History Snapshot: Overview of The Great Depression
Complied from multiple sources and written by William Lane Callaway, TRIUMPH OVER TRAGEDY Program Manager
(photos courtesy of the Library Of Congress)
Soup Kitchen
Summary
A global economic phenomenon occurring during the interwar years of 1929 to roughly 1942 depending on the nation involved.
Causes were cumulative and interlocking with World War I (1914-1918) not causing the economic depression but creating the conditions for this unprecedented global economic depression. World War I altered social, political, economic, financial, diplomatic, social classes, gender roles, and racial relationships and patterns.
Sharecropper Near Shreveport, LA (1937)
Market crash of the New York Stock Exchange on October 29, 1929 was the trigger not the cause of the Great Depression.
The Great Depression caused several consequences: further rise of fascism, militarism, and totalitarianism and start of welfare capitalism with the state being responsible for the economic security of individuals.
Each industrialized nation was affected differently and emerged from the Great Depression at various times and for various reasons. Japan emerged by 1932, Germany by 1936, Britain and France about 1937 and the United States emerged by 1942 due initially to war contracts from European nations and finally by defense contracts from the federal government.
Music and the Arts Lifted the Spirits
The Great Depression did not cause World War II but was a contributing factor to this global war.
The Great Depression started a chain reaction that caused the economic slump to feed upon itself and spread globally.
The very global quality of the depression itself, made it impossible for any purely national policy to restore full prosperity.
Global Context.
The Great Depression was a global economic phenomenon – coming barely a decade after the turmoil and dislocations of World War I. The causes of the Great Depression were cumulative and interlocking being a combination of domestic and international economic difficulties and an international financial panic. The Great Depression impacted on urban and rural populations and workers in both industrial and agricultural sectors just as much as it affected national governments and economies. The event triggering the Great Depression was the New York stock market crash in the autumn of 1929 however multiple causes originating with the Great War also known as World War I (1914-1918) aggravated by economic and financial circumstances of the 1920s are the real culprits.
Cumulative and Interlocking Causes.
The Great Depression was caused by economic, financial, and governmental factors during the interwar years of 1919 to 1939 that had emerged due to World War I.
Industrial.
The turmoil and disruption of World War I on international trading patterns and relations caused economic and population dislocations especially in war torn Europe. The war highlighted structural problems within Western industrial economies and economic weakness in areas (like Latin America) dependent on sales of raw materials. The basic industrial and agricultural problem was overproduction at a time of weakening market demands. The increased export competition between the United States and Japan during the 1920s contributed to this overproduction. Dependent economies like those in Latin America and colonies of industrialized nations were unable to buy industrial exports in turn weakening demand for western produced products precisely when output tended to rise.
Agriculture. 
The world’s agricultural sector in the interwar war years became a contributing cause of the Great Depression. The 1920s saw a general decline in agricultural prices also due to overproduction. During World War I, national governments encouraged and in many cases subsidized increased production (i.e. wheat production spread to Australia and Argentina) to ensure a steady supply of food for the war effort. The war years saw farmer’s increasing acreage primarily through buying new land and putting it into production as well as improving their crop yield efficiency with new farming technologies. After the war ended in 1918, farmers kept planting at wartime levels. This continued overproduction caused farmers in food exporting countries to fall into their own economic slump by early to mid-1920s well before the full industrial catastrophe in 1929. Yearly harvests in the 1920s tended to be better than the previous one so that by 1929, the harvest were exceptionally good.
Regardless of where farmers produced their goods, overproduction tended to drive market prices depressing farm earnings. However, farmers still needed to pay the mortgage for new lands acquired during the war as well as for new technologies and machinery bought. Therefore in the farmers’ thinking, increased production would raise the market price of their produce. Unfortunately the opposite was true – overproduction caused market prices to tumble. And in many primarily agricultural areas like the new east-central European states created by the Paris Peace Conference in 1919, the farmer’s plight translated into political instability.
Nationalistic Economic Selfishness.
Western governments in particular in both the industrial and agricultural sectors became more selfish in their economic outlook moving from free trade sentiments to protectionist by constructing tariff barriers to protect their domestic producers. Therefore as demand and market prices for industrial and agricultural goods declined due to overproduction, leading industrial nations provided scant leadership as the looming economic crisis of 1929 began to build. Protectionism reduced market opportunities making a bad situation worse so that by the late 1920s, key industrial sectors in the western economies – coal, iron, and textiles – began to decline in their production and exports beginning worker lay offs.
