Chapter 17 The Great Depression 1928-1932

Impending Disaster As the fun of the Roaring 20’s was going on, the economy started to go through some changes. RR – b/c of trucks, buses; textiles and steel not making much of a profit. Coal wasn’t in as big of a demand b/c of new energy, new houses (Housing Starts) weren’t being built as much, which affects lumber and lots of other related industries.

Farmer’s Struggle During war, farms were prospering...after war, demand went down. Farmers took out loans to buy more equipment to produce more Farms couldn’t pay loans back so banks foreclosed Some banks closed b/c they weren’t getting payments from farms. Farmers also bought on credit to try to get appliances

Unequal Wealth Distribution -Lots of stuff being produced - families buying it on credit – price’s rising – lot’s of debt – production increasing more than wages – rich getting richer. -70% of families – earn less than $2,500, (considered minimum for standard of living)

Herbert Hoover In the election of 1928, people voted based on republican prosperity of the 1920’s and Hoover was easily elected over Democratic candidate Alfred Smith.

Stock Market 1929 – 4 million Americans owned stock Speculation – people began buying stocks and bonds on the chance of a quick profit Buying on the Margin – Paying a small % of a stock’s price as a down payment and borrowing the rest. Laissez-faire

The Crash 9/3/1929 – stock market peaked and fell 10/24/29 – market went down; Black Thursday 10/29/29 – Black Tuesday – The market crashed, people tried to sell but many were stuck w/huge debts…people lost all their savings 3-4 wks later, investors had lost $30 billion. Hoover tried to calm the public but by Nov 13, 1929 stock went from 381 to 198.7

The Great Depression The Great Depression – the period from 1929 –1941 w/big unemployment and bad economy. Banks closing – 11k/25k, 90k business went bankrupt, 25% of workforce unemployed (Ford laid off 75k at one factory), GDP was cut in ½ - 104 billion to 59 billion The FED limited $ supply to discourage lending and so there was to little $ in circulation when the stocks crashed

Causes of the Depression People lose their jobs. Demand drops. Fewer goods are sold. The Spiral Of Depression Even more people Lose their confidence And spend less money In order to stay in business companies cut wages Good place to point out that the spiral of depression is the opposite to the cycle of prosperity. Even discuss in relation to Henry Ford and the impact on the other industries that produced his standardised goods. Companies are forced to cut costs by laying people off People lose their confidence & start saving their money Demand drops even further.

Hawley Smoot Tariff Highest tariff in U.S. history, supposed to protect farmers & manufactures from foreign comp, instead Europeans couldn’t sell and therefore couldn’t buy U.S. stuff Europe raised their tariffs This caused a ripple effect where no one was making $

The “Snowball Effect”

Great Depression in the Cities In cities across the country people: lost their jobs Were evicted from their houses Ended up living on the street. Shantytowns, soup kitchens and bread lines appeared

Hoover Gets the Blame Hoovervilles/Sh anty-towns – People were evicted from their homes...these little towns consisting of made up shacks sprang up.

Charities Lend a Hand Soup Kitchens + Breadlines – People went to these to get food which were run by charities. African Americans and Latinos had it worse off…had lower pay and Latinos were told to get out...”last hired, first fired”

People waiting in line for bread and soup and also living out of their car.

The Dust Bowl Dust bowl – b/c many farms overused their land and drought in the mid-west, it was void of trees and became a dust center. Farmers moved West to escape the dust storms and b/c they were evicted from their farms….800k moved…they were called “Okies” Some farmers resorted to tenant farming

Traveling the Rails...Looking for Work Lots of men became hobos (as young as 15-20) There was no federal system of direct relief – helping out the poor w/food and $ Some cities offered relief but not much.

The Plight of Families There was resentment against women b/c people thought they shouldn’t work if men couldn’t + they weren’t seen in breadlines Children ran away on trains around the country, 300,000 kids were out of school b/c schools closed and families couldn’t afford them

Hoover’s Plan Hoover wanted the country to remain up- beat…no worries that all of your $ just went down the drain and you’ll never get out of debt…it will be all good. Voluntarism Gov’t’s role was to facilitate cooperation between competing groups and interests in society

Volunteerism and Rugged Individualism Rugged Individualism – People should succeed through their own efforts and federal handouts would be disrespectful He told business’s to work together, not layoff people, demand higher wages...doesn’t work...contradicts human self-interest

Too Little...Too Late Federal Home Loan Bank Act – lowered mortgages and allowed farmers to refinance Reconstruction Finance Corporation – $2 billion to banks, RR, life insurance…trickle down economics – if the gov’t gives out loans to banks, they’ll loan to business’s and then they’ll make money, give raises, and hire jobs He did have the Hoover Dam built and cut taxes

Hoover Fails at Press Relations Bonus Army – Veterans wanted $ now instead of 1945 that they had been promised w/ the Adjusted Compensation Act. Congress voted to give them their $ in 1931 but Hoover vetoed it...everybody is hurting They marched on DC Hoover had the Bonus Army removed from Washington (forcefully/violently) and it hurt his image