Mr. McCormackChapter 15 Essentials Study Guide
US History II
• The Great Crash of 1929 unfolded in October, but many warning signs appeared long before then. Industries were producing too many goods, people were going too deeply in debt, buying stocks “on the margin” created risky debts, and much of the nation’s wealth was controlled by a very small group of people. Many people (including farmers) had never really shared in the boom.
• When the market crashed, only a few million Americans were directly invested in stocks. Nevertheless, the effects of the Crash quickly spread. Thousands of banks that could not recover the risky loans they’d made were forced to close, taking with them all of their depositors’ savings. People suddenly broke or worried about going broke suddenly started saving more and spending less. As demand for products fell, many businesses cut wages or fired excess employees. These people had to cut back on spending even more, which further depressed the economy. Our Gross National Product (a measure of the value of all goods and services produced in the economy in a single year) shrank.
• The Great Depression, the worst economic downturn in our nation’s history, would last until 1941. At its peak, unemployment during the Great Depression reached 25% of willing workers. Since most families relied on a single wage-earner, and since there were few relief programs available, being unemployed for even a short time could be devastating.
• Homeless people had to find ways to cope. Many began to live in shanty towns (“Hoovervilles”) with whatever shelter they could scrounge together. Others, mostly men, took to a wandering life by hitchhiking or jumping on trains to go from town to town. These “hobos” were generally unwelcome, though some people might give them food or a place to stay in exchange for doing small jobs.
• The Depression hit farmers especially hard. Many who had borrowed money to buy machines and land could not repay those loans, and the banks foreclosed on many (though some states did pass laws to prevent foreclosures on farms). Some farmers were able to keep their farms, though, when their neighbors agreed to keep the bidding low when their property was put up for auction.
• Economic challenges facing farmers were made worse by a seven-year drought that struck much of the Great Plains. Dry conditions and poor farming practices made the land especially vulnerable to erosion. Wind storms could stir up so much dust that people experiences “black blizzards” that could stretch for hundreds of miles. Many called the affected area the “Dust Bowl,” and millions of farmers moved to find a better life. Many went to California, but settling there was not always easy, either.
• The Depression hurt people in other ways. Hungry, malnourished people were more prone to sickness and might even starve. Many families broke up, and many could not handle the psychological stress of financial ruin. Discrimination aimed at minorities and immigrants grew more common as many resented their competition for jobs. These negative effects of the Depression proved long-lasting, as many survivors continued for years to act as though another Depression was just around the corner.
• People found ways to help each other during the Depression, and some were able to make the misery more tolerable through humor and games. The game Monopoly was invented in 1935 and gave people the illusionary experience of being wealthy. Many jokes were made at the expense of President Hoover, who people blamed for being ineffective. Some people took inspiration from completion of the EmpireStateBuilding, a massive achievement in its own right and a sign of better days to come.
• At first, Hoover believed that restoring confidence in the economy would fix the nation’s economic woes. He sought pledges from businessmen not to cut wages or fire workers, but many businessmen felt like they had no choice but to break those pledges or go bankrupt.
• Hoover believed that the economy would heal by itself as part of the natural business cycle, though he did try a few programs to help it along. His program to stabilize farm prices was a costly failure, and his aid to big businesses and banks was resented by average people who interpreted that aid as benefitting only the wealthy.
• John Maynard Keynes, a British economist, theorized that massive government spending would stimulate the economy and pull nations out of the Depression. He believed that governments could borrow money to spend during a recession and then cut back on spending and raise taxes later to pay those debts. It took some time for his ideas to catch on, and they are still a little controversial today.
• A low point for Hoover came when he ordered the army to disperse a mostly peaceful protest movement of WWI veterans known as the Bonus Army.
• Democrats nominated New York Governor Franklin Delano Roosevelt for president in 1932. He had previously served in the New York senate, as Assistant Secretary of the Navy, and unsuccessfully ran for Vice President in 1920. His disability, a result of a bout with polio, was not widely known. He campaigned on optimism and a promise of a New Deal. His wife, Eleanor, was more political than previous presidential spouses and was seen as an asset to his campaign. He won in a landslide and helped reorient the government away from the Republican domination that had started with the Civil War.
• In 1933 Congress passed the 21st Amendment to repeal prohibition, and it was ratified very quickly. Still, a few states continued to ban alcohol within their borders.