The American Vision: Modern Times © 2008

Chapter 11: The Great Depression Begins

Chapter Overviews

This chapter examines the causes of the Great Depression and describes how families, businesses, and government responded to the economic crisis.

Section 1 identifies the causes of the Great Depression. An aura of optimism surrounded the nation as President Herbert Hoover took office in 1928. As industrial production flooded markets, stock prices reached new highs. Many investors confidently purchased stocks on margin and engaged in speculative trading. Optimism disappeared, however, when on October 21, 1929, sliding stock prices triggered a massive sell-off, and the stock market crashed. Banks that had loaned to speculators and invested depositors' funds lost their cash reserves. Bank failures caused Americans to not only lose their bank savings, but also their faith in the banking system. Several factors added to the nation's economic troubles. An uneven distribution of income left most families with little expendable income. When Americans cut back on spending, manufacturing slowed production, which in turn led to lower wages and unemployment. As high tariffs restricted foreign demand for American goods and the Fed tightened available credit, the economy spiraled downward.

Section 2 describes the hardships of the Great Depression. By 1933 more than 12 million workers were unemployed—about one-fourth of the nation's workforce. Families often went hungry, and many lost their homes. Some of the homeless constructed makeshift shacks in shantytowns called Hoovervilles, while others simply wandered about the country, riding the rail lines. The economic troubles that farmers had experienced in the 1920s worsened with the drought of the 1930s. Drought transformed the unplanted fields of the Great Plains into a vast "Dust Bowl." Many farmers who couldn't pay their mortgages lost their land. Some headed west looking for migrant work in California, but their living conditions only seemed to worsen. While movies and radio programs offered Americans a temporary escape from despair, Depression-era writers and artists focused on revealing families' real suffering.

Section 3 discusses President Hoover's response to the Depression. In the months following the stock market crash, President Hoover kept an optimistic outlook. He hoped that the voluntary actions of business leaders and labor and government officials would provide relief, but his programs proved inadequate against deepening economic troubles. Hoover was unwilling to use deficit spending to fund relief efforts, and he strongly opposed federal participation in direct relief. However, the programs he created failed to impact the growing financial crisis. In 1932, despite Hoover's protests, Congress provided federal funds for public works and loans to the states for direct relief. By then it was too late to reverse the economy's accelerating collapse. Frustrated Americans participated in hunger marches, while farmers destroyed crops in a desperate attempt to raise crop prices. When World War I veterans' asking for their bonus met with violence in Washington, Hoover's chances of reelection looked slim.