The Great Depression Introduction
The 1920s were a time of economic boom! The country was making money, new inventions
were making consumers’ lives easier, and leisure activity was on the rise. F. Scott Fitzgerald
termed the decade the Roaring Twenties and chronicled the 1920s, known as the Jazz Age.
There was an explosion of art that came out of a neighborhood called Harlem in the 1920s,
called the Harlem Renaissance, as jazz music, colorful and exotic paintings, and poems about
cultural heritage flowed from Harlem.
As the Roaring Twenties came to a close, businessmen continued in a pattern of over
speculation that had come to define the 1920s. This meant that they made business decisions
based on the belief that the economy would keep getting better. They borrowed money from
banks, and promised to pay those banks back with money they got from stocks. They put almost
all of their money in stocks! In the early part of 1929, this worked wonders. The stock market
had never been higher, and businessmen made a lot of money. The stock market reached an all
time high in September 1929, and all looked well for the United States! But economic collapse
lurked behind the corner.
In late October 1929, the stock market suddenly dropped and
collapsed. On October 24, 1929 (now called “Black Thursday”), the
market dropped 11%, meaning that stocks lost 11 cents for every
dollar. Many businessmen were convinced that the market would
swing back up and kept trading a large number of stocks, but it
didn’t. Between October 28 and 29, 1929 (October 29 is now called
“Black Tuesday”), the market lost $30 billion in just two days. The
new President of the United States, Herbert Hoover did not know
what to do! In one week in October 1929, everything seemed to fall apart.
All of the money that people had borrowed from the bank to put in
stocks could not be paid back! As a result, many banks closed and people
could not get the money they had put in those banks to save. Herbert Hoover
and the Federal Reserve Bank – which is the Nation’s bank that is supposed to
protect all of the countries’ banks – did not save the banks that closed! In
order to create stability in the country, the government created
large tariffs (tariffs are basically taxes) on any trading with other
countries. As a result, the remaining healthy companies stopped
trading as much with other countries. This caused the economy in
the United States to go down even further. It even caused a
Depression in Europe!
As a result of this Great Depression, many banks and
businesses failed. By 1932, 25% of all Americans were unemployed, and many people became
homeless and lived in small towns in parks. These towns made up
of homeless people in city parks came to be called, “shanty
towns” or sometimes “Hoovervilles.” People called them
Hoovervilles, because they blamed President Herbert Hoover for
not doing more to end the crisis. In fact, President Hoover did
almost nothing to end the Great Depression; his biggest attempt
was something called the Reconstruction Finance Corporation.
The RFC gave $2 billion in loans to state governments and banks.
These loans were supposed to help the businesses recover so they could help give out more jobs.
It was also designed to help the states make internal improvements to give out more jobs.
Hoover was President from 1929 to 1933, he didn’t create the Reconstruction Finance
Corporation until 1932. Although the RFC would help a little bit, it was too little too late for
Hoover. When he ran from reelection in 1932, many Americans wanted anyone but him to be
president. Instead of Hoover, they turned to a Democrat from New York named Franklin
Delano Roosevelt (FDR for short). Roosevelt pledged a “new deal” for Americans. He promised
to help get them out of the economic crisis.
FDR defeated Hoover in a landslide victory. Americans wanted a
New Deal, and so in his first 100 days in office, Roosevelt gave one to
them. He created government work programs, like the Tennessee
Valley Authority (TVA) and the Civilian Conservation Corps (CCC)
among many others. These organizations made improvements to
America’s roads and infrastructure. They gave many Americans jobs.
He also set up a system called Social Security. Social Security would
take a little money out of the paychecks of workers, and the workers
would get that money back when they retired. That way Americans would still have some
savings if banks collapsed. FDR also created the environmental improvement programs (TVA did
this), farm assistance programs (to help farmers get back on their feet), and gave workers
increased rights. His New Deal was designed to help America get out of the Great Depression.
In spite of the New Deal, America remained in a Great Depression for all of the 1930s.
They had to make due with much less than they had to begin with. The Roaring Twenties were
over, and the Depression of the 1930s forced Americans to live with less money and less wealth.
America would continue in this Depression until the early 1940s, when another great event
would force factories to work extremely hard. We’ll talk about that next unit.
Review:
1. Write one word to summarize the Great Depression and one sentence explaining why you
choose that word.
2. What was the New Deal? List three programs created under the New Deal.