The Great Depression

The Great Depression

The Great Depression was a decade-long period of poverty and unemployment that followed the 1929 stock market crash.

Learning Objectives

Identify the central causes of the Great Depression

Key Takeaways

Key Points

  • The Great Depression, a decade-long period of unemployment and poverty beginning in 1929, resulted from several economic factors in the United States including an overall decline in demand, imbalances and weaknesses in the economy, faltering demand for housing, and reduced production in the automobile industry.
  • Loans to foreign nations after World War I became problematic in the 1920s as European countries lacked the means to repay the loans, destabilizing American debt markets. Farm prices began to fall in the post-war period and farmers, already deeply in debt, could not pay back their creditors.
  • After the stock market crash on October 29, 1929, banks began to fail in 1930, which caused a massive, nation-wide demand on banks as depositors hurried to convert their savings into currency. “Buying on margin,” whereby investors buy shares on  credit  and use loans to pay, further destabilized the market.
  • The collapse of the banks and stock markets led to widespread factory closures and foreclosures, leading to millions of unemployed and dispossessed Americans during the 1930s.

Key Terms

  • Dust Bowls: Drought-stricken areas across the Great Plains in the 1930s that became a symbol of the Great Depression.
  • Wall Street Crash of October 1929: The event that marked the start of the Great Depression, when the New York Stock Exchange dropped by 40 percent on October 29, 1929.
  • Great Depression: A major economic collapse that lasted from 1929 to 1940 in the United States.

The Great Depression was the result of an untimely collision of negative economic factors that began with the Wall Street crash of October 1929 and rapidly spread worldwide. The market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth and personal advancement. The Depression showed how intricately interconnected the national economy was and marked a low point for America in almost every way, with widespread suffering by citizens throughout the land and at most levels of society.

Origins

Several events inevitably led to the Great Depression, although its exact causes are still debated. One of the most significant events was the overall decline in consumer demand. Around 1928, demand for new housing had faltered, subsequently leading to declining sales of building materials and unemployment among construction workers. The automobile industry and other manufacturers had to reduce production rates, while the prices of agricultural goods also dropped.

A speculative boom had taken hold in the late 1920s, which led hundreds of thousands of Americans to invest heavily in the stock market. Many investors bought shares “on margin,” meaning that they purchased them on credit while at the same time taking out loans to pay for those shares. Investors hoped that when the shares sold, they would make enough money to pay back the loans and interest and have some profit for themselves. By August 1929, brokers were routinely lending small investors more than two-thirds of the face value of the stocks they were buying. The loans exceeded $8.5 billion, more than the entire amount of currency circulating in the United States at the time.

Stock Market Crash

The rising share prices encouraged more people to invest as they hoped the share prices would rise further. Speculation thus fueled further rises and created an economic bubble. Because of margin buying, investors stood to lose large sums of money if the market turned down, or failed to advance quickly enough. With the Dow Jones Industrial Average, a major U.S. stock market index, just past its September 3 peak of 381.17, the market finally turned down and panic selling started at the New York Stock Exchange, the primary center of American financial activity located on Wall Street in New York City. On October 24, 1929, also known as “Black Thursday,” the value of common stock and shares in the U.S. market dropped by 40 percent and a massive, debilitating economic downward spiral was set in motion.

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Stock market crash, 1929: A crowd gathers on Wall Street following the stock market crash on October 29, 1929.

Depression

The Wall Street crash had a major impact on the United States and world economy, and the psychological effects reverberated across the nation as business became aware of the difficulties in securing capital markets investments for new projects and expansions. The decline in stock prices caused bankruptcies and severe macroeconomic difficulties, including contraction of credit, business closures, firing of workers, bank failures, a decrease in the money supply, and other economy-depressing events.

The failure set off a worldwide run on U.S. gold deposits and forced the Federal Reserve to raise interest rates. American banks began to fail in October 1930, one year after the crash, when farmers defaulted on loans. There was no federal deposit insurance during that time, and bank failures were common. Depositors, worried that they might lose all of their savings, withdrew their deposited amounts (the accounts through which money flows back and forth among financial institutions) and changed them into hard currency (the paper and coins we hold). As withdrawals increased, the money multiplier decreased, meaning that money circulation throughout the economy slowed. This led to a decrease in the money supply, an increase in interest rates, and a significant decrease in aggregate investment. Some 4,000 banks and other lenders ultimately failed.

By 1932, unemployment had surged to 24 percent, while stock prices plummeted by more than 80 percent. More than 85,000 businesses declared bankruptcy. Industries that suffered the most included agriculture, construction, shipping, mining, and logging, as well as durable goods such as automobiles and appliances, whose purchase could be postponed.

The economy reached bottom in the winter of 1932–1933. In 1933, unemployment rose to 25 percent, with more than 11 million people seeking work. As the Depression deepened, vast numbers of families were unable to pay rent and were evicted from their homes to stay in “Hoovervilles,” the slang term for shantytowns that were contemptuously named after President Herbert Hoover, whose policies were considered to blame for the Depression.

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Hooverville: A Depression-era shantytown, commonly called a “Hooverville,” near Portland, Oregon.

The agricultural losses were especially acute in the Great Depression. Between 1930 and 1936, severe drought conditions existed in America’s Great Plains regions, with soil turning to dust and then blowing across dry, unused fields in what became known as “Dust Bowls.” The high-speed wind storms that helped destroy the farmlands reportedly reached up to 60 miles per hour on April 14, 1935, also known as “Black Sunday.”

A great migration occurred in which approximately 200,000 farmers traveled west, hoping to find better land and opportunities in California. A large number of these workers did not have money for train or bus tickets and took to illegally hopping onto freight trains, earning them the slang name, “Hobos.” The migration also included many families, often more than one generation, who traveled together in search of work, food, and a place to live.

