DO NOT USE CHATGPT OR ANY AI SOURCE. YOU DO NOT HAVE TO MAKE IT SOUND SMART.
Begin by reading Then look at the bar graphs and read the statistics about the number of families on relief in the U.S. in 1933.
Then answer the following questions based on what you read in each source and based on your prior knowledge of the Great Depression gleaned from the lectures (applicable to questions 1,4 and 5.)
read the following:
The Rise of Herbert Hoover
- Hoover was eminently qualified to be President.
- He came from a working-class background and took great pride in being a self-made man.
- He was from the first graduating class at Stanford, where he studied engineering. He went on to make a fortune in the mining industry and worked for firms in Asia, Africa and Europe.
Hoover believed in rugged individualism which meant that he felt that individuals controlled their own destiny and had to work hard to pull themselves up by their bootstraps in times of economic crisis. This way of thinking was common in the early 1900s and similar to Social Darwinism which we learned about earlier in the semester.
The Election of 1928
Herbert Hoover had been Secretary of Commerce during the Coolidge administration and had been in charge of the American Relief Administration which provided food aid to Europe after WWI. He was not a career politician but rather someone who was called to public service after his own financial success. But based on his past government work and his business acumen Hoover was one of the best-qualified men to have ever run for president. He ran against Al Smith in 1928. Al Smith was a Democrat from New York. He was a four-time governor of the state. He was a politician who worked actively to continue Progressive Era reforms. He improved labor laws in his state along with passing a number of workplace safety reforms. He was also the product of the Tammany Hall political machine that controlled NY politics during the Gilded Age. Smith was against prohibition and called a wet in the papers for this stance. He was also a Catholic which did not sit well with a lot of American Protestants who believed that Smith would somehow be controlled by the Pope.The Rise of Herbert Hoover
- Hoover was eminently qualified to be President.
- He came from a working-class background and took great pride in being a self-made man.
- He was from the first graduating class at Stanford, where he studied engineering. He went on to make a fortune in the mining industry and worked for firms in Asia, Africa and Europe.
Hoover believed in rugged individualism which meant that he felt that individuals controlled their own destiny and had to work hard to pull themselves up by their bootstraps in times of economic crisis. This way of thinking was common in the early 1900s and similar to Social Darwinism which we learned about earlier in the semester.
The Election of 1928
Herbert Hoover had been Secretary of Commerce during the Coolidge administration and had been in charge of the American Relief Administration which provided food aid to Europe after WWI. He was not a career politician but rather someone who was called to public service after his own financial success. But based on his past government work and his business acumen Hoover was one of the best-qualified men to have ever run for president. He ran against Al Smith in 1928. Al Smith was a Democrat from New York. He was a four-time governor of the state. He was a politician who worked actively to continue Progressive Era reforms. He improved labor laws in his state along with passing a number of workplace safety reforms. He was also the product of the Tammany Hall political machine that controlled NY politics during the Gilded Age. Smith was against prohibition and called a wet in the papers for this stance. He was also a Catholic which did not sit well with a lot of American Protestants who believed that Smith would somehow be controlled by the Pope.
Germany’s War Debts
When World War I ended in 1918, the Allies insisted that German and Austria pay war reparations for the losses and damages suffered. England, for example, relied on Germany and Austria to pay the English government its war reparations, so that it could pay back its loans to the United States. The way that the debt was restructured meant that Germany and Austria were forced to take loans from American bankers in order to pay its war reparations to England and other allied nations. This created a vicious cycle of debt where money was moved from place to place but no one was really paying off any debts. What the United States should have done was forgiven the war debts, but at the time there was tremendous opposition against doing so. As a result of protectionist tariffs and a lack of European purchasing power, American farmers and manufacturers no longer had strong markets for their products abroad. Germany only recently paid off the last of the war debt.
In 1921 Germany declared that it could not pay the war reparations owed to the Allies. Under the terms of the Treaty of Versailles, the Germans owed the British and French approximately $33 billion. As a result of this non-payment, France moved into the Ruhr Valley area and took control of the German territory. France also demanded that German miners continue to mine coal so that it could be sold to repay the war reparations. The German miners went on strike and refused to work. The German government, The Weimar Republic, supported the coal miners and began to send more troops into the area. This created a military standoff between Germany and France which I will discuss more in the World War II chapter. The Ruhr Valley was also the industrial heart of Germany and when France invaded it created hyperinflation in Germany and began to sink the country into a financial depression. Eventually, France was told to stand down and withdraw from the Ruhr Valley in exchange for Germany promising to pay its war reparations. There were two plans proposed the first in 1924 was called the Dawes Plan which was brokered by the U.S. government formulated by Charles Dawes.
