Depression of the 1930s

 

The economic depression that beset the United States and
other countries in the 1930s was unique in its magnitude
and its consequences. At the depth of the depression, in
1933, one American worker in every four was out of a job.
In other countries unemployment ranged between 15 percent
and 25 percent of the labor force. The great industrial
slump continued throughout the 1930s, shaking the
foundations of Western capitalism and the society based
upon it. Economic Aspects President Calvin COOLIDGE had
said during the long prosperity of the 1920s that "The
business of America is business." Despite the seeming
business prosperity of the 1920s, however, there were
serious economic weak spots, a chief one being a depression
in the agricultural sector. also depressed were such
industries as coal mining, railroads, and textiles.
Throughout the 1920s, U. S. banks had failed--an average of
600 per year--as had thousands of other business firms. By
1928 the construction boom was over. The spectacular rise
in prices on the STOCK MARKET from 1924 to 1929 bore little
relation to actual economic conditions. In fact, the boom
in the stock market and in real estate, along with the
expansion in credit (created, in part, by low-paid workers
buying on credit) and high profits for a few industries,
concealed basic problems. Thus the U. S. stock market crash
that occurred in October 1929, with huge losses, was not
the fundamental cause of the Great Depression, although the
crash sparked, and certainly marked the beginning of, the
most traumatic economic period of modern times. By 1930,
the slump was apparent, but few people expected it to
continue; previous financial PANICS and depressions had
reversed in a year or two. The usual forces of economic
expansion had vanished, however. Technology had eliminated
more industrial jobs than it had created; the supply of
goods continued to exceed demand; the world market system
was basically unsound. The high tariffs of the Smoot-Hawley
Act (1930) exacerbated the downturn. As business failures
increased and unemployment soared--and as people with
dwindling incomes nonetheless had to pay their
creditors--it was apparent that the United States was in
the grip of economic breakdown. Most European countries
were hit even harder, because they had not yet fully
recovered from the ravages of World War I.) The deepening
depression essentially coincided with the term in office
(1929-33) of President Herbert HOOVER. The stark statistics
scarcely convey the distress of the millions of people who
lost jobs, savings, and homes. From 1930 to 1933 industrial
stocks lost 80% of their value. In the four years from 1929
to 1932 approximately 11,000 U. S. banks failed (44% of the
1929 total), and about $2 billion in deposits evaporated.
The gross national product (GNP), which for years had grown
at an average annual rate of 3.5%, declined at a rate of
over 10% annually, on average, from 1929 to 1932.
Agricultural distress was intense: farm prices fell by 53%
from 1929 to 1932. President Hoover opposed government
intervention to ease the mounting economic distress. His
one major action, creation (1932) of the Reconstruction
Finance Corporation to lend money to ailing corporations,
was seen as inadequate. Hoover lost the 1932 election to
Franklin D. ROOSEVELT. The New Deal The depression brought
a deflation not only of incomes but of hope. In his first
inaugural address (March 1933), President Franklin D.
ROOSEVELT declared that "the only thing we have to fear is
fear itself." But though his NEW DEAL grappled with
economic problems throughout his first two terms, it had no
consistent policy. At first Roosevelt tried to stimulate
the economy through the NATIONAL RECOVERY ADMINISTRATION,
charged with establishing minimum wages and codes of fair
competition in every industry. It was based on the idea of
spreading work and reducing unfair competitive practices by
means of cooperation in industry, so as to stabilize
production and prevent the price slashing that had begun
after 1929. This approach was abandoned after the Supreme
Court declared the NRA unconstitutional in SCHECTER POULTRY
CORPORATION V. UNITED STATES (1935). Roosevelt's second
administration gave more emphasis to public works and other
government expenditures as a means of stimulating the
economy, but it did not pursue this approach vigorously
enough to achieve full economic recovery. At the end of the
1930s, unemployment was estimated at 17.2%. Other
innovations of the Roosevelt administrations had
long-lasting effects, both economically and politically. To
aid people who could find no work, the New Deal extended
federal relief on a vast scale. The CIVILIAN CONSERVATION
CORPS took young men off the streets and sent them out to
plant forests and drain swamps. The government refinanced
about one-fifth of farm mortgages through the FARM CREDIT
ADMINISTRATION and about one-sixth of home mortgages
through the Home Owners Loan Corporation. The WORKS
PROGRESS ADMINISTRATION employed an average of over 2
million people in occupations ranging from laborers to
musicians and writers. The PUBLIC WORKS ADMINISTRATION
spent about $4 billion on the construction of highways and
public buildings in the years 1933-39. The depression years
saw a burst of union organizing, aided by the NATIONAL
LABOR RELATIONS ACT of 1935. New industrial unions came
into existence through the efforts of organizers led by
John L. LEWIS, Walter REUTHER, Philip MURRAY, and others;
in 1937 they won contracts in the steel and auto
industries. Total union membership rose from about 3
million in 1932 to over 10 million in 1941. Political and
Cultural Effects The expanded role of the federal
government came to be accepted by most Americans by the end
of the 1930s. Even Republicans who had bitterly opposed the
New Deal shifted their stance. Wendell WILLKIE, the
Republican presidential nominee in 1940, declared that he
could not oppose reforms such as the regulation of the
securities markets and the utility holding companies, the
legal recognition of unions, or Social Security and
unemployment allowances. What bothered him and other
opponents of the New Deal, however, was the extension of
the federal bureaucracy. The depression caused much
questioning of inherited economic and political ideas. Sen.
Huey P. Long (see LONG family) of Louisiana found a
national following for his "Share the Wealth" program. The
socialist writer Upton SINCLAIR was nearly elected governor
of California in 1934 with a similar program for
redistributing the state's wealth. Many writers and other
intellectuals swung even further left, concluding that
capitalism was on its way out; they were drawn to the
Communist party by what they supposed to be the
accomplishments of the USSR. In other countries the
depression had even more profound effects. As world trade
fell off, countries turned to nationalist economic policies
that only exacerbated their difficulties. In politics the
depression strengthened the extremes of right and left,
helping Adolf HITLER to power in Germany and swelling
left-wing movements in other European countries. The
depression was thus a time of massive insecurity among
peoples and governments, contributing to the tensions that
produced World War II. Ironically, however, the massive
military expenditures for that war provided the economic
stimulus that finally ended the depression in the United
States and elsewhere. 
 
Bibliography: 

Bernstein, Irving, A Caring Society: The New Deal, the
Worker and the Great Depression (1985); Boardman, Fon W.,
Jr., The Thirties: America and the Great Depression (1967); 

Davis, Joseph S., The World Between the Wars, 1919-39: An
Economist's View (1974); Galbraith, John K., The Great
Crash, 3d ed. (1972; repr. 1980); 

Garraty, John A., The Great Depression (1986);
Kindleberger, Charles P., The World in Depression,
1929-1939 (1975; repr. 1983); 

Markowitz, Gerald, and Rosner, David, eds., Slaves of the
Depression (1987); Mitchell, Broadus, Depression Decade,
1931-1941 (1977); 

Rothbard, Murray N., America's Great Depression (1975;
repr. 1983); Schlesinger, Arthur M., Jr., The Age of
Roosevelt, 2 vols. (1959); 

Swados, Harvey, ed., The American Writer and the Great
Depression (1966); Wecter, Dixon,