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The American Yawp, Volume 2, edited by Joseph Locke and Ben Wright, licensed under CC BY-SA 4.0. Read the original free This shelf’s study material is shared under the same license (CC BY-SA 4.0).
Chapter 9 · pp. 262–299
This chapter explains how the stock market crash of 1929 grew into the worst economic crisis in US history. It covers the causes of the Depression, Herbert Hoover's limited response, the human suffering of ordinary families, and the migrations, protests, and political change that followed. It then shows how Franklin D. Roosevelt's New Deal reshaped the role of the federal government.
The Depression kept making itself worse. When people stopped borrowing and spending, stores sold less. They cut prices, and when lower prices still did not bring in enough buyers, they fired workers to save money. Workers who lost their paychecks could buy even less, so shops cut prices and jobs again (p. 262).
By about four years after the crash, nearly one in four people who wanted work could not find any, which is about 25 percent unemployment. Most of those who did have jobs worked only part-time. Farm prices fell so low that harvesting some crops cost more than the crops were worth, so food rotted in the fields while people went hungry (pp. 262, 266).
The crash began on Thursday, October 24, 1929. About 262 to 73 to $8 (pp. 263–264).
A common misconception is that the crash alone caused the Depression. Only about 2.5 percent of Americans owned stocks, so most people lost nothing directly. The crash mattered because it exposed weaknesses already in the economy. Combined with panic, those weaknesses pulled the country down (p. 264).
Three weaknesses stand out:
Policy mistakes deepened the slide. Hoover had promised higher tariffs to protect farmers and boost domestic buying. In 1930 he signed the Smoot-Hawley Tariff, the highest in US history, just as world markets were weakening. Other countries answered with their own tariffs. International trade fell from 12 billion between 1929 and 1932, and American exports dropped 78 percent (p. 266).
Panic added another blow. To curb speculation, the Federal Reserve raised interest rates and tightened credit. Banks then refused loans and demanded repayment of old ones. Frightened customers rushed to withdraw their savings (pp. 266–267).
This produced a chain reaction, shown below:
About 1,352 banks failed in 1930 and nearly 2,300 in 1932. Their failure erased savings and cut off credit (pp. 263, 266–267).
Hoover first treated the crash as an ordinary "bust" in the usual boom-bust cycle, and he kept predicting recovery. In 1930 he told an audience that the depression was over. Yet within months, new car registrations fell by almost a quarter, and spending on durable goods dropped by a fifth in 1930. His optimism could not keep up with the facts (pp. 266–267).
His other remedies were higher tariffs, immigration limits, "sound money," and public statements of confidence. None restored spending, lending, or jobs (p. 263).
Hoover's thinking rested on associationalism: the belief that businesses, charities, and local groups would cooperate voluntarily to solve economic problems. He feared that direct government aid would weaken people's work ethic. So he asked business leaders to keep up jobs and investment, and he created the President's Organization for Unemployment Relief (POUR) to coordinate private charity (pp. 267–269).
This approach failed because the need was far too large. By mid-1932, a quarter of New York's private charities had closed for lack of money. In Atlanta, relief groups could give needy families only $1.30 a week. Detroit officials said the city could not prevent hunger using its own resources (pp. 268, 271).
In 1932, Hoover made one major exception to his limited-government views. He created the Reconstruction Finance Corporation (RFC) to make emergency loans to banks, railroads, and other businesses. The RFC aided industry and finance, not jobless individuals. Congressman Fiorello La Guardia mocked it as a "millionaire's dole" (p. 269).
In the 1932 presidential race, Hoover, a Republican, warned that reckless experimenters would wreck the Constitution. His main target was the Democratic nominee, New York governor Franklin D. Roosevelt, who promised a "New Deal." Voters chose Roosevelt in a landslide. That result began a lasting change in what Americans expected from the federal government (pp. 263, 266, 268).
Families facing joblessness usually ran out of resources in stages. A New York City official described the pattern in 1932. First, a jobless breadwinner spends any savings. Next, he borrows from friends and relatives until they cannot help more. Then grocers and butchers extend credit, and landlords hold off on collecting rent. Families also took in boarders or "doubled up" with relatives in tenements, and some skipped meals or stopped paying utility bills (pp. 270–271).
