7 Great Depression

Dorothea Lange's Migrant Mother
Dorothea Lange’s photograph, “Migrant Mother”, depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.
  1. Origins

The excitement of the stock market and its possibility of speculative fortunes permeated popular culture in the 1920s. A Hollywood musical, High Society Blues, captured the hope of instant prosperity of the decade. Ironically, it didn’t hit theaters until after the market crash. “I’m in the Market for You,” a popular musical number from the film, even used the stock market as a metaphor for love: You’re going up, up, up in my estimation / I want a thousand shares of your caresses, too / We’ll count the hugs and kisses / When dividends are due / ’Cause I’m in the market for you. But just as the song was being recorded in 1929, the stock market reached the apex of its climb, crashed, and brought an abrupt end to the seeming prosperity of the Roaring Twenties. The Great Depression had arrived.

 

Crowd gathering at the intersection of Wall Street and Broad Street after the 1929 crash. The Building across the street from the stock exchange is the J.P. Morgan bank.

The exact causes of the Stock Market Crash that began the Great Depression is still being debated by economists and historians, but it is probably fair to say that a huge speculative bubble had formed during the Roaring Twenties. Although most Americans had little savings and only 2.5 percent invested in stocks, those who did often borrowed to do so. Most stock purchases were made on “margin”, which allowed shares to be bought with money borrowed from brokers. Often, margin accounts enabled buyers to borrow 90% to 95% of the money needed to complete a transaction. That meant a speculator could buy $1,000 in shares for $50 or $100. This was a great deal if the value of the shares rose quickly. If a trader could make a 10% gain on $1,000 in shares (or $100) that had only cost her $50 and a couple of dollars in interest on the loan, she would be way ahead. And share prices seemed to be rising steadily. One reason for this, of course, was all the demand generated by margin buying, which also meant that everybody was able to buy ten to twenty times more shares than they could actually afford.

The problem with margin buying was that share prices were not guaranteed to rise forever. Just as the potential to profit was leveraged, so was the potential to lose money. A ten percent downward move in the price of the stock would mean the speculator lost $100 on that same investment of $50. By the rules of most brokers, the trader would receive a “margin call” once she had lost more than she had actually invested, asking her to pay the money borrowed if she wanted to hold onto the shares. Most speculators did not want to (or weren’t able to) cover these calls, so the stocks would be sold to prevent further losses. An avalanche of selling to cover margin positions once the market turned, drove the stock prices down even more rapidly. The bubble that had been inflated by margin speculation burst in the fall of 1929.

On Thursday, October 24, stock market prices suddenly plummeted. Ten billion dollars in investments (equivalent to about $100 billion today) disappeared in a matter of hours. Panicked selling set in as thousands of positions were closed to cover margins, stock values sank to sudden lows, and stunned investors crowded the New York Stock Exchange demanding answers. The Dow Jones Industrial Average began Thursday at 305, but was dropping fast on volume three times greater than normal. New York’s leading bankers met at the Wall Street offices of J. P. Morgan and raised millions in personal and institutional funds to halt the slide. They marched across the street and ceremoniously bought big blocks of stocks to shore up prices. The market stabilized and closed at 299. On Friday the Dow rose above the price it had opened on Thursday. But fears spread over the weekend and the following Monday frightened investors dumped their portfolios to avoid further losses, dropping the Dow to 260. On October 29, Black Tuesday, the stock market began its long precipitous fall. Stock values evaporated and the Dow dropped to 230. It kept dropping for the next three years, finally reaching a bottom at 41. The stock market lost 90% of its value, and would not reach the level it had seen in September 1929 for another twenty-five years. Shares of U.S. Steel dropped from $262 to $22. General Motors stock fell from $73 a share to $8. Four fifths of J. D. Rockefeller’s fortune—the greatest in American history—vanished.

 

DJIA, 1929-1932
Dow Jones Industrial Average, Price Index on Wall Street from just before the crash in 1929 to 1932 when the price bottomed out.

Although the crash stunned the nation, it exposed deeper, underlying problems with the American economy in the 1920s. The stock market’s popularity had grown throughout the decade, but the overwhelming majority of Americans had no personal stake in Wall Street. The stock market’s collapse, no matter how dramatic, did not by itself destroy the American economy. Instead, the crash exposed factors such as rising inequality, declining demand, rural collapse, overextended investors, and bursting speculative bubbles that all combined to plunge the nation into the Great Depression. Despite resistance from Populists and Progressives, the gap between rich and poor widened throughout the early twentieth century. But not everyone agreed on the meaning of these economic changes. In the aggregate, Americans were better off in 1929 than in 1919 and the economy (GDP) had grown. Per capita income had risen 10% for all Americans, but 75% for the nation’s wealthiest citizens. The return of conservative politics in the 1920s reinforced federal policies that exacerbated the divide: high import tariffs, low corporate and personal taxes, easy credit and low interest rates overwhelmingly favored wealthy investors who spent their money on luxury goods and speculative investments in the rapidly rising stock market.

The pro-business policies of the 1920s were designed for an American economy built on the production of durable goods, that had shifted into the overdrive of wartime production from 1914 to 1919. In the 1920s, industry was unable to keep producing at that pace. The boom of automobile manufacturing, the great driver of the American economy in the 1920s, slowed as the market became saturated and fewer Americans with the means to purchase a car had not already done so. Manufacturers scaled back production and companies fired workers, stripping potential consumers of cash, blunting demand for consumer goods, and strengthening the downward economic pressure. The situation was only compounded by increased automation and rising efficiency in American factories. Despite impressive overall growth throughout the 1920s, unemployment hovered around 7 percent throughout the decade, suppressing purchasing power for large numbers of potential consumers.

 

Soup kitchen
Unemployed men queued outside a depression soup kitchen opened in Chicago by Al Capone. February 1931.

For American farmers, meanwhile, hard times began long before the markets crashed. The war years had been good for farmers, who had seen their incomes and profits rise while Europeans ate food shipped from America. Farmers increased production, and many new farmers entered the market and plowed new fields, often on marginal land, as we will discuss below. In the early 1920s, wartime demand disappeared and farm prices in the South and West began a long decline as both domestic and international demand for cotton, foodstuffs, and other agricultural products stalled. Widespread soil exhaustion on western farms only compounded the problem. Farmers found themselves unable to make payments on loans taken out during the good years, and banks in agricultural areas tightened credit in response. By 1929, farm families were overextended, in a precarious economic position even before the Depression wrecked the global economy.