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Broke, baby sick, and car trouble!: Dorothea Lange’s 1937 photo shows a dust-bowl family from Missouri stuck on the side of the road near Tracy, California.

Additional Economic Factors

Some believe a change in government policy, specifically a change in interest rates by the federal government, could have slowed the downward steps into the Great Depression. Yet international influences also contributed to the Great Depression. After World War I, nations adopted the practice known as ” Protectionism,” under which foreign goods were subject to tariffs, or import duties, so that foreign products would cost more and local products would cost less. The United States enacted extremely high tariffs, causing other nations to retaliate by establishing their own tariffs against American goods. Thus, American businesses lost several foreign markets in which they normally sold their goods.

International credit structure was another cause of the Depression. At the end of World War I, European nations owed enormous sums of money to American banks, but these debts were rarely repaid, and large banks suffered due to these debts. On a less widespread but still significant front, small American banks were crippled because U.S. farmers could not pay their debts as the overall economy worsened.

Economists still dispute how much weight to give the stock market crash of October 1929 as a cause of the Great Depression. It clearly changed sentiment about and expectations of the future, shifting the outlook from very positive to negative. Many academics see the Wall Street crash of 1929 as part of a historical process called “boom and bust.” According to economists such as Joseph Schumpeter and Nikolai Kondratieff, the crash was merely a historical event in the continuing process of economic cycles. The impact of the crash was merely to increase the speed at which the cycle proceeded to its next level. Milton Friedman’s book, A Monetary History of the United States, cowritten with Anna Schwartz, makes the argument that what made the “great contraction” so severe was not the downturn in the business cycle, trade protectionism, or the 1929 stock market crash, but the collapse of the banking system during three waves of panic over the 1930–1933 period.

Results

In 1932, the Pecora Commission was established by the U.S. Senate to study the causes of the Wall Street crash. The following year, the U.S. Congress passed the Glass-Steagall Act, officially named the “Banking Act of 1933,” mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.

President Hoover had lost the presidential election of 1932 to Democrat Franklin Delano Roosevelt in a landslide, and Roosevelt’s economic recovery plan, called the New Deal, instituted unprecedented programs for relief and reform. In 1933, Roosevelt created the Federal Deposit Insurance Corporation (FDIC), which provided a legal protection against bank losses.

Stock markets around the world instituted measures to suspend trading in the event of rapid declines, claiming that the measures would prevent such panic sales. The “Uptick Rule,” which, “allowed short selling only when the last tick in a stock’s price was positive,” was implemented after the crash to prevent short sellers from driving the price of a stock down in a bear run, a period of economic pessimism that fuels stock sales. Yet the one-day crash of October 19, 1987, known as “Black Monday,” when the Dow Jones Industrial Average fell 22.6 percent, was worse in percentage terms than any single day of the 1929 crash.

The net effect of the 1929 stock market crash was a sudden and general loss of confidence in the country’s economic future. The explanations included high consumer debt, ill-regulated markets that permitted over-optimistic loans by banks and investors, and the lack of high-growth new industries, all interacting to create a downward economic spiral of reduced spending, falling confidence, and lowered production. The result was a Great Depression that showed the vast impact a nation’s economic health has on its overall wellbeing and the immense human toll such an event can cause.

The Human Toll

The Great Depression caused widespread homelessness and illness, fueled discrimination, and increased migrant labor.

Learning Objectives

Describe some of the suffering the Great Depression brought upon Americans

Key Takeaways

Key Points

  • The Great Depression of the 1930s increased the number of homeless people and concentrated them in ” Hooverville ” settlements, where terrible living conditions caused widespread illness. The “Dust Bowl,” a large area across the South and the Great Plains, experienced windstorms and droughts that led to widespread destruction of farmlands and forced Midwestern farm families into cities, compounding urban poverty.
  • Migrant  laborers, who traveled from farm to farm selling labor by harvesting crops, were excluded from  federal  and state legislation protecting wages and fair working practices and often received unfair pay.
  • The Depression also resulted in an increase in racism and discrimination, as African Americans, Hispanics, and women often were denied available jobs in favor of awarding them to white men. The Black Shirts, a racist southern group, recruited more than 40,000 people to proscribe African Americans from working as paid labor before white people.

Key Terms

  • migrant worker: An agricultural laborer who travels from place to place harvesting seasonal crops.
  • Dust Bowl: American prairie lands in the 1930s that suffered major ecological and agricultural damage as a result of severe dust storms.
  • Hoovervilles: The slang name for shantytowns built by homeless people during the Great Depression. They were contemptuously named for President Herbert Hoover, whose policies were blamed for the economic strife.

The Great Depression of the 1930s brought thousands of people, and even entire regions of the country, to their knees. The sudden, catastrophic economic downturn that followed the Wall Street crash of 1929 caused widespread homelessness, poor health and early deaths, and the creation of shantytowns in urban areas. A massive, forced migration took laborers away from their homes to transient jobs in which they experienced discrimination and unfair working conditions and pay. The economic desperation also fueled discrimination against people of color and women.

Hoovervilles

The increase in homelessness, due to sudden unemployment and an inability to pay rent, concentrated thousands of Americans in squalid, urban settlements throughout the nation. These became known as “Hoovervilles,” a term coined by Democratic National Committee publicity chief Charles Michelson to slander the name of Republican President Herbert Hoover, whose policies many people blamed for the stock market crash and ensuing Depression.

Hoovervilles arose in many public areas, including in well-known locations such as Central Park in New York City, where scores of homeless families camped out at the park’s Great Lawn, as well as in New York’s Riverside Park. Some of the men forced to live in these conditions possessed construction skills and were able to build houses out of stone. Most people, however, resorted to building shelters out of cardboard, wood from crates and fences, scraps of metal, or whatever other materials were available to them. These makeshift homes offered scant protection from wind, rain, and the cold of winter. Usually these settlements had no running water or bathrooms, and living conditions were extremely unsanitary, enabling illness to spread easily. Local authorities did not officially recognize these Hoovervilles and occasionally removed occupants for trespassing on private lands, although they were frequently tolerated or ignored out of necessity.