When all of this was gone, people who had never been poor had to ask for public aid. But public aid and private charity were already overwhelmed, as Detroit's example shows (pp. 270–271).
By 1932 public aid and private charity were running dry. A Detroit official warned that the city could not prevent widespread hunger with its own money. Its work plan for 11,000 families had collapsed because there was no cash to pay the workers (p. 271).
The longest-unemployed Americans built Hoovervilles. These were shantytowns that sprang up in cities on public or marginal land. The name blamed President Hoover for the misery. Residents survived on bread lines and by selling small items on street corners (p. 271). The veterans' camp in Washington in 1932 was also called a Hooverville (p. 276).
The Depression did not hurt everyone equally. Women often suffered more than men because of a common belief that jobs belonged to male breadwinners. Employers hesitated to hire married women and often fired those already working, assuming they did not need the pay. This belief ignored reality, since poor women and children had always worked to survive. Women alone and out of work also faced a greater risk of sexual violence, and many relied on one another for protection (p. 271).
Black Americans were hit even harder. They were usually the last hired and the first fired. In 1932, when about 25 percent of all workers were jobless, Black unemployment reached as high as 50 percent. Black workers who kept their jobs often saw their low wages cut sharply. A National Urban League study suggested that employers used this practice to reduce white unemployment, whatever the cost to Black workers (pp. 271–272).
The Dust Bowl was the part of the Great Plains ruined by drought and dust storms from about 1932 to 1936. Farmers had plowed up the natural ground cover that held the soil, and the area had been spared trouble only because earlier decades were wet. When the rains stopped, the exposed topsoil dried into dust. With no sod or trees to slow the wind, huge storms darkened the sky and killed livestock. They even dropped dirt on Washington, D.C., and on ships in the Atlantic. The disaster showed, too late, how much the land needed conservation (p. 272).
Drought was only part of the story. Farmers in Texas, Oklahoma, Kansas, and Arkansas already faced foreclosures and falling crop prices. Many saw California as their one hope, with its harvests and possible farm work. The result was a mass exodus. Oklahoma alone lost 440,000 people, or 18.4 percent of its 1930 population (p. 272).
Photographer Dorothea Lange captured this movement in Migrant Mother (1936). She took the picture for the Farm Security Administration at a farmworker camp in Nipomo, California. It shows a worn, worried woman, originally from Oklahoma, holding an infant while two older children lean on her. The image came to stand for the nation's struggle (pp. 272–273).
The westward migrants were scornfully nicknamed "Okies" by their new neighbors. They were only the most visible travelers. By 1932, sociologists estimated that millions of men were riding freight cars or hitching rides in search of work. Popular culture took notice. The film Wild Boys of the Road (1933) and John Steinbeck's novel The Grapes of Wrath (1939, a film in 1940) portrayed these uprooted people (pp. 273–274).
The Depression also brought the first significant reversal of the rural-to-urban trend. Thousands of people left jobless cities for the countryside. Many states and towns then tried to keep poor newcomers out. Some made it a crime to bring poor migrants into the state, and officials could deport them to neighboring states. In 1935–1936, California, Florida, and Colorado set up "border blockades" (p. 274).
Sympathy for migrants grew only late in the decade. The Grapes of Wrath drew attention to their plight, and in 1940 Congress formed a committee to study the interstate migration of destitute citizens. Real relief came from somewhere else. As World War II began, defense industries needed workers, and the migrant "problem" became a labor shortage (p. 275).
Many Americans feared that foreign workers would accept even lower wages. In September 1930, the Hoover administration told consuls abroad to deny visas to anyone "likely to become public charges." That could cover most foreign laborers and artisans. European visas fell about 60 percent. From 1930 to 1932, 54,000 people were deported and another 44,000 left "voluntarily" (p. 275).