2. Hoover and the Politics of the Depression

Despite serious problems in the industrial and agricultural economy, most Americans in 1929 and 1930 believed the economy would bounce back quickly. President Herbert Hoover reassured an audience in 1930 that “the depression is over.” But the president was not simply guilty of false optimism. Hoover made many mistakes. During his 1928 election campaign, Hoover had promoted higher tariffs to encourage consumption of U.S.-produced products and to protect American farmers from foreign competition. Spurred by the ongoing agricultural depression, Hoover signed the highest tariff in American history, the Smoot-Hawley Tariff of 1930, just as global markets began to crumble. Other countries retaliated, tariff walls rose across the globe, and between 1929 and 1932, international trade dropped from $36 billion to only $12 billion. American exports fell by 78%. More economic policies backfired. The Federal Reserve overcorrected in their response to speculation by raising interest rates and tightening credit. Across the country, banks denied loans and called in debts. Their patrons, afraid that reactionary policies meant further financial trouble, rushed to withdraw money before institutions could close their doors, ensuring their fate. Such bank runs were not uncommon in the 1920s, but in 1930, with the economy worsening and panic from the crash accelerating, 1,352 banks failed. In 1932, nearly 2,300 banks collapsed, taking personal deposits, savings, and credit with them.

 

Run on the American Union Bank
Run on the American Union Bank, New York City. April 26, 1932.

The Great Depression was the confluence of problems which had begun during a time of unprecedented economic growth. Fiscal policies of the Republican “business presidents” widened the gap between rich and poor and fostered a standoff over international trade, but such policies were widely popular and, for much of the decade, widely seen as a source of the decade’s explosive growth. With fortunes to be won and standards of living to maintain, few Americans had the foresight to repudiate an age of easy credit, rampant consumerism, and wild speculation. Instead, as the Depression worked its way across the United States, Americans hoped to weather the economic storm as best they could, waiting for some form of relief, any answer to the ever-mounting economic collapse that strangled so many Americans’ lives.

As the Depression spread, public blame settled on President Herbert Hoover and the  the Republican Party. Hoover had taken credit for economic prosperity; now he was blamed for collapse. In 1928 Hoover had believed his presidency would be no different from that of his predecessor, Calvin Coolidge, whose time in office was marked by relative government inaction, seemingly rampant prosperity, and high approval ratings. Hoover epitomized the “self-made man.” Orphaned at age nine, he  graduated from Stanford University in 1895 and worked as an engineer for multinational mining companies. He became a household name during World War I when he oversaw voluntary rationing as the head of the U.S. Food Administration and, after the armistice, served as the director-general of the American Relief Association in Europe. Hoover’s reputation for humanitarian service and problem solving made him one of the few politicians whose career benefited from wartime public service. After the war both the Democratic and Republican parties tried to draft him to run for president in 1920.

 

Herbert Hoover, 1928
Herbert Hoover in 1928

Hoover had declined to run in 1920 and 1924. He served instead as secretary of commerce under both Harding and Coolidge, taking an active role in all aspects of government. In 1928, he seemed the natural successor to Coolidge. Politically, aside from the issue of Prohibition (he was a “dry,” Democrat Al Smith a “wet”), Hoover’s platform differed very little from Smith’s, leaving little to discuss during the campaign except personality and religion. Both benefited Hoover. Smith’s popularity among urban ethnic voters counted for little. Several southern states, in part owing to the work of itinerant evangelical politicking, voted Republican for the first time since Reconstruction. Hoover won in a landslide, taking nearly 60 percent of the popular vote.  Although Hoover is remembered as a “business president” and is given a big share of the blame for exacerbating (if not causing) the Depression, some historians point out he also embraced a system of voluntary action called associationalism that assumed Americans could maintain a web of voluntary cooperative organizations dedicated to providing economic assistance and services to those in need. Businesses, Hoover believed, would willingly limit harmful practices for the greater economic good. To Hoover, direct government aid would discourage a healthy work ethic while associationalism would encourage the self-control and initiative that fueled economic growth. When the Depression exposed the incapacity Hoover’s associationalist strategies to produce an economic recovery, he was not flexible enough to recognize the limits of his ideology. And when the ideology failed, so too did his presidency.

Hoover entered office on a wave of popular support, but by the end of 1929 the economic collapse had overwhelmed his presidency. Hoover and his advisors assumed, and then desperately hoped, that the sharp economic decline was a temporary downturn, just a part of the inevitable boom-bust cycles that stretched back through America’s commercial history. Many economists argued that periodic busts culled weak firms and paved the way for future growth. But when suffering Americans looked to Hoover for help, Hoover could only answer with volunteerism. He asked business leaders to avoid laying off workers and encouraged state and local charities to assist those in need. Hoover established the President’s Organization for Unemployment Relief, or POUR, to help private agencies. While POUR urged charitable giving, relief organizations were overwhelmed by the growing needs of unemployed, underfed, and unhoused Americans. By mid-1932 a quarter of all of New York’s private charities had closed after running out of money. In Atlanta, relief charities could only provide $1.30 per week to needy families. The size and scope of the Depression overpowered the capacity of private volunteerism organizations to fix the crisis. By 1932, with the economy long stagnant and a reelection campaign looming, Hoover grew desperate. Hoping to stimulate American industry, he created the Reconstruction Finance Corporation (RFC) to provide emergency loans to banks, building-and-loan societies, railroads, and other private industries. RFC was radical in its use of direct government aid and out of character for the normally laissez-faire Hoover, but it also bypassed needy Americans to bolster industrial and financial interests. New York congressman Fiorello LaGuardia captured public sentiment when he denounced the RFC as a “millionaire’s dole.”

3. The Bonus Army

Bonus Army
Members of the Bonus Army camped out on the lawn of the U.S. Capitol building, 1932.

