Chapter 22 Class Notes by stariya


									Mr. Schaber - US History - Ch. 22 - Crash and Depression
*Section 1 - The Economy in the Late 1920s
- The mood of most Americans in the late 1920s was optimistic, and with good reason
- Because of medical advances, life expectancy had lengthened and people lived better
- The brightest hopes came from the economy
- In his final message to Congress, Pres. Calvin Coolidge said the country could “regard the
present with satisfaction and anticipate the future with optimism”
- His successor, Herbert Hoover, predicted that “poverty will be banished from this nation”
- In 1928, Hoover won the Presidential election with ease - he was a self-made millionaire
- People expected that the good times would only get better under Hoover
- As Hoover took office, the US economy seemed to be in fine shape
- Because the stock market was widely regarded as the nation‟s economic weathervane, The New
York Times could describe the year as one “of unprecedented advance, of wonderful prosperity”
- Working people seemed to have prospered in the post-World War I period - since 1914, the
value of workers‟ wages had risen more than 40 percent - unemployment averaged below 4
- People had unusually high confidence in the business world during the 1920s - for some,
business success became almost a religion
- For example, corporate leader John J. Raskob, in his 1929 article “Everybody Ought to Be
Rich,” stated that savings of only $15 a week over 20 years could bring a $400-a-month income
from investments
- Although people in the late 1920s were wildly buying stocks with borrowed money, the Hoover
administration did little to discourage such borrowing
- To keep the unions weak, many companies launched strategies to meet some of their workers‟
needs without demands from unions - this idea is called welfare capitalism
- Employers raised wages and provided benefits such as paid vacations, health plans, and even
English classes for recent immigrants
- Despite some stock market success stories, it was mainly the rich who got richer - huge
corporations rather than small businesses dominated industry
- Similarly, a small proportion of families held most of the nation‟s personal wealth
- Another sign of trouble was an increase in personal debt - in the 1920s assembly-line
production made consumer items more affordable and available - people continually bought and
bought, whether they could afford or not
- Fed by the optimism of the age, a “get-rich-quick” attitude prevailed during the 1920s
- There was widespread speculation (the practice of making high-risk investments in hopes of
getting a high gain)
- Before WWI only the wealthy played in the stock market - now, the press reported stories of
ordinary people who had made fortunes
- Small investors entered the stock market, often with their life savings
- By the late 1920s, the country‟s warehouses held piles of un-bought consumer goods - wages
had risen, but people still could not afford to buy goods as fast as the assembly lines turned them
- Although the stock market kept rising, overproduction caused some industries to slow in the
late 1920s
- For some sectors of the farm economy, the 1920s brought not prosperity but devastation
- During the good times, many farmers had purchased the new tractors and other machinery now
- Falling farm prices made farmers unable to repay their debts for land and machinery - rural
banks suffered when loans were not repaid, and about 6,000 banks went out of business
- Life remained exceedingly hard for many factory workers as well - while companies grew
wealthy, most laborers still worked long hours for low wages
- To some observers, these factors - uneven wealth, rising debt, stock speculation,
overproduction, and the hardships of farmers and workers - clearly signaled trouble in the
*Section 2 - The Stock Market Crash
- In early 1928 the Dow Jones Industrial Average (an average of stock prices of major industries)
had climbed to 191 - on September 3, 1928, the Dow Jones Average reached an all-time high of
- The rising stock market dominated the news - keeping track of prices became almost as popular
as counting Babe Ruth‟s home runs
- After the peak in September, stock prices fell slowly - some brokers began to call in loans, but
others continued to lend even more
- When the stock market closed on Wednesday, October 23, the Dow Jones average had dropped
21 points in 1hr.
