The Depression In The U.S.–An Overview Essay, Research Paper

The Great Depression

In October 1929 the stock market crashed, wiping

out 40 percent of the paper values of common stock. Even after the stock market collapse,

however, politicians and industry leaders continued to issue optimistic predictions for

the nation’s economy. But the Depression deepened, confidence evaporated and many lost

their life savings. By 1933 the value of stock on the New York Stock Exchange was less

than a fifth of what it had been at its peak in 1929. Business houses closed their doors,

factories shut down and banks failed. Farm income fell some 50 percent. By 1932

approximately one out of every four Americans was unemployed.

The core of the problem was the immense disparity

between the country’s productive capacity and the ability of people to consume. Great

innovations in productive techniques during and after the war raised the output of

industry beyond the purchasing capacity of U.S. farmers and wage earners. The savings of

the wealthy and middle class, increasing far beyond the possibilities of sound investment,

had been drawn into frantic speculation in stocks or real estate. The stock market

collapse, therefore, had been merely the first of several detonations in which a flimsy

structure of speculation had been leveled to the ground.

The presidential campaign of 1932 was chiefly a

debate over the causes and possible remedies of the Great Depression. Herbert Hoover,

unlucky in entering The White House only eight months before the stock market crash, had

struggled tirelessly, but ineffectively, to set the wheels of industry in motion again.

His Democratic opponent, Franklin D. Roosevelt, already popular as the governor of New

York during the developing crisis, argued that the Depression stemmed from the U.S.

economy’s underlying flaws, which had been aggravated by Republican policies during the

1920s. President Hoover replied that the economy was fundamentally sound, but had been

shaken by the repercussions of a worldwide depression — whose causes could be traced back

to the war. Behind this argument lay a clear implication: Hoover had to depend largely on

natural processes of recovery, while Roosevelt was prepared to use the federal

government’s authority for bold experimental remedies.

The election resulted in a smashing victory for

Roosevelt, who won 22,800,000 votes to Hoover’s 15,700,000. The United States was about to

enter a new era of economic and political change.

Roosevelt and the New Deal

In 1933 the new president, Franklin Roosevelt,

brought an air of confidence and optimism that quickly rallied the people to the banner of

his program, known as the New Deal. "The only thing we have to fear is fear

itself," the president declared in his inaugural address to the nation.

In a certain sense, it is fair to say that the

New Deal merely introduced types of social and economic reform familiar to many Europeans

for more than a generation. Moreover, the New Deal represented the culmination of a

long-range trend toward abandonment of "laissez-faire" capitalism, going back to

the regulation of the railroads in the 1880s, and the flood of state and national reform

legislation introduced in the Progressive era of Theodore Roosevelt and Woodrow Wilson.

What was truly novel about the New Deal, however,

was the speed with which it accomplished what previously had taken generations. In fact,

many of the reforms were hastily drawn and weakly administered; some actually contradicted

others. And during the entire New Deal era, public criticism and debate were never

interrupted or suspended; in fact, the New Deal brought to the individual citizen a sharp

revival of interest in government.

When Roosevelt took the presidential oath, the

banking and credit system of the nation was in a state of paralysis. With astonishing

rapidity the nation’s banks were first closed — and then reopened only if they were

solvent. The administration adopted a policy of moderate currency inflation to start an

upward movement in commodity prices and to afford some relief to debtors. New governmental

agencies brought generous credit facilities to industry and agriculture. The Federal

Deposit Insurance Corporation (FDIC) insured savings-bank deposits up to $5,000, and

severe regulations were imposed upon the sale of securities on the stock exchange.

Unemployment

By 1933 millions of Americans were out of work.

Bread lines were a common sight in most cities. Hundreds of thousands roamed the country

in search of food, work and shelter. "Brother, can you spare a dime?" went the

refrain of a popular song.

An early step for the unemployed came in the form

of the Civilian Conservation Corps (CCC), a program enacted by Congress to bring relief to

young men between 18 and 25 years of age. Run in semi-military style, the CCC enrolled

jobless young men in work camps across the country for about $30 per month. About 2

million young men took part during the decade. They participated in a variety of

conservation projects: planting trees to combat soil erosion and maintain national

forests; eliminating stream pollution; creating fish, game and bird sanctuaries; and

conserving coal, petroleum, shale, gas, sodium and helium deposits.

Work relief came in the form of the Civil Works

Administration. Although criticized as "make work," the jobs funded ranged from

ditch digging to highway repairs to teaching. Created in November 1933, it was abandoned

in the spring of 1934. Roosevelt and his key officials, however, continued to favor

unemployment programs based on work relief rather than welfare.