Hoover’s reaction to another public protest sealed his legacy. In the summer of 1932, Congress began debating a bill to immediately pay long-promised cash bonuses to veterans of World War I. The bonuses had been originally scheduled to be paid in 1945, but given the economic hardships facing the country, the veterans had asked for an early payment. The bonus came to symbolize government relief for people Americans considered the most deserving recipients, and from across the country more than fifteen thousand unemployed veterans and their families converged on Washington, D.C. They erected a tent city across the Potomac River in Anacostia Flats, like the “Hooverville” camps of homeless and unemployed Americans appearing in many American cities. Concerned with the impact immediate payment would have on the federal budget, Hoover opposed the bill and it was defeated in the Republican-controlled Senate. While most of the “Bonus Army” left Washington after the bill’s defeat, many stayed in protest. They were unemployed and homeless, but Hoover called the remaining veterans “insurrectionists” and ordered them to leave. When thousands failed to heed Hoover’s order, he sent General Douglas MacArthur. Accompanied by local police, the U.S. Army infantry, cavalry, tanks, and a machine gun squadron burned the tent city and routed the Bonus Army. National media covered the disaster as troops attacked veterans, chased down men and women, tear-gassed children, and torched the shantytown. Several veterans were killed in the attack.

During the Bonus crisis, a war hero named Smedley Butler visited the camp. Major General Butler was the most decorated Marine in U.S. history, and had even won the Medal of Honor twice. He had fought in the Spanish-American War, the Philippine War, the Boxer Rebellion, and a number of “banana wars” in Central America, and had finally come to the conclusion that most of those military actions had been taken for the benefit of corporations. Butler published his thoughts in a book called War is a Racket in 1935. At the Bonus camp Butler warned the veterans not to do anything that would cost them public sympathy, but he told the men they had just as much right to lobby Congress as any corporation. Hoover’s insensitivity toward suffering Americans, his unwillingness to address widespread economic problems, and his repeated platitudes about returning prosperity condemned his presidency. Hoover was not personally responsible for the Depression, just as he had not been responsible for the previous prosperity. But neither he nor his advisors understood the enormity of a crisis his conservative ideology could neither accommodate nor address. As a result, Americans found little relief from Washington until the election of 1932.

 

Bonus army evicted
Shacks that members of the Bonus Army erected on the Anacostia Flats burning after its confrontation with the army, 1932.

As the United States slid ever deeper into the Great Depression, individuals, families, and communities faced the painful, frightening, and often bewildering collapse of the economic institutions on which they depended. The more fortunate were spared the worst effects, and a few even profited from it, but by the end of 1932 the crisis had become so deep and so widespread that most Americans had suffered directly. With rampant unemployment and declining wages, Americans slashed expenses. The fortunate could survive by simply deferring vacations and regular consumer purchases. Middle- and working-class Americans might rely on credit at neighborhood stores, default on utility bills, or skip meals. Those who could borrowed from relatives or took in boarders in their homes. Many poor families “doubled up” in tenements. The most desperate encamped on public lands in “Hoovervilles,” spontaneous shantytowns that dotted America’s cities, depending on bread lines and street-corner peddling. Poor women and young children tried to enter the labor force, as they always had. The ideal of the “male breadwinner” was always a fiction for poor Americans, but the Depression eliminated jobs for millions of new workers. The emotional and psychological shocks of unemployment only added to the material difficulties of the Depression. Social workers and charity officials, for instance, often found the unemployed suffering from feelings of futility, anger, bitterness, confusion, and loss of pride. Such feelings affected the rural poor no less than the urban.

 

Seattle Hooverville
Another Hooverville in Seattle, Washington, located on Port of Seattle tidal flats, 1935.

4. The Dust Bowl

Dust storm
A farmer and his two sons during a dust storm in Cimarron County, Oklahoma, April 1936.

On the Great Plains, environmental catastrophe deepened America’s longstanding agricultural crisis and magnified the tragedy of the Depression. The end of the World War reduced demand for American farm products as European farmers gradually got back to work. This was a blow to the American farmers who had expanded production, often onto marginal lands in the Southwest typically used as rangeland for cattle. Then, beginning in 1932, severe droughts hit these newly-opened farmlands from Texas to the Dakotas and compounded years of agricultural mismanagement. To grow additional crops, Plains farmers had plowed up deep-rooted prairie grasses that covered the surface of the dry Plains states. Relatively wet conditions in the first decades of the twentieth century had protected them; and farmers and agricultural boosters had convinced themselves that “Rain followed the plow.” But plowing high-prairie rangeland did not bring rain and shallow-rooted annual grain crops were unable to reach deep for water as the prairie grasses had. In the early 1930s, without rain, the exposed fertile topsoil turned to dust, Without sod or windbreaks such as trees, winds churned the dust into massive storms that blotted out the sky, choked settlers and livestock, and rained dirt not only across the region but as far east as Washington, D.C., New England, and ships on the Atlantic Ocean. For example, In a single storm, beginning on November 11, 1933, topsoil from Oklahoma was blown all the way to Chicago, where over 12 million pounds of it fell on the city like snow. On Black Sunday, April 14, 1935, dust storms were reported from the Canadian border to Texas. Newspaper reporters throughout the affected area wrote that they could not see five feet through the blowing dust. The agricultural disaster that became known as the Dust Bowl caused an exodus from the high plains region that should never have been put under the plow. But the disaster was not just just agricultural. Of 116,000 refugee families surveyed on their way into California, only four out of ten were farm families. A full third of the heads of families who fled Oklahoma, Kansas, Nebraska, and Texas were white collar professionals. When the farms blew away the whole region was wiped out. For many in Texas, Oklahoma, Kansas, and Arkansas who were “baked out, blown out, and broke,” their only hope was California, whose rains still brought bountiful harvests and potential jobs for farmworkers. Oklahoma lost 440,000 people, or a full 18.4 percent of its 1930 population, to outmigration.

 

Buried farm machinery
Buried farm machinery in a barn lot. Dallas, South Dakota, May 1936.

