How Did We End Up in the Great Depression?

The Great Depression was a miserable time for the United States. In 1929 unemployment reached an all time high- a whopping 25% (Markawitz and Rosner). Even though the Great Depression was a brutal time for the American nation as a whole, it led to social change in impoverished communities, religious communities, and even altered gender roles. How did we end up in this situation? Warren G. Harding was elected president in 1923 with Vice President, Calvin Coolidge, who was later elected in 1933. Both men were Republicans who wanted less government in business and more business in government.

Both believed reduced federal regulations. Harding raised taxes by 25%, which lead to the start of a tariff war as other nations retaliated (Christiano).

The Secretary of Treasury, Andrew Mellon, who worked under President Harding, Coolidge, and even President Hoover, favored a low tax. Mellon wanted the wealthy to pull the country out of hard times therefore reducing the federal budget. Calvin Coolidge had laissez faire policies and got rid of anyone he suspected of corruption while reducing federal spending.

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Coolidge didn't help farmers or veterans (Ayers 672-673) rather he affected the upper and middle classes as industrial profits rose and the stock market flourished. Many people worked on welfare capitalism— bosses provided pensions and cared for workers in exchange for lower wages and worker's loyalty. People worked in factories for 12-16 hours a day while getting paid as little as a single dollar for their labor.

As a result of unfair wages, domestic workers struggled to support their families (Markwitz and Rosner).

In addition to government policies and low wages, in the late 1920's, stock values grew. Even though this seemed good, it was actually a huge misconception. The money was only on paper and people technically did not have any money until they sold their stocks. Additionally, some people did not sell their stocks in time before the Stock Market crash and lost a lot or all of their money. New advertising methods convinced people to buy different products; commercials were enticing rather than informing. Big companies were sponsoring radio shows in order to advertise new products, such as; refrigerators, vacuums, radio, and even passenger airplanes. New ways to pay for products were also invented.

Someone would now be able to pay a small down payment and pay the remainder in installments. Ninety percent of goods were bought on credit (borrowing) and people were encouraged to get what they want now and pay later. This led to the accumulation of tons of debt to both individuals and banks (Ayers 674-675). The consumer culture and obsession with materialism began in the Great Depression and continued to rise until today (Van der Putten). Not everyone prospered; farm wages fell down and remained low. Even more so, demand for farmer's products slowed down after WWI (Christiano).

Not only were finances changing during the Great Depression, but social changes were also rising across the nation. People in cities prospered and were more open to social change as opposed to rural areas where people were more conservative and traditional. Fundamentalists believed in Christian values and literal interpretation of Bible, while modernists emphasized science, technology, and secular values (Aryes, 676). Conflicts arose on whether or not modern science should be taught in schools because it clashed with Bible teachings.

The most controversial of all was whether or not Charles Darwin's idea of evolution should be taught the theory that inherited characteristics of a population changed over generations and new species arose (History.com). A teacher, John Thomas Scopes from Tennessee, taught the idea of evolution despite the courts law that teaching evolution in public schools was not allowed. Even though Scopes was found guilty, his court case was a revolutionary time for our country. Scope's trial led to the teaching of science in all schools once the Supreme Court overturned the ruling and dropped Scope's charges (History.com).

The 18th Amendment also known as prohibition, bans the public from making, selling, and distributing alcohol. The Volstead Act prohibits the production, sale and transportation of intoxicating liquors even in private (Aryes 651); it was passed to help the government enforce the 18th amendment. The temperance movement was spread by many women who wanted to stop domestic violence caused by drinking, factory owners who didn't want their workers coming in drunk, and religious people who thought drinking was sinful. This also helped reduce the consumption of grains and grapes during WWI to give more to troops. The target of this act was the Irish, Italian, and Jewish immigrants, who were stigmatized with drinking (Van der Putten).

Its goal was to reduce crime rates and make America better, but instead the opposite happened. People bought alcohol on the black market, bootleggers smuggled alcohol in their boots, and organized crime and gangs formed. They even had illegal bars where alcohol was served, such as Al Capone, speakeasies (Aryes 651-653). This act affected our nations first amendment, which gives citizens the right to assemble. Taking away bars, clubs and primary social scenes of urban areas limits interaction between individuals of different classes.

Although women were still primarily caring for the household and depending on their husband's' finances, change arose in their behavior as the rising idea of equality began to emerges (Turkel). Flappers, young women who defied traditional ideas of proper dress and behavior, are free to come down from their pedestal of objectification. They wore shorter skirts and bobbed their hair (short haircuts) to look like men. Women were able to vote, drink, and smoke in public. Though it was only like this in urban settings, which represents the rift between urban and rural areas.