As a response to the beginning and spreading of the Great Depression, primarily Western countries took individual approaches to address falling production and market prices. The British formed a coalition called the National Government that imposed the “imperial preference” system in essence a closed trading zone within the British Empire. The philosophy of national self-determination advocated by American President Woodrow Wilson and put into practice at the Paris Peace Conference in 1919, in essence cut up a large free-trade zone under the Austrian-Hungarian Empire into predominately agricultural and economically inefficient nation-states. This economic situation aggravated the political environment in these newly created countries contributing to the eventual overthrown of democratically elected regimes in Eastern Europe. The Weimar Republic in post-war Germany became politically polarized after 1929 due to the frustration caused by the Depression resulting in several short-lived and ineffective coalition governments and numerous elections. This condition added to the appeal of stability promised by a new political group called the Nazi Party. In France, national governmental instability compounded the effects of the spreading Depression. Japan, heavily dependent on trading finished products for natural raw materials, saw a severe contraction in its foreign trade. In the United States, the Congress raised protectionist barriers to unprecedented levels resulting in further stifling international trade and making it difficult for European nations to pay their debts to the U.S. Government. As a reaction to American rising of tariffs, several foreign countries imposing their own trading barriers so by 1933, over 30 percent of global trading had ceased. Ironically, the Soviet Union was the least effected economy since its internal industrial and agricultural development was not dependent on western financing and the Communist state had very limited economic links to the West.
International Financial Situation.
World War I made the United States a creditor nation for the first time in its history and after 1919 the engine of global capitalism. European nations had been very dependent on American war loans (some $10 billion) to keep their economies going during the war and this dependency on American loans continued into the 1920s. American investment and loan dollars flowed into Germany since this single country was the key to European general economic recovery after World War I. However the American government shied away from world economic leadership.
American post-war loans to Germany became a circular flow of dollars. In essence, American loans to Germany were used by the Germans to pay war reparations required by the 1919 Treaty of Versailles (ending World War I) to Western European nations, primarily Britain and France. In turn, these German war reparations were used by the British and French to repay war loans to the United States. After the 1929 market crash, the United States called for the repayment in full of war time loans by European nations while simultaneously stopping American loans to Germany. The American stopping of loans to Germany caused Germany to cease war reparation payments resulting in Britain and France defaulting on their American war loans. Therefore the entire global financial structure collapsed. This general financial collapse caused devaluation of currencies especially in Europe motivating Europeans to make runs on their banks to secure their savings thus causing some European banks to close.
The Great Depression was indeed an international collapse – a sign of the tight bonds and serious imbalances that had developed in trading patterns and currency exchanges. The very global quality of the depression itself, made it impossible for any purely national policy to restore full prosperity to the global trading system.
Global Perspective.
As the Great Depression into the 1930s, far-reaching political consequences occurred. In essence, either a parliamentary system became increasingly incapacitated, unable to come to grips with this economic dilemma and too divided to take vigorous action, even in foreign policy (prime example is France) – or – the outright overturning of the parliamentary system (example Germany). Germany and Spain saw the rise of fascism to national rule. In the Soviet Union, Joseph Stalin’s consolidated his authority and created a truly totalitarian communism state. Japan created its own version of a military-centered authoritarian state and began a concerted effort at territorial expansion in Asia to secure the raw materials it needed for its industrial economy. The Great Depression increased Japanese suspicions of the West and promoted new expansionism sentiments designed to win more assured markets in Asia. Rise of strongman rule or military dictatorship in most of the new nations of east Europe and throughout Latin America occurred. China – beset by internal turmoil and strife – turned away from any sentiment for republican national government and returned to warlord rule. The West – including the United States – saw the start of welfare capitalism where the state took responsibility for the economic security of its citizens.
