1. THE ECONOMY OF THE 1920S – PROSPERITY TO POVERTY From Prosperity to the Crash

2. INDUSTRIAL GROWTH AND OVERPRODUCTION THE INCREASE IN PRODUCTIVITY IN THE UNITED STATES REFLECTED OUR NEW ABILITY TO MANUFACTURE GOODS, WHICH HAD BEEN IMPROVED DURING THE GREAT WAR. REFRIGERATORS, RADIOS, AUTOMOBILES, AND HOUSEHOLD APPLIANCES WERE BEING PRODUCED AND SOLD TO NEW MARKETS. HOWEVER, INCREASED PRODUCTIVITY WOULD RESULT IN A SURPLUS OF SUPPLY – OVERPRODUCTION – WHICH INEVITABLY CAUSED PRICES TO DROP, AND COMPANY PROFITS TO DECLINE. Refrigerators Automobiles

3. CONSUMERS RELY ON CREDIT.  Installment Buying – buying products on credit. Customers could pay for a product by putting a little money down, and then paying off a little bit each month until the bill was settled. This style of consumerism was a departure from the traditional “cash on the barrel” mentality, but it allowed people to let their money work in more than one place – they could invest.

4. LABOR REDUCING HOUSEHOLD APPLIANCES - WITH GROWING ELECTRIFICATION, APPLIANCES SOLD WELL. The Washing MachineThe Vacuum Cleaner

5. GOVERNMENT POLICIES TO STIMULATE THE ECONOMY  The United States government maintained HIGH TARIFFS which protected American companies. A tariff added a tax to the price of any goods which were made in foreign countries. So a washing machine or vacuum made in England, for example, would cost more than the American made Hoover vacuum. Since most consumers will purchase the cheaper of two relatively equal products, this encouraged sales of American products.  The US government also LOWERED TAXES on wealthy people, which were extremely high at the time. This allowed rich Americans to spend more of their money – hopefully on American made goods which would benefit companies across the country.  Whether or not these policies helped the economy or hurt it is still a hotly contested point of debate. To a large extent, it frames our national political discussion to this day.

6. A BULL MARKET  A “Bull Market” is one characterized by the rising value of stock prices. When Wall St. is characterized as a “Bull Market,” investors and stockholders are confident and companies are prosperous. But the market is a very fickle place, and that was a bull market during the 1920s very quickly evaporated into a catastrophic collapse.

7. A BEAR MARKET  By 1928, the writing was on the wall, according to many economists. Companies had overproduced, stockpiles were quickly multiplying, workers were being laid off, and the future of many companies did not look as bright. Cautious investors began to sell off their assets and repay their loans when necessary.

8. THE STOCK MARKET

9. BUYING “ON THE MARGIN” Buying “on the margin” is a process that involves borrowing money in order to purchase stock. In some cases, investors paid less than 10% of the value of the stock – then borrowed close to 90% of the money required to buy the shares they wanted. Banks provided stockbrokers and investors with the money they needed to purchase stock. If the value of the stocks continued to improve over time, the investors could pay off their debts and make money – essentially profiting by using another man’s money on a bet. But if the stock’s value failed, the investors lost their money. And, to make matters worse, they had to pay back the money they had borrowed – potentially nine times what they had invested themselves. When brokers who had invested on the margin failed to pay their debts, problems began.

10. OTHER FACTORS: OVERPRODUCTION BY FARMERS  Farmers produced more crops than Americans could eat – overproduction.  Usually, European markets bought American grains – but after World War I, those nations were too in debt to purchase these goods.  Farmers had borrowed enormous sums of money from banks to invest in machinery and more land – now, they could not repay their own debts.

11. OTHER FACTORS: THE ASSEMBLY LINE

12. THE IMPACT OF ASSEMBLY LINES  Although some companies were able to create high quality jobs by using the assembly line, like Ford Motor Company did during the 1920s and throughout most of the twentieth century, the overall impact of the technique was to reduce the need for skilled laborers.  Most people could be trained to do whatever jobs were asked of them on an assembly line. The need for skilled laborers, individuals with a specific set of job skills like carpenters, blacksmiths, mechanics, or electricians, was reduced.  Unskilled laborers could accomplish more work, perhaps, but they could not command a high wage. Therefore, high paying jobs usually disappeared as technology was introduced to the workplace.  By August of 1931, Ford had cut production of automobiles to virtually nil, laying off over 75,000 workers.

13. THE ELECTION OF 1928: AN UNLUCKY WINNER? The Happy Warrior: The Catholic, Democratic Candidate, Al Smith Promising “A Chicken in Every Pot,” Republican Herbert Hoover

14. PRESIDENT HERBERT HOOVER

15. HOOVER AND THE CRASH The Onset of the Great Depression, 1929 - 1933

16. OLDER INDUSTRIES, STRUGGLING IN THE 1920S Agriculture, which suffered from overproduction and paralyzing debt which had accumulated throughout the decade. Coal Mining, which was less and less profitable due to competition from oil and other energy forms. Railroads, which were being replaced by cars and trucks as the primary form of long distance transportation and trade. Clothing Manufacture, or the Garment industry, which was less profitable due to the competition from foreign nations and synthetic cloth.