The Okies, as the refugees were disparagingly called by their new neighbors, were the most visible group who were on the move during the Depression, lured by rumors of jobs in far-flung regions of the country. By 1932, sociologists were estimating that millions of men were on the roads and rails traveling the country. Popular magazines and newspapers were filled with stories of homeless boys and the veterans-turned-hoboes of the Bonus Army commandeering boxcars. Popular culture, such as William Wellman’s 1933 film, Wild Boys of the Road, and, most famously, John Steinbeck’s The Grapes of Wrath, published in 1939, captured the Depression’s dislocated populations. The 1930s witnessed the first significant reversal in the flow of people between rural and urban areas. Thousands of people fled the jobless cities and moved to the country looking for work. As relief efforts floundered, many state and local officials tried to prevent migration, making it difficult for newcomers to receive relief or find work. Some state legislatures made it a crime to bring poor migrants into the state and allowed local officials to deport migrants to neighboring states. In the winter of 1935–1936, California, Florida, and Colorado established “border blockades” to block poor migrants from entering their states and competing with local residents for jobs. A billboard outside Tulsa, Oklahoma, informed potential migrants that there were “NO JOBS in California” and warned them to “KEEP Out.”

 

"Broke, baby sick, and car trouble!"
“Broke, baby sick, and car trouble!” Dorothea Lange photo of a Missouri migrant family’s jalopy stuck near Tracy, California, 1937.

Sympathy for migrants, however, accelerated late in the Depression with the publication of John Steinbeck’s The Grapes of Wrath. The Joad family’s struggles drew attention to the plight of Depression-era migrants and, just a month after the nationwide release of the film version starring Henry Fonda in 1940, Congress created the Select Committee to Investigate the Interstate Migration of Destitute Citizens. Starting in 1940, the committee held widely publicized hearings. Americans meanwhile feared foreign workers willing to work for even lower wages. The Saturday Evening Post warned that foreign immigrants, who were “compelled to accept employment on any terms and conditions offered,” would exacerbate the economic crisis. In September 1930, the Hoover administration had instructed consular officers to scrutinize carefully the visa applications of those “likely to become public charges” and suggested that this might include denying visas to most, if not all, foreign workers and artisans. The crisis had already stifled foreign immigration, but such restrictive and exclusionary actions in the first years of the Depression intensified its effects. The number of European visas issued fell roughly 60 percent while deportations dramatically increased. Between 1930 and 1932, fifty-four thousand people were deported. An additional forty-four thousand deportable aliens left “voluntarily.”Exclusionary measures hit Mexican immigrants particularly hard. The State Department began working to reduce immigration from Mexico as early as 1929, and government officials in the Southwest led a coordinated effort to push out Mexican immigrants. In Los Angeles, the Citizens Committee on Coordination of Unemployment Relief began working closely with federal officials in early 1931 to conduct deportation raids, while the Los Angeles County Department of Charities began a simultaneous drive to repatriate Mexicans and Mexican Americans on relief, negotiating a charity rate with the railroads to return Mexicans “voluntarily” to their mother country. According to the federal census, from 1930 to 1940 the Mexican-born population living in Arizona, California, New Mexico, and Texas fell from 616,998 to 377,433. Franklin Roosevelt did not indulge anti-immigrant sentiment as willingly as Hoover had, and under the New Deal, the Immigration and Naturalization Service halted some of the Hoover administration’s most divisive practices. But with jobs suddenly scarce, hostile attitudes intensified, and official policies less than welcoming, immigration plummeted and deportations rose. Over the course of the Depression, more people left the United States than entered it.

5. Franklin Delano Roosevelt and the “First” New Deal

Hoover and FDR
Outgoing president Herbert Hoover and Franklin D. Roosevelt on Inauguration Day, 1933.

Under Herbert Hoover, the early years of the Depression were catastrophic. The crisis deepened each year. Unemployment peaked at 25 percent in 1932. With no end in sight, and with private firms crippled and charities overwhelmed by the crisis, Americans looked to their government as the last barrier against starvation, hopelessness, and perpetual poverty. Few presidential elections in modern American history have been more consequential than that of 1932. Exasperated voters overthrew Hoover in a landslide to elect the Democratic governor of New York, Franklin Delano Roosevelt. FDR was born into a very large and wealthy family in New York’s Hudson River Valley. His cousin, Theodore Roosevelt, was president while Franklin was at Harvard. Franklin married his fifth cousin, Eleanor Roosevelt, in 1905 and began a slow but steady ascent through state and national politics. In 1913, he was appointed assistant secretary of the navy, a position he held during World War I. In the midst of this political rise, in the summer of 1921, Roosevelt suffered a sudden bout of lower-body pain and paralysis. He was diagnosed with polio, a virus that affected millions throughout the world until a vaccine was developed in the 1950s. The disease left him a paraplegic, but, encouraged and assisted by Eleanor, Roosevelt received treatment and maintained sufficient political connections to reenter politics. In 1928, Roosevelt won election as governor of New York. He responded to the growing Depression and drew ideas from progressivism to address the economic crisis. As governor, Roosevelt introduced the first comprehensive unemployment relief program and helped pioneer efforts to expand public utilities. He also relied on like-minded advisors. For example, Frances Perkins, then commissioner of New York’s labor department, pioneered legislation that enhanced workplace safety and reduced the use of child labor in factories. Perkins later accompanied Roosevelt to Washington and served as the nation’s first female secretary of labor.

When he was nominated as the Democratic Party’s presidential candidate in July 1932, Roosevelt promised, “I pledge you, I pledge myself, to a new deal for the American people.” Newspaper editors seized on the phrase “new deal,” and it became  shorthand for Roosevelt’s program to address the Great Depression. Roosevelt crushed Hoover, winning more counties than any previous candidate in American history. He spent the months between his election and inauguration traveling, planning, and assembling a team of advisors which became famous as Roosevelt’s “Brain Trust” of academics and experts, to help him formulate a plan of attack. On March 4, 1933, in his first inaugural address, Roosevelt declared, “This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Roosevelt’s reassuring words would have rung hollow if he had not taken swift action against the economic crisis. In his first days in office, Roosevelt and his advisors prepared, submitted, and secured passage of laws designed to halt the worst effects of the Great Depression. His administration threw the federal government headlong into the fight against the Depression.

 

Fireside Chat
President Franklin D. Roosevelt broadcast his First Fireside Chat regarding the banking crisis from the White House, on March 12, 1933, eight days after taking office.