Mexicans and Mexican Americans were hit hardest. Many had come north during the Mexican Revolution and found jobs in the booming farms and industries of the Southwest. Officials there used harassment, intimidation, and armed "street sweeps." These sweeps deported few people directly, but they were meant to frighten families into leaving (p. 275). In Los Angeles, a citizens' committee worked with federal officials on raids. County charities pushed people on relief to go and arranged cheap rail fares to Mexico. Repatriation trains also left from San Antonio, Detroit, and New York (p. 276).
Roosevelt's administration stopped some of Hoover's harshest practices, but jobs were scarce and hostility continued. Over the decade, more people left the United States than entered. The census shows the Mexican-born population of Arizona, California, New Mexico, and Texas dropping from about 617,000 in 1930 to about 377,000 in 1940. Scholars estimate that roughly one million Mexicans were pushed out overall, including many children who were US citizens by birth (p. 276).
In summer 1932, more than 15,000 unemployed World War I veterans and their families came to Washington. They wanted their bonuses, due in 1945, paid right away. They camped at Anacostia Flats, drilled, and marched as the "Bonus Army." Hoover worried about the budget and opposed the bill, and the Senate voted it down. When thousands stayed anyway, Hoover ordered them out. General Douglas MacArthur led soldiers, tanks, and tear gas against the camp and burned it. Two marchers and a baby died (pp. 276–277).
Newsreels showed the attack, and the public was shocked. Hoover was not personally to blame for the Depression. But his ideology could not meet a crisis this large, and his repeated promises of returning prosperity sank his presidency (p. 278).
Franklin D. Roosevelt came from a wealthy New York family. Polio left him paralyzed in 1921, but he returned to politics and became governor in 1928. In 1931 he argued that helping the jobless was a "social duty," not charity. His Temporary Emergency Relief Administration (TERA) gave public-works jobs and food, shelter, and clothing, and it soon reached 10 percent of the state's families (pp. 278–279). Among his advisors was Frances Perkins, New York's labor commissioner. She won laws for safer workplaces and less child labor, and she later became the first female secretary of labor (p. 280).
Accepting the Democratic nomination on July 1, 1932, Roosevelt promised "a new deal for the American people." Editors turned the phrase into the name of his program. It called for jobs and public works, higher wages, old-age pensions, unemployment insurance, farm subsidies, bank regulation, and lower tariffs. Hoover called the plan un-American and compared it to communism, but voters rejected his warnings and Roosevelt won in a landslide (p. 280).
At his March 4, 1933 inauguration, Roosevelt said the only thing to fear was "fear itself." He relied on a group of academic experts called the "Brain Trust." Later, the Twentieth Amendment moved inauguration day to January 20. His calm words were backed by quick action (p. 280).
The first target was the banks. Two of every five banks open in 1929 had closed. Roosevelt declared a bank holiday and pushed the Emergency Banking Act through Congress. On March 12 he gave the first "Fireside Chat" by radio, explaining the new safeguards and asking people to trust the banks. They did, and deposits exceeded withdrawals (pp. 280–281). In June, the Glass-Steagall Banking Act created the Federal Deposit Insurance Corporation (FDIC) to insure deposits. It also separated commercial banking from investment banking. Insurance means savers have less reason to panic and rush to withdraw their money, as they had in 1930–1932 (p. 281).
