began on "Black
" with the Wall
Street Crash of October, 1929
and rapidly spread worldwide. The
market crash marked the beginning of a decade of high unemployment,
poverty, low profits, deflation
farm incomes, and lost opportunities for economic growth and
personal advancement. Although its causes
uncertain and controversial, the net effect was a sudden and
general loss of confidence in the economic future. The usual
explanations include numerous factors, especially high consumer
, ill-regulated markets that permitted
malfeasance by banks and investors, cutbacks in foreign trade, lack
of high-growth new industries, and growing wealth inequality
, all interacting to
create a downward economic spiral of reduced spending, falling
confidence, and lowered production.
The initial government response to the crisis exacerbated the
situation; protectionist policies like the 1930 Smoot-Hawley Tariff Act
in the U.S.
strangled global trade as other nations retaliated against the U.S.
Industries that suffered the most included agriculture, mining, and
logging as well as durable goods like construction and automobiles
that people postponed.
The economy eventually recovered from the low point of the winter
of 1932-33, with sustained improvement until 1937, when the
Recession of 1937
1934 levels of unemployment.
USA GDP annual pattern and long-term
trend, 1920-40, in billions
USA GDP annual pattern and long-term trend, 1920-40, in
Political results of the depression
The depression caused major political changes in the United States.
's failure to prevent
the depression caused him to lose the United States
presidential election, 1932
to Franklin Delano Roosevelt
Roosevelt's economic recovery plan, the New
, instituted unprecedented large-scale federal relief
programs aimed to aid the agricultural industry and support labor
From 1933 to 1936 President Roosevelt argued a reconstruction of
the economy would be needed to prevent another, or avoid
prolonging, the current depression. New Deal programs, such as the
National Recovery Administration (NRA), sought to stimulate demand
and provide work and relief for the impoverished through increased
government spending. A series of panels comprising business leaders
in each industry set regulations which ended what was called
"cut-throat competition," which kept forcing up prices and profits
The NRA, which ended in 1939, had these roles:
- Setting maximum prices and wages
and competitive conditions in all industries. (NRA)
- Encouraging unions that would raise wages, to increase the
purchasing power of the working class by 93%. (NRA)
- Cutting farm production so as to raise prices and make it
possible to earn a living in farming (done by the AAA and successor farm
These reforms (together with relief and recover measures) are
called by historians the First New
. It was centered around the use of an alphabet soup
of agencies set up
in 1933 and 1934, along with the use of previous agencies such as
, to regulate and stimulate the economy. By
1935, the "Second New Deal
(WPA), a national relief agency; and, through
the National Labor
, a strong stimulus to the growth of labor
unions. Unemployment fell by two-thirds in Roosevelt's first term
(from 25% to 9%, 1933 to 1937) but then remained high until
In 1929, federal expenditures constituted only 20% of the GDP
. Between 1933 and 1939, they
tripled, but the national debt remained about level at 40% of GNP.
(The debt as proportion of GNP rose under Hoover from 20% to 40%;
the debt as % of GDP soared during the war years, 1941-45.) After
the Recession of 1937
Republican victories in the 1938 elections, opponents of the New
Deal,who called themselves conservatives, formed a bipartisan
stop further expansion of the New Deal and, by 1943, they had
abolished all of the relief programs. Social Security continued.
