. Because Smith was a Roman Catholic the Protestants started saying the Catholic Church was financing the Democratic Party and would take over the United States if he was elected. Hoover tried to stop people from saying these things about the Catholic Church, but it was too late. Republicans took credit for the prosperity in the 1920's, which made the challenge for Smith getting elected even greater. Hoover won the election by a landslide. In Hoover's speech he said the country was bright with hope.

Because of Hoover's hope the stock prices rose to an all time high. The extended bull market persuaded people to invest in the stock market. In 1929 about ten percent of all households in the United States had bought stock. Markets started to rise and investors bought stock making only a small down payment in cash. People got loans from a stockbroker who would earn commission and interest. Stockbrokers would hold the stock as collateral. To repay the loan the investors sold their stock and kept the remaining money. Brokers could also issue a margin call, which would force investors to pay back the loan right away. By 1929 the stock market started running out of customers, and professional investors started to sell their holdings which caused the prices to fall. Investors started to sell their stocks as fast as they could, which caused a dramatic fall in the stock market. There was a concern that the Stock Market was overvalued and the shares were poorly valued. Buying and selling shares on the Stock Market was very risky. On October 24, also known as Black Tuesday, prices fell the most they ever had. About 16 million stocks were sold on Black Tuesday. On that single day $14 billion was lost. By the middle of November stock market prices had dropped more than one third, which caused about $30 billion to be lost. The crash of the stock market damaged the economy's ability to get past other weaknesses.

In 1929 banks loaned stock speculators $6 billion which started to weaken the banks. The banks also invested in depositors’ money in the stock market, by doing this they hoped to get back more money to use for loans. But speculators failed to pay their loans and banks lost money on their investments. So the banks significantly cut down the loans they made. Consumers and businesses were no longer able to borrow very much money. This caused banks to close, but since the banks were uninsured government didn’t back up deposits if a banks closed the customer would lose all their money. This helped to send the economy into a recession. Too many people started to withdrawal their money which would also cause banks to close. By 1932 more than ten percent of banks had already closed.

Another factor of the Great Depression was over production. One reason for over production was there were more machinery that increased production rates of both farms and factories. Most Americans wages were too low that they had very little spending money, therefore could not afford all the extra amount of items being made. People started to buy expensive items using installment plans, where a down payment would be made and then monthly costs. Then Americans stopped buying new items which deceased sales and forced businesses to cut both employees and production. Since more people were jobless there was even less people who could afford to buy things, causing sales to decrease even more and businesses to close.

Soon other countries were in the same boat as America and no longer had enough money to buy American products. Hoover wanted to lower tariffs so oversea countries would buy more products, but Republicans were against this because they wanted to protect the American businesses. The Hawley-Smoot Tariff raised tariffs even more, and put them at an all time high. Because tariffs were so high less products were exported because other countries couldn't afford American products. The Hawley-Smoot Tariff affected both farmers and companies.

The Federal Reserve Board kept the interest rates low so people could buy more products on credit. But this actually helped cause the Great Depression. One way it helped cause the Great Depression was that bank employees were encouraged to make dangerous loans. Also Businesses kept borrowing money to keep up production since they thought the economy was still growing because of the low interest rates. This lead to over production but very little people bought the items. Businesses' inventory increased when products were repossessed because payments weren't being paid on the installment plan. The Great Depression was finally here full force. Companies began laying off more employees, the Federal Reserve raised interest rates, tightened credit, and the economy kept falling.

Life During the Great Depression

By 1930 the Great Depression had became even worse. More than 9,000 banks and 30,000 companies were forced to closed, and 12 million people were without a job. In New York City the YMCA was feeding about 12,000 a day because the unemployed couldn't afford food. Bailiffs were ordered to remove belongings from nonpaying tenants and leave them on the streets. Some home owners could no longer afford to pay their mortgage and would also lose their homes. Homeless people started to put shacks on public land, which was known as shantytowns, because they blamed the president they were also called Hoovervilles. Since most people lost what they owned they had to move around to find a job to support their family. So people began to walk, hitchhike, and ride the rails to try to find a job somewhere. One person that did become wealthy during this time was Joseph P. Kennedy who bought up a lot of real estate. During this time thousands of children had to leave school because of the economic crisis. Instead the children had to work in fields, mines, factories, and canneries so they could also help support their families.

Since crop prices fell in the 1920's farmers just left their fields uncultivated, and plowed up the grasses that kept the soil in place. Since there was no rain or vegetation to hold the small amount of rain there was, the soil dried up and turned to dust. From the Dakotas the Texas the fields became the Dust Bowl.   

During the 1930's movies, radios, and comic books became very popular. In the late 1830's Superman and Batman were printed. Each week more than 60 million Americans were going to the movies. Comedies became popular and helped to release daily worries. To get rid of their daily worries Americans also played games like Monopoly and Scrabble. Walt Disney created Mickey Mouse in 1928. Disney then produced Snow White and the Seven Dwarfs in 1937, the first feature-length animated film. MGM created The Wizard of Oz and Gone With the Wind in 1939. Gone With the Wind won nine Academy Awards and Hattie McDaniel, an African American, won Best Supporting Actress. McDaniel was the first African American to win an Academy Award. Ten million people were listening to the radio daily, it gave both news and entertainment. The Guiding Light, a daytime drama, was mostly listened to by the middle class, it portrayed illness, conflict, and other problems. The sponsors of the shows were laundry soaps, the the shows were called soap operas. These were so popular because people could relate to the lives of the radio characters.

