The Great Depression
The Great Depression started at the end of 1929 and brought one of the worst times for the United States. No other time in U.S. history had such widespread economic downfall happened for so long, or been as deep and painful for so many people. One out of four people in 1932 were unemployed. In many cities nearly half of the population of adults were unemployed. Many farms were lost because the farmers could not pay their mortgages, and thousands of banks failed.
The United States had gone through depressions before the Stock Market crash in 1929. None had ever been as bad or lasted as long as before “Black Thursday.” At the beginning of the crash, economists believed that it was only a bump in the stock markets and the markets were only correcting themselves. The optimists were incorrect; the depression steadily worsened. By the spring of 1933 when Franklin D. Roosevelt took the oath of office, the national unemployment had risen from 8 million to 15 million; the non-farmer workforce and the gross national product had decreased from $103.8 billion to $55.7 billion. Forty percent of the farms in Mississippi were on the auction block on Franklin D. Roosevelt's inauguration day.
The poor took the heaviest toll during the Great Depression. By 1932 in Harlem, almost fifty percent of the town was unemployed. Property owned or managed by blacks fell from thirty percent to five percent. Farmers in the Midwest were doubly hit by the Dust Bowl and the poor economy. Schools budgets fell and school days and years were shortened.
Investors’ hopes were boosted with the election of Herbert Hoover in 1928. Stock in U.S. companies had steadily risen since 1924. In 1927 prices soared upwards recklessly. In 1929 Hoover voiced concern in the rise in the stock market and urged investors to be be cautious. By the middle of 1929, industrial production, employment, and other types of economic activity were declining; still the stock market rose. Then in early September, the speculative bubble burst when the stock market fell sharply. By October the world stock markets were in steep decline. Still investors were positive. Then on October 29, 1929, the day that would become known as Black Tuesday, investors tried selling all of their stocks that were failing. The New York stock exchange fell an average of thirty-seven percent.
The government’s initial response was that there is no crisis. The Treasury Secretary Andrew Mellon said that the best policy would be to let the depression run its course and liquidate labor, liquidate stocks, liquidate the farmers, and liquidate real estate. This idea of letting everything run its course was supposed to purge the rottenness out of the system. Mellon’s do-nothing approach did not work. With so many people losing jobs and income, consumers and businesses simply could not buy enough goods to get the economy up and growing again.
Hoover’s response to the depression was not the same as Melon’s. President Hoover could not just sit back and let the economy fix itself. Hoover did more than any other president in such poor economic circumstances. Hoover invited parties of business, labor, government, and agricultural leaders to the White House to continue employment and keep the wage levels up; begged labor unions to stop strikes; and told states to continue planned construction within. None of these efforts worked, unemployment numbers increased, and wages continued to fall.
In May 1930 President Hoover told the U.S. Chamber of Congress that the worst was past and with continued effort the U.S. should rapidly recover. Hoover’s uplifting words were not enough; more and more people lost their jobs and their homes. With personal income plummeting the government tax revenues began to fall. Despite depression Hoover still tried to balance federal budgets. To do this Hoover pushed the Revenue Act of 1932. The Revenue Act of 1932 was the largest and most poorly timed peacetime tax increase in American history. The economic slowdown increased because Hoover was taking money out of consumers’ hands and giving it to the government. Consumers had less money to spend because of the tax increase, and in reality, what was needed was for the consumers to spend more money in the economy. Little shanty towns made of cardboard and scrap pieces of metal and tin (called Hoovervilles in criticism of the president) started showing up on the edges of towns where the jobless and homeless went because there was nowhere else to go. As the numbers rose, more people called for the government to help. Hoover rejected any federal intervention in the helping of the poor and homeless.
As always the party in charge was at fault for the economic problems in the country. As the New York Times reported in 1930, the public opinion “is turning quite heavily against the Hoover Campaign.” Hoover was not liked by the general public, so in November 1930, the Democratic Party won its first ever national victory since 1918, filling the majority of the Senate and House. Hoover once again denied what was happening in front of him and failed to see the election as a warning that his era would soon be over. With increased pressure and Congress stacked up against Hoover, Congress passed the Reconstruction Finance Corporation to give emergency loans to failing railroads, banks, and life insurance companies. People argued that the federal government should go further and help the middle class citizens out.
The lives of a common family, even if they were able to keep a job, were changed tremendously. Often those that were lucky enough to keep a job took large pay cuts and were put on part time jobs. Even upper middle class jobs like doctors and lawyers saw their income drop up to forty percent. In some large communities the people had potlucks and thrift gardens where people were able to share food and teach others to garden. Between 1931 and 1932, the Detroit Thrift Garden provided food for 20,000 people. Board games and mini golf became increasingly popular during the depression; these games were a way for the families to spend time and spend it cheaply.
When Franklin D. Roosevelt was elected president, he was in the middle of his term as Governor of New York. Roosevelt could thank his election to the fact that most of the public blamed the Hoover administration on the economic downfall. By the time Roosevelt was inaugurated on March 4, 1933, there were over 13 million unemployed Americans. In his first inaugural address to the public by radio, President Franklin D. Roosevelt said, “This great nation will endure as it has endured, will revive and prosper…The only thing we have to fear is fear itself.”
Roosevelt started off his first one hundred days by shutting down banks for a few days to make congress pass reform legislation. He also started giving regular national radio addresses which helped pick up the public’s confidence and preventing harmful bank runs. After passing of the Emergency Banking Relief Act, three out of four banks were back open. Also in F.D.R’s first one hundred days he created the New Deal which formed the Agricultural Adjustment Administration, the Public Works Administration, the Civilian Conservation Corps, and the Tennessee Valley Authority. Along with just making programs giving farmers and workers economic relief he created the Federal Deposit Insurance Corporation (FDIC) to protect depositors accounts, and the Securities and Exchange Commision to help regulate the stock market and to prevent the abuse that caused the depression. After there were signs that the economy was improving Roosevelt asked Congress to pass the Second New Deal, his deal included the Social Security Act and Works Progress Administration. The Democratic-controlled government also imposed higher taxes on large corporations and wealthy individuals. The failure of the New Deal was its inability to restore prosperity and end record levels of unemployment. Only the prolonged crisis of World War II helped produce full employment.
Roosevelt was extremely good at developing new policies, keeping what worked, and getting rid of those that did not. Roosevelt increased the regulatory powers of federal government and expanded many of the social welfare programs we have today. Roosevelt was not at all a Socialist like Republican critics said. He still believed in capitalist economic structure while providing protection to the nations most vulnerable people.
The Great Depression was a terrible time for many Americans. The Stock market crashed and the economy fell into a deep hole that took many years to correct. The ultimate savior of the economy was World War II and Roosevelt's New Deal programs. Roosevelt’s New Deal plan created programs such as the Social Security Act that are still used today.