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Hooverville in Manhattan, 1935: This photo taken in an alley in the Manhattan borough of New York City in 1935, shows makeshift housing of the type found in Depression-era shantytowns named “Hoovervilles” to place blame on President Herbert Hoover.

Democrats coined other terms—such as “Hoover blanket,” an old newspaper used as blanketing and “Hoover flag,” an empty pocket turned inside out—that pressed the idea of the president’s blame for the public misery. “Hoover leather” was cardboard used to line a shoe when the sole wore through, while a “Hoover wagon” was an automobile with horses hitched to it because the owner could not afford fuel.

There were various tactics employed to try to end the suffering of those forced to reside in squalid conditions. Soup kitchens, invented by Benjamin Thompson and run by volunteers, gave free food to homeless Americans, who often received their only daily meal from these establishments.

After Franklin Delano Roosevelt soundly defeated Hoover in the November 1932 presidential election, FDR’s “New Deal” economic recovery plan enacted special relief programs for the homeless under the Federal Transient Service (FTS), which operated from 1933 to 1935. In 1934, the Frazier-Lemke Farm Bankruptcy Act and Taylor Grazing Act also became pivotal tools in the effort to prevent farms from failing and to add livestock feeding areas, both of which helped reduce homelessness. After 1940, the economy recovered, unemployment fell, and shanty eradication programs destroyed all of the remaining Hoovervilles.

The “Dust Bowl”

In 1930, a confluence of bad weather and poor agricultural practices compounded the Depression’s effects on farmers in areas in the South and Midwest Great Plains that came to be known as the “Dust Bowl.” The affected area included 1 million acres centered on the panhandles of Texas and Oklahoma, and adjacent parts of New Mexico, Colorado, and Kansas.

Drought and massive windstorms that threw up giant clouds of dust continued throughout the 1930s, leading to the period being called the “Dirty Thirties.” The dust storms caused major ecological and agricultural damage to American prairie lands, particularly in 1934 and 1936. In 1934, an estimated 75 percent of the United States felt some effect from the storms, including New England, where red snow fell.

The phenomenon was caused by severe drought coupled with decades of extensive farming without crop rotation, fallow fields, cover crops, and other techniques to prevent wind erosion. Farmers grew more and more crops, despite the prices of each of the crops beginning to decline. Deep plowing of the virgin topsoil of the Great Plains displaced the natural deep-rooted grasses that normally kept the soil in place and trapped moisture even during periods of drought and high winds.

As the 1930s progressed, the soil continued to dry, turn to dust, and blow eastward and southward in large, dark clouds. At times, these clouds blackened the sky, reaching all the way to East Coast cities such as New York and Washington, D.C. Much of the soil—carried by prevailing winds, which were themselves strengthened by the dry and bare soil conditions—ended up deposited in the Atlantic Ocean, These immense dust storms, given names such as ” black blizzards ” and “black rollers,” often reduced visibility to a few feet. During black blizzards, normal activities such as breathing, eating, and walking outside became very difficult tasks. More than 350 houses had to be torn down after one storm alone, and more than 500,000 Americans were left homeless.

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Buried machinery in the “Dust Bowl,” 1936: Farm equipment in South Dakota is left half exposed by one of the many windstorms that swept across the Great Plains during the “Dust Bowl” period of the Great Depression in the 1930s.

The sustained drought and storms damaged the land so badly that overall farm revenue fell by 50 percent in the “Dust Bowl” region. Some residents of the Great Plains, especially in Kansas and Oklahoma, became ill and died of dust pneumonia or malnutrition. While there is no official death toll due to insufficient record keeping, it is believed that up to 7,000 deaths occurred as a result of conditions in the “Dust Bowl.” Already suffering from depressed prices and declining incomes, many farmers were forced to abandon their operations and move to the cities or to agricultural areas in other states in order to survive.

Migrant Labor

The “Dust Bowl” exodus was the largest migration in American history within a short period of time. By 1940, 2.5 million people had moved out of the plains states, including 200,000 who moved to California. With their land barren and homes seized in foreclosure, many families were forced to leave farms in Oklahoma, Arkansas, Missouri, Iowa, Nebraska, Kansas, Texas, Colorado, and New Mexico. Americans primarily migrated west looking for work, although most found that the economic conditions were not much better than the ones they had left, given the pervasiveness of the Great Depression throughout the country.

“Migrant labor” is a term applied to those who travel from place to place harvesting crops that must be picked as soon as they ripen, a practice that became a harsh necessity for indigent farm workers. There were two kinds of migrant workers: seasonal urban dwellers and permanent migrants who followed crops from one place to another in order to make a living. For both categories, the hard work produced little reward. Because of their exclusion from federal and state legislation that protected workers against exploitation and unfair labor practices, migrant workers earned lower wages than other farm laborers. The jobs were hazardous, while housing and health conditions were extremely poor.

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Migrant Mother: In this famous Dorothea Lange photograph, a destitute mother and two of her seven children take a break from picking peas in California. The 1936 image became synonymous with the plight of migrant farm workers during the Depression.

More of the migrants were from Oklahoma than any other state, earning them the nickname “Okies.” The names “Arkies” and “Texies” were also used, but were less common. Ben Reddick, a freelance journalist and later publisher of the Paso Robles Daily Press in California, is credited with first using the term “Oakie” in the mid-1930s to identify migrant farm workers. Reddick noticed the “OK” abbreviation on many of the migrants’ license plates and referred to them in his article as “Oakies.” Californians began calling all migrants by the name, even though many newcomers were not Oklahomans. West Coast residents and some politically motivated writers used “Okie” to disparage these poor, white workers and their families, but also included those of Native-American ancestry such as Cherokees, who were the largest tribal group.