Agriculture

The New Deal years were characterized by a belief

that greater regulation would solve many of the country’s problems. In 1933, for example,

Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to

farmers. The AAA had at its core a plan to raise crop prices by paying farmers a subsidy

to compensate for voluntary cutbacks in production. Funds for the payments would be

generated by a tax levied on industries that processed crops. By the time the act had

become law, however, the growing season was well underway, and the AAA encouraged farmers

to plow under their abundant crops. Secretary of Agriculture Henry A. Wallace called this

activity a "shocking commentary on our civilization." Nevertheless, through the

AAA and the Commodity Credit Corporation, a program which extended loans for crops kept in

storage and off the market, output dropped.

Between 1932 and 1935, farm income increased by

more than 50 percent, but only partly because of federal programs. During the same years

that farmers were being encouraged to take land out of production — displacing tenants

and sharecroppers — a severe drought hit the Great Plains states, significantly reducing

farm production. Violent wind and dust storms ravaged the southern Great Plains in what

became known as the "Dust Bowl," throughout the 1930s, but particularly from

1935 to 1938. Crops were destroyed, cars and machinery were ruined, people and animals

were harmed. Approximately 800,000 people, often called "Okies," left Arkansas,

Texas, Missouri and Oklahoma during the 1930s and 1940s. Most headed farther west to the

land of myth and promise, California. The migrants were not only farmers, but also

professionals, retailers and others whose livelihoods were connected to the health of the

farm communities. California was not the place of their dreams, at least initially. Most

migrants ended up competing for seasonal jobs picking crops at extremely low wages.

The government provided aid in the form of the

Soil Conservation Service, established in 1935. Farm practices that had damaged the soil

had intensified the severity of the storms, and the Service taught farmers measures to

reduce erosion. In addition, almost 30,000 kilometers of trees were planted to break the

force of winds.

Although the AAA had been mostly successful, it

was abandoned in 1936, when the tax on food processors was ruled unconstitutional. Six

weeks later Congress passed a more effective farm-relief act, which authorized the

government to make payments to farmers who reduced plantings of soil-depleting crops –

thereby achieving crop reduction through soil conservation practices.

By 1940 nearly 6 million farmers were receiving

federal subsidies under this program. The new act likewise provided loans on surplus

crops, insurance for wheat and a system of planned storage to ensure a stable food supply.

Soon, prices of agricultural commodities rose, and economic stability for the farmer began

to seem possible.

Industry and Labor

The National Recovery Administration (NRA),

established in 1933 with the National Industrial Recovery Act (NIRA), attempted to end

cut-throat competition by setting codes of fair competitive practice to generate more jobs

and thus more buying. Although the NRA was welcomed initially, business complained

bitterly of over-regulation as recovery began to take hold. The NRA was declared

unconstitutional in 1935. By this time other policies were fostering recovery, and the

government soon took the position that administered prices in certain lines of business

were a severe drain on the national economy and a barrier to recovery.

It was also during the New Deal that organized

labor made greater gains than at any previous time in American history. NIRA had

guaranteed to labor the right of collective bargaining (bargaining as a unit representing

individual workers with industry). Then in 1935 Congress passed the National Labor

Relations Act, which defined unfair labor practices, gave workers the right to bargain

through unions of their own choice and prohibited employers from interfering with union

activities. It also created the National Labor Relations Board to supervise collective

bargaining, administer elections and ensure workers the right to choose the organization

that should represent them in dealing with employers.

The great progress made in labor organization

brought working people a growing sense of common interests, and labor’s power increased

not only in industry but also in politics. This power was exercised largely within the

framework of the two major parties, however, and the Democratic Party generally received

more union support than the Republicans.

The Second New Deal

In its early years, the New Deal sponsored a

remarkable series of legislative initiatives and achieved significant increases in

production and prices — but it did not bring an end to the Depression. And as the sense

of immediate crisis eased, new demands emerged. Businessmen mourned the end of

"laissez-faire" and chafed under the regulations of the NIRA. Vocal attacks also

mounted from the political left and right as dreamers, schemers and politicians alike

emerged with economic panaceas that drew wide audiences of those dissatisfied with the

pace of recovery. They included Francis E. Townsend’s plan for generous old-age pensions;

the inflationary suggestions of Father Coughlin, the radio priest who blamed international

bankers in speeches increasingly peppered with anti-Semitic imagery; and most formidably,

the "Every Man a King" plan of Huey P. Long, senator and former governor of

Louisiana, the powerful and ruthless spokesman of the displaced who ran the state like a

personal fiefdom. (If he had not been assassinated, Long very likely would have launched a

presidential challenge to Franklin Roosevelt in 1936.)

In the face of these pressures from left and

right, President Roosevelt backed a new set of economic and social measures. Prominent

among these were measures to fight poverty, to counter unemployment with work and to

provide a social safety net.

