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Lecture: The Great Depression


Cannery in Florida with workers
String bean processing at cannery, 1937
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Timeline © Copyright 2008 Eric Davis http://hopes-and-dreams.net
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"Link to Dust Bowl website" American Experience: Surviving the Dust Bowl

The Stock Market Crash

Understanding the Stock Market Crash necessarily entails understanding the stock market.

Stocks and shares

Stock refers to shares, offered by a company when it "goes public". Companies sell shares in order to raise capital for improvements and investments. People buy shares hoping to purchase at a low price and sell at a high price when the company improves or expands. Stockbrokers make money off of commissions for buying and selling. "Stock Exchange"

Shares are traded on the stock market, or stock exchange, and follow the laws of supply and demand. If a company offers, say, 100 shares of stock at $1 apiece, and no one buys them, then the price goes down (because the supply is high and demand is low). If the company offers 100 shares at $1 each and everybody wants to buy them, the price goes up since the demand is high. Often, a high volume of trading on the stock market means that many people are trying to sell stock but few are buying, and those who are buying are purchasing at reduced prices. When everyone wants stock that isn't available, the volume of trading remains low.

Panic can ensue if the supply of stock in general is very high, and the demand is very low. A company's stock can start a spiralling decline of value, ending (if the trend continues) as worth nothing at all. This can cause a company to go under.

Signs of trouble

During the "boom" (or "bull") market of the 1920s, there were signs of weakness in the system that were ignored. Although most business and banking indicators were fine, if you'd looked at farming and housing construction you might have gotten nervous. Farm product prices were far too low, the result of overproduction following the war with depressed markets in Europe. Farmers wanted the government to buy food and create an artificial shortage to raise prices. But since farming had been a problem child throughout history (remember the Populists?), with only 20 successful years (1899-1919), no one paid attention to farming woes.

Housing construction peaked in 1925, then started showing severe slowing. Construction is a good economic indicator, because all sorts of industries (lumber, stone quarrying, metal for pipes, electricity and other utilities, paint, flooring, home decor, etc.) are involved. By 1925, housing contractors had saturated the middle class market; there were more middle-class homes than there were people to buy them. Despite the fact that the poor still needed low-income housing, few companies were interested in providing it. As a result, construction declined.

But the prosperity of business was too good to ignore. Stock yields regularly got higher returns than savings accounts or government bonds, the traditional purchases made by conservative investors. This had the effect of luring conservative investors into the stock market. Why buy a government bond when you could double your money, at least, over eight years? These high returns continued throughout the 1920s, so by 1929 almost everyone owned some stock.

Buying on margin

One reason everyone could own stock was that stockbrokers were more than willing to help. Let's say you wanted $100 worth of stock, but you only had $10. "No problem", says your broker, "I'll lend you the $90 and you pay me back, plus interest, when you make the money back." This system of "buying on margin" had originated because rich people frequently had their capital tied up in investments. They could liquidate these investments in an emergency, but it made them more money if they could borrow temporarily.

The market rose so much during the 20's that brokers were willing to lend to anyone, even those with little or no collateral. Where did brokers get the money to lend? From banks, mostly. At the beginning of the 20's, 70% of their money came from bank loans, backed by collateral like their business or home. But by 1929, only 22% of their money came from bank loans. The rest was coming from businesses, who did not want to be left out of the opportunity.

Instead of channeling their capital back into their own company, businesses were making money off the market by making loans to brokers. Do you get the feeling that a house of cards was being built? It was. And to make things even more unstable, both customers and businesses engaged in speculation, placing bets on whether share prices would go up or down in a particular way.

The Crash

As early as 1926, industrial production and auto sales were declining. Although these were prime indicators of disaster, both had declined before and recovered. So no one paid any attention.

Then, in February 1929, the Federal Reserve announced that it would not back any loans used for stock speculation. Up until then, the Reserve had provided a sort of insurance for bank loans. Although this restriction was limited only to loans for speculation, it made people think that the government did not have as much confidence in the stock market.

The volume of stocks traded began to rise. When market volume is low, it means that few shares are being sold because either everyone wants to keep their stock or the price is too high. When volume is high, it means many people are trying to sell stock, and it's being bought at discount prices. That's a bad sign. It means that share values are declining. In March, the most shares ever traded in one day (8.2 million) changed hands. "Skyscraper"

On October 29 (Black Tuesday), 16 million shares were dumped on the market. It was possible to wipe out your earnings from the previous year in just one day. Some stocks declined to 50% of their value in the one day. And the slide just kept going. Fortunes were lost.

