Unit 2 Notes 1:Causes of and Life During the

Great DepressionModern U.S. History – Hamer

February 23, 2011

Economic Troubles in the 1920’s

The 1920’s were similar to the Gilded Age of the late 1800’s – beautiful and seemingly prosperous on the outside with huge problems on the inside. While new improvements in technology allowed industries and farmers to produce more goods, this led to overproduction which flooded the market and drove down the price for goods.

Economic Troubles in the 1920’s

Advertising and a rising consumer culture drove people to purchase more goods which led to a reliance on buying on credit.

Changes Hurt IndustriesMajor industrial powerhouses, such as railroads, mining, and lumbering, all suffered significant losses in the 1920’s. Trucks, busses, and cars caused railroads to lose business. Lumbering had expanded during the war but was no longer in high demand. Coal mining was injured by new forms of energy – hydroelectric power, fuel oil, and natural gas.

Changes Hurt Industries

One of the greatest industries to suffer in the 1920’s was agriculture. During WWI, the world demand for wheat and corn grew rapidly as European countries could not produce their own. Farmers took out loans to purchase new equipment and land to grow more crops.

Changes Hurt Industries

After the war, though, crop prices fell at least 40%. This was caused by farmers producing more goods than were demanded. Between 1919 and 1921, annual farm income fell from $10 billion to $4 billion.

Problems with Consumers

Farmers began purchasing fewer goods as their incomes dropped, but this trend also permeated a large portion of society. Production was expanding faster than wages; this led to an expanding gap between the rich and the poor.

Problems with Consumers

Workers were making less and could purchase fewer products even though factories continued to produce. After a few years of buying on credit, people began to realize that they had less income to spend as they were paying off previous purchases. This realization also dampened consumer spending.

Uneven Distribution of Wealth

During the 1920’s, the rich got richer and the poor got poorer. Between 1920 and 1929, the income of the wealthiest 1% of the population rose by 75% compared with a 9% increase for America as a whole.

Uneven Distribution of Wealth

More than 70% of American families earned less than the amount needed to maintain a decent standard of living ($2500). Economists estimate that the average man or woman bought a new outfit of clothes only once a year. Most of the people in the 1920’s did not have the money to purchase the goods that factories were producing.

Uneven Distribution of Income - 1929

Faith in the Stock MarketThroughout the 1920’s, those who could afford to do so invested money in the stock market at an increasing rate. The Dow Jones Industrial Average climbed steadily throughout the 1920’s and people saw the stock market as an example of America’s ever increasing prosperity.

***Dow Jones Industrial Average: a measure of the stock market’s health, this is an

average of 30 large firms that are traded on the NY Stock Exchange

Faith in the Stock Market

By 1929, 3% of the population (4 million people) owned stocks; many of these investors were already wealthy, and others were hoping to strike it rich.

Faith in the Stock Market

The practice of buying on margin, where a person could buy a stock by paying a small percentage of its price and borrowing the rest, grew rapidly. This practice was used by speculators – people who quickly bought and sold stocks in the hopes of getting rich.

Faith in the Stock Market

The combination of these practices fueled the upward progress of the market, but at inflated rates. The rising prices for the stocks did not reflect what the companies were worth. Also, if someone was buying on margin and the price of their stock dropped, they had no way to pay off their loan.

The Stock Market Crashes

In September of 1929, the stock market began to show signs of stress as it peaked and then fell. Some began to lose confidence in the market and sold their stock. On October 24th, the market plunged and panicked investors began to unload their shares.

The Stock Market Crashes

The worst came on Tuesday, October 29th – now known as Black Tuesday. People frantically tried to sell their shares before prices fell even lower. A record 16.4 million shares were sold that day. Even more could not find buyers.

The Stock Market Crashes

Those who had bought stocks on the margin were faced with huge debts, while those who had invested their savings lost everything. By mid-November, investors had lost approximately $30 billion – an amount equivalent to how much America spent in World War I.

