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The Great Depression began in October 1929 when the stock market crashed, causing economic chaos and forcing many businesses and banks to go bankrupt. The Great Depression increased America’s awareness of the poor as more Americans lived in poverty, ceasing to take affluence for granted. In its most basic sense, the Great Depression arose from economic circumstances: during the Depression, the total national income fell from $90 million to $40 million; from 1929 to 1933 consumption levels declined 18 percent and investment levels declined by 98 percent. The American state of mind during the Great Depression also had an impact on the economy as businesspeople lost faith in the economy and refused to invest, which caused the Gross National Product (GNP) to decline. Although the economic effect of the Depression had ended by late 1941, when America entered World War II, some of the cultural, social, and political effects faded more slowly; some remain even today.
The causes of the Great Depression were more complicated than a simple stock market crash. Some long-term causes of the Great Depression were evident in the 1920s, notably overproduction of agricultural produce and commercial products, which led to low prices for farm produce, and a relative lack of demand for products in the 1930s that negatively impacted the economy. In the 1930s workers’ wages lagged, plummeting many middle- to lower-class persons below the poverty line. This process began before the stock market crash: at the end of the 1920s, 60 percent of
Americans lived below the poverty line, and the top 1 percent owned 20 percent of the nation’s wealth. The agricultural downturn of the 1920s also foreshadowed the Great Depression: production during World War I led to agricultural growth in the 1910s, but continued high-level production after the war flooded the market, driving profits down. This result was a crisis in American agriculture, and small-scale farms (sharecroppers, family farms) were affected the most. Large farms were able to outlast the downturn because of New Deal programs such as the 1933 Agricultural Adjustment Act (AAA), which limited production in an attempt to raise produce prices. Ironically, the AAA only helped large farmers and drove most remaining small (or dependent) farmers from their land. Such examples show that the nation was totally unprepared for the onset of the Great Depression, despite various warnings in the 1920s. The stock market crash affected all aspects of American life: society, politics, economy, and psychology.
The Official Response: Conflicting Ideologies
Herbert Hoover, a self-made Progressive Republican from Iowa, was president in 1929 when the stock market crashed. Although he was a capable leader and a successful businessman, Hoover did not know how to react, except to reassure business leaders and the public that the economy would soon recover. Ironically, the very traits that made Hoover a success— faith in individualism and optimism in the American capitalist system—led to his political downfall. Faced with America’s largest economic crisis in recent memory, Hoover chose not to involve the federal government directly, hoping that the economy would correct itself. As the Depression continued and more and more people lost work, many Americans began to resent Hoover’s inaction and policy of catering to large business. Impoverished Americans blamed the President for the high unemployment levels and bitterly referred to the makeshift shantytowns that developed across the nation as “Hoovervilles.” The low point of Hoover’s popularity was the so-called Bonus Army of World War I veterans, who gathered in Washington in 1932 to demand early payment of promised service benefits. After a riot broke out in late July, Hoover called for federal troops, led by General Douglas MacArthur, to disperse the Bonus Army. Hoover was not entirely unsympathetic, however, and he established a few programs in 1932 to aid the economy, such as the Reconstruction Finance Corporation (RFC), which was designed to prevent banks and insurance companies from bankruptcy. But his overall policy was to wait out the Depression rather than to engage the federal government in welfare-relief programs or superfluous spending.
The policies of Franklin D. Roosevelt, who decisively defeated Hoover in the 1932 election, were nearly opposite his predecessor’s. Roosevelt’s New Deal emphasized action over planning, and, although its economic results were mixed, the nation’s morale improved after 1933. The New Deal began the American welfare state, but it retained many conservative elements: the New Deal used federal money to aid the unemployed and to restore economic prosperity, but Roosevelt never turned to the strategies of the political Far Left, such as the federalization of industry. Some historians think that the New Deal saved the American capitalist system. During the 1932 campaign, Roosevelt emphasized his willingness to act quickly, and his engaging personality and optimistic outlook helped him convince people that, under his guidance, America could overcome the Depression. Roosevelt’s optimism was one of the most successful aspects of the New Deal: his public
persona helped lessen the psychological effects of the Depression. After 1933, bankers lost some of their initial reluctance, and the economy improved slightly from 1933 to 1937, when a short-lived recession occurred. The election of 1936 was Roosevelt’s high point, and the recession of 1937, along with disagreements with the Supreme Court, lessened congressional support for New Deal programs, which were less necessary in the late 1930s from an economic standpoint—the initial shock had faded somewhat.
Roosevelt’s New Deal significantly changed the way that the federal government understood its role in controlling social and economic order. In general, the New Deal replaced the individualistic approach of the Progressives—like Herbert Hoover, who favored private business over federal control—with a more liberal and active federal government. Under the New Deal, federal agencies set up and oversaw relief and work programs such as the Civilian Conservation Corps (CCC) and the Works Progress Administration (WPA). Some historians have emphasized Roosevelt’s left-leaning political orientation, but Roosevelt was primarily concerned with action, not ideology, and the New Deal did not mark a political shift to the Left but was rather the result of the economic, social, and political crisis that followed in the wake of the Great Depression.