Film star Will Rogers, who had Oklahoma roots, jokingly remarked that Okies moving to California increased the average intelligence of both states. Author John Steinbeck later wrote his novels Of Mice and Men and the Pulitzer Prize-winning The Grapes of Wrath about migrant laborers and their struggles. The music and writings of Woody Guthrie were also inspired by migrant workers and the “Dust Bowl.”

Discrimination

The Depression was an extremely difficult time for white Americans in the lower classes. Yet it was even worse for other races, especially for African Americans, as the hard economic conditions once again forced virulent racism and discrimination into the open in American society. In the South in 1930, an organization called the “Black Shirts” recruited approximately 40,000 people to its racist agenda, which primarily stated that no African American would be given a job before a white person. Unemployment among black workers grew to almost 50 percent by 1932.

In the Southwest, the claim that Hispanic workers were “stealing jobs” from whites became prevalent. The U.S. Department of Labor deported 82,000 Mexicans between 1929 and 1935, while almost half a million people returned to Mexico either voluntarily or after being tricked or threatened into believing they had no other choice. Many of these people had immigrated legally, but lacked the proper documentation to prove their status. Government officials also ignored the legislation automatically designating children born
in the country as legal U.S. citizens.

Discrimination against women was also widespread, with many believing sexist claims that women were stealing available jobs from men. In a survey conducted in 1930 and 1931, 77 percent of schools refused to hire married women as teachers, while 63 percent of schools fired females already working as teachers but who then chose to marry.

Hoover’s Efforts at Recovery

President Hoover attempted to stem the Great Depression but was thwarted by political influences, economic realities, and his own ideals.

Learning Objectives

Analyze the fiscal and monetary tools that Hoover used to combat the Great Depression

Key Takeaways

Key Points

  • President Hoover believed that self-reliance and public-private cooperation, rather than excessive federal  government  intervention, were the paths to recovery from the Great Depression. Despite calls for greater government assistance, Hoover refused to fund welfare programs that he believed would reduce incentives to work.
  • Intending to reduce municipal aid-services burdens and combat white American unemployment, Hoover instituted the Mexican repatriation  program in 1929. This resulted in the forced  migration  of more than 500,000 Mexicans and Mexican Americans to Mexico.
  • The Smoot-Hawley  Tariff  raised the entry tax on thousands of imported items as part of a failed effort to encourage the purchase of American-made goods, raise federal revenue, and protect farmers.
  • The Hoover Moratorium, issued in 1931, called for a one-year halt in both  reparation  payments by Germany to France and the repayment of Allied war debts to the United States. This was met with much opposition in France and Britain and did little to ease economic declines.

Key Terms

  • Mexican Repatriation program: A mass, forced migration that took place from 1929 through 1936, when between 500,000 and 2 million Mexicans and people of Mexican descent were forced or pressured to leave the United States. The event, carried out by American authorities, took place without due process.
  • Revenue Act of 1932: A law that raised U.S. tax rates across the board, with the rate on top incomes rising from 25 percent to 63 percent. It doubled the estate tax and raised corporate taxes by almost 15 percent.
  • Hoover Moratorium: A public statement issued by U.S. President Herbert Hoover on June 20, 1931, proposing a one-year moratorium on payments of World War I and other war debt and postponing the initial payments and the interest; Hoover hoped it would ease the coming international economic crisis.
  • Smoot-Hawley Tariff: An act signed into law on June 17, 1930, that raised U.S. tariffs on more than 20,000 imported goods to record levels.

The onset of the Great Depression tested the ideals and government policies of President Herbert Hoover, who firmly believed cooperation between public and private spheres would lead to long-term growth in the economy. Hoover feared too much intervention or coercion by the government would destroy individuality by fostering a reliance on assistance and reducing the incentive to work. Yet this proved increasingly problematic as the U.S. economy continued to decline and calls for greater government assistance increased.

Rugged Individualism

“Rugged individualism” was a term Hoover used often during his presidency to explain the idea that individuals should be able to help themselves without government involvement in personal economic affairs or national economics in general. A libertarian, Hoover’s own rugged individualism may have resulted from his frustration with the unprecedented government involvement in the economy during World War I. He emphasized that rugged individualism was not laissez-faire economics, which he denounced.

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Herbert Hoover: Hoover addresses a large crowd on the campaign trail in 1932.

Hoover entered office in March 1929 with a plan to reform the nation’s regulatory system, holding that a federal bureaucracy should have limited regulation over a country’s economic system. A self-described Progressive and reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by encouraging public-private cooperation. He termed this relationship as ” volunteerism ” and considered it preferable to government coercion or intervention, both of which he believed were in opposition to the American ideals of individualism and self-reliance.

Hoover said that, “given the chance to go forward with the policies of the last eight years, we shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation.” He added that, “we in America today are nearer to the final triumph over poverty than ever before in the history of any land.” These statements came mere months before the Wall Street crash of October 29, 1929, which opened a chapter of American history that would redefine an impoverished society.

A strong proponent of balanced budgets and unwilling to run a deficit to fund welfare programs, Hoover carried his idea of rugged individualism into the Great Depression that followed the crash, insisting that the federal government should not interfere with the American people during the economic crisis. Providing large-scale humanitarian efforts, Hoover feared, would injure, “the initiative and enterprise of the American people.”

Yet in spite of his personal, libertarian beliefs, Hoover still pursued policies aimed at pulling the country out of the Depression. Some of his major initiatives, however, were misguided and negatively impacted both the economy and American society.

Mexican Repatriation

In 1929, Hoover authorized a program of Mexican repatriation with the stated intention of combating rampant American unemployment, reducing the burden on municipal aid services, and removing people who were considered usurpers of American jobs. This has been perceived as an attempt by the administration to use immigrants as a scapegoat to divert criticism and regain the support of the U.S. organized labor movement.

