10 Facts About the Great Depression
The Great Depression was a severe economic depression that occurred during the 1930s, beginning in the United States. Most do not realize that the Great Depression made a global impact, although its exact timing and effects varied from country to country. Today, the Great Depression is used as an example of how far the world's economy can decline.
In this article, I'll cover some more interesting facts about the Great Depression that you may or may not know. Below are ten facts about the Great Depression.
10 Facts About the Great Depression
- The Great Depression started on Wall Street
- Herbert Hoover was president during the start of the Great Depression
- The peak of the Great Depression was during 1932 to 1933
- The Great Depression caused social upheaval and political unrest
- Trade policies made the Great Depression worse
- The Dust Bowl occurred during the Great Depression
- Crime increased during the Great Depression
- Franklin D. Roosevelt became president during the Great Depression and took immediate action to try to stabilize the country
- The Great Depression had global impacts
- World War II effectively ended the Great Depression
1. The Great Depression Started on Wall Street
The Great Depression started on Wall Street in New York City when, on September 4, 1929, stock prices began to fall. It was not until October 29, 1929, also known as "Black Tuesday," that the stock market entirely crashed, sending the global economy into a downward spiral. For the previous decade, known as the "roaring twenties," wealth rose rapidly in the American economy. However, widespread and reckless stock market investments had made stocks overpriced by 1929. When the economy slowed, people suddenly panicked and sold their shares. Millions of shares were traded in less than a week, and many of them ended up being worthless.
The crash, taking place in October, followed directly after the London Stock Exchange's crash in September, and signalled the beginning of the 12-year Great Depression which would go on to affect nearly all Western industrialized countries.
The Great Depression had devastating effects in countries that were both rich and poor. The unemployment rate in the U.S. rose to 25 percent, and in some other countries all the way up to 33 percent. International trade dropped by 50 percent.
What Started the Great Depression?
The stock market crash and, ultimately, the Great Depression were started by speculative boom by investors who believed the stock market would continue to rise for ever. A rather ambiguous term, in the realm of economics speculation is the purchase of an asset with the hope that it will become more valuable at a future date.
With American industries showing almost doubled profit gains in 1928, a rise in stock-exchange speculation led hundreds of thousands of Americans to invest heavily in the stock market. This caused the stock prices to become even more valuable, but the problem was that most Americans were investing with borrowed money. Just before the stock market crash, over $8.5 billion was out on loan, more than the entire amount of currency circulating in the United States at the time.
Soon, stock-market forecasters began to predict an inevitable crash. As a result, panic selling ensued. This caused the stock market to fall from its highest high, to its lowest low. Once the damage was beyond repair, the president of Chase National Bank said at the time:
We are reaping the natural fruit of the orgy of speculation in which millions of people have indulged. It was inevitable, because of the tremendous increase in the number of stockholders in recent years, that the number of sellers would be greater than ever when the boom ended and selling took the place of buying.
2. Herbert Hoover Was President During the Start of the Great Depression
Republican Herbert Hoover was the president of the United States at the start of the Great Depression. He had gained the presidency on a wave of optimism just six months before the crash. However, as the economic downturn became severe, Hoover's name began to be used in a derogatory fashion. The watery soup eaten by the unemployed was named "Hoover Stew," and the shantytowns constructed from cardboard and metal sheets were called "Hoovervilles."
What Were Hoovervilles Like During the Great Depression?
Hoovervilles were shanty towns built by recently displaced homeless persons during the Great Depression. These slums could be found across the country, and were populated by hundreds of thousands of people. Most of these improvised towns were situated close to free soup kitchens and on private property.
The more handy amongst the Hooverville inhabitants would build shelters out of stones, but most utilized wooden crates, cardboard, scraps of metal, or whatever material they could find. Each shanty would likely have had a small stove, bedding, and some pots and pans. People of every age and from all walks of life lived in Hoovervilles, and when not on the futile search for a job, they frequented public charities or begged for food from those who managed to keep their homes.
What Kind of Food Did People Eat During the Great Depression?
During the Great Depression, families had to economize their rations so as to make a little go a long way. One-dish suppers, church potlucks, and soup from free kitchens were common meals for Great Depression-era folk. On the radio and in magazines, "home economists" would give homemakers advice on how to stretch their food budget with casseroles and meals like creamed chipped beef on toast or waffles. Other dishes included:
- Macaroni and cheese
- Creamed chicken on biscuits
In short, whatever foods were cheapest and could be stretched a long way were those which people would eat during the Great Depression. And if they were not buying food or receiving it out of charity, many people hunted or caught their food.
3. The Peak of the Great Depression Was Between 1932 and 1933
The Great Depression peaked between 1932 and 1933. There were bank runs in the spring and fall of 1931, and in the fall of 1932. By the start of 1933, thousands of banks had closed, despite attempts by President Hoover to prop up the ailing banks. 70,000 factories were closed by 1933, and the number of unemployed workers reached 12 million, which, at the time, made up 25 percent of the population.
What Is a Bank Run?
A bank run, or a run on the bank, happens when a large number of people withdraw their money from their bank because they believe the bank may close or become insolvent in the near future. During the Great Depression, bank runs caused many banks to collapse. Much of the Great Depression's economic damage in the United States was caused by bank runs.
4. The Great Depression Caused Social Upheaval and Political Unrest
The Great Depression caused social upheaval and political unrest across the world. The U.S. saw a number of hunger marches by poverty-stricken WWI veterans in Washington D.C. Perhaps the most famous of these was the "Bonus Army" march in 1932, where protesters set up a Hooverville opposite the federal heart of the capital on the bank of the Anacostia River. The protesters were eventually violently dispersed and their tents were burnt down.