The Dawes Plan, which was passed in 1924, was meant to take Germany out of hyperinflation. Under the Dawes Plan (and later the Young Plan) the U.S. government restructured the payment of the debts to give Germany a break and tried to keep the world from sliding into an economic depression. Under the Dawes Plan, U.S. banks loaned Germany $200 million. The Germans took the money to build up their economy which would allow them to pay back the war reparations. The money flowed from Germany to France, England and other Allied countries, who then paid back their war loans to the U.S. bankers. The Dawes Plan was meant to be a temporary fix because in reality no one was really getting paid. The Dawes Plan was replaced by the Young Plan in 1929 because the Germans could not pay their debts and the world economy was at stake. Under the Young Plan the war reparations were reduced by 20% and the Germans were given 58 years to repay the reparations. But the cycle of the U.S. loaning money to Germany to pay the Allies continued and did not resolve the problem.
The Germans did not actually pay off the debt until 2010. The country paid back approximately $26 billion dollars which was the restructured debt under the Young Plan. Which was 92 years after the end of World War I.
What Caused The Great Depression?
- Decline in Agricultural sector. Too much competition from U.S.S.R after 1928.
- England left the Gold Standard. Englands economy in depression since WWI.
- Overproduction and under-consumption of goods.
- A wild stock market.
- Federal Reserve issues which did not properly regulate the monetary system.
If you are interested in learning more on the economic policy side of all of this I will direct you to the works of economists Irving Fisher’s works on debt deflation, Milton Friedman and Anna Schwartz’s A Monetary History of the Unite States, Jim Powell’s modern critique on the New Deal FDR’s Folly, The work of Ludwig von Mises is also essential reading for those interested in learning more about the European side of the Depression.
Historians and economists alike are still debating what exactly caused the Great Depression. But scholars do agree that the Great Depression occurred as a result of several factors and not one single issue. If anything the abundant amount of literature on the Great Depression shows us just how interconnected the American economy was in the 1920s and 1930s, and that problems in one industry, eventually had a ripple effect into other areas. Economists and historians do agree that the financial sector collapsed due to easy credit and an unprecedented amount of stock speculation. When debts went unpaid bank failures soon followed, and even those who had been cautious with their money, saw their lifes savings disappear when their bank closed its doors.
The overproduction of farm crops and manufactured goods also contributed to the countrys economic woes. Equilibrium within the economy was thrown completely out of balance due to a tremendous decrease in consumer demand across the economy, which in turn increased unemployment. The problems in Europe, particularly Germanys inability to pay its war reparations (33 billion dollars to Britain and France) also wreaked havoc on the American economy and were certainly significant. But in the three years that followed the stock market crash of 1929 most of the economists in the United States were not convinced that the economic downturn was anything different than depressions that had occurred before. Even as late as 1932, economic theorists still proclaimed that less federal government intervention in the economy was what was needed, not more. When Americans were forced to cut back on spending the economy was driven to near-collapse in 1932, and by the time FDR took the oath of office in 1933, it had hit rock bottom. As the recession turned into a depression the American public demanded that the federal government do something to combat the mounting unemployment problem. Although Congress was successful in passing legislation to start public works projects and provide some relief assistance to the states in 1932, to most Americans the efforts were too little too late, and viewed as half-hearted by many.
Buying on Margin
- It was not uncommon for brokers to extend their clients credit to purchase stock, requiring as little as 10% of the cost of the stock purchased in cash and the remaining 90% purchased on credit through a call-loan. Although most reputable brokers required 40% to 50% of the stock purchase to be made in cash, with the remaining amount purchased by loan.
- The methodology behind this was that you could buy stocks low, sell high, pay back the call-loan, and have money left-over to put in the bank. In an era where it seemed everyone was making money in the stock market, middle-class Americans felt confident enough to overextend themselves, in the short-term for the promise of long-term financial gain.
In 1929 about 1.5 million people were invested in the stock market in the U.S. Out of a population of 120 million people about 30 million families had money invested in the stock market. About 2/3 or 600,000 customers were trading on margin; that is, on money they did not possess. They were borrowing the funds to invest in the market from brokers. Brokers borrowed from banks in order to loan money to their clients to invest in the market.