- The next day, Thursday, October 24, worried investors began to sell, and stock prices fell
- Again, business and political leaders told the country not to worry
- Hoover maintained that the nation‟s business “is on a sound and prosperous basis”
- To stop the panic, a group of bankers pooled their money to buy stock - this action stabilized
prices, but only for a few days
- By Monday prices were falling again - investors all over the country raced to get their money
out of the market
- On October 29, known as Black Tuesday, a record 16.4 million shares were sold, compared
with the average 4 million to 8 million shares a day earlier in the year
- This collapse of the stock market is known as the Great Crash
- It took time for people to recognize the extent of the disaster caused by the Crash
- For people whose entire wealth did not depend on the stock market, life went on much as
before, with perhaps a few cutbacks - others, including wealthy families, lost everything
- By 1929, about 4 million people out of a population of 120 million had invested in the stock
- They were first to suffer from the Crash, but it soon affected millions who had never owned a
single share of stock
- The Crash triggered a much wider, long-term crisis known as the Great Depression (a severe
economic decline that lasted from 1929 until the US entry into WWII in 1941)
- The Great Depression caused millions of Americans to lost their jobs, farms, and homes
- As income and profits fell, American factories began to close - thousands of workers lost their
jobs or had their pay cut - in 1931 Henry Ford shut down his Detroit automobile factories,
putting 75,000 people out of work
- By 1932 more than 12 million people were unemployed, about a quarter of the entire US labor
- Others worked only part-time or had their wages cut
- The Gross National Product (GNP) - the total value of goods and services a country produces
annually - was $103 billion in 1929, and by 1933 it was only $56 billion
- The effects of the Crash spread - restaurants and other small businesses closed because
customers could no longer afford to go to them
- Farm prices, already low, fell even more, bringing final disaster to many families
- Unpaid farm loans already had ruined many rural banks - now city banks were in trouble
- Banks exist on the interest they earn from lending out their deposits - they assume that not
everyone will claim their deposits at once
- After the stock market crash, people with loans to repay as well as nervous depositors rushed to
withdraw their money
- Thousands of banks closed their doors when they could not return their depositors‟ money
- By 1933, the money from 9 million savings accounts had vanished
- When the world‟s leading economy fell, the global economic system began to crumble
- The US had insisted that France and Britain, its wartime allies, repay their war debts
- The Allies had to rely on Germany‟s reparations payments for income
- As long as the US companies invested in Germany, reparations payments continued - but with
the Depression, investments fell off - German banks failed, Germany suspended reparations, and
the Allies in turn stopped paying their debts - Europeans no longer could afford to buy
American-made goods
- Thus the American stock market crash started a downward cycle in the global economy
- But, deeper problems were the real underlying causes of the Great Depression
- During the 1920s, speculators bought stocks with borrowed money, then pledged those stocks
as collateral to buy more stocks
- The stock market boom was thus based on borrowed money and optimism instead of real value
- Mistakes in monetary policy were also to blame
- The Federal Reserve system had cut interest rates in the „20s to spur economic growth - then, in
1929, it limited the money supply to discourage lending
- After the Crash there was too little money in circulation to help the economy recover
- Overall, the seemingly prosperous economy lacked a firm base - national wealth was unevenly
distributed, with the most money in the hands of a few families who tended to save or invest
rather than buy goods
- Industry produced more goods than most consumers wanted or could afford

*Section 3 - Social Effects of the Depression
- Many Americans thought the Depression that followed would not last - for them, reality hit in
1931 and 1932
- Imagine that the bank where you had a savings account suddenly closed - your money was
gone - or your parents lost their jobs and could not pay the rent or mortgage - one day you come
home to find your furniture on the sidewalk - you had been evicted
- People at all levels of society faced these conditions and situations
- The hardest hit were those at the bottom of the economic ladder - some unemployed laborers,
unable to pay their rent, moved in with relatives - other people just drifted
- Homeless people sometimes built shanty towns, with shacks of tar paper, cardboard, or scrap
- These shelters of the homeless came to be called Hoovervilles, mocking the President, whom
people blamed for the crisis
- When they could not pay their mortgages, they lost their homes or farms to the banks, which
sold them at auction
- In the South, landowners expelled tenant farmers and sharecroppers
- In protest against low farm prices, farmers dumped thousands of gallons of milk and destroyed
other crops - these desperate actions shocked a hungry nation
- For thousands of farm families in the Midwest, the harsh conditions of the Depression were
made even more extreme by another major crisis of the decade
- This one was not economic, but environmental - it was the Dust Bowl (a region in the Great
Plains where drought and dust storms took place for much of the 1930s)
- More than 440,000 people left Oklahoma during the 1930s - nearly 300,000 people left Kansas
- Thousands of families in Oklahoma, Texas, Kansas, and other southwestern Plains states
migrated to California
- Dorothea Lange - she photographed the hundreds of migrant workers that streamed into
California from the Dust Bowl - the pictures stirred public attention and helped win aid for the
- Her most famous photograph is entitled “Migrant Mother” - her work also inspired John
Steinbeck‟s Depression-era novel The Grapes of Wrath
- As the Depression wore on, it took a serious physical and psychological toll on the entire nation
- “No one has starved” President Hoover declared - but, some did starve, and thousands more
went hungry
- One man said, “All last winter we never had a fire except about once a day when Mother used
to cook some mush or something. When the kids were cold they went to bed. I quit high school,
of course.”