17. BLACK TUESDAY October 29, 1929

18. “BLACK TUESDAY” OCTOBER 29, 1929 Between October 23 rd and October 29 th, 1929, the New York Stock Exchange suffered its worst losses in its history. The prices of stocks dropped dramatically, and stockbrokers could not find investors to purchase company shares – causing prices to plunge. Investors who had amassed fortunes on paper lost everything they had. Stockholders who had purchased their goods “on the margin” not only lost everything – but also had to pay back the banks or stockbrokers from whom they had borrowed. Many could not repay their debts – causing banks to fail. Some stockbrokers lost everything. 

19. OVERPRODUCTION  A situation in which the supply of manufactured goods exceeds the demand for the product.  When supplies increase, but demand for a product remains the same, prices will decline.  The result of decreased prices was a decrease in profits for companies.

20. HOUSING AND AUTO MANUFACTURING  The housing construction and automobile manufacturing businesses were in decline.  Housing construction had boomed following World War I – due to an increase in demand for homes. But by the end of the 1920s, there were more homes available than people looking for homes. This led to stagnation in housing prices and a major decline in new home construction.  Automobile manufacturers had the same problem: too many cars, not enough customers.

21. THE BANKING CRISIS By 1933, over 5,000 banks had been forced to close their doors across the nation. Most of the depositors in these banks lost everything in their savings – and most of them didn’t even realize that they had put anything up on the Stock Market. The bank runs, though, were real, and those who got their first were allowed to withdraw funds until they ran out.

22. THE VICIOUS CYCLE OF JOB LOSS AND BANKRUPTCY

23. DEFAULT  Failure to repay one’s loans. In this case, the United States economy and banks were hurt because European nations defaulted on their loans. American bankers had loaned millions of dollars to the Allied Powers to rebuild. When the Depression hit worldwide, nations were unable to keep up payments. Internationally, the banking crisis was amplified – the loans due to American creditors from World War I would never be repaid. When banks loan out money and their customers default on the loans, the bank’s future is in grave jeopardy. Banks need to make a profit to thrive. The reckless lending practices of banking institutions during the Great Depression came home to roost when the market collapsed. But the lending institutions were not the only casualties – ordinary Americans with savings accounts were wrecked in the process as well.

24. THE BANKING CRISIS: THEN AND NOW

25. UNEMPLOYMENT SKYROCKETS! Between 1927 and 1933, unemployment exploded in the United States. Dramatic jumps in the unemployment rate in 1929, ‘30, ‘31 and ’32 resulted in 24 % unemployment by1933.

26. HOOVERVILLES

27. HOOVER THE SCAPEGOAT?

28. HERBERT HOOVER

29. MEN OFTEN LEFT THEIR FAMILIES IN SEARCH OF WORK – AND WERE NOT OFTEN WELCOMED ON THE ROAD SEEKING WORK…

30. SCHOOLS AND MAJOR PUBLIC SERVICES OFTEN CLOSED DUE TO A LACK OF FUNDING – AND UNEMPLOYMENT INCREASED AS A RESULT OF THE JOB LOSSES.

31. HOOVER’S ADVISORS: LAISSEZ- FAIRE  Almost all of Hoover’s Cabinet members believed that the Depression would go away on it’s own – there was no need for the government to meddle in the economy…Advocates of a natural business cycle – which would expand or contract according to natural economic fluctuations, were in Hoover’s ear.

32. THE RECONSTRUCTION FINANCE CORPORATION  Hoover’s major initiative was the RFC, which game money to fund critical businesses, banks, insurance companies, and railroads. So, in the American people’s darkest hours of economic need, Hoover gave the taxpayer’s money to the most powerful industries. Many Americans considered him heartless and without compassion.

33. THE BONUS ARMY  At the end of World War I, every living American veteran was promised a $1000 bonus, to be paid out in 1945. By the end of Herbert Hoover’s term in office, many veterans were convinced that they may not live that long – they were starving and homeless.  In 1932, around 20,000 men, women and children organized a march to Washington, D.C. Some walked the entire distance from their homes to the nation’s capital, to petition the government for their bonuses 13 years early.  Once they arrived, they established their own Hooverville, right in Washington, D.C. They met with Congressional Leaders, and their petition was refused.  Most men left, but several thousand lingered, and Hoover became worried that the men could attempt to attack the government – only 5,000 Bolsheviks, after all, had overthrown the Tsar in Russia during the 1917 Revolution there.

34. THE BONUS ARMY  In 1932, Hoover decided he could no longer tolerate the threat of these unarmed, impoverished, and desperate men in his city.  He sent in the US Army, led by Dwight David Eisenhower and Douglas MacArthur, to disperse the men by force.  To clear them out, government forces used tear gas, tanks, and machine guns. The attack killed at least one veteran, injured 100, and left the tent city a smoldering ruin. Rumors persist that a small child was killed, too.  Americans were horrified and outraged that their own president would take up arms against unarmed, impoverished, United States Veterans.

35. THE BONUS ARMY

36. THE BONUS ARMY: HOOVERVILLE

37. THE GOVERNMENT ATTACK ON THE BONUS ARMY

38. SIMILARITIES BETWEEN THE GREAT DEPRESSION OF THE 1920S AND THE PRESENT…  What factors are considered causes of the Great Depression? What causes are enumerated for the present “Great Recession?”  To what degree is the lack of government regulation or oversight of banks and other businesses a cause these economic downturns?  To what extent is the government able to correct downturns in the economy through its policies: jobs programs, tax code, and government regulations?  How do individuals in society register their protests against those they hold responsible for the economic malaise in both eras?