Great Depression in the United States

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The Great Depression was a period where economic activity was stagnant and at an all time low in many countries of the world. The effects of the stock market crash of 1929 that ensued in the Great Depression in the United States lasted from late in the year 1930 to the late 1930's.

Contents

1 Causes
2 Effects

2.0.1 Migration
2.0.2 Middle class survival
2.0.3 Cultural Trends: movies
2.0.4 Depression Statistics

3 See also

3.1 Academic secondary sources: USA

Causes

Effects

The Stock Market Crash of 1929 did not plunge all Americans into instant poverty. There was a brief recovery in the market in early 1930, but late in the year it began almost continuously to bounce downwards for the next two years, producing the greatest long-term market declines by any measure. It wasn't until late in 1930 and early in 1931 that Americans began to fully feel the effects of that event. Indeed, only about one third of the population was seriously hurt by 1932. The other two thirds (who were employed) suffered from reductions in job security, money income, and hours of work. Those with secure income (or assets) gained in real wages due to reduced prices, but those with debt suffered. The depth of the suffering was far more acute than the height of the benefits, with extreme poverty and even serious malnutrition. Moreover even those that benefitted were unsure of their future; many had family who were hurt.

Easy credit fueled the consumer driven economy of the 1920s, and following the depression, credit availability began to tighten, both for business and consumers. With lenders restricting their credit availability, and moving quickly to secure their liabilities, employers who were hurt by the ripple effect of Wall Street were the first to be liquidated. As employers closed their companies, the ranks of the unemployed grew, which further complicated the banking situation by reducing income from credit lines, which cascaded into a liquidity crisis leading up to the banking panic of 1933. Consumers who had taken advantage of credit sometimes were unable to meet the monthly payment and repossession of automobiles, furniture and household goods became common.

Foreclosures on home mortgages rose throughout the period, and affected people in all income brackets. In a few localities, the forced sale of personal property drew neighbors who attempted to disrupt the proceedings as a form of protest of the action and support of the family under the eviction notice. The angry crowds also had the effect of scaring off potential bidders for auction goods. While this allowed neighbors to pay pennies on the dollar for their neighbors' possessions (which were occasionally given back to the family following the sale), it also did little to reduce the debt of the family being evicted.

The wealthy, who had significant investments in Wall Street, did experience losses; however those losses depended on how investments were structured. As a result, all but the very well-off curtailed their spending habits. Some of the wealthiest families, like the Kennedys, were virtually unfazed by the Stock Market Crash, and were able to continue living their lives largely as they had before the Depression. Others, like the Hellers, used independent investments to "float" for several years after the Crash, most bottoming out by the mid-1930's. Many wealthy American families found their extensive finances wiped out overnight, and went literally "from riches to rags."

A massive series of bank runs in early 1933 caused 4,004 banks to close permanently that year, with an average of $900,000 in deposits. These banks were merged into stronger banks; many months later the depositors received about 85% of their money. It is an urban legend that millions lost their money in banks; rather they were forced to withdraw their deposits to pay their bills. The total of all deposits in all 9,106 banks that suspended 1929-33 was $6,886 million; losses to depositers were $1,336 million, or 19%. [Historical Statistics series X741-755].

High end consumer goods providers, such as the luxury automobile industry, saw their sales numbers dwindle. Cleveland, Ohio had the highest concentration of luxury automobile manufacturers outside of Detroit. Between 1929 and 1934, production of Peerless, Jordan, and Stearns-Knight cars all ceased; Peerless, as a company, did survive, but did so by discontinuing automobile production and regrouping as a brewery.

Purchases of cheaper cars also slowed. General Motors attempted to encourage consumers to buy cars by advertising that "the sale of one car keeps an autoworker employed for three months, allowing that worker and his family to buy goods and services with their salary." However a sizable percentage of Americans couldn't even pay for a tank of gas, let alone a new car, and the entire auto industry struggled to maintain sales at a profitable level.

Buried machinery in barn lot. Dallas, South Dakota, May 1936

Migration

Young Oklahoman migrants in Imperial Valley, California.

Drought hit the Great Plains states. While weather was the catalyst for the Dust Bowl (a name coined in 1935), the root cause was poor farming and soil conservation techniques on land not suited for growing corn. When the thin layer of top soil was depleted, the land was unsuitable for cash crops, leading to farm failures and mortgage foreclosures. Migrants who trekked West to California were called Okies, and Arkies, as they flooded the labor supply of the agricultural fields. Their story was dramatized in the famous novels The Grapes of Wrath and Of Mice and Men by John Steinbeck.

In the South, rural workers and share croppers migrated north by train with plans to work in auto plants around Detroit. In the Great Lakes states, farmers had been experiencing depressed market conditions for their crops and goods since the end of World War I. Family farms that had been mortgaged during the twenties to provide money to "get through until better times" risked foreclosure when their owners failed to make payments. Unlike the dustbowl states, the midwest experienced near normal weather conditions in the 1930s, and farmers could make a living if they spent their incomes in a wise and prudent way.

