Chapter 22 The Great Depression Begins
Section 1 The Nation’s Sick Economy
Economic Troubles on the Horizon • During the 1920s, the economy boomed. But there were economic problems under the surface. • industries., such as clothing, steel-making, and mining, were hardly making a profit. • Many industries had been successful, but by the late 1920s, they were losing business. • These industries included auto manufacturing, construction, and consumer goods. • The biggest problems were in farming. • Many farmers could not make the mortgage payment on their farms.
Continued • Congress tried to help farmers by passing price supports-law that keeps prices above a set level. • With price supports, the government would not allow food prices to fall below a certain level. • Americans were buying less: • Many found that prices were rising faster than salaries. • Many people bought on credit-an arrangement in which consumers agreed to make monthly payments with interest. • A small number of rich people were getting richer.
Hoover Takes the Nation • The Republican Herbert Hoover easily defeated the Democratic challenger, Alfred E. Smith. • People believed Hoover when he said the American economy was healthy. • The Dow Jones Industrial Average-a measure of 30 popular stocks, was way up. • Many people were engaging in speculation-buying risky stocks in hopes of a quick profit. • To do so, they were buying on margin-paying just a small amount and borrowing the rest.
The Stock Market Crashes • On Tuesday, October 29, 1929, called Black Tuesday, prices fell so sharply that people said the market had “crashed.” • Financial Collapse: • The stock market crash signaled the Great Depression-period of bad economic times when many people were out of work, lasted from 1929-1940. • The situation became worse when Congress passed the Hawley-Smoot Tariff Act-law that raised taxes on imports and worsened the Depression.
Continued • The Great Depression had several causes: • Tariffs and war debt policies that cut down the foreign market for American goods. • A crisis in the farm sector. • The availability of east credit. • An unequal distribution of income.
Section 2 Hardship and Suffering During the Depression
The Depression Devastates People’s Lives • The Depression brought suffering and hardship to many Americans. • Cities across the country were full of homeless people. • Some built shantytowns-where they lived in little shacks they made out of scrap material. • Some ate in soup kitchens-charities served free food to the needy. • Those who could not afford to buy food stood in bread lines to receive free food.
Continued • From 1929 to 1932, about 400,000 farmers lost their land. • The soil was exhausted from over-farming. • When powerful winds swept across the Great Plains, the soil simply blew away. • This dry area of blowing soil was called the Dust Bowl. • Many Oklahoma farmers packed up their belongings and started for California to look for work. • They became migrant workers, moving from place to place to pick crops. • Because so many of them came from Oklahoma, migrant workers were often called Okies.
Effects on the American Family. • Children suffered terribly from poverty and the break-up of families. • Many children had poor diets and no health care. • Their parents could not afford to buy healthy food or to pay doctor bills. • During the early years of the Great Depression, the federal government did not give direct relief-cash or food directly to poor people.
Section 3 Hoover Struggles with the Depression
Hoover Tries to Reassure the Nation • At first Herbert Hoover (31st president) believed that the Great Depression was just another slow-down that would end on its own. • Hoover believed government should help different groups work together to improve the economy. • Hoover also believed in “rugged individualism”-the idea that people should succeed through their own efforts. • He believed people should take care of themselves and each other, and that the government should encourage private groups to help the needy.
Continued • He thought that charities-not government-should give food and shelter to people who were poor or out of work. • One project that did help was the Boulder Dam-a huge dam on the Colorado River, built to help create jobs during the Depression. (1,244ft. long, 726ft. high. Tallest in the world, Hoover Dam today.) • Farmers burned crops and dumped milk rather than sell it for less than it cost them to produce it. • People called the shanytowns that sprang up “Hoovervilles.”
Hoover Takes Action • Hoover did not offer direct aid to the poor. • He tried to help farmers with the Federal Farm Board, and banks by creating the National Credit Corporation. • By 1931, the economy had not improved. • Congress passed the Federal Home Loan Bank Act-this law lowered mortgage rates. • Congress hoped that low mortgage rates would help farmers change the terms of there mortgages. • This would help protect there farms from foreclosure.
Continued • Hoover also created the Reconstruction Finance Corporation-provided money for projects to create jobs. • Thousands of veterans and their families came to Washington. • This so-called Bonus Army set up tents to live in near the Capitol Building. • The Bonus Army was made up of unemployed WWI veterans who marched to Washington to demand their war bonuses.