Causes of the Great Depression

I. Myths: Depression caused by the Stock Market Crash.
A. Compare with previous panics. Stock Market had not lost that much.

B. Exaggerated the numbers of investors. (20 million when there were only 3)
So 97.5% owned no stock.
Age before pensions when millions have a stake in our financial system. (Kennedy)

C. What is surprising? Not its causes but its duration.
1. Real question. Not why there was a depression but why so bad?
Real Causes a. Lack of diversification.
(1) Prosperity based on construction and automobiles.
(a) 1929 both fell. Autos by 1/3rd.
b. Maldistribution of income.
(1) 1929. More than half lived on the edge or below the level of subsistence.
(2) Too poor to buy what industry provided.
c. Credit structure
(1) Farmer’s lands mortgaged.
(2) Could not pay them off becaused crop prices too low.
(3) Small banks had too many defaulted loans.
(4) Large banks had invested unwisely and recklessly.
(a) Chose to raise interests rates as times became tough.
d. Our position in international trade.
(1) Europe was producing more if its own food and it had economic problems of its own
e. Especially War Debts. (Federal Reserve Board?)
(1) Allies tried to pay off debts by borrowing money from U.S.
(2) Austria and Germany couldn’t pay anything because their economies were in shatters.
(3) Of course Hawley-Smoot didn’t help.
Alan Brinkley, The Unfinished Nation, pp. 682-3.

D. Banks were already failing in the 20s. The legacy left from Andrew Jackson. A free-wheeling system that had produced some 25,000 banks. (Today we have 9,143)

“The country had never before known unemployment of these magnitudes of this duration. It had in place no mechanism with which to combat mass destitution on this scale. Private unemployment insurance plans, sponsored by employers and unions, including a pioneering program at General Electric, covered fewer than two hundred thousand workers as the Depression began, less than 1 percent of the private-sector work force. (D. Kennedy, 87-8)

1. Relief always reponsibility of state and local governments.
a. Resources gone by 1932. Woefully inadequate anyway.
(1) All public and private relief in NY in 1931. 79 Million. This meant one month’s wages for the 800,000 out of work.
2. Cry for federal assistance grows.
3. But more inexplicable, why not fascism or Communism?
a. FDR and many others can’t explain public mood.
b. Tugwell: Never since the Civil War had our institutions been so threatened.

D. Some dismal facts. (Facts and figures besides those from Lorena Hickok and her trip around the country—Assigned by Harry Hopkins)
1. Stockholders: Saw 3/4ths of the value of their assets disappear since 1929.
2. Crash of 5,000 banks wiped out $7 billion of depositor's money.
3. 600,000 lost their homes. (1930-1933)
4. Chicago quit paying their teachers.

E. Other statistics.
1. Farm income: From lean year '29 of $6 billion to $2 billion in '32. That meant 60% drop.
a. 1/3rd lost their land.
b. Starting in 1930 one of the worst droughts in history.
(1) Decades long, it was a tribute to our system that we continued to produce far more food than we could afford.
(2) What did farmers do? Went to the cities. Dust bowl meant going to CA.
c. Without land, what did they do? Picked crops. (Agricultural migrants)
2. Per capita income of Mississippi. $239 in '29 to $117 in '33.
3. 1933: 25% of the workforce (13 million) unemployed. Even with all the New Deal programs unemployment averaged about 17.1%.

F. Unemployment and Relief
1. Industrial cities paralyzed by unemployment.
a. Cleveland, 50%, Akron, 60%, Toledo, 80% (1932)
2. Workers walked the streets looking for jobs that did not exist.
3. Families apply for assistance just to eat.
a. Local agencies unable to handle the problem.
b. Private relief not nearly enough.
c. States ran out of money.

II. Women and families during the G. Depression.
A. Bostered two beliefs about women.
1. She should be in the home.
2. She should not work if the husband had a job.
a. 1932-7. Illegal for more than one family member to hold a federal civil service job.

B. Yet some did. Why did they have to? Had to have food for the family.
1. Startling: 25% more were working at the end of the depression than before. Why? Salesclerks, stenographers, teachers were still in demand. (nonprofessional)

C. How about Black Women? 50% lost their jobs. (Middle class did away with their servants)
1. And what about feminism? Frustration. The gains they had made in the 20s eroded. They could no longer really hope to become economically and professionally self-sufficient.
2. Families accustomed to rising expectations saw the gains of the 20s disappear. What did they do?
3. Sew your own clothes, take in laundry, take in relatives.
4. Marriage rate, birth rate, and divorce rates declined. But husbands left families to escape humiliation.

Random Numbers

I. By the end of Hoover's term:
  • GNP fallen 3/4ths of its 1929 level. (Only regained that level in 1941)
  • 5,000 banks failed between 1929 and 1933. (On paper, investors lost nearly $80 billions in those four years)
  • By 1933, one worker in four was unemployed.

A. What does this mean?.
1. March 1933:
13,577,000 (Robert Nathan);
14,586,000 (National Conference Board);
15,389,000 (AFL); 16,000,000 (CIO)
2. Average for Depression years: 10-11 million

B. Population: Unemployed
1. 1933: 123,202,000 1933 13,689,000 24.9%
2. 1999: 273,866,000 1997 6,739,000 4.9

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