The Great Depression
After the stock market crash of 1929, the American economy spiraled into a depression that would plague the nation for a decade.
- The Great Depression was the worst economic downturn in US history. It began in 1929 and did not abate until the end of the 1930s.
- The stock market crash of October 1929 signaled the beginning of the Great Depression. By 1933, unemployment was at 25 percent and more than 5,000 banks had gone out of business.
- Although President Herbert Hoover attempted to spark growth in the economy through measures like the Reconstruction Finance Corporation, these measures did little to solve the crisis.
- Franklin Roosevelt was elected president in November 1932. Inaugurated as president in March 1933, Roosevelt’s New Deal offered a new approach to the Great Depression.
The stock market crash of 1929
The value of the US stock market nearly doubled in a frenzy of speculative buying in the eighteen months before the crash began on “Black Thursday,” October 24, 1929. On that day, and on “Black Tuesday,” October 29, panic set in as millions of shares of stock traded at ever-falling prices.
The October 1929 downturn was only the beginning of the market collapse. By mid-November the stock market had lost a third of its September value, and by 1932—when the market hit bottom—stocks had lost ninety percent of their value. A share of US Steel which had sold for $262 before the crash sold in 1932 for $22.
The stock market crash signaled the beginning of the Great Depression, but it was only one factor among many root causes of the Depression. A weak banking system, further collapse in already-low farm prices, and industrial overproduction each contributed to the economic downturn. The disastrous 1930 Hawley-Smoot Tariff (which raised average tariff rates to nearly 60 percent) caused America’s international trading partners to retaliate by raising rates on US-made goods. The result was shrinking international trade and a further decline in global economies.
The Great Depression
As the effects of the Depression cascaded across the US economy, millions of people lost their jobs. By 1930 there were 4.3 million unemployed; by 1931, 8 million; and in 1932 the number had risen to 12 million. By early 1933, almost 13 million were out of work and the unemployment rate stood at an astonishing 25 percent. Those who managed to retain their jobs often took pay cuts of a third or more.
Out of work Americans filled long breadlines, begged for food, or sold apples on street corners. A Chicago social worker wrote that “We saw Want and Despair walking the streets, and our friends, sensible, thrifty families, reduced to poverty.”
Photograph of a long line of men waiting in front of a storefront which advertises free soup, coffee, and doughnuts for the unemployed.
More than a third of the nation’s banks failed in the three years following 1929. Long lines of desperate and despairing people outside banks hoping to retrieve their savings were common. Many ordinary citizens lost their life savings when banks failed.
Farmers were hit particularly hard by the crisis. On top of falling prices for crops, a devastating drought in Oklahoma, Texas, and Kansas brought on a series of dust storms known as the Dust Bowl. In the South, sharecroppers—both white and black—endured crushing poverty and almost unimaginable degradation. African Americans suffered significantly higher levels of unemployment than whites due to pervasive racism.
The financial crisis was not limited to the United States. Countries in Europe and around the world experienced the depression. Hitler’s rise to power in Germany was fueled in part by the economic slowdown, and throughout the 1930s international tensions increased as the global economy declined.
Hoover's response to the crisis
President Hoover initially met the economic downturn from the perspective of his long-held voluntarist principles—that is, his belief in minimal government interference in the economy, as well as a conviction that direct public relief to individuals would weaken individual character, turn people away from the work-ethic, and lead them to develop a dependency on government handouts. By 1931 Hoover reversed his earlier approach and embraced government intervention in the economy. The 1932 Reconstruction Finance Corporation (RFC) authorized the lending of $2 billion to banks, railroads, and other privately held companies, and in July 1932 the federal government appropriated $300 million for the nation’s first relief and public works projects.
For many, however, these actions were too little, too late. Shantytowns of makeshift hovels—disparagingly labeled “Hoovervilles” in disgust with the president’s inaction in the face of crisis—grew up across the country in public parks and in vacant lots, as the out-of-work, unable to pay mortgages or rent, were evicted from their homes. Trouser pockets pulled out to signal the lack of money within them were “Hoover flags.” Newspapers used for warmth by the homeless were “Hoover blankets.”
In November 1932, Franklin D. Roosevelt was elected president in a landslide, winning 57.4% of the vote to Hoover’s 39.7%.
What do you think?
What caused the stock market crash that began in October 1929?
Do you think President Herbert Hoover’s response to the economic downturn that began in 1929 was adequate?