Economic depression and political change dominated the 1930s and feed into an eventual global war. Fragmentation of the global economic system into increasingly disconnected trading blocs is indicated by the emerging alliances and adversary configurations of the 1930s that would fight World War II. Specifically in Europe, the British and French and their respective empires confronted the Fascist Italy-Nazi Germany alliance, seeking to extend its control over much of Europe and the Mediterranean. In the Pacific, the United States sought to thwart Japanese maneuvers to assert their control over China, Southeast Asia, and the western Pacific. Splintering of the global economy had not only intensified competition in a time of profound economic breakdown and human suffering – it had severed the economic linkages and dependencies that might have served as a brake on the march to another global war that seemed unavoidable by the late 1930s.
The Global Human Toll.
The Great Depression was unprecedented in its depth, intensity, duration, and ineffectiveness of political leaders attempting to cope with it. Generally the lost of earnings, lost of work, fear that loss would come – devastated people 
of all classes. One-third of all blue-collar workers in the West lost their jobs for prolonged periods of time during the Depression. Britain saw three million unemployed in 1932 meaning one Englishman in four was on public assistance. Two out of five Germans were unemployed counting for six million or 30 percent of workers in 1932. Latin America – heavily dependent on export economies – saw unemployment rise rapidly and this stimulated greater state involvement in economic planning and direction. France’s official unemployment never exceeded 600,000 but family farm workers and small shopkeepers were not covered by France’s “registered unemployed” category. Nevertheless, the Great Depression slowly ate away at French political will and economic structures. Italy had experienced economic troubles before 1929 with some 1.1 million unemployed by 1933. Italy went to war against Ethiopia in part to stimulate its economy. In the United States, by 1933 unemployment had risen to 12½ million or 25 percent of the work force. Workers saw their paychecks dwindle to an average weekly wage of $16.21 by 1932. American blue collar and white collar workers were either thrown out of work or had reduced wages and work hours. Graduating college students could not find work or resorted to jobs that did not tap into their level of education. Some wives and mothers found it easier to gain jobs in a low-wage economy than their husbands – confusing traditional family roles.
The Road to War (World War II).
The Great Depression did not lead directly to war since World War II came after recovery was well underway in Europe. Nevertheless when combined with the turmoil caused by World War I, the Great Depression became a contributing factor. The Great Depression generated fear – fear that mechanism of international trade would not deliver necessary raw materials and foodstuffs; fear about jobs and livelihoods; fear of other state’s policies; and sometimes fear of one’s own government’s policies. It is normal for national governments to become natural targets of popular discontent during bad economic times – however Europe of the 1930s saw alien minorities also become targets particularly when they showed signs of some prosperity.
The effects of the Great Depression were far-reaching and indirectly contributed to the start of a general war in Europe by 1939 – with preparation for war ironically providing stimulus to European economies.
The American Context.
Tattoo Shop in Alexandria, LA
Post-World War I Americans were eager to return to life as it had been or as they nostalgically dreamed it had been, with this popular sentiment lumped under the political slogan of “normalcy.” American society in the 1920s reflected shifting of patterns in American life with the decade becoming a time of profound transition for Americans. The war molded American consumer demands and involved basic shifts in the economy in short creating a consumer-centered domestic economy. The war changed the pattern of life for most Americans. America of the 1920s was a decade of social changes and deep cultural conflicts with the nicknames given the decade characterizing these social conflicts: The Aspirin Age; Roaring 20s, The Jazz Age; Age of the Flapper; Flaming Youth; Dollar Decade, The Golden Twenties; Prosperity Decade; Lawless Decade; Age of Advertisement; among others.
Urban Society.
The Census of 1920 showed for the first time America was predominantly an urban society. Cities grew in population with greater numbers of ethnic populations – with people from southern and eastern Europe continuing to account for a majority of immigrants (temporary stopped by World War I and resumed with 3.2 new immigrants coming to American before the United States restricted entry). Racial composition of cities underwent a decisive change with immigranst pouring into industrial cities of the Northeast and Midwest as well as an additional 1.5 million African-Americans moving from the South to mostly Northern cities (continuation of The Great Migration that had started as early as 1914). For the most part, the increasing number white middle-class Americans moved to the fast-growing suburbs with the automobile opening up these new residential areas. Housing became limited with minorities living in segregated residential areas defined by “neighborhood improvement associations,” restrictive covenants, and zoning codes. These restrictions caused African-American “cities” to develop within larger cities with Harlem being the largest black American city. Also cities “built up” with the 1920s being the first great era of building skyscrapers. With increased activities in central business districts and use of the automobile, city planners attempted to reduce the traffic congestion of “rush hour” and holiday traffic jams by designing traffic circles, synchronized stoplights, and divided dual highways.