People of average means began to invest in new technology companies. The apple, Microsoft or Google stock back then would have been RCA. Radio Company of America. I am using RCA as an example here because it would have been the equivalent of investing in Apple, Google, or Facebook at the time. It soon became a cautionary tale.
RCA was nicknamed a Glamour Stock because people could buy it when it was cheap sit on the stock for awhile and then sell it when it price took off. Between 1924-1929 the stock soared in an unprecedented way. One share of RCA stock cost $11 in 1924 and reached a high of $114 a share in September of 1929. A 936% appreciation in five years. As the depression wore on this once coveted stock lost nearly all of its value. It drops to as little as $1 a share or less in 1929 and then rebounded to about $3 a share only a few years later. A far cry from the value at its height.
After the stock market crash banks collapsed in both big cities and in rural areas. Stock-brokers who had extended loans to their clients (who bought on margin) could not pay their loans to the banks since they had not been paid back by their clients. Interest rates were lowered to stimulate the economy and then raised again.
Banking Statistics
From mid-1928 until mid-1929, at the height of the boom, 549 American banks closed their doors most of them in agriculturally depressed areas. This trend continued and by July of 1929 an additional 649 banks closed their doors. The following year another 1,553 banks closed, with a loss of over $1 billion and in the first ten months of 1932 1,199 banks were out of business. The first banking crisis occurred in October of 1930, followed by a second crisis in March of 1931. In the years 1931-32 there were over 5,000 bank failures out of an initial 24,000 American banks, again mostly in rural areas.
The Farm Crisis
Trouble in the Agricultural Sector
The collapse in the agricultural sector of the economy played a significant role in the collapse of the overall economy. Throughout the World War I era and continuing into the 1920s American farmers had increased the amount of agricultural products they sold abroad to Europe. Farmers soon found themselves in a strong economic position with what seemed like an endless amount of paying customers.
The European demand created during and after World War I enticed farmers to grow as much grain as possible in order to make money abroad. In countries such as Belgium and France, the countryside had been destroyed by trenches and warfare generally, and it would take many years for the soil to recover and become fertile again. In the meantime, European countries had little choice, but to import grain and other products from American farmers.
Once the war was over, American farmers were called upon once again, this time to provide grain and other food aid to the Soviet Union during the famine of 1920-1921. With so much potential income to be made, American farmers began to borrow money from banks to buy more land and better equipment in order to make as much money as possible during the 1910s and early 1920s. Although American farmers were making a great deal of money during World War I, farm prices eventually dropped because of overproduction and competition, and never fully recovered to their pre-war or even wartime levels.
As agriculture in Europe began to rebound in the 1920s, demand for American farm products began to decline. The decline in crop prices forced famers to increasingly rely on bank loans and credit. Soon, overextended American farmers could not pay back loans to banks; and saw homes and farms fall into foreclosure. As rural banks failed in record numbers the overall U.S. economy was dealt a serious blow.
Aid for Farmers
When Hoover assumed the presidency in 1929 he set to work to tackle the problems within the agricultural sector. He stressed the need for volunteerism, and called on farmers to work cooperatively in their own industry to help one another; including fixing prices, and monitoring production so that surpluses were kept in check. Hoover long believed in the rugged individualism of the American people to pull themselves out of economic hard times and did not believe in federal government involvement in the economy.
But because of his experience as Secretary of Commerce, and as a businessman, in 1928 Hoover had to admit that farmers needed some help from the federal government. The plight of American farmers soon took center stage in the early months of his presidency.
In a message to Congress on April 16, 1929, Hoover proposed the creation of the Federal Farm Board as a start towards fixing the problems that had plagued the agricultural sector throughout the 1920s. In the same address to Congress, he explained that many plans had been tried in the past, but that no plan put forth by the farming organizations had worked effectively, therefore some government intervention was necessary. Luckily, Hoover and Congress managed to come to an agreement on farm relief after much debate. Direct Relief for farmers though was something that both President Hoover and Secretary of the Treasury, Andrew Mellon, argued against.
