however, did not reduce production. As a
result, prices for farm products stayed low.
Besides low farm prices, other signs
pointed to an economic slowdown. The demand for new homes and office buildings
declined. The sale of heavy machinery fell.
Consumers were buying less. However, the
government kept few detailed records in the
1920s. Therefore, most Americans were not
aware of the trouble.
The Stock Market Plunges
H e r b e r t Hoover campaigned for election confidently in 1928. He declared:
CCWe in America are nearer to the final triumph over poverty than ever
before in the history of any land.
The poorhouse is vanishing from
among us. 99
The following year, the stock market
crashed. The United States began a plunge
into the worst depression in its history. Everywhere, stunned people asked: How
could this have happened?
An Economy in Trouble
When Hoover took office in 1929, he
saw a growing economy. Along with most
of the nation's leaders, he did not recognize
the signs that warned of trouble.
Many Americans, as you have read, did
not share in the prosperity of the 1920s.
Farmers, especially, faced hard times. Once
in office, President Hoover tried to help
farmers. He persuaded Congress to create
the Federal Farm Board. The Farm Board
helped farmers to sell their products and
worked to keep prices stable-neither rising
too high nor dropping too low. Farmers,
708
Chapter 25
By August 1929, a few investors had begun selling their stocks. They felt the boom
might end soon. In September, more people
decided to sell. The rash of selling caused
stock prices to fall.
A nervous market. The President reassured nervous investors. "The business of
the country is on a sound and prosperous
basis," he stated. Words were not enough,
however. As the selling continued, prices
tumbled.
Many investors had bought stock on margin. (See page 686.) Now, brokers asked investors to pay the money they still owed for
the stock. Investors who could not pay had
to sell their stock. This caused prices to
drop even more. Between October 24 and
October 29, desperate people tried to unload millions of shares of stock.
Stock market crash. On Tuesday, October 29, a stampede of selling hit the New
York Stock Exchange. On Black Tuesday, as
it was soon called, prices plummeted because there were no buyers for the stock.
People who thought they owned valuable
stocks were left with worthless paper. Overnight, millionaires lost their fortunes.
Business leaders and bankers tried to restore confidence in the economy. John D.
Rockefeller told reporters, "My son and I
have for some days been purchasing some
common stocks." Replied comedian Eddie
Cantor, "Sure, who else has any money left?"
-
-.
Panic! In October 7929, screaming headlines
announced the stock market crash. Here, people
gather on the street to read the alarming news.
Economics What effect did panic have on stock
prices?
Sliding into depression. Following the
stock market crash, the economy slid into a
severe depression. The crash did not cause
the depression, but it did shake confidence
in the economy. Many people who had invested their savings in stocks suddenly had
little or nothing left.
Causes of the De~ression
*
The economic hard times that lasted
from 1929 to 1941 are known as the Great
Depression. Many Americans experienced
the despair of joblessness. As the depression
worsened, people tried to understand how
the prosperity of the 1920s had turned into
the nightmare of the 1930s.
Too many goods, too few buyers.
Among the chief causes of the Great Depression was overproduction. American
farms and factories produced vast amounts
of goods in the 1920s. Wages did not rise as
much as prices, however. As a result, workers could not afford to buy many goods.
Farm families also had little money for cars
and other expensive items.
Soon, factories and farms were producing more goods than people were buying.
As orders slowed, factories closed or laid off
workers.
Problems in the banking system. Another cause of the depression was weakness
in the banking system. During the 1920s,
banks made loans to people who invested
in the stock market. When the stock market
crashed, borrowers could not repay their
loans. Without the money from the loans,
the banks could not give depositors their
money when they asked for it. Many banks
were forced to close.
More than 5,000 banks closed between
1929 and 1932. When a bank closed, depositors lost the money they had in the
bank. A family's savings could disappear
overnight.
A cycle of disaster. After the stock market crash, the economy skidded downhill.
One disaster triggered another. The stock
market crash, for example, ruined many investors. Without money from investors, or
capital, businesses could no longer grow
and expand.
With the banks in trouble, businesses
could not turn to them for capital, either.
Businesses cut back on production. Production cutbacks led to wage cuts and employee layoffs. Unemployed workers, in turn,
had little or no money to spend. As a result,
they bought less. The demand for clothing,
cars, and other goods fell. In the end, many
businesses went bankrupt.
Chapter 25
709
Worldwide depression. In the 1920s,
the Unitecl States had made large loans to
European nations. When American banks
stopped making loans, European banks also
began to fail. The Great Depression spread
from one nation to another, leading to a
worldwide economic collapse. You will read
more about the effects of the depression on
other countries in Chapter 26.
Hard Times
The United States had suffered other
economic depressions. None, however, was
as bad as the Great Depression. The Great
Depression lasted longer than other depressions. Also, in earlier times, most Americans
lived on farms and grew their own food. In
the 1930s, millions of Americans lived in
cities and worked in factories. When factories closed, the jobless had no money for
food and no land on which to grow it.
Soaring unemployment. A s the depression spread, the number of jobless people
soared. By the early 1930s, one in every
four workers was unemployed. Millions
more worked shortened hours or had to
take pay cuts. Many of the jobless lost their
homes.
The chance of finding work was small.
On an average day, one New York job
agency had 5,000 people looking for work.
Only about 300 found jobs. In another city,
police had to keep order as 15,000 women
pushed and shoved to apply for six jobs
cleaning offices.
Some of the jobless sold apples from
sidewalk stands. Others shined shoes on
street corners. The man now looking for a
handout, noted a reporter, "might be the
same fellow who a few months. . . ago had
cheerfully O.K.'d your loan at the bank."
Families in crisis. During the depression, families suffered. Marriage and birth
rates dropped. Hungry parents and children
searched through city dumps and restaurant
710
.