The repatriation program, which continued through 1936, was a forced migration of Mexicans and Mexican-Americans over the southern border, with estimates of the deported ranging from 500,000 to 2 million. In 2005, the government of California proclaimed an official apology to those who were removed from the state to Mexico, including an estimated 1.2 million legal U.S. citizens.

To justify the program, county officials in Los Angeles, California, for example, petitioned the federal government to reduce the number of families on federal welfare and make jobs available to “Real Americans” by deporting immigrants. The American Federation of Labor and the National Club of America for Americans both stated that deportation of Mexicans would free jobs for U.S. citizens. This sentiment took precedence as the Great Depression continued, despite national statistics showing that less than 10 percent of people on welfare were Mexican or of Mexican descent. Nonetheless, states passed laws requiring all public employees to be American citizens, while the federal government imposed restrictions on immigrant labor. Many employers fired Mexican workers and refused to hire others, causing an increase in unemployment in the Mexican community.

Hoover endorsed a plan to deport “foreigners” under the third U.S. secretary of labor, William N. Doak, whose measures to expel Mexican immigrants included arresting participants in labor protests and farm strikes, charging them with illegal activities or being illegal immigrants, and deporting them. This focus on labor garnered public support for further actions by immigration agents including mass arrests and arbitrary deportations.

Portrait of William Doak

William Doak: William N. Doak served as the U.S. secretary of labor under President Herbert Hoover.

Smoot-Hawley Tariff

Despite the objections of many economists, Hoover signed the Tariff Act of 1930, commonly called the “Smoot-Hawley Tariff,” which raised the entry tax on more than 20,000 items imported from foreign countries to historically high levels.

Signed into law on June 17, 1930, and sponsored by Senator Reed Smoot of Utah, the Republican chairman of the Senate Finance Committee, and Representative Willis C. Hawley of Oregon, the Republican chairman of the House Ways and Means Committee, the act encouraged the purchase of American-made products by increasing the cost of imported goods. It also was expected to garner revenue for the federal government and protect U.S. farmers from foreign competition.

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Hawley and Smoot: U.S. Representative Willis C. Hawley, left, and Senator Reed Smoot in April 1929, shortly before the Smoot-Hawley Tariff Act passed the House of Representatives.

By the time the tariff passed into law, however, the economic depression had spread through much of the world, spurring other nations to retaliate by increasing their own tariffs on American-made goods and subsequently lowering the overall amount of international trade. This worsened the Great Depression by reducing American imports and exports by more than half.

A petition signed in May 1930 by 1,028 U.S. economists had asked Hoover to veto, rather than pass, the tariff act. Automobile magnate Henry Ford visited the White House in an attempt to convince Hoover to veto the bill, while J.P. Morgan CEO Thomas W. Lamont was quoted as saying he, “almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot tariff.” Hoover himself opposed the bill, calling it, “vicious, extortionate, and obnoxious” due to its undermining of his pledge to international economic cooperation. He yielded to pressure from within his own party and the business community, however, and signed the bill, which was later used against him by Franklin Delano Roosevelt in the 1932 presidential election that tossed Hoover from office.

Moratorium and NCC

On June 20, 1931, the president issued the so-called Hoover Moratorium, his proposal for a one-year halt in reparation payments by Germany to France as well as payments of Allied war debts to the United States. This was met with fierce opposition among a large segment of Americans and especially by France, which had suffered significant losses to Germany during World War I. The moratorium, however, gained the support of 15 nations by early July and earned congressional approval in December. Yet it did little to ease the continuing economic decline. As the moratorium neared its expiration, representatives from Britain, France, and Germany met from June 16 to July 9, 1932, at the Lausanne Conference in Switzerland to find a permanent solution. Yet a working compromise was never established and by the start of World War II, reparations payments had stopped completely.

Hoover also urged the major U.S. banks to form a consortium known as the “National Credit Corporation (NCC)” in 1931. The NCC exemplified Hoover’s belief in volunteerism as a mechanism for aiding the economy. He encouraged NCC member banks to provide loans to smaller banks in order to prevent their collapse. The banks within the NCC were often reluctant to provide loans and usually required small banks to provide their largest assets as collateral. It quickly became apparent the NCC was incapable of fixing the problems it was designed to solve.

Hoover and Congress also approved the Federal Home Loan Bank Act to spur new home construction and reduce foreclosures. The plan initially seemed to work as the rate of foreclosures dropped, but for many, it was seen as too little, too late, with tens of thousands of Americans homeless.

Final Attempts

By 1932, unemployment had reached 24.9 percent; a drought persisted in the central United States, particularly in Oklahoma and Texas; businesses and families had defaulted on loans in record numbers, and more than 5,000 banks had failed.

To pay for government relief programs and to make up for lost revenue, Hoover agreed to roll back several tax cuts his administration enacted on higher-bracket incomes. Prior to the Great Depression, Hoover’s first Treasury secretary, Andrew Mellon, had proposed and enacted numerous tax cuts under presidents Warren G. Harding and Calvin Coolidge, which cut the top income tax rate from 73 percent to 24 percent. When combined with the sharp decline in incomes during the early Depression, the result was a serious deficit in the federal budget.

Desperate to increase federal revenue, Congress approved one of the largest tax increases in American history, the Revenue Act of 1932. Income tax on the highest incomes rose from 25 percent to 63 percent, the estate tax was doubled, and corporations were taxed at an increased rate of 13.75 percent. A “check tax” placed a two-cent levy on all bank checks, equal to more than 30 cents in today’s economy. Hoover also encouraged Congress to investigate the New York Stock Exchange, resulting in various reforms.

The final Hoover administration attempt to rescue the economy occurred in 1932 with the passage of the Emergency Relief and Construction Act, which authorized funds for public works programs and the creation of the Reconstruction Finance Corporation (RFC), an independent agency whose purpose was to provide government-secured loans to financial institutions, railroads, and farmers.