There were many suicides in late 1929 and the early 1930s, most of them stockbrokers. As the market disintegrated, businesses and banks called in the loans they'd made to brokers. Brokers tried to call in the loans they'd made on margin, but their customers couldn't pay because they'd never made the money back from the market. If you were a broker, you would lose all your collateral (business, home, car, everything). If you were lucky enough to have a life insurance policy that did not have a suicide exemption, killing yourself could provide money so your wife and kids could survive even after your property was repossessed. Some shot themselves; some jumped from skyscrapers on Wall Street.

Galbraith's theory

Economist John Kenneth Galbraith, in his book The Crash of 1929 (short and surprisingly readable if you're interested) claimed that long-term management problems in the U.S. are what turned the Stock Market Crash into the Great Depression. In short, there were five reasons:

1. Unequal distribution of income: The top 5% of Americans had 33% of the income. The economy was dependent on their high levels of investment and spending. When the market crashed and they stopped investing and buying fancy cars and furs, it had a disproportionate impact on the country.

2. Weak corporate structure: Corporations had their capital tied up in holding companies and brokers' loans, when they should have invested their surplus in their own companies.

3. Poor banking structure: When one bank failed, the others nearby would freeze their assets, closing their doors against their own customers until the panic subsided. This was necessary because there was absolutely no insurance on bank deposits. If you had money in a bank and the bank went out of business, you lost all your money, perhaps even your life savings. Ironically, those who had kept their money in the bank ended off just as badly off as those who had invested in the market, because many banks went out of business.

4. Bad international trade balance: After WWI, the U.S. had made many loans to European countries in order to keep them trading with us. These loans were backed by government gold deposits and private investors. American companies had also invested massively in cheap post-war European industries, especially in Germany. In order to create recovery for themselves, European countries had to export as much as possible to the U.S. But the U.S. had a high tariff, designed to protect American industry. This made the prices of European goods high and thus few were imported. As a result, European countries defaulted on their debts, and couldn't buy American goods (including food, which helped cause the agricultural depression of the 20's).

5. Poor state of economic intelligence: The view that prosperity was endless was encouraged by the government and by economists, which led people to greater levels of stock purchase. After the crash, economic advisors recommended balancing the federal budget, which meant no money to help improve the economy. This approach did not take into account the rampant unemployment of the Depression. Herbert Hoover, however, took this as his policy.

Naturally, Galbraith was a Keynesian, who believed that the government should help in Depression. So was President Roosevelt. I'll get to that.

Dust Bowl

"Eroded Land"A foundation in ecology is important to understanding the Dust Bowl. Erosion is the removal of topsoil by wind or rain. Erosion obviously happens naturally, but in most places its effects are limited by the natural vegetation, which holds down the topsoil. Topsoil is critical to plant life: it is the stratum which contains the most nutrients, since it receives decaying organic matter from dying vegetation and nitrogen from the air.

Due to farming improvements, grassland areas in Oklahoma, Arkansas and Texas were turned into a new wheat heartland. This occurred during the agricultural boom of 1897-1919, a time of unusually high rainfall and booming agricultural trade with Europe. During the 20s, agriculture began to decline in the face of low prices (the result of overproduction because Europe wasn't buying). Then the unusually high precipitation stopped, and the region returned to its natural climate pattern: hot, dry summers and frozen winters. "Farm in Dust"

So, with less being planted, and no water, the topsoil in this region of the country lay bare. When winds picked up, the Dust Bowl began. It is hard to describe a dust storm unless you've been in one, and I have. When I was a kid growing up in Bakersfield, we had a dust storm that lasted several days. We were sent home from school with hankerchiefs across our faces. People were told to stay indoors. You couldn't see anything but dirt when you looked outside. Dust got everywhere: it came in through the cracks of the windows and piled in little drifts on the sill, it got in books and dishes and the bathtub and the washing machine. It got in our teeth and at night we crunched it, lying between dirty sheets. We looked out the window and felt totally isolated (which was interesting, because with the Tule fogs in the winter we thought we were used to feeling isolated).

In Oklahoma, Arkansas and Texas, farmers literally saw their livelihood blow away. Even once the winds stopped, they knew there would be no more topsoil and thus no more farming. So they left, many of them coming to California. (You can explore more about the Dust Bowl at PBS's American Experience: Surviving the Dust Bowl.) Where I come from, the Okies aren't in a history book. They lived north of the river and south of the tracks. We called them "Okies" as a slam, and other names too, especially "redneck" and "hick". We weren't told of their origins, how they came to live there.