Roosevelt immediately stabilized the collapsing banking system. Too many banks were being wiped out by “runs” when panicked customers demanded their deposits in cash. He declared a national “bank holiday” closing American banks and set to work pushing the Emergency Banking Act swiftly through Congress. On March 12, the night before select banks began reopening under stricter federal guidelines, Roosevelt spoke to Americans on the radio in the first of his Fireside Chats. The addresses, which the president continued delivering through four terms, were informal, even personal. Roosevelt used his airtime to explain New Deal legislation, to encourage confidence in government action, and to mobilize the American people’s support. In the first chat, Roosevelt described the new banking safeguards and asked the public to place their trust and their savings in banks. Americans responded and across the country, deposits outpaced withdrawals. The act was a major success. In June, Congress passed the Glass-Steagall Banking Act, which instituted federal deposit insurance and barred the mixing of commercial and investment banking.

 

National Recovery Administration Blue Eagle
National Recovery Administration Blue Eagle

Stabilizing the banks was only a first step. In his First Hundred Days, Roosevelt and his congressional allies focused on relief for suffering Americans. Congress debated, amended, and passed what Roosevelt proposed. As one historian noted, the president “directed the entire operation like a seasoned field general.” Despite questions over the constitutionality of Roosevelt’s New Deal legislation, Americans and their representatives conceded that the crisis demanded swift and immediate action. The Civilian Conservation Corps (CCC) employed young men on conservation and reforestation projects; the Federal Emergency Relief Administration (FERA) provided direct cash assistance to state relief agencies struggling to care for the unemployed; the Tennessee Valley Authority (TVA) built a series of hydroelectric dams along the Tennessee River as part of a comprehensive program to economically develop a chronically depressed region; and several agencies helped home and farm owners refinance their mortgages. The heart of Roosevelt’s early recovery program consisted of two massive efforts to stabilize and coordinate the American economy: the Agricultural Adjustment Administration (AAA) and the National Recovery Administration (NRA). The AAA, created in May 1933, aimed to raise the prices of agricultural commodities and boost farmers’ income by offering cash incentives to voluntarily limit farm production; decreasing supply, raising prices. The National Industrial Recovery Act (NIRA), which created the NRA in June 1933, suspended antitrust laws to allow businesses to establish “codes” that would coordinate prices, regulate production levels, and establish conditions of employment to curtail “cutthroat competition.” In exchange for these exemptions, businesses agreed to provide reasonable wages and hours, end child labor, and allow workers the right to unionize. Participating businesses earned the right to display a placard with the NRA’s Blue Eagle, showing their cooperation in the effort to combat the Great Depression.

The programs of the First Hundred Days stabilized the American economy and GDP began climbing once more. But even as output increased, unemployment remained stubbornly high. Though the unemployment rate dipped from its high in 1933, vast numbers remained out of work. If the private economy could not put people back to work, Roosevelt decided, the New Deal would try. The Civil Works Administration (CWA) and, later, the Works Progress Administration (WPA) put unemployed men and women to work on infrastructure projects designed and proposed by local governments. The Public Works Administration (PWA) provided grants-in-aid to local governments for large projects such as bridges, tunnels, schoolhouses, libraries, and America’s first federal public housing projects. Together, they provided not only tangible projects of immense public good but employment for millions. The New Deal was reshaping much of the nation.

6. The New Deal in the South

The impact of initial New Deal legislation was quickly apparent in the South, a region of perpetual poverty especially plagued by the Depression. In 1929 the average per capita income in Southeastern states was $365, the lowest in the nation. Southern farmers averaged $183 per year at a time when farmers on the West Coast made more than four times that. Worse, they were producing cotton and corn, crops that depleted the soil and returned ever-diminishing profits. And the little industry the South had remained low-wage, low-skilled, and primarily extractive. Southern workers made significantly less than their national counterparts: 75 percent of non-southern textile workers, 60 percent of iron and steel workers, and a paltry 45 percent of lumber workers. At the time of the stock market crash, southerners were already underpaid, underfed, and undereducated.

 

family living in a shanty
A Southern American family living in a shanty, 1936.

Several major New Deal programs were designed with the South in mind. FDR hoped that by decreasing the amount of land devoted to cotton, the Agricultural Adjustment Act would arrest its long price decline. Farmers plowed up their cotton and left fields fallow, and the market price did rise. But in an agricultural world of landowners and landless farmworkers (tenants and sharecroppers), the benefits of the AAA went to the landowners and bypassed the southerners who needed them most. The government expected landowners and local organizations to distribute money fairly to those most affected by production limits, but many owners simply kicked tenants and croppers off their land, kept the subsidy checks for keeping those acres fallow, and reinvested the profits in mechanical farming equipment that further reduced the demand for labor. Instead of making farming profitable again, the AAA pushed landless southern farmworkers off the land. Many of these tenants and sharecroppers found jobs in Southern industry where the NRA encouraged higher wages and better conditions. It began to suppress the rampant use of child labor in southern mills and, for the first time, provided federal protection for unionized workers all across the country. Those gains were eventually solidified in the 1938 Fair Labor Standards Act, which set a national minimum wage of $0.25/hour (eventually rising to $0.40/hour). The minimum wage disproportionately affected low-paid southern workers and brought southern wages within the reach of northern wages.

The president’s support for unions had a very large impact in the South. Southern industrialists had been ardent foes of unionization, particularly in textile mills. In 1934, when workers at textile mills across the southern Piedmont struck for higher wages and shorter hours, owners turned to local and state authorities to attack workers’ groups and recruited thousands of strikebreakers from the displaced farmers swelling industrial centers looking for work. But in 1935 the National Labor Relations Act, also known as the Wagner Act, guaranteed the rights of most workers to unionize and bargain collectively. Southern workers, backed by the federal government and determined to enforce the reforms of the New Deal, pushed for higher wages, shorter hours, and better conditions. With growing success, union members came to see Roosevelt as a protector of workers’ rights. Or, as one union leader put it, an “agent of God.”

 

TVA
Pumping water by hand from sole water supply in Wilder, Tennessee before the TVA.

Perhaps the most successful New Deal program in the South was the TVA, an ambitious program to use hydroelectric power, agricultural and industrial reform, flood control, economic development, education, and healthcare to radically remake the impoverished region of the Tennessee River Valley. Roosevelt’s TVA sought to “make a different type of citizen” out of the area’s penniless residents. The TVA built a series of hydroelectric dams to control flooding and distribute electricity to remote rural areas at government-subsidized rates. Agents of the TVA met with residents and offered training to improve agricultural practices and exploit new job opportunities. The TVA encapsulated Roosevelt’s vision for uplifting the South and integrating it into the larger national economy.