After the 1929 Crash

The Great Depression - Economics

The 1929 Stock Market crash triggered the beginning of the Great Depression. While the crash alone did not cause the Great Depression, it quickened the collapse and made it more severe.

*** The Great Depression: the period from 1929 to 1940 in which the

economy collapsed and unemployment rose drastically

Depression hits Everyone

Bank and Business Failures

After the crash, many people panicked and tried to withdraw their savings from banks. But many could not get their money because banks had invested it in the stock market and had lost it. In the fall of 1929, 600 banks closed. By 1933 11,000 of the country’s 25,000 banks had failed. Millions of people lost their savings accounts.

Bank and Business Failures

Between 1929 and 1932, the GNP was cut nearly in half from $104 billion to $59 billion. Approximately 90,000 businesses went bankrupt including automobile and railroad companies.

***Gross National Product (GNP): the nation’s total output of goods and

services (how much America produces in a year)

Bank and Business Failures

Millions of workers lost their jobs. Unemployment jumped from 3% in 1929 to 25% in 1933 (13 million workers out of work in 1933). Those who kept their jobs faced pay cuts and reduced hours.

Bank Failures

Business Failures

Unemployment Rates

2-2 Clip 1 - The Crash

Worldwide Problems Add to the Depression

Much of Europe had suffered during the 1920’s as they attempted to recover from WWI debts. Germany also had to pay billions in war reparations. Since America’s buying power dropped drastically during the Great Depression, the U.S. could no longer import European goods. This made it harder to sell American goods abroad.

Worldwide Problems Add to the Depression

In 1930, Congress passed the Hawley Smoot Tariff Act. This established the largest protective tariff in U.S. history. The point of the tariff was to protect American farmers and manufacturers from foreign competitors. But it had a terrible effect: by reducing the flow of foreign goods into the U.S., other countries had less U.S. currency with which to purchase American goods.

Worldwide Problems Add to the Depression

The tariff worsened unemployment in industries that could no longer export goods to Europe. Other countries also retaliated by raising their own tariffs. World trade fell by more than 40% in just a few years.

Life During the DepressionWhile 25% of the population was unemployed, many other workers were receiving reduced wages. Millions during the Depression suffered through hardship, homelessness, and hunger.

The Depression in CitiesPreviously the pinnacle of culture, cities now harbored millions without jobs. Many people were evicted from their homes and slept in parks or sewer pipes with newspapers for blankets. Others built shacks out of cardboard and scrap materials. Groups of these shacks, called shantytowns, sprung up in every major city.

Shantytown in NYC

The Depression in CitiesTo feed themselves, the poor dug through garbage cans or begged. Soup kitchens offered free or low-cost food from charitable organizations and bread lines gave away some food. While these organizations existed, those who waited for their handouts often felt hopeless and ashamed.

Soupline

The Depression in Cities

Charitable organizations also frequently discriminated

against African Americans. African Americans and Latinos

suffered a higher rate of unemployment and collected

lower wages. This time also saw increasing racial

violence with 24 African American deaths from lynching

in 1933. Latinos living in the Southwest were often

deported even though many had been born in America.

By the late 1930’s, hundreds of thousands of people of

Mexican descent had to relocate to Mexico.

The Depression in Rural Areas

Those in rural areas did have one advantage over city dwellers – they could try to grow their own food. With prices for farm goods dropping and debt rising, thousands of farmers lost their land though. Between 1929 and 1932 about 400,000 farms were lost through foreclosure. Many farmers turned to tenant farming and barely made a living.

The Dust Bowl

A drought began in the early 1930’s that wreaked havoc on the Great Plains. The land of the Great Plains had already been damaged through heavy use of plowing and tilling and overproduction of crops that destroyed the delicate soil structure.

The Dust BowlWhen a drought began in the early 1930’s, there was little plant matter to hold the soil down. Wind scattered the precious topsoil and exposed sand underneath. The dust traveled hundreds of miles – a 1934 dust storm carried dust from the plains to the East Coast cities.

