The Great Depression
The Great Depression was a period of severe worldwide economic decline that lasted more than a decade . To this day, it is the worst, longest and most widespread economic decline ever experienced in the United States.
Factors leading to the depression
Many historians disagree on the exact causes of the depression. However, certain factors most likely played a role in the economic downturn.
Trouble in big industry: Railroad, mining, coal and lumber suffer from over production, new competition and lower demand following the end of WWI.
Farming industry suffers: Farmers take out loans to meet the production demands to feed troops during WWI. Demand dramatically dropped after WWI, which meant that profits dramatically dropped and farmers struggled to pay back their loans.
Living on Credit: Americans were increasingly buying products and services on credit. Americans were building more debt with interest charges piling up. As a result, many Americans reached a point where they struggled to pay off their credit. This also resulted in consumers purchasing less consumer products and goods, hurting businesses in the process.
Uneven distribution of wealth: The income of the wealthy rose dramatically while the income of the rest of the population rose only slightly. Most Americans were having trouble paying for goods and services because their wages did not keep up with rising costs of living.
The stock market crash took place on October 24th, 1929, a day that became known as "Black Thursday". The stock market crash was marked by an abrupt and sharp drop in stock prices. Many historians see this as the official marking period of the Great Depression and one of the many factors resulting in its long duration.
During the period known as the roaring 20's, stock prices continued to rise in value. Many felt optimistic that stocks would continue to rise in value with no end in site. Many individuals, eager to cash in on the rising value of the market, bought stocks on margin. Buying stocks on margin meant that a person or investor only paid a portion of the stock price with the remaining amount loaned to them by a broker. The investor buying on margin would hope to pay the loan back once their stocks increased in value and they could sell them for a profit. However, this was a dangerous practice for many as they would not be able to pay loans back if prices of stocks dropped dramatically.
The market was extremely unstable in the days leading up to the crash. Prices of stocks would rise and drop repeatedly in those days with heavy selling and trading of stocks taking place. After the opening bell signaling the start of trading on October 24th, 1929, the market lost 11 % of its value. In a panic, people tried to sell their stock before prices would drop even lower. People who bought stock on margin could not pay afford to pay back their loans. Others lost most of their life’s savings that they had invested in the market.
Impact of the Depression
Banks shut down: Many banks failed and closed as many people withdrew all their money. Others could not get their money from the bank because the banks had invested and lost consumers’ money in the stock market.
High unemployment: Many businesses went bankrupt resulting in many Americans losing their jobs. The unemployment rate remained very high during the depression, as high as 25% at its peak, as many Americans struggled to find work.
Farming industry suffers: The farming industry suffered greatly from the economic conditions and the dust bowl. The dust bowl was a period during the depression where severe drought caused a series of dust storms that caused massive damage to many lands, making growing crops very difficult for farmers. Most farmers struggled to make a profit and had to sell their farms.
Drop in international trade: Because the depression was a global crisis, countries could not afford to import or export goods. International trade dramatically dropped.
Hoovervilles and the homeless: Named after the president in office at the start of the depression, Hoovervilles were the name for tents or shacks built by the homeless who could not afford housing. They were usually built near soup kitchens in crowded urban areas. The conditions were horrible for the occupants.
President Hoover's Response to the Depression
Herbert Hoover was the republican president in office from the start of the depression. Many individuals accused him of not doing enough to help the American people through the tough economic times.
Hoover’s administration, along with members of congress, passed the Hawley Smoot Tariff Act of 1930 as part of an effort to help American farmers and businessmen. The act placed high tariffs (A tax on traded goods and services) on imported and exported goods. The thought behind the tariff was that it would encourage consumers to buy more domestically produced goods. The tariff wound up having more of a negative affect on the economy since other countries reacted by increasing their own tariffs on goods. The result was that international trade dramatically dropped, further damaging the economies of many countries.
Hoover believed in the idea of “rugged individualism”. People should take care of themselves through their own efforts rather than depend on government bail outs. He was against federal welfare or direct government relief to the people. Instead, he believed that Americans should help one another through churches and charity organization. This angered many as they believed he was not doing enough to ease the financial suffering of the people.
Hoover tried to improve conditions despite the belief that he did nothing to combat the depression. Soon after the stock market crash, he gathered the top business leaders in the country to urge them not to fire their employees. He increased corporate taxes and taxes for the rich. He also created public works projects like the building of the Hoover dam. Hoover tried to assure the American public that the economy would recover but by the end of presidency, their was little improvement. Franklin Delano Roosevelt won the 1932 election with a landslide victory.
FDR and the new deal
FDR ran against Hoover as the democratic candidate and began serving as president in 1933. His policies designed to combat the depression became known as the new deal. He pushed through several pieces of his new deal legislation through congress during his first 100 days in office. He believed in a policy of deficit spending in which the government should overspend in order to stimulate the economy and encourage growth. FDR communicated his beliefs and policies through frequent radio addresses know as fireside chats.
New deal legislation included the FDIC created to insure consumers bank accounts in case of loss, the securities exchange commission created to regulate wall street and investing, the federal securities act, the tennessee valley authority, the agricultural adjustment act, the civilian conservation corps and the social security act. Some of the new deal legislation were challenged as unconstitutional and overturned by the supreme court. Of the many pieces of new deal legislation passed, social security, the securities exchange commission and the FDIC still exist today.
FDR’s policies did improve conditions somewhat and created confidence among Americans that the economy was improving. However, the depression continued with a high unemployment rate up until WWII. While some question just how effective FDR’s policies actually were in ending the depression, one of his lasting legacies is that he put in place many supports to avoid a depression in the future.
FDR's First Inaugural Address (March 4, 1933)
This is a day of national consecration. And I am certain that on this day my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impels. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.
In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.
More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.
Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live. Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.
Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of ur natural resources.
Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly.
Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order: there must be a strict supervision of all banking and credits and investments, so that there will be an end to speculation with other people's money; and there must be provision for an adequate but sound currency.
Inaugural Address Continued...
These are the lines of attack. I shall presently urge upon a new Congress, in special session, detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.
Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.
The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first considerations, upon the interdependence of the various elements in and parts of the United States-a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.
In the field of world policy I would dedicate this Nation to the policy of the good neighbor—the neighbor who resolutely respects himself and, because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.
If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we cannot merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.
With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.
Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.
It is to be hoped that the normal balance of Executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.
I am prepared under my constitutional duty to recommend the measures that a stricken Nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption.
But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.
For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.
We face the arduous days that lie before us in the warm courage of national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.
We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.
In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.
Retrieved from: http://millercenter.org/president/speeches/detail/3280