The Works Progress Administration (WPA), the

principal relief agency of the so-called second New Deal, was an attempt to provide work

rather than welfare. Under the WPA, buildings, roads, airports and schools were

constructed. Actors, painters, musicians and writers were employed through the Federal

Theater Project, the Federal Art Project and the Federal Writers Project. In addition, the

National Youth Administration gave part-time employment to students, established training

programs and provided aid to unemployed youth. The WPA only included about three million

jobless at a time; when it was abandoned in 1943 it had helped a total of 9 million

people.

But the New Deal’s cornerstone, according to

Roosevelt, was the Social Security Act of 1935. Social Security created a system of

insurance for the aged, unemployed and disabled based on employer and employee

contributions. Many other industrialized nations had already enacted such programs, but

calls for such an initiative in the United States by the Progressives in the early 1900s

had gone unheeded. Although conservatives complained that the Social Security system went

against American traditions, it was actually relatively conservative. Social Security was

funded in large part by taxes on the earnings of current workers, with a single fixed rate

for all regardless of income. To Roosevelt, these limitations on the programs were

compromises to ensure passage. Although its origins were initially quite modest, Social

Security today is one of the largest domestic programs administered by the U.S.

government.

A New Coalition

In 1936, the Republican Party nominated Alfred M.

Landon, the relatively liberal governor of Kansas, to oppose Roosevelt. Despite all the

complaints leveled at the New Deal, Roosevelt won an even more decisive victory than in

1932. He took 60 percent of the population and carried all states except Maine and

Vermont. In this election, a broad new coalition aligned with the Democratic Party

emerged, consisting of labor, most farmers, immigrants and urban ethnic groups from East

and Southern Europe, African Americans and the South. The Republican Party received the

support of business as well as middle-class members of small towns and suburbs. This

political alliance, with some variation and shifting, remained intact for several decades.

From 1932 to 1938 there was widespread public

debate on the meaning of New Deal policies to the nation’s political and economic life. It

became obvious that Americans wanted the government to take greater responsibility for the

welfare of the nation. Indeed, historians generally credit the New Deal with establishing

the foundations of the modern welfare state in the United States. Some New Deal critics

argued that the indefinite extension of government functions would eventually undermine

the liberties of the people. But President Roosevelt insisted that measures fostering

economic well-being would strengthen liberty and democracy.

In a radio address in 1938, Roosevelt reminded

the American people that:

Democracy has disappeared in several other great

nations, not because the people of those nations disliked democracy, but because they had

grown tired of unemployment and insecurity, of seeing their children hungry while they sat

helpless in the face of government confusion and government weakness through lack of

leadership….Finally, in desperation, they chose to sacrifice liberty in the hope of

getting something to eat. We in America know that our democratic institutions can be

preserved and made to work. But in order to preserve them we need…to prove that the

practical operation of democratic government is equal to the task of protecting the

security of the people….The people of America are in agreement in defending their

liberties at any cost, and the first line of the defense lies in the protection of

economic security.

Eve of World War II

Before Roosevelt’s second term was well under

way, his domestic program was overshadowed by a new danger little noted by average

Americans: the expansionist designs of totalitarian regimes in Japan, Italy and Germany.

In 1931 Japan invaded Manchuria and crushed Chinese resistance; a year later the Japanese

set up the puppet state of Manchukuo. Italy, having succumbed to fascism, enlarged its

boundaries in Libya and in 1935 attacked Ethiopia. Germany, where Adolf Hitler had

organized the National Socialist Party and seized the reins of government in 1933,

reoccupied the Rhineland and undertook large-scale rearmament.

As the real nature of totalitarianism became

clear, and as Germany, Italy and Japan continued their aggression, American apprehension

fueled isolationist sentiment. In 1938, after Hitler had incorporated Austria into the

German Reich, his demands for the Sudetenland of Czechoslovakia made war seem possible at

any moment in Europe. The United States, disillusioned by the failure of the crusade for

democracy in World War I, announced that in no circumstances could any country involved in

the conflict look to it for aid. Neutrality legislation, enacted piecemeal from 1935 to

1937, prohibited trade with or credit to any of the warring nations. The objective was to

prevent, at almost any cost, the involvement of the United States in a non-American war.

With the Nazi assault on Poland in 1939 and the

outbreak of World War II, isolationist sentiment increased, even though Americans were far

from neutral in their feelings about world events. Public sentiment clearly favored the

victims of Hitler’s aggression and supported the Allied powers that stood in opposition to

German expansion. Under the circumstances, however, Roosevelt could only wait until public

opinion regarding U.S. involvement was altered by events.

With the fall of France and the air war against

Britain in 1940, the debate intensified between those who favored aiding the democracies

and the isolationists, organized around the America First Committee, whose support ranged

from Midwestern conservatives to left-leaning pacifists. In the end, the interventionist

argument won a protracted public debate, aided in large measure by the work of the

Committee to Defend America by Aiding the Allies.