In the 1930's writers and artists began using the homeless and unemployed as their subjects in their pictures and stories. The Grapes of Wrath written by John Steinbeck received the Pulizer Price and was made into a move. Steinbeck added flesh and blood into his story to show the poverty and misfortune.Novelist William Faulkner wrote The Sound and The Fury, which showed the hidden attitudes of the Southern whites and African Americans. Faulkner won the Nobel Prize for Literature. Photographers started using 35-millimeter cameras that showed pictures of how the Great Depression was affecting average Americans. In 1936 Henry Luce, Time magazine publisher, introduced Life which was a weekly photojournalism magazine. 

How the Government reacted to the Great Depression

The day after Black Thursday President Hoover said "the business of the country is on a sound and prosperous basis." On March 7, 1930 he said "the worst...will have passed during the next 60 days." Hoover was trying to avoid more bank runs and layoffs, he wanted leaders to make rational decisions. Hoover believed that the government should not help individuals out. He thought it wouldn't help in economic recovery if the government would help people out, this made it hard for Hoover to propose policies that had the government taking more control. In 1922 Hoover wrote a book, American Individualism. Even though Hoover had said the economy was not in trouble he was still worried and had many conferences with banks, railroads, big businesses, labor leaders, and government officials. In 1931 owners had to close factories and cut wages to keep from losing everything. To create some jobs Hoover put money into public works. However Hoover wasn't going to let the government increase spending to make even more jobs available. Hoover did not want economic recovery to take a long time so he didn't want taxes raised and he didn't want to borrow money. Due to the bad economy and high unemployment the Republicans lost the majority vote in the House but kept the Senate by one vote.

Hoover thought the government needed to help banks make loans to corporations so they could expand production and rehire the workers. The Federal Reserve Board refused to put more money into circulation. So Hoover set up the National Credit Corporation (NCC) in October 1931, this was to create a pool of money for the banks to lend money to communities, but it failed to meet the needs of the nation. In 1932 Hoover had Congress set up the Reconstruction Finance Corporation (RFC), this was to make loans to businesses. By the early 1930's RFC lent about $238 million to 160 banks, 60 railroads, and 18 building and loan organizations. But the RFC failed to meet the lending needs and the economy continued to decline. The Bureau of Labor Statistics thought there were 12,830,000 people out of work in 1933. People who were out of work affected the social and emotional impact on the unemployed. People stopped coming to America from other countries. 

Hoover believed that only state and local government should give relief to individual people, and their other needs should be met by charities. By spring of 1932 the state and local governments had started running out of money and the charities lacked resources to handle this crisis. In June of 1932 Congress passed the Emergency Relief and Construction Act. $1.5 billion went to public works, and $300 million in emergency loans went to states for direct relief. It was the first time in US history that the federal government was supplying direct relief funds. New programs could not reverse the economy collapse. To try to provide more jobs to the US citizens the Empire State Building and the Golden Gate Bridge were ordered to be built by the US government. This did make a couple more jobs.

The American Communist Party began to organize rallies and hunger marches. In January of 1931 500 people in Oklahoma City stole from a grocery store. In December of 1032 in Washington DC 1,200 marchers were chanting "Feed the hungry, tax the rich." These people were arrested and put into a cul-de-sac without food or water. They were released and allowed to go to Capitol Hill.

Farmers lost their land through foreclosure. Farmers started destroying their crops to bring the prices up. They also burned corn to heat their houses. In Georgia dairy farmers blocked highways, stopped milk trucks, and dumped the milk into the ditches. Congress wanted to give each veteran $1,000 in 1945, but they needed the money now. So they started in Oregon in May 1932 and ended up in Washington. The Press called then the "Bonus Army." 15,000 marchers stayed in Hoovervilles. President Hoover refused to meet with them and the Senate voted against the bill. Some left while others stayed in the vacant buildings. In July 1932 Hoover ordered all the veterans to leave. A police officer shot into the crowd and killed two of the veterans. General Douglas MacArthur cleared the camps using tear gas and burned all the shacks. As a result of troops assaulting veterans, Hoover's reputation was ruined. Hoover lost the election of 1932 letting Roosevelt become President and implementing Federal Relief programs to help teh people of America.      


Section One:

  • Appleby, Joyce Oldham., Alan Brinkley, Albert S. Broussard, James M. McPherson, and Donald A. Ritchie. The American vision: Modern times. New York, NY: Glencoe/McGraw-Hill, 2006.

Section Two:

  • Appleby, Joyce Oldham., Alan Brinkley, Albert S. Broussard, James M. McPherson, and Donald A. Ritchie. The American vision: Modern times. New York, NY: Glencoe/McGraw-Hill, 2006.

Section Three:

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