Fireside Chats were Roosevelt's relaxed, personal radio talks to the public. The first aired on March 12, 1933, the night before some banks reopened under stricter federal rules. In it he described the new banking safeguards and asked people to trust banks with their savings again. Americans listened, and across the country deposits grew faster than withdrawals. That showed the talk worked. (p. 281)
Roosevelt kept giving these talks through four terms. He used them to explain New Deal laws, build confidence in government action, and win public support. Because many Americans heard the president speak directly in their homes, he could build backing without relying only on newspapers. (p. 281)
Fixing the banks was only the first step. During the rest of the First Hundred Days, Roosevelt and Congress turned to relief for suffering Americans. Congress debated and passed what he proposed, because the crisis seemed to demand fast action, even though some people doubted that many of the actions were constitutional. (p. 281)
Several agencies came out of this period:
The core of the early recovery plan was two huge efforts to steady and coordinate the economy. (p. 281)
The AAA. The Agricultural Adjustment Administration, created in May 1933, tried to raise crop prices, and so farm income. It paid farmers cash to voluntarily grow less. The reasoning is simple supply and demand: when supply falls, prices rise. For example, if farmers plow under some cotton and leave fields idle, less cotton reaches the market and each bale sells for more. Prices did rise, but the benefits went mostly to landowners. (pp. 281, 284)
The NRA. The National Industrial Recovery Act of June 1933 created the National Recovery Administration. It suspended antitrust laws so firms in an industry could write "codes" that coordinated prices, limited production, and set working conditions. The goal was to end "cutthroat competition," where firms slash prices and wages to survive. In return, businesses promised reasonable wages and hours, no child labor, and workers' right to unionize. Firms that cooperated displayed the NRA's Blue Eagle. (pp. 281–282)
These programs helped, and output (GDP) began to climb again. But unemployment stayed very high, even after dropping from its 1933 peak. So the New Deal tried to create jobs directly. (p. 282)
Together they produced lasting public works and gave jobs to millions. (p. 282)
A region already poor. In 1929 the Southeast had the lowest per capita income in the nation, only 183 a year, while West Coast farmers earned over four times that. Cotton and corn wore out the soil and paid less and less. Southern industry was low-wage and low-skill. Southern workers earned 75 percent of what nonsouthern textile workers made, 60 percent for iron and steel workers, and just 45 percent for lumber workers. (p. 282)
The AAA's harm to tenants. Roosevelt hoped to stop cotton's price slide by cutting the land planted in it. Farmers left fields empty and prices rose. But the government let landowners and local groups share the payments. Many owners evicted tenants and sharecroppers, kept the subsidy checks, and bought machines, which cut the need for farm labor even more. The program thus pushed landless farmworkers off the land instead of making farming profitable for them. (p. 284)
Labor measures. Other policies helped southern workers. The NRA began to curb child labor in mills. In 1934 textile workers in the Piedmont struck over low pay and long hours, and owners used local and state authorities and thousands of strikebreakers (often displaced farmers) to crush the strike. Starting in 1935, the National Labor Relations Act protected most workers' right to unionize and bargain. The 1938 Fair Labor Standards Act set a minimum wage of 0.40. This raised the lowest southern wages the most and moved them closer to northern levels. Union members came to see Roosevelt as their protector. (p. 284)
The TVA. Probably the New Deal's most successful southern program, the TVA used dams for flood control and cheap electricity in areas without power. Its agents also offered training and classes to improve farming and prepare people for new jobs. It reflected Roosevelt's aim to lift up the South and connect it to the national economy. (pp. 284–285)
Roosevelt and southern Democrats. At first Roosevelt courted conservative southern Democrats, because he needed their votes. That meant the South's racial and economic inequalities stayed in place. By the end of his second term he had enough support outside the South to take them on. He endorsed a report on southern economic conditions and called the region "the Nation's No. 1 economic problem." (p. 285)
Roosevelt's early programs were fairly cautious. He stayed within normal presidential powers and avoided reshaping the basic economic system, unlike some European nations that turned to state-run economies, socialism, or fascism. From 1934, critics said he had not gone far enough, and he had to respond. (p. 285)
Huey Long. This Louisiana senator proposed Share Our Wealth. The government would take the assets of the very rich and redistribute them through guaranteed minimum incomes. More than 27,000 clubs formed. Long was assassinated in late 1935, but his challenge pushed Roosevelt to attack inequality more forcefully. (pp. 286–287)
Francis Townsend and Charles Coughlin. Townsend, a California doctor, promoted old-age pensions. He argued they would help the elderly poor and open jobs as older workers retired. Coughlin, a Michigan radio priest, attacked Roosevelt for working with bankers, used antisemitic rhetoric, and called for a more state-driven economy. Both built large followings. (p. 287)
Opposition from the right. By late 1934, business-friendly Republicans objected to federal regulation and spending on public works. Some southern Democrats turned against programs that challenged the region's order. The biggest obstacle was the Supreme Court, filled with conservative appointees. On May 27, 1935, called "Black Monday" by supporters, it unanimously struck down the NRA in a poultry-processing case. The AAA was struck down in early 1936. (p. 287)