Dustbowl

Pictures of the Dustbowl

The Dust BowlThe region that was hardest hit by soil erosion and dust storms came to be known as the Dust Bowl. Many of the families that could not make it in the Dust Bowl or had been evicted packed up their families and moved west, following Route 66 to California. Some found work as farmhands and others continued to wander. By the end of the 1930’s, hundreds of thousands of farm families had migrated to California, Oregon, and Washington.

Leaving the Dustbowl

2-2 Movie Clip 2 – The Dust Bowl

Effects on the American People: Men

Many men had difficulty coping with unemployment or reduced wages. They were accustomed to having a job and society placed pressures on them to provide for their families. These combined to create misery in many men who were unemployed for more than a few months.

Effects on the American People: Men

During the Great Depression, as many as 300,000 people, mostly men, wandered the country. They were known as “hoboes” and hitched rides on railroad boxcars and slept under bridges. These hoboes looked for work wherever they could get it and begged for handouts.

Riding the Rails

Hobo Signs

Women and Children

Just as the social pressures placed on men made their time during the Depression more difficult, women also struggled because of the roles that they were supposed to fill. Some women tried to work outside of the home to make extra money, but many people resented this. They felt that married women had no right to work when there were unemployed men.

Women and ChildrenAt the same time they were also making less for their work than a man would. Women were also supposed to take suffering quietly; because of this many women died in cold attics and rooming houses. They were too ashamed to reveal their hardship.

Homeless Life

Women and ChildrenChildren suffered greatly during the Depression. Malnourishment and lack of money for healthcare led to serious problems. The government was also losing money because of falling tax revenues. This caused many local areas to shorten the school year or close schools entirely. By 1933, some 2,600 schools were closed across the country with more than 300,000 students out of school.

Women and ChildrenMany teenagers felt that they were an extra burden on their family and joined the hoboes crossing the country on trains. These “Hoover tourists” were eager to tour the country for free and escape poverty. As exciting as these journeys were, they were also dangerous. From 1929 to 1939, almost 25,000 “trespassers” on railroad property were killed and another 27,000 injured.

Children’s “Health Clinic”

2-2 Movie Clip 3 – Hoboes

Map of the Depression

Social and Psychological Effects

The suffering during the Great Depression had a tremendous social and psychological impact on America. Between 1928 and 1932, the suicide rate rose more than 30% and three times as many people were admitted to state mental hospitals.

Social and Psychological Effects

The Depression also had long lasting social effects: many people could not afford to go to the doctor or dentist and their health deteriorated, others gave up their dream of going to college, and many young people put off getting married or having children because of their lack of income.

Social and Psychological Effects

The trauma of poverty also remained with many Americans who lived during this time – achieving financial security became a major focus for many after the Depression. The kindness that some showed to strangers who were suffering also strengthened communities and provided a feeling of unity for Americans.

Social and Psychological Effects

Distractions from the Depression were welcomed in the 1930’s. Talking movies had been invented in the late 1920’s and those who could afford to saved their nickels to go to the movies on Saturday. Those who could afford to also had a radio in their home. Every evening beginning at 7pm, families would sit down and listen to comedy shows, interviews with celebrities, and dance music.

Social and Psychological Effects

The 1930’s also saw a rise in America’s fixation on “heroes”. Characters such as Flash Gordon, Little Orphan Annie, and Buck Rogers were found on the back of cereal boxes, in comic books, and on the radio. Children were especially fascinated by these figures that could fight back even in the worst of times.

Social and Psychological EffectsAnother creation of the Depression was the criminal. Organized crime had taken hold during the Prohibition in the 1920’s, but the 1930’s saw a sharp increase in bank robbers and other high profile thieves. John Dillinger, Ma Barker and her boys, and Bonnie and Clyde were all products of this era.

Social and Psychological Effects

The agency that would become the FBI grew out of this cross-country criminal activity. FBI agents were called “G-men” at the time (as in Government men) and their stories of catching criminals fascinated children and adults during the 30’s.

2-2 Movie Clip 4 – Distractions: Movies and Radio