How was America affected by the Great Depression?

Background Information

On the 24th of October,__ 1929__, Wall Street ‘crashed’. On ‘Black Thursday’, 13 million shares were sold, more than five times the usual number, because people were suddenly losing confidence in the value of shares. They realised that a share was only worth money if someone was willing to buy it, and they were becoming too expensive to buy, and so nobody would buy. This resulted in shares plummeting in price, and investors losing any confidence in the stock market.

This was followed by the worst Depression (time of financial regression and hardship), in the history of the United States, and everyone was affected – farmers, factory workers, the rich, and so on. The government did not know what to do – the President Herbert Hoover, had himself only just encouraged everyone to invest in the Stock Market, and had no contingency plans for any economic trouble.

How was America affected by the Great Depression?, figure 1

This graph shows the change in Stock Market value - note the steep drop during ‘Black Tuesday’, which was the start of the Wall Street Crash. You can see from the table, that since the Wall Street Crash, only one day in American history has been worse for the Stock Market (1987).

The Wall Street Crash

The Great Depression was largely brought about through over deregulation of the financial markets, and an exploding sense of overconfidence in the Stock Market. People invested too much money in stocks and shares – more than they could afford, and in many cases all of their money. As such, when Wall Street struggled, the economy collapsed. Share prices tumbled by hundreds of dollars overnight as people realised they were based on confidence, and all of a sudden there was no confidence left. This resulted in the collapse of the American Stock Market.

People lost all of their savings, companies lost their savings, and one of the central pillars of the American economy was destroyed. As a result of this, a whole generation of Americans were worried about retirement – indeed, many who were meant to retire around the time of the Great Depression could not afford to. In 1929, over 650 banks went bankrupt because their customers had used all of their savings to invest in stocks – now worthless.

This was certainly the trigger cause – the Wall Street Crash set off the rest of the Great Depression, and the other effects which will be explained below. As investment stopped, so too did buying and employment. As people lost their savings, so too did companies have to save costs by firing people and putting up prices – which nobody could afford to buy any more.

Unemployment and Hoovervilles

Unemployment skyrocketed from 1929, in industry more than anywhere else – over 13 million had lost their jobs before 1932, 12’000 people were being fired every day, and certain areas were affected particularly badly – for example steel workers in Cleveland, of whom a full half were fired. Many of those who became unemployed initially tried to move cities, thinking it might be better elsewhere. Later, even though they knew it wasn’t, they had to move because they could not pay their mortgages.

People who moved cities could not afford a new house or mortgage, and began to congregate in a sort of slum, known as ‘Hoovervilles__’ (this was a joke about the then-President, Hoover, who was criticised for his handling of the Depression). Hoovervilles were full of self-made houses using scrap materials, and had no services (including power, water, or sewage). Many were reduced to begging, looking for food and belongings in rubbish heaps, and queuing for free food – these were known as breadlines.

How was America affected by the Great Depression?, figure 1

This photograph shows what typical ‘Hooverville houses’ looked like. People would make these out of left over industrial supplies, often raiding factories that had shut down as a result of the Great Depression.

Agriculture

Farmers had already been losing money in the second half of the 1920s. They were affected even more badly by the Depression. Industrial techniques had also led to food overfarming in several States, which drove prices too low for farmers to make any profit. Expensive bank loans for new equipment suddenly had to be repaid – the farmers could not afford this. Their only answer was to try and farm even harder; growing more intensely, with fewer workers and with less care.

All non-essential workers were quickly fired, farming businesses went bankrupt, and there was too much food in some States and not enough in others. This combined with poor weather and the Dust Bowl; intensive farming practices had been too demanding on the land, and turned good soil into little more than dust and sand. Huge storms passed through the farming States, blowing up and away the useless sand-soil and making farming impossible.

How was America affected by the Great Depression?, figure 1

This picture shows the effects of overproduction and overfarming - the soil has turned almost to sand. This made it impossible to grow food, and thousands of farmers were unable to work.

How was America affected by the Great Depression?, figure 2

When the wind blew, the soil was such poor quality (essentially dust and sand) that it was picked up and created these enormous Dust Storms. The degraded farmland in the central United States became known as the ‘Dust Bowl’.

Industry

Factories had got so carried away with_ mass production_ that for several years factories had been overproducing. They did not want to slow down production, as this would make the prices higher, or result in having to fire workers. However, the factories produced more goods than the American people wanted, or could buy. These companies also couldn’t sell abroad, because foreign governments had reacted to the Republican tariffs with their own taxes on American goods.

As soon as companies’ shares started to tall, the companies started to collapse. Investment was immediately withdrawn, there were huge numbers fired overnight, and businesses could not pay back their loans from banks. This caused either the business, bank, or both to go bankrupt. Entire towns had been built around huge factories, and when these workers were fired it affected everyone. There were no workers to eat out, get haircuts, go to the movies; entire towns’ and cities’ economic systems collapsed.

To Sum Things Up

American was hit extremely hard – this was arguably the biggest crisis the country had ever had to face. The repercussions would affect America for over a decade, and would arguably not be fixed until the U.S. started to thrive off the trade of the Second World War.

Farmers and industrial workers were the jobs hit most, and the most relevant to the spec; however, workers in the service industry (entertainment, food, music and so on), were also particularly badly hit. At least for a few years, the Consumerism of the 1920s took a significant blow, as people simply could not afford to spend money.

Beyond this, it was Black African Americans who were hit the worst by the Great Depression. This reflects the prejudice remaining in society at the time. These people tended to be the first workers fired, and the government was the slowest to act to help them when they were in trouble. For some time, the Great Depression only entrenched prejudice in American society, as people were most concerned about helping themselves.

How was America affected by the Great Depression?, figure 1

Many African American workers were made homeless and unemployed. Some had to sell their homes, and were left with only the cars (purchased during the 1920s Boom) to live in. Many had to leave - some moved back South to live with family and form African American communities which looked after each other. Others moved North in the hope of finding less prejudice and more work. Few found what they were looking for in either place.

Define the following terms:

Economic Depression
Your answer should include: unemployment / market crash / negative growth
Stock Market
Your answer should include: New York / companies / stocks / shares / investment
Hoovervilles
Your answer should include: unemployment / homeless / president / depression
Herbert Hoover
Your answer should include: President / America / Great Depression
The Dust Bowl
Your answer should include: farming / overfarming / land / unemployment
Overproduction
Your answer should include: producing / too much / factories / unemployment