The agency gave $2 billion in aid to state and local governments and made loans to banks, railroads, mortgage associations, and other businesses. Though the RFC had minimal impact at the time, it was adopted by Franklin D. Roosevelt and greatly expanded as part of his New Deal economic recovery plan. In fact, economist Rexford Tugwell, a member of FDR’s policy team known as the “Brain Trust,” later remarked that although no one would say so at the time, “practically the whole New Deal was extrapolated from programs that Hoover started.”

Hoover is seated at a desk surrounded by a flurry of images, including papers, pens, political figures, ships, planes, and trains.

Hoover congressional initiatives: President Herbert Hoover, depicted in a March 1929 political cartoon, took up a number of federal initiatives intended to reverse the economic damage caused by the Wall Street crash of 1929 and the Great Depression that followed.

Herbert Hoover has been criticized for taking a laissez-faire approach to the Depression, relying on “volunteerism” through churches and social groups to provide public assistance. Yet in his memoirs, he claimed to have rejected Treasury Secretary Mellon’s suggested “leave-it-alone” approach and noted that he called many business leaders to Washington, urging them to refrain from terminating workers or cutting wages.

The Bonus Army

Great Depression unemployment led veterans known as the “Bonus Army” to protest for early payments of military service certificates.

Learning Objectives

Discuss the demands of the Bonus Army marchers and the outcome of their campaign

Key Takeaways

Key Points

  • Under the World War Adjusted Compensation Act of 1924, veterans received bonuses in the form of certificates they could not redeem until 1945.
  • The Bonus Army, led by former Sergeant Walter Waters, was an  assembly  of over 40,000 World War I veterans, families, and affiliated groups who marched on Washington, D.C. in 1932 to demand an immediate cash payment of service certificates.
  • President Hoover and  Republicans opposed cashing certificates because the government would be forced to levy higher taxes to cover the cost. The U.S. Senate failed to pass a Bonus Bill allowing veterans to receive early payments. Hoover eventually ordered the eviction of the Bonus Army from Washington and violence ensued, greatly damaging his reelection campaign.
  • President Franklin D. Roosevelt negotiated a settlement with the Bonus Army by offering positions in the newly created Civilian Conservation Corps. Congress passed the Adjusted Compensation Payment Act in 1936, authorizing the payment of $2 million in World War I bonuses over FDR’s  veto.

Key Terms

  • CCC: A U.S. public work-relief program from 1933 to 1942 for unemployed, unmarried men ages 17 to 23. A part of the New Deal of President Franklin D. Roosevelt, it provided unskilled, manual labor jobs related to the conservation and development of natural resources in rural lands owned by federal, state, and local governments.
  • Walter Waters: (1898—1959) A former U.S. Army sergeant who in May 1932 led the 20,000-strong army of World War I veterans called the “Bonus Army” on its march to Washington, D.C. The veterans sought immediate payment of service certificates, essentially additional pay, promised to them by Congress in the World War Adjusted Compensation Act of 1924 and scheduled for payment in 1945.
  • World War Adjusted Compensation Act: A U.S. federal law passed on May 19, 1924 that granted a benefit to veterans of American military service in World War I; also called the “Bonus Act.”
  • Veterans of Foreign Wars: Commonly known as the VFW, the organization formed in September 1899 advocates for the legislative rights of American war veterans and assists disabled veterans and veterans’ widows and orphans, while promoting patriotism and community service.

The “Bonus Army” was the popular name of protesters who gathered in Washington, D.C. in the spring and summer of 1932 to demand immediate cash payment of their World War I service certificates. Their march on the capital was effective in bringing to light the misfortune of men who had fought for their country only to be denied government assistance. In addition, the breakup of the Bonus Army encampment by U.S. Army troops contributed to the eventual election loss of President Herbert Hoover.

Reasons for the March

Many World War I veterans had been out of work since the Great Depression began in 1929. The World War Adjusted Compensation Act of 1924 had awarded them bonuses in the form of certificates. Each service certificate, issued to a qualified veteran soldier, bore a face value equal to the soldier’s promised payment plus compound interest. The certificates, however, could not be redeemed until 1945, which was the root of the protest that followed.

The Veterans of Foreign Wars (VFW) pressed the federal government to allow early redemption of military service certificates due to the crushing economic effects of the Great Depression that began in 1929. In January 1932, a march of 25,000 unemployed Pennsylvanians took place in Washington D.C. The group was dubbed “Cox’s Army” after their leader, pro-labor activist and Roman Catholic priest Father James Renshaw Cox of Pittsburgh. At that time, it was the largest demonstration to take place at the nation’s capital and set a precedent for future marches by the unemployed.

In the spring and summer of that year, some 43,000 marchers, including 17,000 World War I veterans, their families, and affiliated groups, came together to demand early payment of service certificates. Led by Walter W. Waters, a former Army sergeant, organizers referred to the assembly of protesters as the “Bonus Expeditionary Force,” echoing the name of World War I’s American Expeditionary Force in Europe, while the media dubbed their protest action the “Bonus March.”

Although there was Congressional support for the immediate redemption of the military service certificates for members of the Bonus Army, President Hoover and Republican congressmen opposed such action. They reasoned the government would have to increase taxes to cover the costs of the payout, and thus any potential recovery from the Depression would be slowed.

On June 15, the U.S. House of Representatives passed the Patman Bonus Bill, which would have moved forward the date for World War I veterans to receive cash bonuses. The U.S. Senate, however, defeated the bill and left the early payments unfunded. On June 17, the same day that the Senate rejected the measure, the Bonus Army amassed in Washington.

Bonus Army in Action

Most of the Bonus Army camped in a Hooverville —the slang name given to shantytowns built by the poor during the Depression throughout the 1930s—on the Anacostia Flats, a swampy, muddy area across the Anacostia River from the federal core of Washington D.C.

