1. Great Depression 1
The 1920’s seemed like an endless era of prosperity. Yet in 1929, the stock market crashed as production fell and unemployment rose.
In the 1928 election, the Republican Party was confident as they took credit for the strong economy and prosperity of the 1920’s.
Their candidate was Herbert Hoover, the Great Humanitarian, who believed in voluntary cooperation between business and labor.
There were signs of weakness in the economy:
1. Farmers were in trouble as huge farm surpluses depressed prices and farmers could not afford to buy goods or repay loans.

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2. Easy credit with installment buying lead people to purchase goods they could not pay for. Sales began to decline as people became “tapped out.”
By 1929, Americans had created $6 Billion in personal debt, more than double the 1921 level. ($3 Trillion in personal debt as of 11/2013)
Consumers used the Installment Plan to buy cars (60%), radios, and appliances.

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3. Uneven distribution of wealth as 65% of workers made $2000 or less each year.
Wages for factory workers rose 8% but factory output rose 32%. While workers income rose some, rich investor income skyrocketed.
5% of the wealthiest controlled 70% of the wealth. The rich were getting richer as a huge income gap developed.

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The stock market continued to rise until September 1929.
Buying on Margin-people borrowing money to purchase stocks. Only required 10% down.
Some feared that stocks were overpriced.
As stock prices rose, people would pay back the 90% borrowed. If markets fell, it could wipe out savings.
Speculation-buying and selling stock in hopes of making a profit.
Government encouraged speculation and credit with low interest rates on loans.
Many people played the market with no experience.

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On October 29, 1929, the stock market went into a free fall as too many investors began to sell and created a panic of selling.
16 million shares were sold on what became known as Black Tuesday.
$30 Billion was lost in a few hours.
Many who bought stocks on margin were wiped out.
GNP fell from $103 Billion to $56 Billion. 26,000 businesses failed.
The Great Crash was symbolic of the business cycle in which the economy periodically grows and contracts.

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In growth periods, workers are hired, wages rise, and demand for products increase.
In contraction periods, workers are fired, wages drop, and demand for products falls.

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The stock market crash did not cause the Great Depression. It quickened the collapse of the economy and showed that there were problems in the economy.
Banks felt the effects of the crash first. People feared that their money would be lost so they ran to the bank to withdraw their money.
Banks do not have enough money hand to meet such large cash demands.
These banks runs caused banks to fail failed by 1933.
Factories closed causing worker layoffs.

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This lowered demand for goods which caused more layoffs.
Workers without jobs cannot purchase goods.
Henry Ford cut 75,000 workers..
By 1933, the unemployment rate reached 25% from 2% in 1929.
Congress then passed the Hawley-Smoot Tariff to protect American businesses from foreign competition.
This strategy backfired as foreign countries retaliated with their own tariffs.
This led to a further drop in sales for American companies.

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With declining sales worldwide, the Great Depression spread around the world.
John Maynard Keynes created Keynesian economics in which the government should intervene to maintain economic growth, even if it has to go in debt to do so.
Desperate poverty gripped the nation and forged a generation with a strong character and will to restore prosperity.
While few Americans understood the causes of the Great Depression, everyone felt its impact.
Those who managed to keep their jobs saw wages and hours cut. Wages dropped by $4 million.

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6000 men sold apples or pencils in New York City for 5 cents.
Many young people left home in search of work.
On The Bum-people on the move looking for jobs (1 million).
Marriages and births declined.
1/5 (20%) of children in New York City were malnourished.
Unemployment hit 50% in Chicago, 80% in Toledo.
For many, the only food available came from soup kitchens or bread lines run by charities such as the YMCA or churches. People sold their property to buy food.

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The homeless lived in empty railroad cars, cardboard boxes, or in shacks built hastily on public lands or empty lots.
These haphazard shelters became known as Hoovervilles and they appeared across the country.
When possible, families moved in together to cut costs.
250,000 people lost their homes.
Between 1930 and 1934, almost 1 million farmers lost their farms, homes, and equipment to foreclosure as they could not pay their debts.
364,000 farms were foreclosed in 1933 alone.

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Bankers sold the land and equipment at auction to those who had money.
Some farmers became tenant farmers working for bigger landowners.
Others decided to leave in search of work elsewhere in the U.S.
The remaining farmers on the Great Plains suffered a terrible drought leading to the Dust Bowl.
Dust storms destroyed 50 million acres of farmland.
Millions of tons of topsoil were blown away in giant dust storms that could be seen for miles.