Middle class survival

Dust storm approaching Stratford, Texas in 1935, during the Dust Bowl.

Like many across the country, this New York woman stored food during the depression.

However, a large percentage of the American middle class was able to survive the ordeal. Those in professions where skills and jobs were considered "depression proof" (government positions, teachers in well-funded districts, doctors, lawyers, etc.) continued to work. Daily life was made more secure if these workers had little debt before the stock market crash, had liquid savings and generally lived without overt extravagances. Middle class households managed to get through the economic depression by adapting to conditions, spending wisely and avoiding unnecessary purchases.

Cultural Trends: movies

One industry that flourished in America during the 1930s was the movie industry (Hollywood). The emergence of sound films in the late 1920s, combined with the escapism that film provided to a nation down on its luck, made the film industry one of the few that succeeded in profits and in setting a national mood. Films commonly featured rich sets and carefree characters, allowing an increasingly depression-weary nation to leave its cares behind. Shirley Temple's films were leading attractions, perhaps because her characters' unwavering hopefulness in the face of trying circumstances spoke to American audiences. Movie genres that thrived during the 1930s were screwball comedies (notably those by the Marx Brothers and the Three Stooges), animated cartoons from Disney and Warner Brothers, lavish musicals (notably those by Busby Berkeley), Westerns, gangster movies, and newsreels.

Depression Statistics

GDP in United States Jan 1929 to Jan 1941

In the U.S., says Broadus Mitchell, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically" (Mitchell p 404). Economic indicators show that GNP in the American economy reached nadir in summer 1932 to February 1933, then steadily went up until a downturn in 1938. However, unemployment continued to remain very high until 1941.

Statistic 1929 1931 1933 1937 1938 1940
Real Gross National Product (GNP) (i) 1.4 84.3 68.3 103.9 96.7 113.0
Consumer Price Index (ii) 122.5 108.7 92.4 102.7 99.4 100.2
Index of Industrial Production (ii) 109 75 69 112 89 126
Money Supply M2 ($ current billions) .6 42.7 32.2 45.7 49.3 55.2
Exports ($ current billions) .24 2.42 1.67 3.35 3.18 4.02
Unemployment (% of civilian work force) 3.1 16.1 25.2 13.8 16.5 13.9

Statistic	1929	1931	1933	1937	1938	1940
Real Gross National Product (GNP) (i)	1.4	84.3	68.3	103.9	96.7	113.0
Consumer Price Index (ii)	122.5	108.7	92.4	102.7	99.4	100.2
Index of Industrial Production (ii)	109	75	69	112	89	126
Money Supply M2 ($ current billions)	.6	42.7	32.2	45.7	49.3	55.2
Exports ($ current billions)	.24	2.42	1.67	3.35	3.18	4.02
Unemployment (% of civilian work force)	3.1	16.1	25.2	13.8	16.5	13.9

(i) in 1929 billion dollars (ii) 1935-39 = 100

Sources: GNP: U.S. Dept of Commerce, National Income and Product Accounts[link]; Mitchell 446, 449, 451; Money supply M2[link]

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national debt/ GNP climbs from 20% to 40% under Hoover; levels off under FDR; soars during WW2 from Historical States US (1976)

Unemployment

% labor force
Lebergott Darby

1933
24.9 20.6

1934
21.7 16.0

1935
20.1 14.2

1936
16.9 9.9

1937
14.3 9.1

1938
19.0 12.5

1939
17.2 11.3

1940
14.6 9.5

1941
9.9 8.0

1942
4.7 4.7

1943
1.9 1.9

1944
1.2 1.2

1945
1.9 1.9

Derby counts WPA workers as employed; Lebergott as unemployed source: Historical Statistics US (1976) series D-86; Smiley 1983 Smiley, Gene, "Recent Unemployment Rate Estimates for the 1920s and 1930s," Journal of Economic History, June 1983, 43, 487-93.

Unemployment
% labor force	Lebergott	Darby
1933	24.9	20.6
1934	21.7	16.0
1935	20.1	14.2
1936	16.9	9.9
1937	14.3	9.1
1938	19.0	12.5
1939	17.2	11.3
1940	14.6	9.5
1941	9.9	8.0
1942	4.7	4.7
1943	1.9	1.9
1944	1.2	1.2
1945	1.9	1.9

In Roosevelt's twelve years in office the economy had an 8.5% compound annual growth of GDP Historical Statistics of the United States (1976) series F31, the highest growth rate in the history of any industrial country Angus Maddison, The World Economy: Historical Statistics (OECD 2003); Japan is close, see p 174, but it came with heavy taxes and federal controls that angered businessmen.