But another compromise between the federal government and the farmers was reached in the spring of 1929 when Congress passed the Agricultural Marketing Act. This Act authorized the government to buy crop surpluses, (especially during harvest time when a glut was created) and take the products off the market. Congress hoped that this would help stabilize crop prices, and stop them from dropping further. Another part of the Agricultural Marketing Act was $100 million from the Treasury Department which provided low-interest loans to farmers and farming co-operatives for a period of 20 years to help stabilize crop prices. Although the Agricultural Marketing Act provided some aid to farmers it proved to be more hindrance than a help. Yet farmers clung to the hope that prices would rise again, and continued to plant wheat and cotton which by 1930 flooded an already glutted market. The government continued to prop up the agricultural sector by injecting more capital and allocated an additional $100 million to the Federal Farm Board in the spring of 1930. None of this had the desired effect of stabilizing crop prices. In the end, skittish investors withdrew funding over fears of large surpluses, which ultimately led to lower prices and a loss of profit.
Another Congressional attempt to aid farmers was the Hawley-Smoot Tariff of 1930, but it too failed to cure the problem. This tariff on imports into the United States indirectly started a trade war with the rest of the world, who retaliated with their own protectionist tariffs. In previous eras, a protectionist tariff had stimulated business investment and aided the U.S. economy, but the Hawley-Smoot, caused the exact opposite to occur. The world economy had changed by 1930 and the United States faced stiff competition from European countries that were eager to protect their own businessmen. Europeans decided that they could live without a lot of U.S. goods. Ultimately the Hawley-Smoot tariff hurt American businesses across the board, and only served to exacerbate an already bad situation. These problems in agriculture in 1929 and 1930, along with the stock market crash of 1929 certainly pushed the economy further deeper into a depression. Hoover responded by issuing a grace period on European war debts which resulted in Europeans lowering their tariffs on American goods.
Unemployment
Unemployment was a massive problem during the Hoover administration. I cover this extensively in Chapter 5 of my book. As you are reading pay attention to the plight of the working class in Chicago and female unemployment prior to 1933. I will ask you questions about all of these things on your quiz.
Hoovervilles
Destitution was a serious problem by 1931-32. People who had lost jobs, savings, and had exhausted help from charity organizations often found themselves living in so called Hoovervilles. These places were not sanitary, lacked running water, and were often not safe.
Interestingly, as more people found themselves unemployed through no fault of their own, Social Darwinist attitudes began to disappear, and the Depression did bring out some of the best aspects of humanity. People in shanty towns began to look out for their neighbors and share what little they had. As Hoovervilles seemed more permanent Americans tried to make the best of a bad situation. It is hard to believe but during our last recession there were people who were forced to live in tent cities after they had exhausted all of their financial resources. This was a tent city in Sacramento, CA in 2009 which was eerily similar to conditions in 1930. These people were forced to live in this camp after being evicted from their homes. Ironically it was not that far away from our State Capitol building. Recent events have led to similar situations in San Diego and other California cities. In 2025 we are still grappling with inflation, a housing crisis, a wild stock market and tarriffs which may or may not work. If the current Congress is not careful, we might see a Smoot-Hawley situation again and economic isolationism. As you will read about in my book a lot of the history of the 1930s is repeating itself.
Down and Out
A lot of men and women hit the road so to speak and migrated into cities seeking work. Soup kitchens were established in cities to feed the unemployed. It was not easy to travel into the downtown area to look for work and the thought process was that you could feed men downtown so that they could spend the whole day looking for a job. It was also a way to try and help restore pride. Men could eat downtown for free and then utilize whatever money they saved to help feed their family later in the day. Although anyone could get food at a soup kitchen. For men especially, Soup Kitchens were also a place to network with other unemployed people to try and find work.
Soup kitchens were also sometimes run by criminals and political bosses. Al Capone financed a few soup kitchens in Chicago. He was able to appear to be a Robin Hood like figure in Chicago in that although he made his money illegally, he portrayed himself as helping the poor. He also recruited workers in the soup kitchens. Sometimes men resorted to working for Capone, as a booze delivery man or in another capacity, because he was hiring when no one else was. Quite a few men in Chicago were willing to drive trucks across the Canadian border filled with illegal alcohol in order to earn a paycheck. The grandfather of a former colleague worked for Capone in Wisconsin driving trucks across the Canadian border during the Depression. Apparently the pay was really good for the time and this person’s relative didn’t ask any questions about what he was hauling back and forth preferring to live in ignorance and just collect a paycheck. Gangsters and criminals were glorified during the Depression and many people could relate to figures like Bonnie and Clyde. Many of the movies made during that period were gangster films. Capone’s reputation was greatly improved by his philanthropic efforts such as the soup kitchens during the Depression.
