a.  Great Crash: in 1929 brokers’ loans amounted to $8.5 billion.   When the Stock Market collapsed, many banks and big firms went bankrupt or made cut-backs.

b.  The Fed: (the US Federal Reserve – the American ‘Bank of England’) raised interest rates – which led to a reduction in the money supply and reduced spending

c.  Tariffs: damaged trade (in 1930, the Smoot-Hawley Tariff was even heavier tariff).   Sixty countries passed retaliatory tariffs in response and world trade slumped.   This damaged US industry, especially agriculture.

d.  Maldistribution of wealth: nowadays, historians think the main cause of the depression was the inequality of wealth in America – the top 5% owned a third of the wealth, while 40 per cent of the population were living in poverty, so the money wasn’t in the hands of the people who would spend it.   Consequently, Americans produced too much and bought too little, and prices plummeted.

e.  Weaknesses in the economy: Coal, Iron and Textiles were all experiencing problems in the 1920s.   When the Depression started, they were not strong enough to cope, and collapsed quickly.

f.  Cycle of Depression: banks and companies failed = unemployment = less spending = more companies went bankrupt etc.

HOW DID THE POLICIES OF THE AMERICAN GOVERNMENT ENCOURAGE ISOLATION?

The Effects of the Great Depression

Overview

The Depression hit America very hard, and here are lots of stories of hardship.   Most Americans blamed Hoover (unfairly).   Also, remember that the Depression was not all bad; a lot of the popular view comes because the media were reporting more (e.g. movies such as It’s a Wonderful Life, and the photographs taken by ????), and not all industries or places suffered – the Depression was worst in farming, and in the old industries, and many people and ‘new’ industries such as cinema and electricals did very well during the Depression.

Facts

1.  Statistics:

●   International trade slumped from $10bn in 1929 to only $3 bn in 1932.

●   5000 banks went bankrupt 1929-1932, including the Bank of America.

●   In 1932 a quarter of a million Americans had their homes repossessed, and a fifth of all farmers lost their farms, 20,000 companies went out of business and 23,000 people committed suicide.

●   By 1933, Industrial production had fallen by 40%, Prices 50%, Wages 60% and a quarter of Americans were unemployed.

2.  Farmers: were badly hit (made worse by the ‘dust bowl’) – ‘Okies’ (from Oklahoma) and ‘Arkies’ (from Arkansas) had to abandon their farms and go fruit-picking in California.

3.  Hobos: no Welfare State – unemployed Americans picked over rubbish dumps/ begged (‘Buddy, can you spare a dime’)/ became hobos = Salvation Army soup kitchens and charity hand-outs – ‘on the breadline’.  

4.  Hoovervilles: shanty towns called ‘Hoovervilles’ (as an insult to President Hoover); there was also ‘Hoover leather’ (cardboard soles for shoes) and ‘Hoover blankets’ (newspapers).   ‘In Hoover we trusted, but now we are busted’.   Americans blamed Hoover for the Depression

5.  Bonus Army: In 1932, 20,000 unemployed ex-soldiers set up a Hooverville in Washington to ask for their war pension (‘bonus’) to be paid early; Hoover set the army on them, who drive them away with guns and tear-gas.

BUT  

6.  Not all industries or places suffered:

●   'New' industries (such as films, electronics and airplanes) continued to expand and pay high wages.

●   Many people who managed to keep their jobs were BETTER off, because prices were much lower.  

●   The Empire State Building was finished in 1931, and the San Francisco Golden Gate Bridge was started in 1932.