Document: Dorothea Lange: Migrant Mother

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Journalists like Carey McWilliams, however, recorded the conditions they faced upon their arrival during the Great Depression. As you read the document, think to yourself:

Document: Carey McWilliams: Okies in California (1939)

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One of the best works written about the Okie experience was John Steinbeck's The Grapes of Wrath, which was published in 1939 and made into an award-winning film the following year. Although fiction, The Grapes of Wrath takes the actual experience of the people migrating to California in the wake of the Dust Bowl, and creates a universal story of courage.

Today, there are still major problems with soil erosion, for the same reasons as the Dust Bowl occurred. Even in irrigated areas, topsoil is eroding at the rate of about one inch per year because there is no natural vegetation and no cycle of decay and replenishment on farmland. We plant and fertilize using chemical fertilizers which are inefficiently used by crops while they poison the water table. The land itself has become pretty much barren of nutrients, which makes our food less nutritious. The plants themselves are weak because they have no access to essential nutrients, so they are attacked by insects and diseases, which are then treated using more chemicals. Only organic farming replenishes the nutrients by keeping the soil restocked with organic matter, assuring that the topsoil is maintained, with cover crops grown to prevent erosion. Although more and more farmers are realizing that changing over to organic methods makes sense (and ultimately saves money), it has been in the interest of chemical companies (such as Monsanto and Dow) to keep farmers dependent on their products.

The Bonus Army

In 1924, a few years after the Great War, Congress had passed a measure granting veterans a special bonus, to be paid in the year 1945. You have read how a group of World War I veterans marched on Washington during the Depression in hopes of getting their bonus early. These men brought their families, and set up houses of cardboard or lived in their cars once in the city. Ultimately, many camped out in Anacostia, across the river from the city. "Bonus Veterans"

During the deliberations in Congress, the President authorized police to distribute leftover food from restaurants and medical aid to the veterans. They were even allowed to occupy abandoned warehouses in the city. Then the Senate voted down the Bonus Bill, despite the House having passed it. Our country's representatives were so afraid of their reception by the veterans that they snuck out of the Capitol using underground tunnels. The police urged the veterans to leave the city, now that they had nothing to gain (Congress had adjourned for the year after the defeat of the Bonus Bill).

But the veterans stayed, and Douglas MacArthur ran them out. First, he used mounted troops to remove the veterans from the city itself. His orders were to let the veterans retreat to their camps at Anacostia. What had been cardboard boxes were now houses made of tin or wood, some with fences and little vegetable gardens. Defying civilian authority, MacArthur crossed the bridge into Anacostia and burned the camps.

There are a couple of points to be made here. First and foremost, the nation's leaders were not able to handle a group of citizens who were peacefully demanding assistance. They met these demands with military violence (several veterans were injured being driven from the city).

Secondly, this is just the beginning of what will be a lifetime of MacArthur defying authority. He'll do it repeatedly in World War II, and it made him a hero for taking on the Japanese. He'll do it again in the Korean War, and bring us close to war with China. President Truman will fire him.

Was the New Deal socialist?

Document: Yip Harburg: Brother, Can You Spare a Dime? (audio)

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As you know, the role of socialism and communism in this country had become a big deal after the formation of the Comintern in 1919. Communist party agitators, who demanded as part of their platform the violent destruction of the U.S. government, were feared throughout the country. By 1932, however, more and more people had begun to accept the socialist idea that it was the government's responsibility to take care of the people. "Herbert Hoover"

Right-wing conservatives, and others fearful of the affects of socialism, denounced the New Deal as a socialist program. They said it would lead the U.S. down the path of the government dominating private life, of hard-workings tax-payers being forced to help lazy people who couldn't get a job. Certainly President Hoover preferred private charities, balancing the budget, and occasional loans to direct aid to Americans. But in the environment of the Depression, where even hard-working taxpayers found themselves jobless and sometimes homeless, the conservative arguments made less and less sense.

Although the Supreme Court would later examine whether its provisions were unconstitutional, at the time many Americans agreed that the government should do something to help people. Roosevelt's programs put people to work, usually for the government, and used deficit spending to "prime the pump" of the economy. Many of its provisions, particularly deposit insurance, were designed to prevent another Depression caused by panic. The Federal Deposit Insurance Corporation (and now similar organizations for credit unions and savings and loan) insured bank deposits up to $100,000 (now $250,000). Other provisions, such as Social Security, were clearly socialist in nature because they were based on the idea of taxing wage-earners to help retirees.