Rise of a Consumer-oriented Economy.
Construction Workers in Monroe, LA (1940)
Evident in the spread of cars, electricity, new appliances, and mass entertainment – spectator sports, radio, phonographs, and the movies – a consumer-oriented national economy came to mold and mirror mass culture in 1920s America. The automobile was the symbol of the new consumer society with this explosion of cars made affordable with the introduction of the assembly line manufacturing process of Henry Ford that cut the cost of new cars. Alfred Sloan advertised the cars of General Motors as symbols of wealth and status and in 1927 introduced the yearly model change. During the 1920s, the United States doubled the number of its roads and highways to reflect the increase of the driving public. Other emblems of the consumer economy were the telephone and electricity. Ready-to-wear clothing – beginning with the defining of standard sizes to meet the demand for uniforms in World War I – was an important innovation in the 1920s expanding the consumer economy. Processed foods – beginning in World War I as manufacturers learned how to efficiently can and freeze foods for troops overseas – shifted America eating habits from bread and potatoes to more fruits and sugar foods and processed foods cut down the time for homemakers in preparing food. Radio became a mainstay in the American home of the 1920s. Radio blunted regional differences and imposed similar tastes and lifestyles and filled American homes with music, variety shows, and comedies. The most significant new instrument of mass entertainment was the movies with eventually three-quarters of the American population seeing a movie every week. And newsreels played at the movies kept Americans informed of current events. The film industry moved to Hollywood California in the 1920s to a climate that allowed year-round filming and where assembly line process were used to meet the demand for movies by the American public. The “studio system” developed in Hollywood with film companies owing their own production facilities, running their own worldwide distribution networks, controlling theater chains, and keeping actors, directors, and screenwriters under contract. By 1926, Hollywood had captured 95 percent of the British and 70 percent of the French markets. Americans attending movies in 1920 equaled some 50 million a week and by 1929 had grown to 90 million a week.
Businesses expanded their advertising to stimulate sales and increase profits – by appealing to consumers’ hunger for prestige and status – and created the nation’s first regional and national chains. In the 1920s, the chain store movement revolutionized retailing (including interlocking networks of banks and utility companies that promoted the decade’s financial speculation). The use of installment credit soared during the 1920s – banks offering the country’s first mortgages – and companies selling their products by allowing consumers to pay “on time” in contrast to the old American belief of thrift and saving. The average American in the 1920s spent a declining proportion of the family income on necessities of life and an increasing share on new consumer products.
Shift in American Society.
The America of the 1920s witnessed a transformation in morals and manners and dramatic shifts in sexual customs and gender roles. For some Americans these transformations were liberations from a Victorian past and for others a symbol of the decay of the United States. The “flapper” became the symbol of the liberated woman who bobbed her hair, painted her lips, raised her hemline, danced the Charleston, smoked and drank in public, and was more sexually active (along with American men) than previous generations. The flapper came to personify the public’s anxiety about the decline of traditional morality. The 1920s also produced many great works of art, music, plays, and literature and began the United States leadership in the world of ideas and cultural trends. The “Lost Generation” – referred to the handful of expatriate novelists and artists who had participated in the Great War only to emerge from the conflict convinced that it was an exercise in futility. These artisans became world famous and contributed to American culture. The “Harlem Renaissance” – centered in the African-American community of Harlem, was a movement for black pride in culture. The Renaissance resulted in expressions of a unique African-American racial consciousness in literature, arts, music, and history.
Franklin D. Roosevelt
Democrat Franklin D. Roosevelt defeated incumbent Republican President Herbert Hoover in the election of 1932. The Great Depression and the lack of federal response to it was the centerpiece of the campaign. During the campaign Roosevelt advocated his concept of a “new deal” for the American people but ironically he did not have a master plan to bring the country out of the Great Depression. The 1932 election swept Roosevelt into the White House and the Democrats to majority in both Houses of Congress.
First New Deal, 1933-1935.