Roosevelt’s New Deal policies, though optimistic, were often poorly planned and inefficient. There were two main stages of the New Deal: in general, the first stage was more idealistic and depended primarily on Roosevelt’s charisma for support; the second stage marked a switch away from blind action toward more moderate policies, such the 1935 Social Security Act, that addressed specific problems. The “Hundred Days,” the first months of Roosevelt’s first term, was an extraordinarily active period, in which Congress approved many New Deal programs despite the lack of a comprehensive plan. After the initial fervor wore off, in the still-active period from 1935 to 1936, Roosevelt considered more pragmatic solutions—such as Keynesian economics. The basic ideology of Keynesian economics, named after English economist John Maynard Keynes, states that the way a government can correct economic recession is to increase spending, which will jump-start investments and the buying power of consumers, which, in turn, will improve the economy. Keynesian economics thus supports deficit spending rather than balancing the budget or increasing taxes; Keynes argued that, once the government invests sufficient capital, the economy will correct itself. Roosevelt corresponded with Keynes but never officially adopted his strategy. However, the return to wartime production in the late 1930s mirrored Keynes’s approach.
Changing Perceptions of Poverty
The Great Depression had a great impact on the way that Americans viewed themselves and their social role: the economic downturn bred psychological depression. Faced with plummeting prices for produce, small farmers—many of who were already poor before 1929—desperately sought to retain their livelihood: many withheld goods from the market, plowed under fields of crops, and slaughtered livestock in an attempt to increase demand and thus prices for agricultural goods. At the same time, many impoverished and unemployed urban dwellers went hungry—there was little cooperation between distinct areas. These conditions contributed to the development of survival attitudes: many Americans began hoarding goods, and many people relocated to other areas, such as California, hoping to obtain jobs.
The Great Depression and the New Deal affected minorities but did not lead to long-term improvement in their lives: the New Deal gave marginalized groups such as African Americans hope; because of the New Deal, many blacks began to believe that they had the power to alter their situation. Federally supported new Deal programs, such as the Civilian Conservation Corps (CCC) and the National Youth Administration (NYA), did not discriminate by race and thus benefited black and minority youths equally. Blacks compromised 11 percent of the CCC and 10 percent of the NYA. Like the NYA, most New Deal programs gave blacks the same wages as whites and provided unskilled workers with job training. During the 1930s the mortality rate of African Americans declined because of an increase in their average standard of living and increased education opportunities. New Deal politicians, such as New York Senator Robert Wagner, also supported workers’ rights—which benefited many minorities. In 1937 Congress passed the United States Housing Act (USHA), which set up large-scale public housing complexes—such as the Red Hook and Queensbrough housing developments in Brooklyn—as sanitary and low-cost alternatives to tenement housing. Unfortunately, public housing failed to solve many problems of the urban poor, and the USHA plan for urban rejuvenation did not provide a long-term solution.
One of the most publicized aspects of the Great Depression was the plight of “Okies”—impoverished farmers and migrant workers who, because of drought and the extremely low produce prices, traveled to California searching for work. Novelist John Steinbeck portrayed the harsh life of Okies in his novel, The Grapes of Wrath, which followed the travels and trials of the Joad family. Steinbeck’s portrayal, though somewhat sympathetic, illustrated the pessimistic outlook that the Great Depression spread throughout the country. The Joads reach California, but their hardships continue there, and Steinbeck gives little impression that their situation will ever significantly change. A work of fiction, The Grapes of Wrath nevertheless provides insight into the psychological and material impact of the Great Depression.
The collective impact of this pessimism—combined with bankers’ financial struggles and reluctance to invest—was a general loss of faith in the American economic system. Brought up in the optimistic pre-Depression culture that stressed self-reliance and individualism as the means to obtain the “American Dream,” unemployed men lost their self-respect because of their inability to provide for self and family; the Depression fomented significant ideological and social changes. The middle-class conception of society—the belief that hard work and determination ensured that one could overcome poverty—was one of the casualties of the 1930s; the economic depression had an especially hard impact on the middle class, which was ill equipped to deal with destitution after the opulence of the consumer-oriented 1920s. During the Great Depression, the middle class understood irst-hand what it was like to be poor; thus public-relief programs enjoyed widespread support. In the long-term, however, the Great Depression had little lasting effect on the perception of the poor by affluent Americans. With the return of prosperity and the emphasis on national unity during World War II, many Americans fell back on the traditional perception that poverty is the consequence of personal inferiority or lack of effort.
References:
- Conkin, Paul, The New Deal, 2nd ed. (Arlington Heights, Illinois: Harlan Davidson, 1975);
- Divine, Robert A., T. H. Breen, et al., The American Story, 2nd ed. (New York: Penguin Books, 2005);
- Link, Arthur S., and William B. Catton, American Epoch: A History of the United States Since 1900, Volume II: 1921-1945, 4th ed. (New York: Alfred E. Knopf, 1973);
- McElvaine, Robert S., The Great Depression: America, 1929-1941 (New York: Three Rivers Press, 1993);
- Patterson, James T., America’s Struggle against Poverty in the Twentieth Century (Cambridge, MA: Harvard University Press, 2000);
- Sitkoff, Harvard, New Deal for Blacks: The Emergence of Civil Rights as a National Issue (Oxford: University Press, 1981);
- Steinbeck, John, The Grapes of Wrath (New York: Viking Press, 1939).
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In 1933 and 1934 one-half of the total U.S. workforce was jobless or underemployed. To make things worse, home mortgages and loans had produced a huge amount of consumer debt, and although incomes decreased, debts did not. Predictably, consumer spending declined dramatically: Between 1929 and 1933 expenses for food and housing went down by more than 40 percent, with crop prices following the same downward path.