Document: Advertisement: Mobilization for Human Needs (Nat'l Citizens Committee, 1933)

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Left-wing solutions are often accepted when times are tough for many people. In this case, when the middle class was in trouble, they became national policy. The programs had been based on the philosophy of John Maynard Keynes, a British economist who believed that assistance to those in need created growth and spending that ultimately solved depressions. "FDR & Eleanor"

So did it work? Well, yes and no. Certainly the New Deal changed the mood of the country and the morale of the people. FDR's fireside chats were reassuring, and men especially needed to have a job, any job. But in terms of GNP and overall economic recovery, that really didn't occur until it became evident that the U.S. would enter World War II. As in other countries, like Germany and Japan, military preparations would end the Depression.

Popular Culture

Document: Ad: They secretly pitied her husband (Continental Can, 1934

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During the Depression, pop culture thrived as people sought an escape from their blues.

Music: The Blues and Dance Music

During the Depression, dancing was a popular pastime for chasing the blues away. There were some strange elements involved with dancing, however. Contests for money were plentiful during the Depression, and some consisted of dance marathons, where couples would dance until they dropped (literally; some died). There was a heart-wrenching film made about these contests called "They Shoot Horses, Don't They?" (1969) which has etched on my mind the image of these humiliating spectacles of desperation. Dance halls, which persisted for decades, featured female employees who were paid by male customers for dancing with them ( and some of these women also ran a side-line in prostitution).

But most dance music was just for dancing in nightclubs (especially once Prohibition was ended). Orchestrated music like this would evolve into the Big Band sound.

"Dance Music"

Lionel Hampton was a Chicago jazzman discovered by Louis Armstrong. He moved to California in 1928 and by 1930 was playing the vibraphone (a sort of electric xylophone) which he helped popularize for orchestral dance music. Here is "On the Sunny Side of the Street", a popular song of the thirties.  Lyrics


Billie Holiday was one of the greatest jazz singers ever, beginning her career at the age of 15 in Harlem nightclubs. The selection here, "Any Old Time", was sung with Artie Shaw's band, which became popular shortly after Benny Goodman introduced the swing style in 1935. Beginning as a professional reed player, Shaw formed several orchestras which played both popular music of the day and Shaw's own tunes. Hiring Billie Holliday, a black singer, was a break with tradition. She later went solo as a torch-song singer. A really bad movie about her life called "Lady Sings the Blues" was made in the 70s. Lyrics

Radio: War of the Worlds

"Radio Booth" Radio was not only used for "fireside chats". In 1927, the National Broadcasting Company became the first national radio network, and programs featured music or books read aloud as "theater". Most music programs were very popular and had sponsors, companies who paid for the program to be produced in return for advertising "on the air".

CBS's Mercury Theatre on the Air did not have any sponsors; it was a small-budget program of readings of literary classics. On Halloween night 1938, a young producer and actor named Orson Welles read the 1898 science-fiction novel War of the Worlds by H. G. Wells. But Orson Welles did not just read the book; he read an adapted version (written by Howard Koch) to make it more exciting for radio, using "news bulletins" and a journalistic reporting style.

War of the Worlds is about Martians visiting the earth. The program set the story in Grover's Mill, New Jersey instead of in the original England. Although the program had been preceded with an announcement and introduction, and although newspaper ads had been run about the program, many listeners believed they were hearing about real, not fictitious, events. By the time the station break came at the half hour, reminding people that they were listening to fiction, many had already panicked. "Orson Welles"

Part of this was the fault of Orson Welles, who had deliberately orchestrated the program so it sounded "real" in order to increase suspense. But part of it was the fault of world events. In 1938, Hitler had just annexed Austria, and people were waiting to hear that war had broken out in Europe. Historian Edward Oxford notes that this conditioned people into an "edge of our seats" mentality, which made it easier to believe that the earth (and New Jersey) was being attacked.

After the program, Welles received an angry phone call from the mayor of Flint, Michigan, for causing chaos in his city. Reporters accused him of causing suicides. The newspapers carried the story the next day, and some people felt really stupid. CBS had to issue a public apology. The FCC considered whether to censor radio programs. Even H.G. Wells wired CBS, upset that his novel had been adapted in a way that made it no longer his novel. Grover's Mill still gets the occasional tourist, wanting to visit the place where everyone thought the Martians had landed.

