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The Crash
During the Roaring Twenties, the United States basked
in unprecedented prosperity. Levels of investment, often speculative
investments, grew to new heights. The economy, however, could not
support such unchecked growth. On Thursday, October 24, 1929, dubbed Black
Thursday, the stock market crashed. When trading closed,
the Dow Jones Industrial Average had fallen 9 percent. Despite the
crash, reports remained optimistic. New York banks united to buy
up $30 million worth of stock in efforts to stabilize the market,
and President Herbert Hoover announced that recovery
was expected. But the situation only became bleaker during the next
week. On October 29, known as “Black Tuesday,” the Dow dropped over
17 percent, confirming the permanency of the crash. By mid-November,
market losses topped $30 billion.
Results of the Crash
As a result of the crash, the national economy fell into
the worst depression in its history. Banks closed their doors in
record numbers, and more than 30,000 businesses failed in 1932 alone.
Unemployment reached an unheard of high of 25 percent in 1933, and
hovered between 15 and 20 percent for most of the 1930s. Small towns
and villages were hit the hardest, as were unskilled workers and
minorities. Abject poverty spread. Children suffered from inadequate
nutrition and healthcare, and starvation became an everyday occurrence.
The refrain of a popular song during the period was, “Brother, can
you spare a dime?”
Hoover’s Response
During the first few months of the Depression, Herbert
Hoover was optimistic about the prospects of recovery, believing
that the economy would rebound by itself. But, as the Depression
continued into 1930, he was forced to take action.
Hoover’s most notable foray into trade regulation
was his advocacy of the Smoot-Hawley Tariff in 1930.
The tariff was designed to protect the nation’s farmers but did not
have its intended effect: it hurt farmers more than it helped them
and further intensified the national depression. Other steps that
Hoover took to help farmers included overseeing the activity of
the Federal Farm Board, which administered loans to farmers, and
creating the Grain Stabilization Corporation, which bought wheat
at high prices in attempts to drive prices up.
Hoover’s principal attempts to address the Depression’s
effects on agriculture included the Smoot-Hawley Tariff and the
Grain Stabilization Corporation.
To help businesses, Hoover authorized $2 billion in funding
for the creation of the Reconstruction Finance Corporation (RFC).
The RFC was intended to loan money to large, stable institutions
such as banks, railroads, and insurance firms. The RFC authorized
almost $2 billion in loans in 1932. In July 1932, Hoover authorized
the RFC to spend an additional $2 billion on state and local public
works projects. These actions, however, were largely ineffective
at countering the Depression.
To spur business recovery, Hoover created the
Reconstruction Finance Corporation, which loaned money to companies
attempting to rebuild after the market crash. It did little to help
the market recover.
The onset of the Great Depression left many Americans
without jobs, without homes, and without hope. In an effort to address
these problems, Hoover established the Emergency Committee
for Employment in 1930 to coordinate the efforts of private
agencies to provide unemployment relief but granted the committee
limited resources. He remained firmly opposed to the use of federal
funds for public works programs, preferring private charity to public
relief.
But Hoover’s efforts did little to spur the economy or
redress unemployment. The consummate symbol of Hoover’s failure
was the Hooverville. Hoovervilles, or communities of homeless
Americans living in shanties and makeshift shacks, sprang up around
many U.S. cities and served as stark reminders of the Depression’s
terrible toll.
The Election of 1932
As the Depression worsened, public calls for aggressive
government intervention intensified. The people wanted their president
to be a hero and representative of the people rather than an aloof
bureaucrat—a departure from the do-nothing presidents of the 1920s
and from Hoover’s restrained approach in the early 1930s. Franklin
Delano Roosevelt promised to answer this call. In 1932, FDR
won the election against Hoover, who many believed had done too
little, too late in fighting the Depression.
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