On the other hand, in rural areas many people disapproved of flappers and thought they only wanted to have fun (Ayers 647-652). Additionally, Harlem, a neighborhood in upper Manhattan, was experiencing a Renaissance. There were many contributing factors to this renaissance. Many African Americans moved north in the hopes of finding freedom and economic opportunities. This major relocation of African Americans is known as The Great Migration. By early 1920's about 200,000 people lived in this city. There were many poets and writers rising during the Harlem renaissance as creative energy was sparked. One of the famous figures of the time is known by the name of James Weldon Johnson, a journalist, educator, and lawyer he was a civil rights activists and a leadership of the NAACP.

Langston Hughes is a Harlem renaissance poet who is famous for his work on defiance and hope. Harlem became the center of jazz with the most famous musician being Louis Armstrong. The Harlem renaissance was very paradoxical. Although African Americans were creating important art and seemingly flourishing, unemployment in black communities was at an all time low (Ayres 652-654). Financially, many crises hit our nation. According to Lawrence Christiano's article on the finances of the Great Depression, the stock market crashed and 5000 banks shut their doors.

The gross domestic product (value of all goods produced) reduced by half. America was facing a bear market, a 20% decline in the stock market (Christiano). Although, in the 1920s, there was an appearance of prosperity; there was a high GDP, automakers and suppliers made a lot of profit, unemployment was low, 400% of stocks increased, and even 1 billion shares were traded. However, in 1929 people were $70 billion in debt since everything was bought on credit and money was only on paper (Christiano 5). In the election of 1928, Herbert Hoover won nearly every state and continued to implement Harding and Coolidge's laissez-faire attitude. Republicans took credit for the strong economy and voluntarism (voluntary cooperation between business owners and labor instead of being regulated by government), but there were weaknesses in the economy, especially since people were buying on credit.

Personal debts went up, farmers were still hurting from after WWI, there was uneven distribution of wealth, speculation continued (people bought stocks without looking into it), people bought stocks on margin (loan where broker would buy a stock for someone and the person would have to pay them back later), and businesses overproduced stockpiles of goods and had to sell them for sale prices which decreased profits even more. There was a cyclic effect low sale that led to job layoffs, which led to less income, which led to fewer purchases, which restarted the cycle all over again. For example, automobile sales declined which led to a decline in reproduction of rubber, oil, and fabric, which led to workers being laid off and wages getting lowered.

People bought stocks on margin, so the market was a bull market, which led to speculation. There was a sharp drop in market prices which left investors in debt and so market went into free fall as investors tried to quickly sell stocks at any price. October 29, 1929, Black Tuesday, (Ayers 675) the stock market dropped at $16 billion and lost 50% of its value. The market went into a free fall and people who bought on margin couldn't pay back brokers. People couldn't repay bank loans so banks ran out of money and people rushed to withdraw their money all at once.

Banks used people's money to lend to others, but those others couldn't pay the banks back and so many people did not get their money back. Bank runs began, a mass of nervous people all withdrew money at once, as there wasn't enough money and 4000 banks failed by 1933 (Aryes 676). Farm failure farmers couldn't pay banks for land so the banks foreclosed on their property, which means the banks essentially confiscated the land. Banks couldn't even sell the land they foreclosed because no one could afford to buy it.

Farmers revolted against judges who ruled their land to be taken away and so farmers couldn't sell their food and prices decreased by 50% (Aryes 676). Unemployment soared to 25% and in some places, such as African American neighborhoods of Harlem, had even higher rates of up to 50% (Markowitz n Rosen). People couldn't provide for their families and were ashamed to take handouts. They felt like failures and were angry at the United States. For example, the story of Jose Yglesias, who worked in a cigar factory, could not afford to pay his rent (Turkel 107).

Hoover failed to stop the crisis. Just a few months into the Depression he said that the worst had passed. People thought he was out of touch and didn't care about them. President Hoover believed that government shouldn't give direct help and the employers should help people help themselves. (Professor Byrd's Slides). Eventually, Hoover saw he had to do something, so he asked businesses to keep wages, employment, and prices at the current level. He called for tax cuts, public works, lower interest, and even asked wealthy to donate, which is called volunteerism.

Hoover believed that problems were best solved at local or state level. However, states did not have the resources to help, causing the country to continue to slip (Ayers 688-689). Despite facing an economic crisis during the late twenties and early thirties— social change was still able to flourish within the nation. Government policies contributed to great social and economic changes in America. Modernists fought fundamentalist's views, urban and rural cultures clashed, women were fighting to break out of the societal stereotype, Harlem was experiencing a renaissance, and prohibition policies lead to a great deal of illegal activities; while the American economy was collapsing. America's diverse population allows for immense social changes despite the troubles experienced in difficult times.