Movies: Screwball Comedy

The films of the 1930s were heavily influenced by the Hays Code. Imagine movies where crime is not glorified, where adultery cannot be "justified, or presented attractively", where there is no "excessive and lustful kissing", where vulgarity or obscenity of any kind is forbidden, and you have films of the 30's. Ministers could not be villians, and there were limitations ("careful limits of good taste") in portraying interrogation methods, cruelty to children or animals, a woman "selling her virtue", or surgeries. Certain things could not be shown in detail: the methods of killing, theft, safe-cracking, use of firearms, smuggling methods.

Much was not expressly forbidden, but understood in the code. Movie makers, accustomed to total freedom in the 20's, were upset by the restrictions. But they responded with some of the most creative films ever made. Some of the most popular of these were the "screwball" comedies, named after the baseball pitch which you expect to go one way, then it goes the other way.

In many of these films, sexual role reversal was used to create a comic element. During the 30's, when many men were unemployed, women took on an almost matriarchal role in society. Many households were run by women, who were supposed to be strong during this challenging time. In the movies, women were often as strong, or stronger, than the men. They're funny, witty, sexy and beautiful.

"It Happened One Night" won lots of Oscars in 1934. It's the story of a rich girl (Claudette Colbert) who's run away from her father for not letting her marry the man of her choice. Along the way, naive and without cash on hand, she's assisted by a newspaper reporter (Clark Gable), who realizes that her story could make him a lot of money. They fall in love (naturally). Two famous scenes can tell you a lot about movies at this time.

Link to video on Vimeo

In one scene, the two are walking on a road, trying to hitch a ride. Gable goes on and on about hitchhiking techniques, showing Colbert the best tricks. Despite their use, he's unable to get them a ride. She goes out to the road by herself, and hikes up her skirt to reveal most of a shapely leg, and stops a car. As they ride, he says something to the effect of, "why don't you take off all your clothes? you could have stopped forty cars." She says, coolly, "oh, I'll remember that the next time we need forty cars." See this clip by clicking on the left. "It Happened One NIght: Poster"

The most famous scene takes place in a motel where they are forced to spend the night when their bus breaks down. Gable tries to lend Colbert his pajamas; she is obviously worried about them spending the night together. Gable ceremoniously drapes a blanket on a rope across the room, separating the two beds. When she doesn't go to her side or accept the pajamas, Gable begins to undress. (The Hays Code says this is OK only if essential to the plot!) He takes off his shirt, exposing his bare chest (which made audiences gasp -- most "gentlemen" wore undershirts). She grabs the pajamas and runs to her side of the blanket. You can see this one too.

"Bringing Up Baby Poster"

In many screwball comedies, however, the woman has the upper hand. In the Thin Man series of mystery-comedies, the wife is the better investigator and her husband is a lovable drunk. In "Bringing Up Baby", a woman who owns a leopard as a pet gets a man tangled up in a farce that ruins his marriage plans and makes him fall in love with her. Throughout screwball comedies, verbal sparring takes the place of sex, creating an underlying sexual tension that is palpable. It has been said that taking all the explicit sex out of films led to a creativity that made dealing with sexual issues more fun. Anti-Hays PosterThis is not to say that censorship is good, just that it can lead to great creativity in an effort to get around "the rules".

I once saw a poster ridiculing the Hays Code. It showed a glamorous, half-dressed woman in lacy underwear, smoking a cigarette and drinking whisky, with a smoking gun pointed at the head of a cop who was lying on the ground under her stiletto heel. The defeat of the law, drinking, sex, drugs, it was all there. A copy of the Hays Code was on the back wall.

The HindenburgHindenburg crash

Though not exactly popular culture, one of the worst air disasters of all time occurred on May 6th, 1937 in Lakehurst, New Jersey, when the dirigible Hindenburg exploded. The cause is still being determined. Dirigibles, or airships, had been a reliable form of transportation and, despite efforts to prove it was a freak accident, the Hindenburg disaster ended dirigible aviation as a form of regular transport.

A radio reporter, Herb Morrison of Chicago, was covering the landing of the Hindenburg when the disaster happened, and these seven minutes (short excerpt instead) are disaster reporting at its finest.




All text, lecture voice audio, and course design copyright Lisa M. Lane 1998-2018. Other materials used in this class may be subject to copyright protection, and are intended for educational and scholarly fair use under the Copyright Act of 1976 and the TEACH Act of 2002.