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The First Four Years. 1929-1933. The Stock Market. By the end of 1929, stock prices were down 50%. By 1932, stock prices had dropped another 30%. In three years, $74 billion of the nation’s wealth simply vanished. Business and Bank Failures. Industrial production fell by 50%.
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The First Four Years 1929-1933
The Stock Market • By the end of 1929, stock prices were down 50%. • By 1932, stock prices had dropped another 30%. • In three years, $74 billion of the nation’s wealth simply vanished.
Business and Bank Failures • Industrial production fell by 50%. • More than 100,000 businesses went bankrupt. • More than 2000 banks closed in 1931 alone. • American exports fell $1.5 billion between 1929 and 1933. • The GNP fell by $12 billion.
Unemployment • Unemployment reached 25% by 1932 and rarely dropped below 17% until World War II. • Nearly 14 million people lost their jobs, leaving 40 million people without income • By 1933, millions of people were on the brink of starvation Job Bureau
Herbert Hoover • Headed Commission for Relief in Belgium during World War I • Fed more than 9 million people for over 5 years • U.S. Food Administrator • Headed American Relief Administration • Secretary of Commerce under Harding and Coolidge • Elected President in 1928
Favored steeply graduated inheritance and income taxes • “…excessive fortunes are a menace to true liberty.” • Believed that society had a responsibility to care for those in need • The wealthy should bear much of the burden
Taken by Surprise • “We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us.” • Herbert Hoover, accepting Republican Party nomination, 1928
Laissez-faire • “Laissez-faire le nature” • let nature take its course • Free market economic philosophy that dominated U.S. economic thought and policy • Jean Baptiste Say: “Supply and demand will come together to create an equilibrium.” • The economy will right itself • Supply and demand levels have to adjust themselves • The worst thing the government can do is to interfere
Hoover’s Economic Views • Hoover believed in traditional laissez-faire economics • Believed the economy would self-correct • Believed that the government MUST NOT ACT • “The fundamental business of this country, that is production and distribution of commodities, is on a sound and prosperous basis.” • Herbert Hoover on October 25, 1929, the day after the first market nose dive
Hoover believed in associationism • Call like-minded people together to solve a problem • He looked to business leaders to solve the problems that a business crisis had created • Conference at Washington’s Gridiron Club • Urged businessmen to continue to invest and not to slash wages • Henry Ford promised to raise wages
Hoover predicted economic recovery by 1930 • Market upturn in December 1929 seemed positive • Business and bank failures continued • Fall 1931, U.S. Steel cut wages 10% • Other major manufacturers, including Ford, quickly followed • State and local charitable resources were quickly exhausted • No federal social security system • State systems quickly collapsed
Unpopular Politics • Hoover believed in providing people with a means to make a living, but dismissed proposals of direct relief as creators of “dependency” • Drought of 1930 • Approved a grant of $45 million to feed livestock • Rejected a proposed grant of $25 million to feed farm families
Reconstruction Finance Corporation • Made $500 million in government credit available to banks, building and loan associations, farm mortgage associations, and railroads • Within six months, added another $1.2 billion in loans to 5000 organizations • Later loaned $1.5 billion to states for public works projects
Smoot-Hawley Tariff • June 1931—raised tariffs on foreign farm products from 38% to 49% • Designed to help American farmers compete with foreign agriculture • Created a global trade war which decreased government tariff revenues • In 1931, Henry Ford closed his plant in Barcelona • Response to increased Spanish tariffs on imported car parts • Spanish tariff increase was itself a response to the Smoot-Hawley Tariff
The Revenue Act of 1932 • High unemployment led to a tax revenue shortfall • Hoover wanted to raise revenue through a sales tax • The sales tax was the highest peace time tax hike in history • Placed on manufacturers who passed it along to consumers • Resulted in lowered consumption
Hoovervilles • In urban areas, many who lost their homes constructed shantytowns they called “Hoovervilles” mocking President Hoover’s unwillingness to create government relief programs Hooverville—Central Park, NYC
Hobos • Millions of men “rode the rails,” living in hobo camps, looking for work.
African-American Experience • The Depression fell hardest on African-Americans • Almost all were pushed out of work by whites seeking jobs • Unemployment reached 50% by 1932
Bonus Expeditionary Force • 1924 World War Adjustment Act • Bonus due to World War I vets • Designed to pay difference between army pay and wages received by war industry workers • $1 per day of service with an additional 25 cents for each day overseas • Bonus due in 1945 • Veterans were allowed to borrow against a portion of the bonus
Spring 1932—veterans (some accompanied by wives and children) converged on Washington • By early June there were 20,000 • Set up a Hooverville across the Potomac in Anacosta, Virginia, called Camp Marks, another shantytown on the Mall between the Capitol building and the Washington and Lincoln monuments, and moved into empty government buildings
Assisted by D.C. Chief of Police Pelham D. Glassford • West Point graduate and the youngest general in the AEF. Had retired from the army in 1931. • Sympathized with the veterans and was concerned about public order • Encouraged them to organize as the BEF • Helped them settle on park land in Anacostia • Helped them obtain relief supplies
Sign reads “We done a good job in France. Now you do a good job in America.”
Wanted immediate payment of their bonus • House approved a bonus bill on June 15 • $2.4 billion for immediate payment of bonus funds • Senate voted it down on June 17 • Hoover convinced Congress to pay veterans’ railroad tickets home. • 5,000 left, but more came. (Estimates vary from 2,000 to 10,000.) • Raised fears of revolution.
In late July, Hoover ordered government buildings cleared. • July 28 • In the morning, D.C. police assisted by a few military personnel moved to clear the buildings. • Two veterans and two policemen were killed. • Vets remained on the Mall and in Anacostia • City commissioners panicked and asked Hoover for military reinforcements
July 28 • In the afternoon, 600-700 soldiers under Army Chief of Staff Douglas McArthur, and junior officers Dwight Eisenhower and George Patton arrived. Included at least • 200 cavalry • 300 infantry • 5 tanks
“Battle of Washington” • The military drove veterans and their families from the Mall, then moved on the Anacostia encampment. • They met no resistance, but used tear gas and set fire to the huts and shacks • An eleven-week old boy was killed and an eight-year-old boy was blinded by the tear gas.
