Great Depression

GREAT DEPRESSION

The stock market crash on October 29, 1929, sent the United States careening into the longest and darkest economic depression in American history. Between 1929 and 1933, all major economic indexes told the same story. The gross national product (GNP), the total of all goods and services produced each year, fell from $104.4 billion in 1929 to $74.2 billion in 1933, setting back the GNP per capita rate by twenty years. Industrial production declined 51 percent before reviving slightly in 1932. Unemployment statistics revealed the impact of the Depression on Americans. In 1929, the U.S. Labor Department reported that there were nearly 1.5 million persons without jobs in the country. After the crash, the figure soared. At its peak in 1933, unemployment stood at more than 12.6 million without jobs, although some estimates placed unemployment as high as 16 million. By 1933, the annual national combined income had shrunk from $87.8 billion to $40.2 billion. Farmers, perhaps the hardest hit economic group, saw their total combined income drop from $11.9 billion to $5.3 billion.

For the first two years of the Depression, which spread worldwide, President Herbert Hoover (1929–1933) relied on the voluntary cooperation of business and labor to maintain payrolls and production. When the crisis deepened, he took positive steps to stop the spread of economic collapse. Hoover's most important achievement was the creation of the Reconstruction Finance Corporation (RFC), a loan agency designed to aid large business concerns, including banks, railroads, and insurance companies. The RFC later became an essential agency of the New Deal. In addition, Hoover obtained new funds from Congress to cut down the number of farm foreclosures. The Home Loan Bank Act helped prevent the foreclosure of home mortgages. On the relief issue, the President and Congress fought an ongoing battle that lasted for months. The Democrats wanted the federal government to assume responsibility for direct relief and to spend heavily on public works. Hoover, however, insisted that unemployment relief was a problem for local, not federal, governments. At first, he did little more than appoint two committees to mobilize public and private agencies against distress. Yet after a partisan fight, Hoover signed a relief bill unmatched in American history. The Emergency Relief and Construction Act provided $300 million for local relief loans and $1.5 billion for self-liquidating public works. Tragically, the Depression only worsened. By the time Hoover's term in office expired, the nation's banking system had virtually collapsed and the economic machinery of the nation was grinding to a halt. Hoover left office with the reputation of a do-nothing President. The judgment was rather unfair. He had done much, including establishing many precedents for the New Deal; but it was not enough.

What happened to the economy after the stock market crash of 1929 left most people baffled. The physical structure of business and industry was still intact, undamaged by war or natural disaster, but businesses closed. Men wanted to go to work, but plants stood dark and idle. Prolonged unemployment created a new class of people. The jobless sold apples on street corners. They stood in breadlines and outside soup kitchens. Many lived in "Hoovervilles," shantytowns on the outskirts of large cities. Thousands of unemployed men and boys took to the road in search of work, and the gas station became a meeting place for men "on the bum." In 1932, a crowd of 50 men fought for a barrel of garbage outside the back door of a Chicago restaurant. In northern Alabama, poor families exchanged a dozen eggs, which they sorely needed, for a box of matches. Despite such mass suffering, for the most part there was little violence. The angriest Americans were those in rural areas, where cotton was bringing only five cents a pound and wheat only 35 cents a bushel. In August 1932, Iowa farmers began dumping milk bound for Sioux City. To dramatize their plight, Milo Reno, former president of the Iowa Farmers Union, organized a farm strike on the northern plains and cut off all agricultural products from urban markets until prices rose. During the same summer, 25,000 World War I (1914–1918) veterans, led by former sergeant Walter W. Waters, staged the Bonus March on Washington, DC, to demand immediate payment of a bonus due to them in 1945. They stood passively on the Capitol steps while Congress voted it down. After a riot with police, Hoover ordered the U.S. Army to clean the veterans out of their shanty-town, for fear they would breed a revolution.

The Great Depression was a crisis of the American mind. Many people believed that the country had reached all its frontiers and faced a future of limited opportunity. The slowdown of marriage and birth rates expressed this pessimism. The Depression smashed the old beliefs of rugged individualism, the sanctity of business, and a limited government. Utopian movements found an eager following. The Townsend Plan, initiated by retired California physician Francis E. Townsend, demanded a monthly pension to people over age 65. Charles E. Coughlin (1891–1979), a radio priest in Royal Oak, Michigan, advocated the nationalization of banks, utilities, and natural resources. Senator Huey P. Long (1893–1935), Governor of Louisiana, led a movement that recommended a redistribution of the wealth. All the programs tapped a broad sense of resentment among those who felt they had been left out of President Franklin Roosevelt's (1933–1945) New Deal. Americans did gradually regain their sense of optimism. The progress of the New Deal revived the old faith that the nation could meet any challenge and control its own destiny. Even many intellectuals who had "debunked" American life in the 1920s began to revise their opinions for the better.

By early 1937, there were signs of recovery in the American economy. Business indexes were up—some near pre-crash levels. The New Deal had eased much of the acute distress, although unemployment remained around 7.5 million. The economy again went into a sharp recession that was almost as bad as 1929. Although conditions improved by mid-1938, the Depression did not truly end until the government launched massive defense spending in preparation for World War II (1939–1945).

See also: Great Depression (Causes of), Hoovervilles, New Deal, Recession, Reconstruction Finance Corporation, Franklin D. Roosevelt, Stock Market Crash of 1929, Unemployment

FURTHER READING

Phillips, Cabell. From the Crash to the Blitz, 1929– 1939. New York: The Macmillan Co., 1969.

Schlesinger, Arthur M., Jr. The Age of Roosevelt. Boston: Houghton Mifflin Co., 1957.

Shannon, David A. The Great Depression. Englewood Cliffs, NJ: Prentice-Hall, 1960.

Terkel, Studs. Hard Times: An Oral History of the Great Depression in America. New York: Pantheon Books Inc., 1970.

Wecter, Dixon. The Age of the Great Depression, 1929–1941. New York: The Macmillan Company, 1948.