Depression of the 1930s

The economic depression that beset the United States and other
countries in the 1930s was unique in its magnitude and its
consequences. At the depth of the depression, in 1933, one
American worker in every four was out of a job. In other
countries unemployment ranged between 15 percent and 25 percent
of the labor force. The great industrial slump continued
throughout the 1930s, shaking the foundations of Western
capitalism and the society based upon it.

Economic Aspects

President Calvin COOLIDGE had said during the long prosperity
of the 1920s that "The business of America is business."
Despite the seeming business prosperity of the 1920s, however,
there were serious economic weak spots, a chief one being a
depression in the agricultural sector. also depressed were such
industries as coal mining, railroads, and textiles. Throughout
the 1920s, U. S. banks had failed--an average of 600 per
year--as had thousands of other business firms. By 1928 the
construction boom was over. The spectacular rise in prices on
the STOCK MARKET from 1924 to 1929 bore little relation to
actual economic conditions. In fact, the boom in the stock
market and in real estate, along with the expansion in credit
(created, in part, by low-paid workers buying on credit) and
high profits for a few industries, concealed basic problems.
Thus the U. S. stock market crash that occurred in October
1929, with huge losses, was not the fundamental cause of the
Great Depression, although the crash sparked, and certainly
marked the beginning of, the most traumatic economic period of
modern times.

By 1930, the slump was apparent, but few people expected it to
continue; previous financial PANICS and depressions had
reversed in a year or two. The usual forces of economic
expansion had vanished, however. Technology had eliminated more
industrial jobs than it had created; the supply of goods
continued to exceed demand; the world market system was
basically unsound. The high tariffs of the Smoot-Hawley Act
(1930) exacerbated the downturn. As business failures increased
and unemployment soared--and as people with dwindling incomes
nonetheless had to pay their creditors--it was apparent that
the United States was in the grip of economic breakdown. Most
European countries were hit even harder, because they had not
yet fully recovered from the ravages of World War I.)

The deepening depression essentially coincided with the term
in office (1929-33) of President Herbert HOOVER. The stark
statistics scarcely convey the distress of the millions of
people who lost jobs, savings, and homes. From 1930 to 1933
industrial stocks lost 80% of their value. In the four years
from 1929 to 1932 approximately 11,000 U. S. banks failed (44%
of the 1929 total), and about $2 billion in deposits
evaporated. The gross national product (GNP), which for years
had grown at an average annual rate of 3.5%, declined at a rate
of over 10% annually, on average, from 1929 to 1932.
Agricultural distress was intense: farm prices fell by 53% from
1929 to 1932.

President Hoover opposed government intervention to ease the
mounting economic distress. His one major action, creation
(1932) of the Reconstruction Finance Corporation to lend money
to ailing corporations, was seen as inadequate. Hoover lost the
1932 election to Franklin D. ROOSEVELT.

The New Deal

The depression brought a deflation not only of incomes but of
hope. In his first inaugural address (March 1933), President
Franklin D. ROOSEVELT declared that "the only thing we have to
fear is fear itself." But though his NEW DEAL grappled with
economic problems throughout his first two terms, it had no
consistent policy.

At first Roosevelt tried to stimulate the economy through the
minimum wages and codes of fair competition in every industry.
It was based on the idea of spreading work and reducing unfair
competitive practices by means of cooperation in industry, so
as to stabilize production and prevent the price slashing that
had begun after 1929. This approach was abandoned after the
Supreme Court declared the NRA unconstitutional in SCHECTER

Roosevelt's second administration gave more emphasis to public
works and other government expenditures as a means of
stimulating the economy, but it did not pursue this approach
vigorously enough to achieve full economic recovery. At the end
of the 1930s, unemployment was estimated at 17.2%.

Other innovations of the Roosevelt administrations had
long-lasting effects, both economically and politically. To aid
people who could find no work, the New Deal extended federal
relief on a vast scale. The CIVILIAN CONSERVATION CORPS took
young men off the streets and sent them out to plant forests
and drain swamps. The government refinanced about one-fifth of
farm mortgages through the FARM CREDIT ADMINISTRATION and about
one-sixth of home mortgages through the Home Owners Loan
Corporation. The WORKS PROGRESS ADMINISTRATION employed an
average of over