The Crash
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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