Chapter 22

The Great Depression Begins

SIGNS OF TROUBLE

Industries in trouble

• Key basic industries which had been the backbone of the American economy barely made profits– Railroads gave way to new types of transportation (cars,

trucks, buses)– Mining & lumbering no longer in demand after the war,

new forms of energy like electricity become popular– Automobiles, construction & consumer goods weakened

as people went further in debt– The housing market declined (therefore, so do related

industries

Four Causes of the Depression

1. Tariff & war debt policies cut down on the foreign market for American goods

2. There was a crisis in the farm sector3. There was availability of easy credit4. There was an unequal distribution of

income

1. Tariff & war debt policies cut down on the foreign market for American goods

• Fordney McCumber Tariff (1922) – Raised tariff 60% percent to protect US businesses

after the war• Hawley-Smoot Tariff (1930)– Raised tariff to new heights to protect US

businesses– Actually • Reduced the flow of goods into the US• Prevented other countries from buying American goods

2. Crisis in the Farm Sector

• During the war prices & demand for crops soared so farmers took out loans for land & equipment

• After the war, demand & prices fell 40-60%• Farmers could not repay their loans– Banks foreclosed (took) their farms– Because farmers defaulted (didn’t pay) on their

loans, rural banks failed

Congress tries to help the farmers

• McNary-Haugen Bill • Called for federal price-supports for key

products– Government would buy the surplus of crops at

guaranteed prices, and sell them on the world market

– Coolidge vetoed the bill 2x

3. The Availability of Easy Credit

• Although people appeared prosperous, they were living beyond their means

• People acquired HUGE debts & couldn’t pay them off

• So they stopped spending money• This led to overproduction

4. Unequal Distribution of Income

• Rich Richer, Poor Poorer– Income of wealthiest 1% rose by 75%– Income of 99% rose by 9%– More than 70% of families earned less than the

standard for decent living ($2,500 per year)

Black Tuesday

• October 29, 1929• Stock prices fell sharply• By November investors

had lost 30 billion

Impact of Black Tuesday

• Banks Fail– Banks invested in stock

markets & lost people’s money• 600 banks closed in 1929• 11,000 of 25,000 banks

closed by 1933 (almost ½!)

– Government did not insure bank accounts

• Businesses Failed • From 1929-1932– The Nation’s total output of goods & services was

cut nearly in half– 90,000 businesses bankrupt– Unemployment went from 3%-25%

Unemployment

Purchasing Power Productivity

Worldwide Impact

• The stock market crash was felt all over the world

• Americans could no longer buy European goods

• Hawley-Smoot Tariff prevented the sale of American goods abroad

• Trade falls 40%

Hardship & Suffering during the Depression

Ch. 22.2

Depression in the Cities

A. People lost their jobs, were evicted from their homes and ended up living in the streets.

B. Shantytowns: towns consisting of shacks The homes were made out of scrap metal and

garbage (Hoovervilles)

C. People begged for food or went to soup kitchens and breadlines to get free or low cost food in order to survive. Charitable organizations ran these operations.

Families

• Family stood as a source of strength• People believed in traditional values and

family unity• With no money, people stayed home and

played board games, like Monopoly, and listening to the radio

Fathers

• Depressed that couldn’t support families• Many fathers left and became transients, or

people that wander• 300,000 “hoboes” wandered the country

Mothers

• Canned food, sewed clothes, managed budgets

• Became targets of resentment– If men can’t find jobs, married women should not

be working!

Children

• Poor diets, lack of healthcare led to malnutrition and diet-related disease

• Schools closed or shortened– 300,000 students were out of school– Thousands went to work

• Road the rails– “Hoover tourists”

African Americans

A. While the national unemployment rate lingered between 23-33%, Unemployment for African Americans was 50%

Quote

“The Negro was born in depression. It didn’t mean too much to him, The Great American Depression…The best he could be is a janitor or a porter, or a shoeshine boy. It only became official when it hit the white man.”

Treatment of Minorities

A. Latinos and African-Americans had an especially difficult time because they earned less wages to begin with and had to deal with daily discrimination.

