Northeast, Great Depression in the

views updated

NORTHEAST, GREAT DEPRESSION IN THE

Given its place at the heart of the American economic system, the Northeast (comprising the states of Connecticut, Rhode Island, Massachusetts, Maine, New Hampshire, Vermont, New York, Pennsylvania, and New Jersey) suffered mightily during the Great Depression. An argument could be made that as a region the Northeast bore the brunt of the economic crisis, particularly because New York City reigned as the capital of global finance. Not only did the American people look to the financiers on Wall Street to bail them out of the crisis, but the entire world hoped that a economic recovery would begin in New York City.

The Great Depression also had a psychological impact on the United States, and news of the economic chaos was spread through newspapers and radio. Since the nation's media spotlight emanated from and shined brightly on New York City, the city's newspapers covered the Great Depression from front row seats that intensified the glare. A reporter for one of New York City's many daily newspapers did not have to travel far to see or feel the devastation—thousands of citizens formed breadlines on a daily basis.

Up and down the Northeast, from the important port cities of Boston and Philadelphia to the financial capital of New York City, the region symbolized the massive human suffering endured during the era. Prior to the stock market crash, the New York Times and the Wall Street Journal had trumpeted the success of the market and kept tabs on the stock market's movers and shakers. Despite the widespread panic gripping the nation after the collapse, newspapers across the region were filled with reassuring stories about the long-term viability of the market system.

Psychologically, money was at the center of American culture in the 1920s. Brokers and investment bankers were society's new heroes—the kinds of people flocking to the financial centers in the Northeast, particularly New York City, Boston, and Philadelphia. Markets fluctuations, hot stocks, and trading exploits became juicy gossip items in the era. The growing consumer culture required money. The impulse to live it up necessitated an ever-growing cash flow. Thus, many relied on stocks and a line of credit to finance their new lifestyles. The banking industry, centered in New York City, gained a tremendous amount of power in determining the economic fortunes of the nation. The "get rich quick" mentality lured people into the market. They hoped for the big score that would take them away from everyday toil.

The bond drives that took place during World War I opened the public's eyes to the power of investment. The large commercial banks were more than willing to facilitate these trades. Win or lose, the big banks and brokerages would receive their cut. In addition, the expanding opportunities to acquire goods on credit familiarized average citizens with the concept of buying stocks on margin.

STOCK MARKET COLLAPSE

Wall Street represented a new religion in the United States. Its priests were the men who ran Wall Street's successful brokerages and investment banks. They formed a sort of exclusive gentleman's club, each belonging to the same clubs, vacationing together, and mainly living on the Upper East Side of Manhattan. The ultimate club was the New York Stock Exchange, with a mere 1,100 seats. The only way in was to purchase an existing seat from one of the members or investment banks that owned the seat. The men who controlled Wall Street had deep ties to the Northeast. Most had attended the private schools and elite colleges dotting the region.

While Wall Street's leaders breezed through an insulated world high above the trading floor, an entirely different kind of trader fueled the stock over-speculation that would lead to the crash. Many traders only cared about stock fluctuation, borrowing enough money to buy and sell, then quickly moving the stock to make money on the difference. Timing, not knowledge, mattered most. By the summer of 1929, stock market value hit $67 billion, up from $27 billion two years earlier.

The economic freefall that took place in and after October 1929 decimated the American economy. Within three years, 75 percent of the value of all securities—a whopping $90 billion—disappeared. The year after the crash, more than twenty-six thousand businesses went bankrupt, surpassed in 1931 by more than twenty-eight thousand failures. In December 1930, the Bank of the United States went bankrupt, wiping out approximately 400,000 depositors.

Early relief efforts advocated by the administration of Herbert Hoover were a mix of public and private cooperation. In November 1930, Philadelphia's most influential citizens formed a committee under the leadership of Horatio Gates Lloyd, a partner in the city's branch of the J. P. Morgan conglomerate. The group raised an initial $4 million, which it doled out to various charitable organizations. Lloyd also participated in a city effort to raise money for the needy. To the dismay of the Hoover administration and the private organizers, such programs did little to stem the disaster. Although the Lloyd committee raised an additional $7 million to fight Philadelphia's economic woes, the money ran out in a little over a year. And even though it raised another $10 million and received $2.5 million more from the state, the committee had disbanded by June 1932. Philadelphia's relief efforts failed, as did the efforts of similar charitable organizations across the region, and with them went the hopes of the Hoover administration for a public-private partnership to end the crisis.

AWASH IN FEAR

As debilitating as the stock market crash was to the nation's economy, the crushing blow came from the way it demoralized the American people. The collapse shocked everyone and shook people's faith in the national economic system. Businessmen and corporations, many headquartered in New York, reacted by making drastic cuts, while anxious consumers virtually stopped spending on anything beyond bare necessities. Millions of workers lost their jobs as businesses desperately cut their operations to the bare essentials. Construction in New York City, for example, came to a near halt as 64 percent of construction workers were laid off soon after the stock market collapsed. Unemployment in 1929 was slightly over 3 percent, but by 1932 the figure had reached 24 percent. Millions more were involuntarily working in part-time positions.

In 1931, nearly 200,000 New Yorkers were evicted from their apartments for failure to pay rent. Many who were not evicted sold off their valuables so they could pay their rent, or they moved from apartment to apartment. If their furniture had been purchased on credit, owners left it behind when they could no longer make payments. Philadelphians experienced 1,300 evictions per month during the year following the crash.

