U.S. History Chapter 18
 

Problems Developing:

  • Old industries suffering
     
    • Railroads
      • Government regulation
      • Competition from trucks, buses, and cars
       
    • Textiles
      • Mills began to move from North to South because of nearness to cotton and non union, cheap labor
      • Foreign competition
      • Change in women's clothing which called for less cloth
       
    • Coal Mining
      • Had expanded to meet wartime needs but when war ended demand dropped off
      • Oil, natural gas, and hydroelectric power cut demand further
      • Union wages kept costs of production high
       
    • Farming
      • Farmers expanded operations during the war by buying new farm equipment and amazing the world with their rate of production.

      The number of tractor manufacturers peaked in 1921 with 186 different firms trying to entice farmers to buy their tractors.
      The next decade saw amazing changes in the technology, and more and more farmers moving from farming with horses to farming with tractors.

      It took a farmer an hour and a half to till an acre of ground with five horses and a gang plow. With a 27-horsepower tractor and a moldboard plow, it took only a half-hour to plow an acre and only 15 minutes with a 35-horsepower tractor and a moldboard plow.

      Today, using a 154-horsepower tractor and a chisel plow, a farmer can till an acre in five minutes.
       
      • Farmers paid for expansion with borrowed money
      • In 1920 the price of many staple crops fell 50%, mostly due to foreign competition
      • Demand fell
      • Farmers tried to get out of this by expanding more
      • Mostly just added to their debt
      • Output was tremendous but demand came nowhere near meeting it
       
    • Rich getting richer and poor getting poorer
      • In 1929 3/5 of the nation's wealth was held by 2% of the people
      • This meant that the majority of the people could not afford to buy products that companies were turning out in great numbers
      • The rich invested heavily in the stock market as something to do with their great wealth
      • The less wealthy invested hoping to get rich quick
      • Many bought on margin
        • Pay a percentage of the stock's cost and borrow the rest from a stockbroker
          • Pay him back when price of stock rises
          • Drove stock prices artificially high
       
    • Presidential Electon of 1928
         

    • Signs that the boom was over
      • Housing starts and other forms of construction were down
      • Business inventories were three times higher than the previous year
        • People weren't buying
        • Production and prices declined as a result
      • Farmers had huge surpluses
       
    • Stock Market Crash
      • Shrewd speculators saw signs and sold their stock
      • Most kept buying
      • In October 1929 prices began to drop
      • People who bought on margin began to sell to cover their loans
      • Black Tuesday - October 29, 1929
        • People started frantically selling their stock before prices went any lower
        • This went on for two weeks
        • Millions of shares could not find buyers
        • By mid November $30 billion had been lost
       
    • The Great Depression
       
      • America from the Great Depression to World War II - Library of Congress
         
      • Causes
        • Uneven distribution of income
          • About half of families lived at or below poverty level
          • No buying power
          • Production did not match consumption
        • Easy credit
          • Lots of debt
          • Installment plans
          • Stock speculation
            • Banks lent money and many failed when the stock market crashed and life savings were lost
        • Unbalanced foreign trade
          • High tariffs lessened buying power of foreign countries to buy American goods
          • Debt from WWI lessened foreign buying power
          • Countries retaliated against high tariffs by not buying
        • Mechanization
          • Fewer people needed as workers
          • Machines do not buy goods
         
      • Scope
        • National income (total payments to producers of nation's goods and services) was cut in half
        • 85,000 businesses closed
        • 400,000 farms lost
        • 6000 banks (1/4 of total) failed
          • 9 million savings accounts wiped out
        • 16 million people (1/3 of labor force) unemployed
        • Widespread hunger and extreme poverty
        • Admissions to insane hospitals tripled
        • 2600 schools closed
        • Drought worsened problems for farmers
         
      • Hoover's response
        • Established some policies to try to help businesses get back on their feet which did not help very much
        • Opposed direct federal relief
          • Increase size of government
          • Weaken self respect
        • Hoover blamed
        • Hoovervilles (shanty town)
       
    • The Story of Tobacco Bag Stringing - University of North Carolina Libraries
       
    • Although it is not politically neutral, Stuck On Stupid has a great summary of the Great Depression.