In 1929, Hoover’s first year as president, the prosperity of the 1920s capsized. Stock prices climbed to unprecedented heights, as investors speculated in the stock market. The speculative binge, in which people bought and sold stocks for higher and higher prices, was fueled by easy credit, which allowed purchasers to buy stock “on margin.” If the price of the stock increased, the purchaser made money; if the price fell, the purchaser had to find the money elsewhere to pay off the loan. More and more investors poured money into stocks. Unrestrained buying and selling fed an upward spiral that ended on October 29, 1929, when the stock market collapsed. The great crash shattered the economy. Fortunes vanished in days. Consumers stopped buying, businesses retrenched, banks cut off credit, and a downward spiral began. The Great Depression that began in 1929 would last through the 1930s.
The stock market crash of 1929 did not cause the Great Depression, but rather signaled its onset. The crash and the depression sprang from the same cause: the weaknesses of the 1920s economy. An unequal distribution of income meant that working people and farmers lacked money to buy durable goods. Crisis prevailed in the agricultural sector, where farmers produced more than they could sell, and prices fell. Easy credit, meanwhile, left a debt burden that remained unpayable.
The crisis also crossed the Atlantic. The economies of European nations collapsed because they were weakened by war debts and by trade imbalances; most spent more on importing goods from the United States than they earned by exporting. European nations amassed debts to the United States that they were unable to repay. The prosperity of the 1920s rested on a weak foundation.
After the crash, the economy raced downhill. Unemployment, which affected 3 percent of the labor force in 1929, reached 25 percent in 1933. With one out of four Americans out of work, people stopped spending money. Demand for durable goods—housing, cars, appliances—and luxuries declined, and production faltered. By 1932 the gross national product had been cut by almost one-third. By 1933 over 5,000 banks had failed, and more than 85,000 businesses had gone under.
The effects of the Great Depression were devastating. People with jobs had to accept pay cuts, and they were lucky to have work. In cities, the destitute slept in shanties that sprang up in parks or on the outskirts of town, wrapped up in “Hoover blankets” (newspapers) and displaying “Hoover flags” (empty pockets). On the Great Plains, exhausted land combined with drought to ravage farms, destroy crops, and turn agricultural families into migrant workers. An area encompassing parts of Kansas, Oklahoma, Texas, New Mexico, and Colorado became known as the Dust Bowl. Family life changed drastically. Marriage and birth rates fell, and divorce rates rose. Unemployed breadwinners grew depressed; housewives struggled to make ends meet; young adults relinquished career plans and took whatever work they could get.
Modest local welfare resources and charities barely made a dent in the misery. In African American communities, unemployment was disproportionately severe.
In Chicago in 1931, 43.5 percent of black men and 58.5 percent of black women were out of work, compared with 29.7 percent of white men and 19.1 percent of white women. As jobs vanished in the Southwest, the federal government urged Mexican Americans to return to Mexico; some 300,000 left or were deported.
On some occasions, the depression called up a spirit of unity and cooperation. Families shared their resources with relatives, and voluntary agencies offered what aid they could. Invariably, the experience of living through the depression changed attitudes for life. “There was one major goal in my life,” one woman recalled, “and that was never to be poor again.” President Hoover, known as a progressive and humanitarian, responded to the calamity with modest remedies. At first, he proposed voluntary agreements by businesses to maintain production and employment; he also started small public works programs. Hoover feared that if the government handed out welfare to people in need, it would weaken the moral fiber of America.
Hoover finally sponsored a measure to help businesses in the hope that benefits would “trickle down” to others. With his support, Congress created the Reconstruction Finance Corporation in 1932 that gave generous loans to banks, insurance companies, and railroads. But the downward spiral of price decline and job loss continued. Hoover’s measures were too few, too limited, and too late.
Hoover’s reputation suffered further when war veterans marched on Washington to demand that Congress pay the bonuses it owed them (see Bonus March). When legislators refused, much of the Bonus Army dispersed, but a segment camped out near the Capitol and refused to leave. Hoover ordered the army under General Douglas MacArthur to evict the marchers and burn their settlement. This harsh response to veterans injured Hoover in the landmark election of 1932, where he faced Democrat Franklin Delano Roosevelt. Roosevelt was New York’s governor and a consummate politician. He defeated Hoover, winning 57 percent of the popular vote; the Democrats also took control of both houses of Congress. Voters gave Roosevelt a mandate for action. "USA" © Emmanuel BUCHOT, Encarta, Wikipedia.
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