Nation of Nations 3/e Davidson, Gienapp, Heyrman, Lytle, and Stoff
	Online Learning Center

THE CHAPTER IN PERSPECTIVE

By the 1920s, the corporate industrial economy had grown for more than half a century. Along with its strengths, serious weaknesses developed. Few Americans noticed them because of the hot pursuit of material wealth. The consumer culture of the 1920s and a business-oriented government promoted not only the pursuit of money but of debt as well. When mass purchasing power could no longer sustain prosperity, the economy collapsed. The greatest depression in history dawned: bringing massive unemployment, withering prices, and a stagnated economy. Unlike his predecessors, Herbert Hoover took action. No president before him had dared to stimulate the economy, for fear of throwing it hopelessly out of balance. But Hoover's policies, for all his good intentions, were too wedded to the old order to make any difference.

OVERVIEW

Get-rich-quick schemes obsessed the nation in the 1920s. Thus this chapter begins with a montage of easy-money schemes. Speculative ventures, including the Florida real estate boom and the soaring stock market, dominated the news and diverted national attention from the economy's problems. The stock market crash of 1929, one of the worst in the nation's history, signaled the onset of a precipitous decline that shrunk the economy by almost half. The Great Depression caught the nation by surprise. Despite the best efforts of its leaders, recovery remained elusive.

The Great Bull Market

For most of the decade a great "bull market" had been building on Wall Street. By 1928 speculative fever, a new breed of aggressive investors and inexperienced young brokers, a host of shady financial devices, and skyrocketing corporate profits fueled rising stock prices and transformed the market into a glittering gambling casino.

In October 1929 the speculative bubble on Wall Street burst and the market crashed in a heap of near-worthless stock. Warning signs went unnoticed but reflected real economic weaknesses. Corporate profits rose at twice the rate of productivity and, in some industries, nearly eight times the rate of real wages. Mass purchasing power therefore declined relative to production. The consumer debt rose, and the gap between the wealthy and the middle and working classes widened. The resulting pattern of income distribution could not sustain prosperity. "Sick" industries—agriculture, coal, textiles, lumbering, and railroads--were characterized by over expansion, declining demand, and weak management. A weak banking and corporate structure, plain economic ignorance, and mistakes by the Federal Reserve also contributed.

The Great Crash did not bring about the Great Depression that followed; it only accelerated the slide. In the three years following the crash income fell by half, factory wages by almost half and foreign trade by more than two-thirds. By some estimates 85,000 businesses failed. The shock waves helped to topple already fragile economies in Europe where banks failed and businesses collapsed.. Countries erected trade barriers which deepened the crisis. Events in Europe further depressed the U.S. economy which became locked in a downward spiral and no one could stop it.

The American People in the Great Depression

The Great Depression was also the great leveler. It reduced differences of class, ethnicity, geography, and race through deprivation. Most people did not plummet to rock bottom; they simply lived leaner lives. Some tightened family budgets; others moved to cheaper quarters. A few starved to death, and more than a few foraged for food. For the first time more people left rather than entered the country. With hard times came shame, self-doubt, and a loss of confidence. Birth and marriage rates dropped, and troubled unions broke apart. In strong and weak families alike, the role of homemaker took on added importance. More and more women worked outside the home to supplement meager family incomes, and the home itself became an inexpensive center of recreation and companionship. A depression culture emerged, but whether on film, radio, or in print, it tended to reinforce the basic social and economic tenets of American culture: middle class morality and family life, capitalism, and democracy.

An ecological disaster transformed 1500 square miles from the Oklahoma panhandle to western Kansas into a gigantic "Dust Bowl." Made partly by man, partly by nature, the Dust Bowl emptied of large numbers of its people, as 3.5 million farmers left the Great Plains, the only states of the country to suffer a net loss of population. "Agribusiness," the corporatization of farming, pushed as many farmers from their land as nature did. A growing migration of rural refugees wandered the country in search of work, more of them than ever before and more of them white and native-born.

Meanwhile outsiders, especially Mexican- and African-Americans, suffered more than their share of hardship. Beginning in 1931, after more than a decade of local encouragement, the federal government launched a series of deportations or "repatriations" of Mexican migrants (and with them their Mexican-American children). The Latino population of the country declined by 500,000. The nation's largest minority, African-Americans, reported unemployment rates as high as 50 percent. The Great Depression, moreover, aggravated racial prejudice as the number of recorded lynchings tripled between 1932 and 1933. African-Americans refused to be victimized by the depression. Some urban blacks, like George Baker ("Father Divine"), stressed economic cooperation and opened shelters, while a few rural blacks joined with whites in the newly founded Southern Tenant Farmers Unions.

The Tragedy of Herbert Hoover

The depth of the crisis soon exhausted private and municipal resources. By 1931 only New York had a statewide relief agency. The federal government became the court of last resort. It alone possessed sufficient resources to meet the manifest need. Unfortunately President Herbert Hoover proved ineffective. He used the techniques of the New Era--self-help, voluntarism, publicity, and public calls for private cooperation. Though he did more than any of his predecessors to combat a downturn, he could not bring himself to do enough, for fear that too much government activity would unbalance the budget, impede the return of business confidence and recovery, and create an unwieldy and intrusive bureaucracy.

Resentment grew and peaked in the disastrous march of the Bonus Army on Washington in 1932. In the election that fall, Hoover suffered a thundering rebuke as Democrat Franklin D. Roosevelt won nearly 58 percent of the popular vote and laid the foundation of a powerful coalition that would dominate politics for decades to come.

Copyright ©1998 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.
For further information about this site contact mhhe_webmaster@mcgraw-hill.com.