Chapter 22

The Great Depression Begins

Initial Prosperity Under President Harding, the US economy

was relatively strong. However, Harding died in 1923 and his VP, Calvin Coolidge took over.

Coolidge was elected to a full term the following year. He supported big business and believed in laissez-faire economics (the idea that gov’t should not regulate business or try to manipulate the market, but let the market take its natural course).

Warren G. Harding29th President

Calvin CoolidgeHarding’s VP30th President

Initial Prosperity People tried to take advantage of the

prosperity by buying stock on speculation (high-risk investments in hopes of making large returns on their money).

Many investors also engaged in buying on margin; investors purchased stocks for only a portion of what they cost and borrowed the difference in a loan.

Initial Prosperity Technology also helped produce a booming

economy in the 1920s. Mechanization meant that products could be

produced in far greater #’s and more efficiently. This also meant that more people purchased

cars, clothes, appliances, and other goods. Consumerism (the practice of buying and

consuming products) became normal and meant that people were spending more money than they saved.

Overproduction & Underconsumption Unfortunately, the good times did not last forever. As manufacturers continued to produce goods at a faster

rate than ever before, they turned out products faster than people could buy them.

When the market has more of a product than what consumers want it is called overproduction.

Consumers’ reluctance to buy all that has been produced is called underconsumption.

Both overproduction and underconsumption lead to falling prices, which leads to more problems.

Overproduction & Underconsumption One group that dealt with this fact the most

were the farmers. Many bills created by Congress to help

farmers were vetoed by Coolidge (remember, he did not think gov’t should interfere in the economy).

As a result, the agricultural industry was unable to recover and many farms went into foreclosure.

Overproduction & Underconsumption Eventually, overproduction had effects on the

environment as well. Midwestern/Great Plains farmers

unknowingly stripped much of the land and left it damaged by poor farming techniques.

This damage combined with massive droughts left the land very dry, exposed by a lack of crops, and easily swept away by winds.

The Dust Bowl These conditions created a disaster in the early

1930s known as the Dust Bowl. The Dust Bowl was a series of storms that hit the

Midwest/Great Plains, causing enormous clouds of dust that covered farms and entire cities and made the entire area uninhabitable.

These storms displaced hundreds of thousands of farmers, forcing them to become homeless migrants.

Many people moved further west to CA in search of jobs as migrant farm workers.

Fleeing the Plains

American Imagination

• The plight of the migrants captured the imagination of some of America’s greatest writers and artists.

• Author John Steinbeck and singer-songwriter Woody Guthrie described the Dust Bowl and the disaster’s effect on the people it touched.

• Guthrie’s lyrics spoke of the hardships all Americans felt during the Great Depression.

The droughts and dust storms left many in the Dust Bowl with no way to make a living, and some simply picked up and moved:

Migrants

• By the end of the 1930s, 2.5 million people had left the Great Plains states.

• Many headed along Route 66 to California, then settled in camps and sought work on farms.

• The migrants were called Okies, after the state of Oklahoma, but migrants came from many states.

• Many migrants met hardship and discrimination.

For much of the decade, the Depression defied most government efforts to defeat it, and Americans had to fend for themselves.

Herbert Hoover & the Great Depression Republican Herbert Hoover became the

president in the Election of 1928. Hoover (like Coolidge) opposed too much

gov’t interference in business. Unfortunately for Hoover, he took office when

the US economy was about to collapse. On October 29, 1929, a date known as

Black Tuesday, the stock market crashed!

Herbert Hoover & the Great Depression Prices dropped drastically and those who had

bought stock on speculation or invested by buying on margin lost everything.

This disaster marked the beginning of the Great Depression.

It lasted for more than a decade and remains as the greatest economic crisis in US history.

The Great Depression would not really end until the beginning of WWII.

Herbert Hoover & the Great Depression

Following the stock market crash of 1929, the US economy unraveled.

People rushed to withdraw money from banks, causing them to close.

People stopped investing in the stock market, causing stock prices to fall even further.

At one point, roughly one out of four Americans did not have jobs; that means the unemployment rate was 25%!

Countless numbers of people were homeless.

Herbert Hoover & the Great Depression

Many people had to rely on soup kitchens and bread lines that provided food for the poor.

In larger cities, many homeless people gathered together to live in homemade shacks.

These villages came to be called Hoovervilles, in reference to the president whom many blamed the Depression on.

As the nation approached the election of 1932, people felt hopeless and desperate. They needed leadership and direction.

The Nation Responds to HooverQuestions of Credibility Hoover eventually saw the

limitations of his ideals and pushed for some direct relief, but his optimistic claims about the economy undermined his credibility with voters.

Early on, when millions lost their jobs, he said the nation’s basic economic foundation was sound.

Just a few months after the crash he announced “I am convinced we have passed the worst,” and he spoke glowingly about the relief efforts.

Millions of Americans did not share Hoover’s viewpoint.

Questions of Compassion Many Americans came to question

Hoover’s compassion. As economic conditions grew

worse, his unwillingness to consider giving direct relief to the people became hard for most Americans to understand.

When Hoover finally broke his stated beliefs and pushed for programs like the Reconstruction Finance Corporation, people wondered why he was willing to give billions of dollars to banks and businesses but not to individuals.