Chapter 15 Crash and Depression

The Stock Market Crash After reaching a record high in September 1929, stock prices begin to fall, and the stock market crashes on Tuesday, October 29. This day is known as Black Tuesday. Panicked investors sell millions of stock in one day. The effects of the Crash ripple through the entire economy. Businesses and individuals are unable to repay bank loans. Afraid that banks will run out of money, there is a rush to withdraw money. Many banks fail, people’s savings are wiped out, and businesses are unable to borrow money.

The Ripple Effect of the Crash Unemployment grows as businesses cut back on production. Factories, restaurants, and small businesses close. by 1932 about one quarter of the nation’s workforce is unemployed in the worst economic downturn in American history. It is known as the Great Depression.

Underlying Causes of the Depression Both the Crash and the Great Depression are the result of underlying problems in the nation’s economy. National wealth is unevenly distributed, with most in the hands of a few families. Industry produces more goods than most consumers want. Much of the stock market boom is based on speculation, with brokers loaning millions to buyers. Concerned about overspeculation in early 1929, the federal Reserve limits the money supply to discourage lending. After the Crash, there is too little money in circulation to help the economy.

Poverty Spreads As poverty spreads, many homeless people move into “Hoovervilles,” shanty towns named for the President, who people feel is not helping. Other homeless and jobless people drift, hitchhike, or ride trains illegally. By 1933 an estimated one million people are moving around the country.

Poverty Strains Society Banks foreclose and sell famrs when farmers cannot pay the mortgages, and another crisis hits farms in the Midwest when destructive farm practices combine with years of drought to produce the Dust bowl. The combination of soil erosion and prices falling cause 60 percent of Dust Bowl families to lose their farms.

Stories of Survival The Depression takes a serious physical and psycohological toll on the whole country. People are hungry, sick, and depressed. Families live crowded together in small apartments or houses. Men are embarrassed by their umemployed status, and working women are accused of taking jobs from men. White laborers, in competition for scarce jobs, are hostile to African American, Hispanics, and Asian Americans. Black unemployment soars to about 56 percent, and African Americans are denied access to education, voting, and health care.

Americans Pull Together To survive, people work long hours for low pay wherever they can. they also work together for the common good. Tenant groups protest rent increases and evictions. When farmers lose their farms, they banks hold auctions to resell the farms. Farmers work together by secretly agreeing to keep bids low.

World In Europe, economic problems bring riots and political upheaval, but few Americans call for radical political change. However, the Communist and Socialist parties are both active, and many remember the decade as a high point of cooperation among groups of students, workers, writers, artists, and professionals of all races.

Signs of Change Two major events occur during this period: Prohibition is repealed, and the Empire State Building is built. It is the tallest building in the world at this time (102 stories), and it provides work for the thousands who conduct it. In a troubled time, it symbolizes hope to all who see it.

Hoover’s Limited Strategy At first, President Hoover insists that all efforts to end the Great Depression be voluntary, and after a year of no change, the public begins to blame him. Then Hoover lends money and extends credit to banks, large industries, and railroads. However, these acts are seen by many as simply helping big business. Hoover’s popularity is further damaged when jobless World War I veterans marching on Washington, D.C., are injured by troops sent by Hoover to stop the march. The stage is set for Franklin and Elanor Roosevelt, a compassionate couple with valuable political experience

A “New Deal” For America The election of 1932 becomes a battle between those who support an active federal government and those who oppose it. FDR wins by a huge margin. The Roosevelt years will see the beginning of many programs that will change the role of American government.