- Living conditions declined as families moved in together, crowding into small houses or
- People gave up even small pleasures like an ice cream cone or a movie ticket
- Men who had lost jobs or investments often felt like failures because they could no longer
provide for their families - many were embarrassed to be seen at home during normal working
hours - they were ashamed to ask friends for help
- Women faced other problems - those who depended on a husband‟s paycheck worried about
feeding their hungry children - working women were accused of taking jobs away from men
- Hard economic times put groups of Americans in competition with one another for a shrinking
number of jobs
- This produced a general rise in suspicions and hostilities against minorities - African
Americans, Hispanics, and in the West, Asian Americans, all suffered
- African Americans continued to leave the South, although not as many as in the 1920s
- Black unemployment soared - about 56% of black Americans were out of work in 1932
- Because relief programs discriminated against African Americans, black churches and
organizations like the National Urban League gave private help
- Discrimination increased for African Americans in the South
- Hispanics and Asian Americans lost not only their jobs, but also their country - thousands were
deported - even those born in America
- A generation of Americans would live to tell their grandchildren how they survived the
- Nothing was wasted - people used everything they could for food, clothing, etc.
- Many kids never got to go to high school, “as survival was more important”
*Section 4 - Surviving the Great Depression
- No one who lived through the Great Depression ever forgot it - long after the economy
rebounded, the “Depression generation,” even those who recovered enough to live a very
comfortable life, would continue to pinch pennies as if financial ruin were just around the corner
- Some people even stuffed money under their mattresses rather than trust their life savings in a
- One reporter said of the American people, “...there is one thing they (Americans) are not, and
that is - beaten.”
- People pulled together to help each other - people helped those they saw as worse off than
- As bad as conditions were, there were no widespread calls for radical political change
- In Europe, economic problems brought riots and political upheaval, but in the US most citizens
trusted the democratic process to handle the problems
- But, some radical and reform movements came from the likes of the Communist party and the
- For the most part, Americans gritted their teeth and waited out the hard times
- Jokes and cartoons kept people laughing through their troubles
- The term “Hooverville” was at first a joke - people who slept on park benches huddled under
“Hoover blankets,” or old newspapers
- Empty pockets turned inside out were “Hoover flags”
- When Babe Ruth was criticized for requesting a salary of $80,000, higher than Hoover‟s, he
joked, “I had a better year than he did.”
- People fought despair by laughing at it - Will Rogers quipped, “When Wall Street took that tail
spin, you had to stand in line to get a window to jump out of.”