Most famous for its “first hundred days” where a Democratic-control Congress pass 15 major bills to confront the Depression. This whirlwind of government activity by President Roosevelt galvanized the American people. Emphasis was on the recovery of business and farmers, relief to the most needy, and reforms. Reforms covered the reorganization of banks (creation of the FDIC) and the stock market (created the SEC and licensing of stock brokers). Relief included providing for the homeless and hungry, vaccinations and immunizations to the poor, refinancing of homes and farms to reduce foreclosures, providing employment through civil work projects and other work programs, federal subsidies to farmers to reduce their production, and relaxing of anti-trust rules to allow business to make concessions to labor including recognizing unions. It was during this time, the federal government increased tremendously in size creating a host of new offices: Civil Works Administration, Civilian Conservation Corps, Federal Emergency Relief Administration, among others.
Second New Deal, 1935 to 1937.
Emphasis of the Roosevelt Administration was on social reforms and social justice. Major programs included the Works Progress Administration and Social Security. The Works Progress Administration (WPA) was an employment program for the public good. Some 2.1 million unemployed gain jobs between 1935 and 1941 – building 572,000 miles of country roads; 40,000 buildings; 67,000 miles of city streets; 78,000 bridges; 8,000 parks; and 350 airports. WPA also employed artists (to paint murals on public buildings), writers (to write regional and state handbooks), and musicians (providing concerts to the public). The WPA Theater entertained 60 million Americans. Total of 6,000 artisans benefited from the $23 million program. However, there were many critics of this “make work” program. The Social Security Act of 1935 (beginning the welfare “state” in the United States) was created to support large number of elderly Americans and provide for the unemployed, the blind and disabled, and dependent children. Pensions for the elderly were provided by payroll taxes and employers’ tax. The Act created unemployment insurance and was expanded in 1937 to include survivor’s benefits.
Roosevelt Coalition.
Proved to be a political realignment in the United States providing an electoral landslide for President Roosevelt in the 1936 election. The Coalition was made up of women, big city ethnic groups, labor union members, African-Americans, and Southern Democrats (lasting until around 1968). Interesting to note, the 1936 election saw African-Americans for the first time vote as a majority for a Democrat instead of their traditional allegiance to the Republicans – the party of Lincoln.
The Third New Deal, 1938-1939.
Saw an emphasis on consolidating the entire New Deal with the most significant legislation concerning minimum wages, maximum work hours; curbing child labor; and housing reform. Cut short as war clouds began to gather in Europe.
Challenges to the New Deal.
Roosevelt’s New Deal was actively challenged by most businessmen opposing reforms; conservatives and most Republicans who thought the New Deal had gone too far; radicals who thought the New Deal had not gone far enough; and Socialists and Communists who criticized Roosevelt for attempting to save capitalism. Dr. Townsend; Father Coughlin; and Huey Long were very vocal and popular critics of President Roosevelt and the New Deal. Also politically powerful Southern Democrats – conservative and segregationist – occupying Congressional chairmanships advocated status quo in segregation. (Roosevelt had to rely upon them to get New Deal programs through Congress in the 1930s similar to the challenge in the 1960s faced by President Johnson to get his Great Society programs approved by a Congress dominated by Southern Democrats occupying Congressional chairmanships.)
Results of the New Deal.
Beginning in 1933, President Franklin D. Roosevelt took action and thus galvanized the American people although he improvised most of the New Deal by trial and error. The New Deal saw an expansion in size and power of the federal government as well as the power of the Presidency. The New Deal strengthened the federal presence in American life – altered labor relations with management; transformed the government’s approach to the farm economy; and placed partial responsibility for the social and economic welfare of American citizens squarely on the shoulders of the federal government. The composition of the federal workforce changed with more women and minorities gaining employment. The New Deal led Americans to view the federal government as their agency of action and reform and the ultimate protector of the public’s well-being. The Great Depression and the New Deal in the United States produced a major political realignment creating a coalition of big city ethnics, African-Americans, labor union members, commercial farmers, women, and Southern Democrats – collectively called the Roosevelt Coalition that lasted well into the 1960s. Despite the best efforts and intentions of President Roosevelt, New Deal programs did not bring the United States out of the Great Depression. Massive war contracts to American industry from European countries as a response to the rising crisis in Europe generated employment. Later this employment momentum was increased with defense contracts from the federal government as the United States mobilized and entered World War II in late December 1941. Global war in Europe and Asia essentially ended the Great Depression in the United States.