Roosevelt had initially needed to court conservative southern Democrats to ensure the legislative success of the New Deal, which meant that the racial and economic inequalities of the region remained intact. By the end of his second term, FDR had won the support of enough non-southern voters that he felt confident confronting some of the region’s most glaring inequalities. Nowhere was this more apparent than in his endorsement of a report titled “A Report on Economic Conditions in the South.” The pamphlet denounced the hardships wrought by the southern economy and blasted reactionary southern anti–New Dealers. In his introductory letter to the report, Roosevelt called the region “the Nation’s No. 1 economic problem”. The report was among the first broadsides in Roosevelt’s coming reelection campaign that addressed the inequalities that continued to mark southern and national life.

The New Deal also addressed the poverty-stricken region, Appalachia, that roughly follows the Appalachian Mountain Range from southern New York to the foothills of northern Georgia, Alabama, and Mississippi. The mountain-and-valley region’s abundant natural resources, including timber and coal, were in high demand during the country’s post–Civil War industrial expansion, but Appalachian industry simply extracted these resources for the profit of far-off owners, depressing the coal-producing areas even earlier than the rest of the country. By the mid-1930s, with the Depression suppressing demand, many residents were stranded in small, isolated communities whose few businesses stood on the verge of collapse. Relief workers from FERA reported serious shortages of medical care, shelter, clothing, and food. Preventable illnesses including typhus, tuberculosis, pneumonia, and venereal disease, as well as childhood malnutrition, further crippled Appalachia.

 

CCC workers
CCC boys leaving camp for home; Lassen National Forest, California

Several New Deal programs targeted the region. Roosevelt established the Division of Subsistence Homesteads (DSH) within the Department of the Interior to give impoverished families an opportunity to relocate “back to the land”. The DSH established thirty-four homestead communities nationwide, including the Appalachian regions of Alabama, Pennsylvania, Tennessee, and West Virginia. The CCC contributed to projects throughout Appalachia, including the Blue Ridge Parkway in North Carolina and Virginia, reforestation of the Chattahoochee National Forest in Georgia, and state parks such as Pine Mountain Resort State Park in Kentucky. The TVA’s efforts aided communities in Tennessee and North Carolina, and the Rural Electric Administration (REA) brought electricity to 288,000 rural households.

7. Roosevelt’s Critics

Huey Long
Louisiana Senator Huey Long on the cover of Time magazine, 1935.

Despite the unprecedented actions taken in his first year in office, Roosevelt’s approach to combatting the Great Depression was not unanimously supported. Some critics found  FDR’s relief programs too conservative. He had been careful to work within the bounds of presidential authority and congressional cooperation. And, unlike Europe, where several nations had turned toward state-run economies, and even fascism and socialism, Roosevelt’s New Deal showed his reluctance to radically tinker with the nation’s foundational economic and social structures. Many high-profile critics attacked Roosevelt for not going far enough. Senator Huey Long, a flamboyant Democrat from Louisiana, was perhaps the most important “voice of protest.” Long’s populist rhetoric appealed to those who saw deeply-rooted injustice in the nation’s economic system. Long proposed a “Share Our Wealth” program in which the federal government would confiscate the assets of the extremely wealthy and redistribute them through guaranteed minimum incomes. “How many men ever went to a barbecue and would let one man take off the table what’s intended for nine-tenths of the people to eat?” he asked. Over twenty-seven thousand Share the Wealth clubs sprang up across the nation as Long traveled the country explaining his program to crowds of unemployed Americans. Long planned the movement to be a stepping-stone to the presidency, but his crusade ended in late 1935 when he was assassinated at the Louisiana state capitol. Even in death, however, Long convinced Roosevelt to more actively attack the Depression and American inequality.

While many Americans urged Roosevelt to go further in addressing the economic crisis, the president faced even greater opposition from conservative politicians and business leaders. By late 1934, complaints increased from business-friendly Republicans about Roosevelt’s willingness to regulate industry and use federal spending for public works and employment programs. In the South, Democrats who had originally supported the president grew more hostile toward programs that challenged the region’s political and social status quo. Yet the greatest opposition came from the Supreme Court, which was dominated by conservative judges appointed during the long years of Republican presidents. By early 1935 the Court had begun reviewing programs of the New Deal. On May 27, a day Roosevelt’s supporters called Black Monday, the justices struck down one of the president’s signature reforms. In a case revolving around poultry processing, the Court unanimously declared the NRA unconstitutional. In early 1936, the AAA fell as well.

8. The “Second” New Deal

Running for reelection and facing rising opposition from both the left and the right, Roosevelt decided to act. He adopted a more radical, aggressive approach to poverty, the Second New Deal. In 1935, hoping to reconstitute some of the protections afforded workers in the defunct NRA, Roosevelt worked with Congress to pass the National Labor Relations Act, which offered federal legal protection, for the first time, for workers to organize unions. Three years later, Congress passed the Fair Labor Standards Act, creating the modern minimum wage. The Second New Deal also oversaw the restoration of a highly progressive federal income tax, mandated new reporting requirements for publicly traded companies, refinanced long-term home mortgages for struggling homeowners, and attempted rural reconstruction projects to bring farm incomes in line with urban ones.

 

Sitdown strike
Strikers guarding window entrance to Fisher body plant number three, Flint, Michigan.

The labor protections extended by Roosevelt were revolutionary. In northern industrial cities, workers responded to worsening conditions by banding together and demanding support for workers’ rights. In 1935, the head of the United Mine Workers, John L. Lewis, broke with the conservative, craft-oriented AFL to form a new national workers’ organization, the Congress of Industrial Organizations (CIO). The CIO won a major victory in 1937 when affiliated members in the United Automobile Workers (UAW) struck for recognition and better pay and hours at a General Motors (GM) plant in Flint, Michigan. In the first instance of a “sit-down” strike, the workers remained in the building until management agreed to negotiate. GM recognized the UAW and the “sit-down” strike became a new weapon in the fight for workers’ rights. Across the country, unions and workers took advantage of the New Deal’s protections to organize and win major concessions from employers.

 

Social Security poster
A poster publicizing Social Security benefits, 1936.