- Americans suffering through the Depression had no idea when the hard times would end - they
looked for signs of change, and even in the early 1930s there were some (signs)
- In February 1933, just 14 years after it passed the Nineteenth Amendment banning the sale of
alcoholic beverages, Congress passed the Twenty-first Amendment, repealing Prohibition
- The 21st Amendment was ratified by the end of the year
- For many, a dramatic symbol of hope was the new Empire State Building, begun in 1930 - this
became the world‟s tallest building for its time
- Some 2,500 to 4,000 people worked on its construction on any given day
- The 102-story Empire State Building soared 1,250 feet into the sky and was topped with a
mooring mast for blimps - the building‟s 67 elevators, traveling 1000 feet per minute, brought
visitors to its observation deck
- On the first Sunday after it opened in 1931, more than 4,000 people paid a dollar each to make
the trip to the top
- By 1933, it was clear that an era was ending - one by one, symbols of the 1920s faded away
- In 1931 organized crime gangster Al Capone was at last brought down, convicted of tax
evasion and sent to prison - baseball legend Babe Ruth retired in 1935
- In 1932 the nation was horrified when the infant son of aviation hero Charles Lindbergh and
Anne Morrow Lindbergh was kidnapped and murdered
- Somehow this tragedy seemed to echo the nation‟s distressed conditions and its fall from the
energy and heroism of the 1920s
- Finally, in January 1933, Calvin Coolidge, the former President who presided over the
freewheeling prosperity of the 1920s, died
*Section 5 - The Election of 1932
- Hoover blamed the Great Depression on “world-wide economic conditions beyond our control”
- not on problems in the US economy
- Taking Hoover‟s advice, business and government leaders tried to maintain public confidence
in the economy
- Hoover believed that voluntary controls by United States businesses were the best way to end
the economic crisis
- Hoover held rigidly to this principle of voluntary action - but, he could not make his plans
attractive to the American people - after a year of misery, they began to blame him and the
Republicans of the crisis
- So, Hoover took a more active approach - to create jobs, the government spent more on new
public buildings, roads, parks, and dams - Boulder Dam (later named Hoover Dam) was built
during this time
- In 1932, Hoover set up the Reconstruction Finance Corporation (RFC), which gave government
credit to banks so that they could extend loans
- Some government efforts helped, but not enough
- Hoover wanted state and local governments to handle relief, but their programs never had
enough money
- Despite the RFC, banks continued to fail
- Many people blamed Hoover, not always fairly, for their problems
- Hoover argued that direct federal relief would destroy people‟s self-respect and create a large
- His refusal to help brought bitter public reaction and negative publicity
- While people went hungry, newspapers showed a photograph of him feeding his dog on the
White House lawn
- Private charities and local officials could not meet the demands for relief as Hoover wanted
- A low point for Hoover came in the summer of 1932, when 20,000 jobless WWI veterans and
their families encamped in Washington, D.C.
- They called themselves the Bonus Army, and they wanted immediate payment of a pension
bonus that had been promised for 1945
- The House of Reps. agreed, but the Senate said no - most of the Bonus Army went home, but a
few thousand stayed around, living in shacks
- Although the bonus marchers were generally peaceful, a few violent incidents prompted
Hoover to call in the army - General Douglas MacArthur decided to use force to drive the
marchers out of Washington
- Armed with bricks and stones, the Bonus Army veterans faced their own country‟s guns, tanks,
and tear gas
- Many people were injured - Hoover was horrified, but he took responsibility for MacArthur‟s
- “I pledge myself to a new deal for the American people,” announced presidential candidate
Franklin Delano Roosevelt as he accepted the Democratic party‟s nomination at its Chicago
convention in July 1932
- The Republicans, in June, had again named Hoover as its candidate
- Roosevelt, nicknamed “FDR” by the press, was born in 1882 - he attended Harvard University -
he was elected twice to the New York State Senate before becoming Assistant Secretary of the
Navy in President Woodrow Wilson‟s administration
- In 1921, he came down with polio and never walked without help again
- He married Eleanor Roosevelt, a niece of Theodore Roosevelt, and Eleanor and FDR were
distant cousins
- After FDR‟s success as governor of New York (1929-1932) his supporters believed him ready
to try for President
- Unlike Hoover, FDR was ready to experiment with government roles
- He had a genuine compassion for ordinary people, in part because of his disability
- He was also moved by the great gap between the nation‟s wealthy and the poor
- As governor of New York, he had worked vigorously for Depression relief
- As a presidential candidate, FDR promised the country a “new deal”
- The 1932 presidential election was a battle between those who believed that the federal
government could not and should not try to fix people‟s problems, and those who felt that large-
scale problems such as the Depression required the government‟s help
- In reality, probably any Democratic candidate could have beaten Hoover in 1932, but FDR was
- FDR won the presidency by a huge margin of 7 million popular votes
- Some people did not vote for Roosevelt as much as they voted against Hoover and the
Republican policies
- In the depths of the Great Depression, many Americans had to give up cherished traditional
beliefs in “making it on their own”
- They turned to the government as their only hope
- In his First Inaugural Address, FDR said, “So first of all let me assert my firm belief that the
only thing we have to fear is fear itself”

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