What Was the Bonus Army?
The Bonus Army were a group of 43,000 marchers. These were made up of at least 17,000 World War I veterans, their families, and affiliated groups. Led by the former sergeant Walter W. Waters, the group of veteran protesters gathered in Washington D.C. to demand cash payment for their redeemable service certificates. Many of the veterans demonstrating had been out of work since the beginning of the Great Depression. To hold them over, they were issued bonuses in the form of certificates they could not redeem until 1945. The demand of the marchers was immediate cash payment.
Eventually, President Hoover ordered the army to clear the protestors from government property. Through use of force, the protestors were removed and their belongings burned.
The veterans were finally paid in 1936, six years early.
5. Trade Policies Made the Great Depression Worse
There is a general agreement among economists that although the stock market crash was the trigger, the subsequent depression was mainly caused by the adoption of trade protectionist policies, and spread to some degree by the gold standard.
The Smoot-Hawley Tariff, for instance, was signed into law on June 17, 1930. The effect of the law was to raise U.S. tariffs on over 20,000 imported goods to the highest levels in U.S. history. However, the new law seriously backfired, as European countries retaliated by not buying American goods, contributing further to the economic crisis.
What Was the Gold Standard?
A gold standard is a monetary system that bases the value of currency on gold. In this system, a standard economic unit of account (such as a dollar) is equivalent to a fixed quantity of gold.
The gold standard was introduced in the U.S. during the 1920s, while the world was engaged in World War I. Many economist blame the gold standard for prolonging the Great Depression, since the Federal Reserve was unable to expand the money supply to stimulate the economy, fund insolvent banks, or fund government deficits.
6. The Dust Bowl Occurred During the Great Depression
Farmers living in the American and Canadian prairies were already struggling in the 1920s, but things got much worse in the 1930s, thanks to the Dust Bowl, a period of severe dust storms and ecological disaster. The phenomenon was caused by severe drought and failure to apply dryland farming methods to prevent wind erosion.
This was further exasperated by the Great Depression. The plight of the farmers was immortalized in print by the writer John Steinbeck, and in song by the folk singer Woody Guthrie.
A large drop of sun lingered on the horizon and then dripped over and was gone, and the sky was brilliant over the spot where it had gone, and a torn cloud, like a bloody rag, hung over the spot of its going. And dusk crept over the sky from the eastern horizon, and darkness crept over the land from the east.— John Steinbeck, The Grapes of Wrath
7. Crime Increased During the Great Depression
The combination of economic hardship and, up until 1933, prohibition led to a crime boom in the United States. Crime became a way of life for many, as it was almost impossible to find employment and there was no effective welfare system. Citizens resorted to building temporary homes on private property, stealing, smuggling, fighting, and other illegal activities that either helped them inch ahead economically, or allowed them to vent their frustrations.
There'd never been a more advantageous time to be a criminal in America than during the 13 years of Prohibition. At a stroke, the American government closed down the fifth largest industry in the United States - alcohol production - and just handed it to criminals - a pretty remarkable thing to do.— Bill Bryson
8. Franklin D. Roosevelt Became President During the Great Depression
In 1932, Democrat Franklin D. Roosevelt was elected president and immediately took action with his "New Deal" plan to try and stabilize industrial and agricultural production, create jobs, and stimulate the economy. He also introduced legislation to regulate the stock market and prevent another crash. Large scale public work and infrastructure projects were set in place, such as the building of dams and hydroelectric projects to control flooding and provide electric power. He also put into place programs that would help farmers who were struggling as a result of both the Great Depression and the Dust Bowl.
9. The Great Depression Had Global Impacts
Although the Great Depression began in the United States, many countries around the world were affected by the subsequent economic decline. These included Australia, Canada, Chile, Greece, New Zealand, South Africa, and the United Kingdom. Germany and Italy were hit especially hard. In Germany, the economic chaos caused social and political breakdown and played a part in bringing Hitler's Nazi Socialist Party to power.
10. World War II Effectively Ended the Great Depression
Historians generally agree that the Great Depression effectively ended with the advent of World War II, as rearmament policies and the mobilization of manpower cut unemployment. After the US entered the war in 1941, for instance, the unemployment rate quickly fell below 10 percent.
If you had asked people in 1929, 'Here is what is about to happen. How much would you pay to avoid the Great Depression from occurring?' The answer is they would have paid a lot. They would have borrowed money if it could be used to prevent the Great Depression.— Austan Goolsbee
Crash Course on the Great Depression (Video)
A Brief Timeline of the Depression
- 1929: Unemployment levels are very low, averaging 3.2% for the year.
- October 1929: The Wall Street Crash happens and the stock market is thrown into a panic, as a series of sharp falls affect the value of shares.
- 1930 Unemployment reaches 8.9%, and in June the Smoot-Hawley Tariff is introduced, increasing costs for US imports and plunging Europe into economic crisis.
- 1931 Unemployment in the US reaches 16.3%. 1931: Major bank collapse deepens the crisis. 1932: Unemployment reaches 24.1%.
- November 1931 Roosevelt is elected. The new president introduces new policies intended to counter the depression and unemployment.
- 1933 Unemployment levels peak before beginning to gradually fall.
- 1936 Roosevelt is reelected.
- December 1941: US enters WWII, and the subsequent mobilization enables the American economy to escape the Great Depression for good.
© 2017 Paul Goodman