The Wall Street Crash and Depression
In 1928 the new Republican president Herbert Hoover confidently stated, 'We in America today are nearer to the final triumph over poverty than ever before in the history of any land.' Within a year, all the confidence had ended and America was plunged into the Depression.
Wall Street Crash
When the Wall Street stock market crashed in October 1929, the world economy was plunged into the Great Depression. By the winter of 1932, America was in the depths of the greatest economic depression [Economic depression: The slowing of economic activity, which usually results in high unemployment, a sharp drop in prices and a fall in production. ] in its history.
The number of unemployed people reached upwards of 13 million. Many people lived in primitive conditions close to famine. One New York family moved into a cave in Central Park. In St Louis, more than 1,000 people lived in shacks made from scrap metal and boxes. There were many similar Hoovervilles all over America. Between 1 and 2 million people travelled the country desperately looking for work. Signs saying 'No Men Wanted' were displayed all over the country.
Many children were deserted and left homeless during the Depression
By the time of the election in November 1932, Hoover's popularity had reached rock bottom. It was not even safe for him to go onto the streets to campaign. After his heavy defeat, Hoover told his friends,
"we are at the end of our string... there is nothing more we can do". The American economy did not fully recover until the USA entered the Second World War in December 1941.
Causes of the Depression
- As early as 1926, there were signs that the boom was under threat - this was seen in the collapse of land prices in Florida.
- Eventually, there were too many goods being made and not enough people to buy them.
- Farmers had produced too much food in the 1920s, so prices for their produce became steadily lower.
- There were too many small banks - these banks did not have enough funds to cope with the sudden rush to take out savings, which happened in the autumn of 1929.
- Too much speculation on the stock market - the middle class had a lot to lose and they had spent a lot on what amounted to pieces of paper.
- The Wall Street Crash of October 1929 was a massive psychological blow.
- America had lent huge sums of money to European countries. When the stock market collapsed, they suddenly recalled those loans. This had a devastating impact on the European economy.
- The collapse of European banks caused a general world financial crisis.
People outside a closed bank during the Depression
Effects of the Depression
- Unemployment - 13 million people were out of work.
- Industrial production dropped by 45 per cent between 1929 and 1932.
- House-building fell by 80 per cent between 1929 and 1932.
- The entire American banking system reached the brink of collapse.
- From 1929 to 1932, 5,000 banks went out of business.
- Although many people went hungry, the number of recorded deaths from starvation during the Depression was 110, although many other illnesses and deaths were probably related to a lack of nutrition.
Revision tip and answer preparation
Write a list of the factors that caused the Great Depression. Place the factors in what you consider to be their order of importance.
As part of your revision, think about the arguments and facts you would use to explain:
- Why there was a great depression in America.
- Why the Depression of 1929 was so sudden and so severe.
- To what extent the Wall Street Crash was the main cause of the Depression.
- What the causes and consequences of the Wall Street Crash were.
- How far speculation was responsible for the Wall Street Crash.
- What impact the Crash had on the economy.
- What life was like in the USA during the Great Depression.
- What the effects of the Depression were on the American people.
- What the social consequences of the Crash were.
Now try a Test Bite