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The Great Depression, Part I
I thought I’d take a look back at some of the basics of the Great Depression as a lead-in to a later discussion on how Herbert Hoover and FDR handled the transition in 1932-33…not well, as it turned out. But first a background.
Nov. 6…Herbert Hoover is elected president in a landslide Republican victory with Hoover defeating Alfred E. Smith, 444-87, in the electoral college. Republicans increased their lead in the Senate to 56-39, with one seat going to a minor party, and controlled the House 267-167, with one seat to a third party here, too.
As the decade neared an end, many were convinced the prosperity that began in 1922 would go on forever, but several aspects of the economy had begun to decline in 1927. Growth, in fact, was brought on by wild speculation in the stock market.
Consider, for example, that in September, national income statistics showed that some 60% of U.S. citizens had annual incomes of less than $2,000, which was estimated as the bare minimum to supply a family with the basic necessities of life.
The Dow Jones peaked at 381 on Sept. 3, but a slow decline began. [Another measurement, the Standard Statistics index of common stock prices reached an average of 216. Its climb was as follows: 100 during 1926; 114 by June 1927; 148 by June 1928; 191 by June 1929.]
On Oct. 24 an abrupt decline began. Leading bankers tried without success to stem the tide. On Oct. 29, Black Tuesday, a record 16,410,030 shares were traded. By Dec. 1 stocks on the New York Stock Exchange had dropped in value by $26,000,000,000. The day after the crash, President Herbert Hoover said, “The fundamental business of the country…is on a sound and prosperous basis.” In actuality, the Great Depression had begun.
Early in the year, President Hoover called a special session of Congress to take up tariff revision, which he had promised in his presidential campaign the fall of 1928. By the time Congress finished its work, however, it sent Hoover the Smoot-Hawley Act, a bill that included some of the highest rates in history on manufactured products. Duties on 890 articles were raised. Hoover signed the act into law on June 17 despite the fact that on May 4 a petition signed by 1,028 economists had been sent to Washington urging defeat of the proposed legislation. Within two years, 25 nations retaliated by raising tariffs on U.S. goods. The economic nationalism deepened the global depression.
Nov. 4…in congressional elections the Republicans lost eight seats in the Senate for a nominal 48-47 majority. In the House the Democrats took a 220-214 lead. [A minority seat in each chamber.]
Dec. 2…In a move to provide jobs for the unemployed, President Hoover asked Congress for money for construction of public works. On Dec. 20 Congress passed the necessary legislation for an appropriation of $116,000,000. The president had announced in October there were 4,500,000 unemployed. At the beginning of the Depression, Hoover had tried to arrange programs to deal with unemployment through state and local governments and organizations.
Dec. 11…The Bank of the United States in New York City, with 60 local branches and 400,000 depositors, closed. More than 1300 banks throughout the country had been closed down at this point by the deepening economic crisis.
Jan. 7…Unemployment was estimated at between 4,000,000 and 5,000,000.
[May 1…the Empire State Building, the world’s tallest building, was dedicated and opened to the public in New York City.]
June 20…An international moratorium on war debts and reparations was proposed by President Hoover, the president’s first important act to break the international financial panic. It seemed successful at first; stock markets rallied and bankers and economists were enthusiastic. But soon the panic became worse than ever.
Sept….A bank panic spread across the nation. In September 305 banks closed; in October 522 shut down. Fear that the U.S. would go off the gold standard led to hoarding of the metal throughout the country.
[Oct. 24…The George Washington Bridge, linking Manhattan with New Jersey, officially opened. It was completed eight months ahead of schedule and under budget!]
A desperate President Hoover tried to stem the Great Depression by granting generous credit to industry and ordering a check on government spending. Heck, he reduced his own salary 20% and persuaded Vice Pres. Charles Curtis and nine Cabinet members to do the same. Public works programs were planned to alleviate staggering unemployment. Hoover’s plans, however, were never realized, for the voters insisted on a change in the White House.
The number of unemployed in the U.S. reached 13,000,000 (or about 25%). National wages were 60% less than in 1929, dividends 56.6% less. Total business loss during the year was placed at $5,000,000,000 to $6,000,000,000. Two and a half years after the Oct. 1929 market crash, U.S. industry as a whole was operating at less than half its maximum 1929 volume.
[You want some good news? Vitamin C was isolated and identified, and Edwin H. Land devised the first Polaroid glass.]
Wheat prices dropped to a new low of 32 cents a bushel. This contrasted with peak prices of $2.33 a bushel in 1920.
Jan. 22…The Reconstruction Finance Corporation was established with $2,000,000,000 at its disposal to lend to failing banks, farm mortgage associations, building and loan societies, railroads, and insurance companies.
[Mar. 1…Charles A. Lindbergh, Jr.’s 20-month infant was kidnapped from the parents’ home at Hopewell, N.J. The body of the child was found on May 12, after payment of a $50,000 ransom.]
June 27-July 2…The Democratic National Convention nominated Franklin D. Roosevelt for the presidency, but only after John Nance Garner gave up his delegates in return for the vice presidency. FDR then broke with tradition and flew to Chicago to accept the nomination. In his speech, he called for a “new deal for the American people.”
Nov. 8…Franklin D. Roosevelt was elected president in a Democratic landslide. Roosevelt carried all but seven states, with 472 electoral votes to 59 for Hoover. The Democrats gained 13 Senate seats for a 60-35 majority. In the House the Dems gained 90 seats for a 310-117 majority, with five seats going to minor parties.
[The reversals in the composition of Congress from the 1928 levels noted above are staggering.]
I’ll continue the story next week, looking specifically at the transition period.
Source: “The Encyclopedia of American Facts and Dates,” edited by Gorton Carruth. *A phenomenal book, though sadly it hasn’t been updated since 1997.