The signature piece of Roosevelt’s Second New Deal came the same year, in 1935. The Social Security Act provided for old-age pensions, unemployment insurance, and economic aid, to assist both the elderly and dependent children. The president was careful to mitigate some of the criticism of what was, at the time, a revolutionary concept. He specifically insisted that social security be financed through a payroll tax, not by federal government grants. “No dole,” Roosevelt said repeatedly, Social Security “mustn’t have a dole.” He thereby helped separate social security from the stigma of being an undeserved “welfare” entitlement. Social Security allowed older workers to retire, opening jobs for younger workers. It became the centerpiece of the modern American social welfare state.

9. Equal Rights and the New Deal

The Great Depression was particularly tough for nonwhite Americans. An old black man told interviewer Studs Terkel, “The Negro was born in depression. It didn’t mean too much to him. The Great American Depression . . . only became official when it hit the white man.” In 1932, with the national unemployment average hovering around 25 percent, black unemployment reached as high as 50 percent, while black workers who kept their jobs saw their already low wages cut dramatically.African Americans faced discrimination everywhere but suffered especially severe legal inequality in the Jim Crow South. In 1931, for instance, a group of nine young men riding the rails between Chattanooga and Memphis, Tennessee, were pulled from the train near Scottsboro, Alabama, and charged with assaulting two white women. Despite clear evidence that the assault had not occurred, and despite one of the women later recanting, the young men endured a series of sham trials in which all but one were sentenced to death. Only the communist International Legal Defense (ILD) came to the aid of the “Scottsboro Boys,” who soon became a national symbol of continuing racism in America and a rallying point for civil rights–minded Americans. In appeals, the ILD successfully challenged the boys’ sentencing, and the death sentences were either commuted or reversed, although the last of the accused did not receive parole until 1946.

Despite an effort to appoint black advisors to some New Deal programs, Franklin Roosevelt did little to directly address the difficulties black communities faced. To do so openly would provoke southern Democrats and put his New Deal coalition at risk. Roosevelt not only rejected such proposals as abolishing the poll tax and declaring lynching a federal crime, he refused to specifically target African American needs in any of his larger relief and reform packages. As he explained to the national secretary of the NAACP, “I just can’t take that risk.”

 

Evicted sharecroppers
Black refugees evicted from sharecropping, now on the roadside. Parkin, Arkansas, 1936.

 

Perhaps the worst failure of the New Deal to aid African Americans came with the passage of the Social Security Act. Southern politicians worried that economic security would allow black southerners to escape the cycle of poverty that kept them tied to the land as cheap, exploitable farm laborers. The Jackson Daily News complained that “The average Mississippian can’t imagine himself chipping in to pay pensions for able-bodied Negroes to sit around in idleness . . . while cotton and corn crops are crying for workers.” Roosevelt agreed to remove domestic workers and farm laborers from the provisions of the bill, excluding many African Americans from the benefits of an expanding economic safety net.

Women, too, failed to receive the full benefits of New Deal programs. On one hand, Roosevelt included women in key positions within his administration, including the first female cabinet secretary, Frances Perkins, and a prominently placed African American advisor in the National Youth Administration, Mary McLeod Bethune. First Lady Eleanor Roosevelt was a key advisor to the president and became a major voice for economic and racial justice. But many New Deal programs were built on the assumption that men would be the breadwinners and women mothers, homemakers, and consumers. New Deal programs aimed to help both men and women, but these gendered assumptions made it difficult for women to attain economic autonomy. New Deal social welfare programs tended to funnel women into means-tested, state-administered relief programs while reserving federal entitlement benefits for male workers, creating a kind of two-tiered social welfare state. And so, despite great advances, the New Deal was unable to eliminate core inequalities that continued to mark life in the United States.

10. Legacy of the New Deal

By 1936 Roosevelt and his New Deal had achieved record popularity. In November Roosevelt annihilated his challenger, Governor Alf Landon of Kansas, beating the Republican in every state save Maine and Vermont. The Great Depression had certainly not ended, but it appeared to be beating a slow yet steady retreat, and Roosevelt appeared ready to take advantage of both his popularity and the improving economic climate to press for even more dramatic changes. But conservative barriers continued to limit the power of his popular support. The Supreme Court, for instance, continued to gut many of his programs. In 1937, concerned that the Court might overthrow social security in an upcoming case, Roosevelt called for legislation allowing him to expand the Court by appointing a new, younger justice for every sitting member over age seventy. Roosevelt argued that the measure would speed up the Court’s ability to handle a growing backlog of cases. But this “court-packing scheme,” as opponents termed it, was clearly designed to allow the president to appoint up to six friendly, pro–New Deal justices to drown the influence of old-time conservatives on the Court. Roosevelt’s “scheme” did not become law, but the Court upheld social security and other pieces of New Deal legislation thereafter. Moreover, Roosevelt was slowly able to appoint more amenable justices as conservatives died or retired.

 

1936 campaign poster
1936 campaign poster for Roosevelt promoting his economic policy.

By the end of the 1930s, Roosevelt and his Democratic Congresses had transformed American government and realigned American party politics. Before World War I, the American federal government, though powerful, had been a “government out of sight.” After the New Deal, Americans came to see the federal government as a potential ally in their daily struggles finding work, securing a decent wage, getting a fair price for agricultural products, or organizing a union. Voter turnout in presidential elections jumped in 1932 and again in 1936, with most of these newly mobilized voters forming a progressive wing of the Democratic Party that would remain loyal well into the 1960s. Even as affluence returned with American involvement in World War II, memories of the Depression continued to shape the outlook of two generations of Americans. Survivors of the Great Depression and their children the “baby boomers” would not quickly forget the hard times or the government’s attempt to end them. Historians debate when the New Deal ended. Some identify the Fair Labor Standards Act of 1938 as the last major New Deal measure. Others see wartime measures such as price and rent control and the G.I. Bill that guaranteed New Deal–style social benefits to veterans as species of New Deal legislation. Still others describe a “New Deal order,” a constellation of “ideas, public policies, and political alliances,” which guided American politics from Roosevelt’s Hundred Days forward to Lyndon Johnson’s Great Society and perhaps even beyond. Today the New Deal’s legacy echoes in calls for a Green New Deal, and its battle lines still shape American politics.