Chapter 25
Year
Source: Historical Statistics of the United States
GRAPH SKILLS During the depression, millions
of Americans were out of work. According to
the graph, in which year was unemployment the
highest? What happened to unemployment
between 1936 and 194 1?
garbage cans. A teacher ordered a thin little
girl to go home to eat. "I can't," said the girl.
"This is my sister's day to eat."
The pressure of hard times led some
families to split up. Fathers and even children as young as 13 or 14 left home to hunt
for work. Their leaving meant the family
had fewer people to feed.
The homeless. Homeless, jobless men
and women drifted from town to town looking for work. Some "rode the rails." They
lived in railroad cars and hitched rides on
freight trains. In cities across the country,
the homeless built shacks out of wooden
crates and scrap metal.
The Great Depression lowered people's
standard of living. It also shook their belief
in themselves. When people lost their jobs,
they felt ashamed. "No matter that others
suffered the same fate, the inner voice whispered, 'I'm a failure,"' one man wrote.
H~sn\reaTakes Action
When hard times hit, President Hoover
saw the suffering of the jobless. He tried to
restore confidence in the economy by predicting better times ahead. However, he did
not think the government should get directly involved in helping businesses. He felt it
was up to businesses to work together to
end the downslide.
At first, the President also opposed government relief programs. Yefie'' means giving help to the needy. Instead, Hoover
urged business leaders to keep workers employed. He also called on private charities to
help Americans in need.
Private relief. Private charities did what
they could. Churches and groups such as
the YMCA fed the hungry at soup kitchens.
Leaders of ethnic communities organized
their own relief programs. The Six Companies in San Francisco's Chinatown gave food
and clothing to needy Chinese. In New
York's Harlem, Father Divine, an African
American religious leader, fed 3,000 hungry
people a day. Mexican Americans and Puerto Ricans turned to their mutualistas, or aid
societies, for help.
Government programs. The numbers
of needy soon overwhelmed private charities. Hoover realized he had to take other
steps. He set up ~ X I F . V ~1x0pn<5
C
nrn-vz-qn3.
The government hired workers to construct
schools and courthouses, build dams, and
pave highways.
By providing jobs, these government
programs helped people earn money. Workers could then spend their wages on goods.
The increased demand for goods, it was
hoped, would cause businesses to expand
and lead to economic recovery.
Hoover also approved the Reconstruction Finance Corporation, or RFC. The RFC
loaned money to railroads, banks, and insurance companies to help keep them in
business. Saving these businesses, Hoover
hoped, would keep workers on their jobs.
Failed efforts. Hoover did more to reverse the depression than any previous
Lining Up for a Meal
As the depression
deepened, millions of
Americans went hungry.
Here, people in a rural
area line up for a meal at
a soup kitchen.
American Traditions
How did private citizens
help provide relief during
the depression?
712
Chapter 25
President had done during an economic
panic. Still, his efforts had little effect. The
depression grew worse. "Men are sitting in
the parks all day long and all night long,
hundreds and thousands . . . out of work,
seeking work," wrote a man in Detroit.
Many people blamed the President for
doing too little. They called the shacks
where the homeless lived Hoovermilles. The
newspapers that the homeless covered
themselves with to keep warm were called
"Hoover blankets." An empty pocket turned
inside out was a "Hoover flag." In food
lines, people waited for a bowl of thin soup
that they called "Hoover stew."
then ordered General Douglas MacArthur to
clear out the veterans. Using cavalry, tanks,
machine guns, and tear gas, MacArthur
moved into the camp and burned it to the
ground. The Washington News expressed
the shock of many Americans at Hoover's
action.
The Rsnrns Arm!!
After the attack on the Bonus Army, the
President lost what little support he still had.
Americans turned to a new leader.
Protests erupted against the government.
The unemployed mounted hunger marches.
Veterans of World War I also took action. After the war, Congress had voted to give veterans a k o ~ r sor
, sum of money, to be paid
in 1945. In 1932, more than 20,000 jobless
veterans marched to Washington to demand
the bonus right away.
The Bonus Army assembles. The veterans traveled to the capital as cheaply as possible. One decorated soldier walked from
New Jersey. "I done it all by my feet-shoe
leather," he told members of Congress. "I
come to show you people that we need our
bonus." Some veterans brought their wives
and children. For two months, the Bonus
Army, as the veterans were called, camped
in a tent city along the Potomac River.
In the end, the Senate rejected a bill to
pay the bonus to the veterans immediately.
Senators thought that the cost would destroy
any hope for the country's recovery. Many
veterans packed up and went home. Thousands remained, however, vowing to stay
until 1945 if necessary.
A "pitifulspectacle."Local police tried
to force the veterans to leave. Battles with
police left four people dead. The President
CCWhat a pitiful spectacle is that of
the great American Government,
mightiest in the world, chasing unarmed men, women, and children
with Army tanks.. . . If the Army
must be called out to make war on
unarmed citizens, this is no longer
America. $9
1. Identify: (a) Herbert Hoover, (b) Great
2.
3.
4.
5.
Depression, (c) Reconstruction Finance
Corporation, (d) Hooverville, (e) Bonus
Army.
Define: (a) relief, (b) public works
program, (c) bonus.
What economic problems existed when
Hoover took office?
What caused stock prices to plunge on
October 29, 1929?
(a) What steps did Hoover take to ease
the economic crisis? (b) What were the
effects of his efforts?
6. CRITICAL
THINKING
understanding Causes
and Effects (a) Describe two causes of
the Great Depression. (b) How did
cutbacks in factory production make the
depression worse?
zii??n)?g~P?n?
Writing to Learn
Imagine that you are a reporter interviewing a
veteran in the Bonus Army. Write five questions
you would ask him.
Chapter 25
713