Changing Family Roles
Roles within families began to change. As men lost their jobs, they often had to rely on wives, sons and daughters to bring in income. The role of father in the family began to change and it was a very demoralizing time for many American men. Women and younger workers earned less money. So when companies had to determine layoffs, the older, more experienced, and therefore more expensive workers, were the first to lose their jobs. It was said in jest in 1931 that a man over 50 should kill himself because he had no chance of getting hired for a job. Women, especially single women suffered tremendously because they were the first to lose their jobs and did not have any additional income from a spouse.
Begin reading Chapter 6 in Belle Baranceanu: Life, Art, and the New Deal Renaissance
Relief Aid Under Hoover
I discuss relief at length in my book. When we talk about Relief during the Great Depression, we are referring to government assistance. Until 1932 the states were forced to rely on Community Chests, Rainy Day funds and private charities in order to take care of destitute people. By 1932 it was clear that all of these local agency funds were exhausted and that federal government welfare relief was necessary. Hoover appropriated money from the Reconstruction Finance Corporation to pay for Direct Relief which was equivalent to welfare today. In order to qualify for Direct Relief recipients had to submit to a means test and if it was found that they and their extended family had no income from any source, then they could qualify for Direct Relief or Work Relief. Both Hoover and FDR preferred Work Relief to the Dole system which was in place in England. One of the problems that arose was that millions of people were destitute but did not qualify for Direct Relief; and there were not enough work relief projects begun, yet, to get the economy moving and people back to work.
A lot of families migrated to other cities and states looking for work. Most migrants were not welcomed. City and state officials worked hard to ensure that migrants were not eligible immediately for financial aid. When state relief agencies began to receive some money from the federal government in late 1932, they usually had a residency requirement in place in order to ensure that the long-term residents of the state received aid first. Migrants often worked together and shared resources as they travelled from town to town. These hobo signs are a good example of how migrants shared information with each other, including safety warnings, as millions of people hit the roads and moved to warmer climates and to the West looking for work.
When migrants arrived in towns, they looked for information left there by other homeless people. During the Depression they came up with a code system to let people know where the safe and unsafe areas were in a town and how to find kind people. The homeless, mostly men, would carve these symbols into trees and fences to lead people to those who could help them. My favorite are the cats.
Emergency Relief and Construction Act
When the Emergency Relief and Construction Act, was passed in 1932, the RFC was authorized to loan as much as $300 million to the states in order to provide relief. But because Hoover had insisted that the spending for public works projects be limited to $575 million, he essentially insured that the amount of help RFC provided would not actually fix the economy. To make matters worse, loans to the states for direct relief expenses were terribly low. By the end of October 1932 the states had been loaned a total of $35 million which proved to be nowhere near adequate. Many people in government believed that Hoover needed to spend more in order to fix the problem and he refused to do so.
The Reconstruction Finance Corporation
- The Reconstruction Finance Corporation was established in 1932.
- It was a federal government agency that loaned that it was granted from the Treasury Department.
- When it began the agency was given $500 million from the Treasury Department which was then loaned out to bailout banks, and assist railroads, farmers and other small businesses and provide Direct Relief aid to the states.
- The RFC $500 million in capital had a budget of $1.5 billion for public works projects alone.
The Fall of Herbert Hoover
By 1931 his popularity had greatly declined. He was blamed for prolonging the Depression. Progressive reformers urged him to support more vigorous relief. Hoover’s greatest failing as President was his fiscally conservative response to the ongoing depression. Although his administration spent billions to fix the problem, in the end it was not enough. Hoover’s government aimed to balance the federal budget each year and he succeeded in having a surplus in 1930, however by 1932 the government was in debt an additional 6 billion dollars and federal spending had increased by 48% during Hoover’s time in office. By the time he left office about 6,000 banks had failed and the unemployment rate had reached a whopping 25% which was unheard of up until that time.
Answer the questions:
- Look at the bar graph chart. What state had the highest number of families on Relief in 1933? List the state and the number of families on Relief. Did this state surprise you? Why or why not?
- What was the population of San Diego (hint: it is highlighted in yellow since it was hard to read)? How many families were on Relief in San Diego in 1933? What percentage of the population was on Relief?
- Look at the bar graph. What percentage of the population of Florida was on Relief in 1933?
- Look at the bar graph. What percentage of the population was on Relief in Oklahoma in 1933? Did this surprise you? Why or why not?
- Do you agree or disagree with Harry Hopkins and the New Deal government’s approach to solving unemployment? Why or why not? Write your response in 1 to 2 paragraphs. It does not need to be an essay. Be sure to use your own words and do not use AI.