13. Dust Bowl

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Farmers helped to create the Dust Bowl by digging up thick prairie grasses to plant wheat.
Nothing was left to hold the soil in place.
100 mph winds blew this dust into clouds 8,000 feet tall in Oklahoma, Texas, New Mexico, Kansas, Nebraska, and Colorado, once even reaching to the Atlantic Ocean.
Wildlife and farm animals suffocated in the choking winds.
In old Model T’s the farmers moved west or to northern cities.
Farmers who had lost their land were called Okies regardless of where they were from.

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Okie was a derisive term denoting the dirty, poor, and uneducated farmer.
800,000 Okies left Texas, Oklahoma, Missouri, and Arkansas alone.
Rural states lost population during the 1930’s.
Okies took the Mother Road, Route 66 to California where rumor had it that there were jobs in the rich agricultural lands.
Those who could afford it, bought distressed neighbor’s farms at low prices to build expanded commercial farms.
Family life was also hurt by the Great Depression.

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Those who still had jobs lived in fear that their next paycheck would be their last.
Those working felt guilty because friends and relatives were unemployed.
American’s felt humiliation if they could not provide for their family.
Suicide rate rose 28% in 1932 and immigration to the U.S. declined for the first time in history.
Minorities suffered even more during the Depression.
Even in good times, African Americans were “last hired, first fired.”

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Many were thrown off southern farms where they were sharecroppers.
As Okies moved west, Mexican and Mexican Americans faced fierce competition for jobs.
Local governments urged repatriation (sending people back from where they came) for Mexican Americans.
Towns throughout the country displayed signs that advised newcomers like hoboes to keep on moving, no jobs were there.
Herbert Hoover did not cause the Great Depression but Americans looked to him for answers.

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Most did not know it, but Hoover worked hard to find solutions to the depression, but failed to do so.
At the beginning, Hoover like all Americans, believed in the laissez faire approach of hands off.
The ups and downs of the business cycle were normal events and would self-correct.
Businesses were thought to be strong enough to weather the storm without government support.
Nobody realized how deep was the depression.
Hoover called for “Rugged Individualism” in which success comes from individual effort.

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Hoover felt that direct assistance would make people dependent and cause them to lose self-respect.
At first, most Americans agreed with Hoover that government should not get involved.
Yet as the crisis worsened, they began to blame Hoover for not doing enough.
Hoover asked business to voluntarily maintain employment and wages.
He called for tax cuts, low interest rates, and public work projects.
He asked the wealthy to donate more to charity.
Yet volunteerism failed.

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Hoover put faith in localism, where problems are best solved at the local and state levels.
Yet towns and states did not have the resources to deal with size of this depression. (1 in 4 families received relief in some states).
Hoover did not support direct federal aid to individuals.
In 1932, Hoover urged Congress to create the Reconstruction Finance Corporation (RFC) to employ trickle down economics.
The RFC would give $2 Billion to banks and large businesses.

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They could then lend or invest in struggling businesses who would hire workers and end the depression.
The money would trickle-down from the top to the worker.
The RFC failed. Businesses took the money but did not hire more workers.
One public work project that did work was the construction of Boulder Dam (later renamed Hoover Dam) across the Colorado River.
Started in 1930, the largest dam in the world provided power for millions, irrigation for farm land, and put 21,000 to work.

22. Hoover Dam Power Distribution

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Hoover’s public work projects built 800 public buildings, 37,000 miles of highways, and spent $800 million.
Yet it was too late by then to correct the depression.
Many grew disillusioned during the Great Depression.
Some blamed Hoover, some blamed themselves, some blamed Capitalism.
Many WWI veterans wanted to obtain early, a bonus promised to them for their WWI service.
In 1932, these veterans formed the Bonus Army and marched on Washington asking for their bonus.

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20,000 veterans set up camps and occupied vacant buildings in Washington D.C.
Congress voted no giving the veterans their bonus early.
Most veterans left after the rejection but about 2000 remained with no place to go.
Hoover ordered Gen. Douglas MacArthur to remove the veterans. He used tear gas, cavalry, tanks, and troops with fixed bayonets.
Press photos of troops using excessive force against poor Americans angered the public. 3 died, including an 11 week old baby.

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The eviction of the Bonus Army by such brutal methods was blamed on Hoover. It had a very strong impact on his chances for re-election in 1932, yet he agreed to run.
Many viewed Hoover as heartless and ineffective.
Americans were ready for new leadership and a greater role for the government in solving problems.