The campsites, built from materials scavenged from a nearby rubbish dump, were tightly controlled by the veterans who laid out streets within the site, built sanitation facilities, and held daily parades. To live in the camps, veterans were required to register and prove they had been honorably discharged from service. Retired Marine Corps Major General Smedley Butler, one of the most popular military figures of the time, visited the Bonus Army’s camp to back the effort and encourage the protesters.

On July 28, U.S. Attorney General William D. Mitchell ordered the veterans to be removed from all government property. The protesters returned, however, and Washington police who met with resistance shot two veterans, who later died of their wounds. Upon learning of the shootings, Hoover ordered the army to clear the veterans from Washington.

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Bonus Army Conflict: A photograph of Bonus Army marchers confronting the police who attempted to clear out their campsites during protests in Washington, D.C., in 1932.

The Army Chief of Staff, General Douglas MacArthur, assembled infantry and cavalry in Pennsylvania Avenue at 4:45 p.m., supported by six tanks under the command of Major George S. Patton. Thousands of civil service workers lined the streets to watch, and Bonus Army marchers cheered for the troops they believed were there to honor them as veterans. Spectators yelled “shame” when the cavalry charged the marchers, followed by infantry troops with fixed bayonets and tear gas, entering the Bonus March campsites and driving out protesters, along with their wives and children.

After burning shelters and belongings, the troops were ordered to stand down by Hoover, but MacArthur ordered another assault, claiming the protest was an attempt to overthrow the federal government. A reported 55 veterans were injured and 135 arrested, one veteran’s wife miscarried her child, and an infant died of what was believed to be a reaction to tear gas.

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Evicting the Bonus Army: A photograph of shacks erected by members of the Bonus Army on the Anacostia Flats in Washington, D.C. burning  after an eviction and confrontation with the military in the summer of 1932.

Fallout from the March

The Bonus Army incident did not affect the military careers of MacArthur or Patton, who was roundly criticized for dismissing an approach by a decorated veteran who had reportedly saved his life during World War I. The violent event, however, proved disastrous for the political career of Hoover, whose chances at reelection were dealt a massive blow by the negative publicity. He lost the 1932 presidential election in a landslide to Democrat Franklin D. Roosevelt.

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Hoover and Roosevelt, 1933: Outgoing President Herbert Hoover, left, drives with Franklin D. Roosevelt on the day of FDR’s March 1933 inauguration in Washington, D.C.

A second, smaller Bonus March in 1933 at the start of the Roosevelt administration was defused with an offer of jobs for veterans in the Civilian Conservation Corps ( CCC ) at Fort Hunt, Virginia. Most of the marchers accepted jobs in the CCC, a newly created public work-relief program that lasted through 1942. Those who chose not to work for the CCC by the May 22 deadline were given transportation home from Washington. In 1936, Congress overrode President Roosevelt’s veto and paid the veterans their bonuses years early.

Escaping Hard Times

The 1930s escapist culture involved inexpensive entertainment such as music, radio, and films that diverted attention from life’s hardships.

Learning Objectives

Describe the role the arts played in helping Americans endure the Great Depression

Key Takeaways

Key Points

  • Spending money on entertainment was a luxury that few could afford during the Depression. The U.S. government offered assistance programs to many artists, who in turn provided cheap or free amusements to the American public.
  • Music genres such as big band and jazz were at the heart of the wildly popular swing music scene and were featured at concert halls that offered inexpensive entertainment, especially in urban centers.
  • Radio broadcasts were a source of free entertainment for the American public and included shows, newscasts, soap operas, and religious sermons.
  • Walt Disney began creating innovative animated films, such as Snow White and the Seven Dwarfs, that became integral to American entertainment culture. Other favorites of the 1930s included films by Charlie Chaplin and the Marx Brothers.

Key Terms

  • jazz: A musical art form rooted in both West African cultural and musical expression and in the African-American blues tradition. The sound, which included diverse influences over time, commonly was characterized by blue notes, syncopation, swing, call and response, polyrhythms, and improvisation.
  • escapism: An inclination to depart from routine or reality into fantasy. Escapist themes were evident in many of the popular films of the 1930s, such as Frankenstein, Dracula, and The Wizard of Oz.
  • The Grand Ole Opry: A weekly country music stage concert in Nashville, Tennessee, that has presented the biggest stars of that genre. It is among the longest-running broadcasts in history since it began on November 28, 1925, as a one-hour, radio “barn dance” on WSM.

As the United States faced its longest and deepest economic downturn in the Great Depression, for most people, spending money on entertainment was out of the question. The culture of escapism of the 1930s revolved around finding innovative and inexpensive forms of entertainment that diverted attention from the pressing problems and hardships of everyday life for millions of Americans.

Music

As it had for hundreds of years, music continued to enjoy wild popularity as a form of entertainment. In the 1930s, however, it took on added importance as music cost the audience little or nothing and diverted public attention from everyday economic troubles. Americans loved a variety of music genres in the 1930s, with big band and jazz music maintaining popularity following their explosion onto the national cultural scene in the previous decade.

Following World War I, many jazz musicians from New Orleans migrated to major northern cities such as Chicago and New York, leading to a wider dispersal of jazz as different styles developed in different cities. As the 1920s progressed, jazz rose in popularity and helped to generate a cultural shift. Because of its popularity in speakeasies, illegal nightclubs where alcohol was sold during Prohibition, and its proliferation due to the emergence of more advanced recording devices, jazz became very popular in a short amount of time, with stars including Cab Calloway and Chick Webb.

Due to the racial prejudice prevalent at most radio stations, white American jazz artists received much more air time than did black jazz artists such as Louis Armstrong, Jelly Roll Morton, and Joe “King” Oliver. Big-band jazz, like that of James Reese in Europe and Fletcher Henderson in New York, was also popular on the radio and brought an African-American style and influence to a predominantly white cultural scene. One of the exceptions was Duke Ellington and his big band, who played several types of music from blues to gospel to jazz and more. One of his most successful songs was, “It Don’t Mean a Thing (If It Ain’t Got That Swing).”