What do you think your life would have been like if you had lived during the Great Depression?
Want to join the conversation?
- We've helped many other countries when they were in a state of "Great Depression" so why didn't they help us?(1 vote)
- Europe was struggling to recover from WWI, especially Germany and France. Many countries owed the U.S. money that had been lent during the war, but worldwide economic depression and years of destruction meant the countries didn't have the resources to pay back or help support the U.S. Also, after WWI, many countries, including the U.S. became more isolated than interventionalist. This was partly due to the Hawley-Smoot Tariff because the tariff made American goods expensive for foreign buyers, who then raised the prices of their own goods so their industries could make profits and earn money to buy American products and pay off debt to the U.S. This reduced global trade, closing potential markets and worsening the depression.
The U.S. was able to support European countries during WWI because it continued to trade and farm while Europe was embroiled in conflict and killing each other on fields rather than growing crops. After the war, these countries were already in debt to the U.S. and their economies weren't stable enough to recover from a war and save the United States from overspeculation, insider trading, and the overuse of consumer credit which had been occurring for years. The depression caused radicalism in several countries as capitalism was viewed as a failing economic system and malcontents advocated for socialism, communism, and stronger central government. These new leaders were more concerned about saving their own countrymen (and gaining personal power) than helping a nation across the Atlantic. So political in addition to economic turmoil hindered foreign aid to the U.S.(32 votes)
- how did the great depression crush some people's ability to achieve the American Dream(13 votes)
- people lost their money and couldn't buy property or businesses they truly desired(5 votes)
- This may sound like a stupid question, but why exactly did people lose their jobs? As in what was the exact cause of this unemployment?(4 votes)
- This mostly happened because the employers couldn't pay there workers so the workers had to be laid off.(8 votes)
- Why didn't people take out their money from the stock market before it hit rock bottom?(3 votes)
- During the 1920s, millions of Americans were buying stocks. Some bought them on credit, so they borrowed money, invested it in the stock market and hoped to repay the loan with the money and profits they make. The Roaring 20s was a time of economic prosperity, and the stock market was going up and up. Most people believed that it would go up forever. Some people during that time did point out problems with the stock market and claimed that it was a bubble, meaning that the stock market would eventually fall. However, those people were ignored and the media,press,and others claimed that good times were still ahead. When the Stock Market crashed on October 29, 1929(Black Tuesday) people did rush to sell their shares, but there were no buyers, so most of the money people invested was lost.(8 votes)
- what can we do if the stocks crash again?(2 votes)
- They have crashed again, and again, and again. Read up on the final years of the George Bush presidency.(8 votes)
- In Stock Market Crash of 1929, paragraph 2, why did the stock market lose one thirds of its september value? Can you explain how the Stock Market Crash of 1929 contributed to the affect of the great depression?(2 votes)
- Stock markets are companies that are offering to give you a very small bit of the company, like way less than even .0001%. When the stock market crashes, that reflects on the companies all around the U.S. When the market crashes, millions of companies are losing a lot of money, and so are the stock holders. When a company is losing money, it has to fire a lot of people so it won't go into debt, and the government has to start inflating money to make up for all the money that has been lost. You cannot keep inflating the money, or else it has no more value, so the government had to stop printing money, thus leading to millions more losing their jobs and the Great Depression. Hope this helps!(7 votes)
- Would this happen again in the later years(2 votes)
- Yes and no. In 2008, the banks failed again, but President Obama took major loans to get the economy back on its feet, basically skipping the depression stage. And no in 2020, well who knows what will happen.(6 votes)
- What was life like after the Great Depression?(1 vote)
- After the great depression, life was war. It even got a name: The Second World War.(6 votes)
- Do you think president Herbert Hoover’s response to the economic downturn that began in 1929 was adequate?(3 votes)
- yes and no. i think hoover had the right views, but tried to provide the prospect of his ideas too late, creating even more resentment toward him.(1 vote)
- What would have life in the Great Depression even been like for the common worker? They were clearly starving and hopeless but what were the day to day challenges other than a lack of food? Disease perhaps?(2 votes)
- Keeping a roof over your head.
Keeping clothes on your back.
Providing a loving and worry free environment to your children.
These were all challenges.
By and large, people coped, though enjoyment was in short supply.
Note that certain sectors of the economy even flourished. Movies and stage plays made huge amounts of money. Large construction companies that built the things the government paid for made a bundle, too.(2 votes)