The labor laws were revised by conservatives in the Taft Hartley Act
of 1947. The New Deal was,
and still is, controversial and widely debated. One small voluntary
response survey from 85 PhD holding members of the Economic History
Society, which the author stated may not be not representative of
all economic historians, showed that there were statistically
different opinions between economic historians who taught or
studied economic history and those that taught or studied economic
theory. The former were in consensus that the New Deal did not
lengthen and deepen the depression, while the latter were more
evenly divided. The Great Depression and the New Deal remain a
benchmark amongst economists for evaluating severe financial
downturns, such as the economic
crisis of 2008
Recession of 1937
Total employment in the United States
from 1920 to 1940, excluding farms and WPA
By 1936, all the main economic indicators had regained the levels
of the late 1920s, except for unemployment, which remained high. In
1937, the American economy unexpectedly fell, lasting through most
of 1938. Production declined sharply, as did profits and
employment. Unemployment jumped from 14.3% in 1937 to 19.0% in
The Roosevelt Administration reacted by launching a rhetorical
campaign against monopoly power, which was cast as the cause of the
depression, and appointing Thurman
to act; Arnold was not effective, and the attack ended
once World War II
began and corporate
energies had to be directed to winning the war. By 1939, the
effects of the 1937 recession had disappeared. Employment in
private sector factories recovered to the level of the late 1920s
by 1937, but did not grow much bigger until the war came and
manufacturing employment leaped from 11 million in 1940 to 18
million in 1943.
Another response to the 1937 deepening of the Great Depression had
more tangible results. Ignoring the pleas of the Treasury
Department, Roosevelt embarked on an antidote to the
depression, reluctantly abandoning his efforts to balance the
budget and launching a $5 billion spending program in the spring of
1938, in an effort to increase mass purchasing power.
Business-oriented observers explained the recession and recovery in
very different terms from the Keynesians. They argued the New Deal
had been very hostile to business expansion in 1935–37, had
encouraged massive strikes which had a negative impact on major
industries such as automobiles, and had threatened massive
anti-trust legal attacks on big corporations. All those threats
diminished sharply after 1938. For example, the antitrust efforts
fizzled out without major cases. The CIO and AFL unions started
battling each other more than corporations, and tax policy became
more favorable to long-term growth.
On the other hand, according to economist Robert Higgs, when
looking only at the supply of consumer goods, significant GDP
growth only resumed in 1946. (Higgs does not estimate the value to
consumers of collective goods like victory in war) To Keynesians,
the war economy showed just how large the fiscal stimulus required
to end the downturn of the Depression was, and it led, at the time,
to fears that as soon as America demobilized, it would return to
Depression conditions and industrial output would fall to its
pre-war levels. The incorrect prediction by Alvin Hansen
and other Keynesians that a new
depression would start after the war failed to take account of
pent-up consumer demand as a result of the Depression and World
A factory worker in 1942.
The government began heavy military spending in 1940, and started
drafting millions of young men that year; by 1945, 17 million had
entered service to their country. But that was not enough to absorb
all the unemployed. During the war, the government subsidized wages
through cost-plus contracts. Government contractors were paid in
full for their costs, plus a certain percentage profit margin. That
meant the more wages a person was paid the higher the company
profits since the government would cover them plus a percentage.
Using these cost-plus contracts in 1941-1943, factories hired
hundreds of thousands of unskilled workers and trained them, at
government expense. The military's own training programs
concentrated on teaching technical skills involving machinery,
engines, electronics and radio, preparing soldiers and sailors for
the post-war economy.
Structural walls were lowered dramatically during the war,
especially informal policies against hiring women, minorities, and
workers over 45 or under 18. (See FEPC
(except in coal mining) were sharply reduced as unions pushed their
members to work harder. Tens of thousands of new factories and
shipyards were built, with new bus services and nursery care for
children making them more accessible. Wages soared for workers,
making it quite expensive to sit at home. Employers retooled so
that unskilled new workers could handle jobs that previously
required skills that were now in short supply. The combination of
all these factors drove unemployment below 2% in 1943.