11. Primary Sources

Herbert Hoover on the New Deal (1932)

Americans elected a string of conservative Republicans to the presidency during the boom years of the 1920s. When the economy crashed in 1929, however, and the nation descended deeper into the Great Depression, voters abandoned the Republican Party and conservative politicians struggled to in office. In this speech on the eve of the 1932 election, Herbert Hoover warned against Franklin Roosevelt’s proposed New Deal.

Huey P. Long, “Every Man a King” and “Share our Wealth” (1934)

Amid the economic indignities of the Great Depression, Huey P. Long of Louisiana championed an aggressive program of public spending and wealth redistribution. Critics denounced Long, who served as both governor and a senator from Louisiana, as a corrupt demagogue, but “the Kingfish” appealed to impoverished Louisianans and Americans wracked by joblessness and resentful of American economic inequality. He was assassinated before he could mount his independent bid for the White House in 1936. In the following extracts from two of his most famous speeches, Long outlines his political program.

Franklin Roosevelt’s Re-Nomination Acceptance Speech (1936)

In July 27, 1936, President Franklin Roosevelt accepted his re-nomination as the Democratic Party’s presidential choice. In his acceptance speech, Roosevelt laid out his understanding of what “freedom” and “tyranny” meant in an industrial democracy.

Second Inaugural Address of Franklin D. Roosevelt (1937)

After winning a landslide victory in his 1936 quest for a second presidential term, President Franklin Roosevelt championed again the ambitious goals of his New Deal economic programs and their relationship to American democracy.

Lester Hunter, “I’d Rather Not Be on Relief” (1938)

Lester Hunter left the Dust Bowl for the fields of California and wrote this poem, later turned into a song by migrant workers in California’s Farm Security Administration camps. The “C.I.O.” in the final line refers to the Congress of Industrial Unions, a powerful new industrial union founded in 1935.

Family Walking on Highway (1936)

During her assignment as a photographer for the Works Progress Administration (WPA), Dorothea Lange documented the movement of migrant families forced from their homes by drought and economic depression. This family was in the process of traveling 124 miles by foot, across Oklahoma, because the father was unable to receive relief or WPA work of his own due to an illness.

“Bonus Army Routed” (1932)

This short newsreel clip made by British film company Pathé shows the federal government’s response to the thousands of WWI veterans who organized in Washington DC during the summer of 1932 to form what was called a “Bonus Army.” At the demand of attorney general, the marchers were violently removed from government property.

Reference Material

This chapter was adapted by Dan Allosso from Chapter 23 of The American Yawp, including edited content from the original chapter and original material. The Yawp chapter was edited by Matthew Downs, with content contributed by Dana Cochran, Matthew Downs, Benjamin Helwege, Elisa Minoff, Caitlin Verboon, and Mason Williams.

12. Recommended Reading

  1. Balderrama, Francisco E., and Raymond Rodríguez.Decade of Betrayal: Mexican Repatriation in the 1930s, rev. ed. Albuquerque: University of New Mexico Press, 2006.
  2. Brinkley, Alan. The End of Reform: New Deal Liberalism in Recession and War.New York: Knopf, 1995.
  3. ———. Voices of Protest: Huey Long, Father Coughlin, and the Great Depression.New York: Knopf, 1982.
  4. Cohen, Lizabeth. Making a New Deal: Industrial Workers in Chicago, 1919–1939.New York: Cambridge University Press, 1990.
  5. Cowie, Jefferson, and Nick Salvatore. “The Long Exception: Rethinking the Place of the New Deal in American History.” International Labor and Working-Class History74 (Fall 2008): 1–32.
  6. Dickstein, Morris. Dancing in the Dark: A Cultural History of the Great Depression.New York: Norton, 2009.
  7. Fraser, Steve, and Gary Gerstle, eds. The Rise and Fall of the New Deal Order, 1930–1980.Princeton, NJ: Princeton University Press, 1989.
  8. Gilmore, Glenda E. Defying Dixie: The Radical Roots of Civil Rights, 1919–1950.New York: Norton, 2009.
  9. Gordon, Colin. New Deals: Business, Labor, and Politics in America 1920–1935.New York: Cambridge University Press, 1994.
  10. Gordon, Linda. Dorothea Lange: A Life Beyond Limits.New York: Norton, 2009.
  11. ———. Pitied but Not Entitled: Single Mothers and the History of Welfare 1890–1935.New York: Free Press, 1994.
  12. Greene, Alison Collis. No Depression in Heaven: The Great Depression, the New Deal, and the Transformation of Religion in the Delta.New York: Oxford University Press, 2015.
  13. Katznelson, Ira. Fear Itself: The New Deal and the Origins of Our Time.New York: Norton, 2013.
  14. Kelly, Robin D. G. Hammer and Hoe: Alabama Communists During the Great Depression. Chapel Hill: University of North Carolina Press, 1990.
  15. Kennedy, David. Freedom from Fear: America in Depression and War, 1929–1945.New York: Oxford University Press, 1999.
  16. Kessler-Harris, Alice. In Pursuit of Equity: Women, Men, and the Quest for Economic Citizenship in 20th-Century America.New York: Oxford University Press, 2003.
  17. Leach, William. Land of Desire: Merchants, Power, and the Rise of a New American Culture.New York: Pantheon Books, 1993.
  18. Leuchtenburg, William. Franklin Roosevelt and the New Deal, 1932–1940.New York: Harper and Row, 1963.
  19. Pells, Richard. Radical Visions and American Dreams: Culture and Social Thought in the Depression Years.New York: Harper and Row, 1973.
  20. Phillips, Kimberly L. Alabama North: African-American Migrants, Community and Working-Class Activism in Cleveland, 1915-1945.Champaign: University of Illinois Press, 1999.
  21. Phillips–Fein, Kim. Invisible Hands: The Businessmen’s Crusade Against the New Deal.New York: Norton, 2010
  22. Sitkoff, Harvard. A New Deal for Blacks: The Emergence of Civil Rights as a National Issue. New York: Oxford University Press, 1978.
  23. Sullivan, Patricia. Days of Hope: Race and Democracy in the New Deal Era.Chapel Hill: University of North Carolina Press, 1996.
  24. Tani, Karen. States of Dependency: Welfare, Rights, and American Governance, 1935–1972. Cambridge, UK: Cambridge University Press, 2016.
  25. Wright, Gavin. Old South, New South: Revolutions in the Southern Economy Since the Civil War.Baton Rouge: LSU Press, 1986.

 

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