FREE ESSAY ON DEPRESSION OF THE 1930'S

DEPRESSION OF THE 1930'S

Depression of the 1930s 
The economic depression that beset the United States and other countries in the 1930s was
unique in its magnitude and its consequences. At the depth of the depression, in 1933,
one American worker in every four was out of a job. In other countries unemployment
ranged between 15 percent and 25 percent of the labor force. The great industrial slump
continued throughout the 1930s, shaking the foundations of Western capitalism and the
society based upon it. Economic Aspects President Calvin COOLIDGE had said during the
long prosperity of the 1920s that The business of America is business. Despite the
seeming business prosperity of the 1920s, however, there were serious economic weak
spots, a chief one being a depression in the agricultural sector. Also depressed were
such industries as coal mining, railroads, and textiles. 
Throughout the 1920s, U. S. banks had failed--an average of 600 per year--as had
thousands of other business firms. By 1928 the construction boom was over. The
spectacular rise in prices on the STOCK MARKET from 1924 to 1929 bore little relation to
actual economic conditions. In fact, the boom in the stock market and in real estate,
along with the expansion in credit (created, in part, by low-paid workers buying on
credit) and high profits for a few industries, concealed basic problems. Thus the U. S.
stock market crash that occurred in October 1929, with huge losses, was not the
fundamental cause of the Great Depression, although the crash sparked, and certainly
marked the beginning of, the most traumatic economic period of modern times. By 1930, the
slump was apparent, but few people expected it to continue; previous financial PANICS and
depressions had reversed in a year or two. The usual forces of economic expansion had
vanished, however. 
Technology had eliminated more industrial jobs than it had created; the supply of goods
continued to exceed demand; the world market system was basically unsound. The high
tariffs of the Smoot-Hawley Act (1930) exacerbated the downturn. As business failures
increased and unemployment soared--and as people with dwindling incomes nonetheless had
to pay their creditors--it was apparent that the United States was in the grip of
economic breakdown. Most European countries were hit even harder, because they had not
yet fully recovered from the ravages of World War I.) The deepening depression
essentially coincided with the term in office (1929-33) of President Herbert HOOVER. The
stark statistics scarcely convey the distress of the millions of people who lost jobs,
savings, and homes. From 1930 to 1933 industrial stocks lost 80% of their value. In the
four years from 1929 to 1932 approximately 11,000 U. S. banks failed (44% of the 1929
total), and about $2 billion in deposits evaporated. The gross national product (GNP),
which for years had grown at an average annual rate of 3.5%, declined at a rate of over
10% annually, on average, from 1929 to 1932. Agricultural distress was intense: farm
prices fell by 53% from 1929 to 1932. President Hoover opposed government intervention to
ease the mounting economic distress. His one major action, creation (1932) of the
Reconstruction Finance Corporation to lend money to ailing corporations, was seen as
inadequate. Hoover lost the 1932 election to Franklin D. ROOSEVELT.
The depression brought a deflation not only of incomes but of hope. In his first
inaugural address (March 1933), President Franklin D. ROOSEVELT declared that the only
thing we have to fear is fear itself. But though his NEW DEAL grappled with economic
problems throughout his first two terms, it had no consistent policy. At first Roosevelt
tried to stimulate the economy through the NATIONAL RECOVERY ADMINISTRATION, charged with
establishing minimum wages and codes of fair competition in every industry. It was based
on the idea of spreading work and reducing unfair competitive practices by means of
cooperation in industry, so as to stabilize production and prevent the price slashing
that had begun after 1929. This approach was abandoned after the Supreme Court declared
the NRA unconstitutional in SCHECTER POULTRY CORPORATION V. UNITED STATES (1935).
Roosevelt's second administration gave more emphasis to public works and other government
expenditures as a means of stimulating the economy, but it did not pursue this approach
vigorously enough to achieve full economic recovery. At the end of the 1930s,
unemployment was estimated at 17.2%. Other innovations of the Roosevelt administrations
had long-lasting effects, both economically and politically. To aid people who could find
no work, the New Deal extended federal relief on a vast scale. The CIVILIAN CONSERVATION
CORPS took young men off the streets and sent them out to plant forests and drain swamps.
The government refinanced about one-fifth of farm mortgages through the FARM CREDIT
ADMINISTRATION and about one-sixth of home mortgages through the Home Owners Loan
Corporation. The WORKS PROGRESS ADMINISTRATION employed an average of over 2 million
people in occupations ranging from laborers to musicians and writers. The PUBLIC WORKS
ADMINISTRATION spent about $4 billion on the construction of highways and public
buildings in the years 1933-39. The depression years saw a burst of union organizing,
aided by the NATIONAL LABOR RELATIONS ACT of 1935. New industrial unions came into
existence through the efforts of organizers led by John L. LEWIS, Walter REUTHER, Philip
MURRAY, and others; in 1937 they won contracts in the steel and auto industries. Total
union membership rose from about 3 million in 1932 to over 10 million in 1941. Political
and Cultural Effects The expanded role of the federal government came to be accepted by
most Americans by the end of the 1930s. Even Republicans who had bitterly opposed the New
Deal shifted their stance.
Wendell WILLKIE, the Republican presidential nominee in 1940, declared that he could not
oppose reforms such as the regulation of the securities markets and the utility holding
companies, the legal recognition of unions, or Social Security and unemployment
allowances. What bothered him and other opponents of the New Deal, however, was the
extension of the federal bureaucracy. The depression caused much questioning of inherited
economic and political ideas. Sen. Huey P. Long (see LONG family) of Louisiana found a
national following for his Share the Wealth program. The socialist writer Upton SINCLAIR
was nearly elected governor of California in 1934 with a similar program for
redistributing the state's wealth. Many writers and other intellectuals swung even
further left, concluding that capitalism was on its way out; they were drawn to the
Communist party by what they supposed to be the accomplishments of the USSR.
In other countries the depression had even more profound effects. As world trade fell
off, countries turned to nationalist economic policies that only exacerbated their
difficulties. In politics the depression strengthened the extremes of right and left,
helping Adolf HITLER to power in Germany and swelling left-wing movements in other
European countries. The depression was thus a time of massive insecurity among peoples
and governments, contributing to the tensions that produced World War II. Ironically,
however, the massive military expenditures for that war provided the economic stimulus
that finally ended the depression in the United States and elsewhere. 
Bibliography
Bibliography: 
Bernstein, Irving, A Caring Society: The New Deal, the Worker and the Great Depression
(1985)
Boardman, Fon W., Jr., The Thirties: America and the Great Depression (1967); 
Davis, Joseph S., The World Between the Wars, 1919-39: An Economist's View (1974)
Galbraith, John K., The Great Crash, 3d ed. (1972; repr. 1980); 
Garraty, John A., The Great Depression (1986)
Kindleberger, Charles P., The World in Depression, 1929-1939 (1975; repr. 1983); 
Markowitz, Gerald, and Rosner, David, eds., Slaves of the Depression (1987)
Mitchell, Broadus, Depression Decade, 1931-1941 (1977); 
Rothbard, Murray N., America's Great Depression (1975; repr. 1983)
Schlesinger, Arthur M., Jr., The Age of Roosevelt, 2 vols. (1959); 
Swados, Harvey, ed., The American Writer and the Great Depression (1966)
Wecter, Dixon, Age of the Great Depression, 1929-1941 (1971).