B. Mexican-Americans were specifically targeted in the Southwest. Even Latinos who had been born in America.

Mexican-Americans

C. Some Mexican Americans voluntarily returned to Mexico and others were forced out by Federal agents.

Example: 1.5 million Chicanos in US at the outset of Depression. 100,000 lived in L.A. and 13,000 were deported back to Mexico.

Depression in Rural Areas: DUST BOWL

A. Severe drought

B. Overproduction during the 1920’s destroyed the soil on American farms which hindered the growing of crops.

C. The wind caused dust to be scattered across the country. Region hit the hardest was called the Dust Bowl

Dust Bowl

D. Kansas, Oklahoma, Texas, New Mexico, and Colorado. People from these states often picked up and headed west to CA to find and find work as migrant workers. Their nickname was “Okies.”

On the fourteenth day of April of nineteen thirty five, There struck the worst of dust storms that ever filled the sky:You could see that dust storm coming the cloud looked deathlike black,And through our mighty nation, it left a dreadful track...This storm took place at sundown and lasted through the night, When we looked out this morning we saw a terrible sight:We saw outside our windows where wheat fields they had grownWas now a rippling ocean of dust the wind had blown.It covered up our fences, it covered up our barns, It covered up our tractors in this wild and windy storm. We loaded our jalopies and piled our families in, We rattled down the highway to never come back again.

Health

• Emotional Health– Suicide rate rose more than 30%– 3x as many people were admitted into state

mental institutions• Physical Health– People stopped going to the dr. or dentist because

they couldn’t afford it• Young people gave up dreams of college,

getting married, & having children

President Hoover’s Response

RUGGED INDIVIDUALISM

People needed Help

• Direct Relief – cash payments or food provided by the government to

the poor• Price Supports for Farmers– McNary-Haugen Bill – Government would buy the surplus of crops at

guaranteed prices, and sell them on the world market– Coolidge vetoed the bill 2x

• He relied on charities & local organizations to pitch in and help care for the less fortunate

How does Hoover respond to the Depression?

• “Any lack of confidence in the economic future…is foolish.”

• Rugged Individualism– People should succeed through their own efforts,

Take care of themselves & their families rather than depend on the government to bail them out

• Hoover rejected the notion of Direct Relief, thought that it would weaken people’s self respect.

Mid term election of 1930

• As economy worsened, people became more dissatisfied with Hoover’s government

• Called shantytowns Hoovervilles”, Newspapers they covered themselves with “Hoover blankets”, empty pockets“Hoover flags”

• Democrats won more seats in Congress– How is this a reaction to Hoover?

Hoover Backs Cooperatives

• A Cooperative is a group of people or businesses who join together to meet an economic, social or political goal

• Federal Farm Board– Group of farmers intended to raise crop prices by

helping members buy crops & keep them off the market temporarily until prices rose

• National Credit Cooperation– Loaned money to smaller banks to hold off

bankruptcy

Direct Intervention

• With the 1931 Presidential election looming, Hoover takes action

• Federal Home Loan Bank Act– lowered mortgage rates for homeowners and allowed farmers to

refinance their farm loans and avoid foreclosure• Glass Steagall Act

– (after Hoover’s time in office is over) separated investment from commercial banking – hopefully will prevent another crash

• Reconstruction Finance Corporation– authorized $2 billion for emergency financing for banks, life

insurance companies, railroads and other large businesses

Building Boulder Dam

• Supported his belief that the federal government can encourage cooperation– Proposed to finance the project by using profits from

sales of the electric power that the dam would generate– Negotiated agreement on water rights among 7 states

(CA, CO, NV, NM, UT, WY)• Provided electricity and flood control, also provided

a regular water supply to CA, which enabled the growth of CA massive agricultural economy– Provides water for LA & Las Vegas

Gassing the Bonus Army

• Further damaged Hoover’s image • Patman Bill – authorized government to pay a

bonus to WWI veterans who had not been compensated adequately for service

• Didn’t Pass