The psychological toll unemployment took on the American people caused high levels of stress and anxiety. While some took to the streets to sell whatever they could gather, others turned to crime in an effort to find food. In Pittsburgh, a man stole a loaf of bread to feed his children, and then later hanged himself in shame. In New York City, hundreds of thousands of unemployed or underemployed workers turned to soup kitchens. By October 1933, New York City counted 1.25 million people on relief. Even more telling is that another one million were eligible for relief, but did not accept it. Six thousand New Yorkers tried to make money selling apples on the streets. But by the end of 1931, most street vendors were gone. Grocery store sales dropped by 50 percent during the Depression. Many urban dwellers scoured garbage cans and dumps looking for food. Studies estimated that 65 percent of the African-American children in Harlem were plagued by malnutrition during the era.

Tens of thousands of people in New York City were forced to live on the streets or in shantytowns located along the banks of the East River and the Hudson River. These clusters of makeshift abodes were dubbed Hoovervilles—a backhanded tribute to the president. The city's largest camp was in Central Park. Ironically, the Central Park shantytown became a tourist attraction and featured daily performances by an unemployed tightrope walker and other out-of-work artists.

Even the rich were not immune to the harsh realities of the Great Depression. From his Manhattan palace, steel king Charles M. Schwab openly admitted his fear. By the early 1930s, the situation was so glum that it became fashionable among the wealthy to brag about how much they had lost in the crash. Even professions one would think were insulated from economic hardship were affected during the Depression. In Brooklyn, one-third of all doctors were forced out of business.

When people learned of the role business leaders had played in the stock market crash, they quickly changed their formerly favorable opinions to outright scorn. The Wall Street collapse proved that these exalted financial leaders did not know what they were talking about in the years leading up to that fateful October as they continually hyped the market. Remarkably, in the days immediately after the collapse, the nation's business leaders (from Sears, AT&T, and General Motors, among others) issued cheery reports about swelling sales and stability in an attempt to bolster public confidence.

The Depression in the Northeast was not confined to the region's urban centers. Farming—still accounting for one-fourth of the U.S. population—had been depressed for nearly a decade. Farmers suffered as exports, crop prices, and land values all dropped. The Great Depression hit farmers and rural areas in the Midwest and West much harder than the Northeast because those areas depended much more on farming as part of the regional economy. In addition, many of the farmers who left their land during the crisis headed west to find a better life in California's agricultural regions and urban centers.

The bleak economic conditions in the Northeast led to direct confrontation between those who were suffering and various authorities. The Communist and Socialist parties, for instance, agitated unemployed workers to rise up against those controlling the economy. While party bosses, like the Communist leader William Z. Foster, dreamed of the end of the capitalist system, hungry and fearful workers demanded food, jobs, and some form of meaningful relief. In early 1930, Communist activists staged rallies against unemployment that drew protestors in New York, Washington, D.C., Boston, and many other cities. At some sites, demonstrators fought with police, who used force against the agitators, including tear gas in the nation's capital. New York police used nightsticks to break up a crowd of thirty-five thousand who had turned out in Union Square to hear Foster speak.

The administration of Franklin D. Roosevelt was not immune to agitation, even though it fought to alleviate the problems plaguing the economy. In 1933 and 1934, unions organized around the country to fight for better wages, working conditions, and hours. On Labor Day in 1934, more than 300,000 textile workers from New England to the southern states staged a strike that became the most violent strike in American history. In Fall River, Massachusetts, approximately ten thousand protestors surrounded a mill, trapping the strikebreakers inside. Riots broke out across New England, and at many sites corporate guards, special deputies, and the police fought with strikers and their supporters. As the violence increased, the National Guard was mobilized in every New England state except New Hampshire and Vermont. President Roosevelt had to personally intervene to end the confrontation between owners and workers.

THE NEW DEAL

Given the state's place at the heart of the financial and psychological turmoil of the Great Depression, it is ironic that a New Yorker, then Governor Roosevelt, rose to challenge incumbent Herbert Hoover in the 1932 presidential election. The public perception that Hoover did not fully grasp the enormity of the economic crisis led to a landslide victory for Roosevelt, who came from a long line of New York aristocrats.

Roosevelt took office in the midst of a banking crisis, but with a deft touch and a supportive Congress, he got the Emergency Banking Act passed, which allayed depositors' fears and gave banks a shot of confidence. Next, Roosevelt used a series of fireside chats to calm the nation, and he created programs that put people back to work and gave them hope for the future.

The Roosevelt administration heard the pleas of those who wanted to work, but could not find jobs. Roosevelt championed the Civil Works Administration and within two weeks 800,000 people were put to work. Several months later, more than four million were working in the program, which focused on construction of roads, bridges, schools, playgrounds, and hospitals. Roosevelt and his aides realized that hunger was not negotiable and putting people to work would relieve some of the doldrums the nation confronted.

In early 1933, the Civilian Conservation Corps (CCC) began operations with an initial enrollment of 250,000 at a cost of $500 million. The next summer, Roosevelt enlarged the group to 350,000, then to half a million in 1935. CCC "soil soldiers" built roads, installed telephone lines, planted trees, and worked for several federal agencies. In New York and Vermont, they supported the Army Corps of Engineers in building much needed flood control projects. Although the CCC was a nationwide effort, it helped ease the plight of northeastern urban centers by relocating young unemployed men out of the cities.

The federal government also supported public works efforts by doling out money from the Public Works Administration (PWA), established in 1933. New York City received more PWA money than any other municipality because of Mayor Fiorello La Guardia's close relationship with President Roosevelt. In all, the city was given $116 million in grants and another $136 million in loans. The improvement projects ranged from new playgrounds and housing complexes to the $42 million Triborough Bridge, linking Queens, Manhattan, and the Bronx.

Later, Roosevelt pushed through the Emergency Relief Appropriation of 1935, which enabled him to create the Works Progress Administration (WPA). Although the WPA cost more than making direct payments to the poor, the program helped lift people's spirits, in the Northeast and elsewhere, making them feel worthy of having a job.