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Duke Ellington: Duke Ellington was one of the most popular jazz musicians and big-band leaders who became well known in the 1920s and remained popular in the 1930s.

Radio

In the 1930s, listening to radio broadcasts became a source of nearly free entertainment for millions of Americans, and radio stations had a little bit of everything for listeners of all ages. Since the 1920s, radio had provided Americans with a trendy new avenue for exploring unfamiliar cultural experiences from the comfort of their living rooms. The most popular type of radio show was a “potter palm,” an amateur concert and big-band jazz performance broadcast from New York and Chicago.

In the 1930s, American adults frequently listened to newscasts, radio theater, soap operas, religious sermons, and entertainment programs. President Franklin D. Roosevelt broadcast his “fireside chats” on national radio in the evenings throughout his presidency beginning in 1933. Amos ‘n’ Andy, while controversial for its racial stereotypes, was a popular comedy and drama beginning in the late 1920s on NBC radio, boasting as many as 40 million listeners in 1930–1931 and lasting into the 1950s on radio and as a television series. Singer Bing Crosby first gained recognition on radio shows in the early 1930s, while famed comedy duo Abbott and Costello made their first known radio performance on The Kate Smith Hour in 1938.

The Grand Ole Opry program, highlighting the biggest stars of the country-music genre, became extremely popular following its launch on November 28, 1925, as a one-hour, radio “barn dance” in Nashville, Tennessee. Its popularity swelled in the 1930s as singers and musicians performed country, bluegrass, folk, and gospel music, as well as comedic performances and skits. The show, which is still aired weekly, helped launch the careers of numerous country music luminaries such as Hank Williams, Patsy Cline, Bill Monroe, the Carter Family, Minnie Pearl, Dolly Parton, and Reba McEntire.

One of the most popular radio shows for young children in the 1930s was Little Orphan Annie, based on a newspaper cartoon strip created by Harold Gray that first appeared in the New York Daily News in 1924. The strip, about an adventurous young girl with an equally daring pet dog named Sandy and a foster father called Daddy Warbucks, was enjoyed by children as well as adults attracted to its political commentary targeting subjects such as organized labor, communism, and FDR’s New Deal.

The strip was adapted to a 15-minute radio program that debuted on WGN in 1930 before going national on NBC’s Blue Network beginning in April 1931. The show was so loved that merchandise such as Annie pins became popular items for children. At its height, the radio program had an estimated six million listeners and remained on the air until 1942. There were two film adaptations in the 1930s, the first by David O. Selznick in 1932 for RKO and the next by Paramount in 1938. The show later saw a huge revival as a theater musical, appearing first on Broadway from 1977 through 1983 and appearing internationally on stage and screen ever since.

Films

Following on the great developments in film of the 1920s, with silent films becoming “talkies” and black-and-white films gradually turning to color, the 1930s saw the release of numerous films and other moving-picture fare that are still highly cherished today.

By the 1930s, all of America’s theaters were owned by the Big Five studios: MGM, Paramount Pictures, RKO, Warner Bros., and 2oth Century Fox. They released a flood of films to satisfy the public clamor for escapism, a departure into a world of fantasy that provided a way to forget the pain and drudgery of the period. Frankenstein (1931), Dracula (1931), King Kong (1933), The Invisible Man (1933), The Bride of Frankenstein (1935), and The Wizard of Oz (1939) were all examples of films that strayed outside the confines of reality. At the same time, romance and dramas such as It Happened One Night (1934), Mutiny on the Bounty (1935), The 39 Steps (1935), and Gone with the Wind (1939) cemented themselves in the pantheon of timeless films.

Comedies were popular films in the 1930s, as a good laugh eased the mind in a time of adversity. Charlie Chaplin was perhaps the world’s biggest film star, maintaining his stature as a top box-office draw with comedies such as City Lights (1931) and Modern Times (1936). The Marx Brothers also provided popular big-screen laughs with Monkey Business (1931), Horse Feathers (1932), and Duck Soup (1933).

The illustration on the poster depicts Charlie Chaplin, with his signature mustache, wearing blue overalls and a t-shirt. He has both hands reaching behind him. With each hand he grips the handle of a circuit breaker. The superimposed text on the poster reads, "Charlie Chaplin in 'Modern Times' written, directed and produced by Charles Chaplin."

Modern Times: Charlie Chaplin’s 1936 film, Modern Times, depicted life in the Great Depression with comedy and empathy and has been named one of the 100 greatest films.

Films depicting America’s fight against the Great Depression became popular as well. Chaplin’s Modern Times shows his character, The Little Tramp, fighting through the pitfalls of life during the Depression and was named to the American Film Institute’s list of 100 Greatest Films. Other examples of life in the Depression include A Man’s Castle (1933) starring Spencer Tracy, Our Daily Bread (1934), My Man Godfrey (1936), and the highly acclaimed Of Mice and Men (1939). Toward the late 1930s, movies from foreign countries also began to play in American theaters.

The late 1920s saw the emergence of Walt Disney and his eponymous studio. Disney’s marquee character, Mickey Mouse, made his debut in Steamboat Willie on November 18, 1928, at the Colony Theater in New York City. Mickey would go on to star in more than 120 cartoon shorts, as well as in The Mickey Mouse Club and other specials. This jump-started Walt Disney Studios and led to the creation of numerous other characters going into the 1930s. Beloved Disney films of the 1930s included The Three Little Pigs (1933) and Snow White and the Seven Dwarfs (1937).

Portrait of Walt Disney

Walt Disney: Animator Walt Disney became a pioneering legend in the film industry with films that became popular in the 1930s including Snow White and the Seven Dwarfs.