The United States joined Canada in a Mutual Board

of Defense, and aligned with the Latin American republics in extending collective

protection to the nations in the Western Hemisphere. Congress, confronted with the

mounting crisis, voted immense sums for rearmament, and in September 1940 passed the first

peacetime conscription bill ever enacted in the United States — albeit by a margin of one

vote in the House of Representatives. In early 1941 Congress approved the Lend-Lease

Program, which enabled President Roosevelt to transfer arms and equipment to any nation

(notably Great Britain, the Soviet Union and China) deemed vital to the defense of the

United States. Total Lend-Lease aid by war’s end amounted to more than $50,000 million.

The 1940 presidential election campaign

demonstrated that the isolationists, while vocal, commanded relatively few followers

nationally. Roosevelt’s Republican opponent, Wendell Wilkie, lacked a compelling issue

since he supported the president’s foreign policy, and also agreed with a large part of

Roosevelt’s domestic program. Thus the November election yielded another majority for

Roosevelt. For the first time in U.S. history, a president was elected to a third term.

Japan, Pearl Harbor and War

While most Americans anxiously watched the course

of the European war, tension mounted in Asia. Taking advantage of an opportunity to

improve its strategic position, Japan boldly announced a "new order" in which it

would exercise hegemony over all of the Pacific. Battling for its survival against Nazi

Germany, Britain was unable to resist, withdrawing from Shanghai and temporarily closing

the Burma Road. In the summer of 1940, Japan won permission from the weak Vichy government

in France to use airfields in Indochina. By September the Japanese had joined the

Rome-Berlin Axis. As a countermove, the United States imposed an embargo on export of

scrap iron to Japan.

It seemed that the Japanese might turn southward

toward the oil, tin and rubber of British Malaya and the Dutch East Indies. In July 1941

the Japanese occupied the remainder of Indochina; the United States, in response, froze

Japanese assets.

General Hideki Tojo became prime minister of

Japan in October 1941. In mid-November, he sent a special envoy to the United States to

meet with Secretary of State Cordell Hull. Among other things, Japan demanded that the

U.S. release Japanese assets and stop U.S. naval expansion in the Pacific. Hull countered

with a proposal for Japanese withdrawal from China and Indochina in exchange for the

freeing of the frozen assets. The Japanese asked for two weeks to study the proposal, but

on December 1 rejected it. On December 6, Franklin Roosevelt appealed directly to the

Japanese emperor, Hirohito. On the morning of December 7, however, Japanese carrier-based

planes attacked the U.S. Pacific fleet at Pearl Harbor, Hawaii, in a devastating, surprise

attack. Nineteen ships, including five battleships, and about 150 U.S. planes were

destroyed; more than 2,300 soldiers, sailors and civilians were killed. Only one fact

favored the Americans that day: the U.S. aircraft carriers that would play such a critical

role in the ensuing naval war in the Pacific were at sea and not anchored at Pearl Harbor.

As the details of the Japanese raids upon Hawaii,

Midway, Wake and Guam blared from American radios, incredulity turned to anger at what

President Roosevelt called "a day that will live in infamy." On December 8,

Congress declared a state of war with Japan; three days later Germany and Italy declared

war on the United States.

The nation rapidly geared itself for mobilization

of its people and its entire industrial capacity. On January 6, 1942, President Roosevelt

announced staggering production goals: delivery in that year of 60,000 planes, 45,000

tanks, 20,000 antiaircraft guns and 18 million deadweight tons of merchant shipping. All

the nation’s activities — farming, manufacturing, mining, trade, labor, investment,

communications, even education and cultural undertakings — were in some fashion brought

under new and enlarged controls. The nation raised money in enormous sums and created

great new industries for the mass production of ships, armored vehicles and planes. Major

movements of population took place. Under a series of conscription acts, the United States

brought the armed forces up to a total of 15,100,000. By the end of 1943, approximately 65

million men and women were in uniform or in war-related occupations.

The attack on the United States disarmed the

appeal of isolationists and permitted quick military mobilization. However, as a result of

Pearl Harbor and the fear of Asian espionage, Americans also committed an act of

intolerance: the internment of Japanese-Americans. In February 1942, nearly 120,000

Japanese-Americans residing in California were removed from their homes and interned

behind barbed wire in 10 wretched temporary camps, later to be moved to "relocation

centers" outside isolated Southwestern towns. Nearly 63 percent of these

Japanese-Americans were Nisei — American-born — and, therefore, U.S. citizens. No

evidence of espionage ever surfaced. In fact, Japanese-Americans from Hawaii and the

continental United States fought with noble distinction and valor in two infantry units on

the Italian front. Others served as interpreters and translators in the Pacific. In 1983

the U.S. government acknowledged the injustice of internment with limited payments to

those Japanese-Americans of that era who were still living.

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