One visible effect of the depression was the advent of Hoovervilles
. "Hooverville" was the popular name
for a town of cardboard boxes built by homeless men. The term was
coined by Charles Michelson, publicity chief of the Democratic
National Committee, named in honor of president Herbert Hoover
whose policies were at the
time blamed for the depression. Residents lived in shacks and
begged for food or went to soup kitchens. Authorities did not
officially recognize these Hoovervilles and occasionally removed
the occupants for technically trespassing on private lands, but
they were frequently tolerated out of necessity. Democrats
popularized related terms such as "Hoover blanket" (old newspaper
used as blanketing) and "Hoover flag" (an empty pocket turned
inside out). "Hoover leather" was cardboard used to line a shoe
with the sole worn through. A "Hoover wagon" was an automobile
drawn by horse because the owner could not afford gasoline; in
Canada, these were known as Bennett
, after the Prime Minister.
Facts and figures
Effects of depression in the United States:
- 13 million people became unemployed. In 1932, 34 million people
belonged to families with no regular full-time wage earner.
- Industrial production fell by nearly 45% between the years 1929
- Homebuilding dropped by 80% between the years 1929 and
- In the 1920s, the banking system in the U.S. was about $50
billion, which was about 50% of GDP.
- From the years 1929 to 1932, about 5,000 banks went out of
- By 1933, 11,000 of the US' 25,000 banks had failed.
- Between 1929 and 1933, U.S. GDP fell around
30%, the stock market lost almost 90% of its value.
- In 1929, the unemployment rate averaged 3%.
- In 1933, 25% of all workers and 37% of all nonfarm workers were
Ohio, the unemployment rate was 60%; in Toledo, Ohio,
Soviet trading corporation in New York averaged 350 applications a
day from Americans seeking jobs in the Soviet Union.
- Over one million families lost their farms between 1930 and
- Corporate profits had dropped from $10 billion in 1929 to
$1billion in 1932.
- Between 1929 and 1932 the income of the average American family
was reduced by 40%.
- Nine million savings accounts had been wiped out between 1930
- 273,000 families had been evicted from their homes in
- There were two million homeless people migrating around the
- Over 60% of Americans were categorized as poor by the federal government
- In the last prosperous year (1929), there were 279,678 immigrants recorded, but in
1933 only 23,068 came to the U.S.
- In the early 1930s, more people emigrated from the United
States than immigrated to it.
- The U.S. government sponsored a Mexican Repatriation program which was
intended to encourage people to voluntarily move to Mexico, but
thousands were deported against their will. Altogether about
400,000 Mexicans were repatriated.
- New York social workers reported that 25% of all schoolchildren
were malnourished. In the mining
counties of West Virginia, Illinois, Kentucky, and Pennsylvania,
the proportion of malnourished children was perhaps as high as
- Many people became ill with diseases such as tuberculosis
- The 1930 U.S. Census determined the U.S. population to be 122,775,046. About 40%
of the population was under 20 years.
- Radio was a growth industry, but far smaller than the
automobile and electric power industries that were growth engines
- Lester Chandler, America's Greatest Depression
- Bernardit Bellushit, The Failure of the NRA
- Ellis Hawtley, The New Deal and the Problem of
- Broadus Mitchell, Depression Decade: From New Era through
New Deal, 1929-1941 (1964)
- Parker, ed. Reflections on the Great Depression
- Specifically, when asked whether "as a whole, government
policies of the New Deal served to lengthen and deepen the Great
Depression," 74% of respondents who taught or studied economic
history disagreed, 21% agreed with provisos, and 6% fully agreed.
Among respondents who taught or studied economic theory, 51%
disagreed, 22% agreed with provisos, and 22% fully agreed. Robert
Whaples, "Where Is There Consensus Among American Economic
Historians? The Results of a Survey on Forty Propositions,"
Journal of Economic History, Vol. 55, No. 1 (Mar., 1995),
pp. 139-154 in JSTOR see also the summary at
- Kennedy, Freedom from Fear (1999)
- Kenneth D. Roose, The Economics of Recession and Revival:
An Interpretation of 1937-38, (1969)
- Gene M. Gressley, "Thurman Arnold, Antitrust, and the New
Deal," Business History Review, Vol. 38, No. 2, pp.
214-231 in JSTOR
- Kenneth D. Roose, "The Recession of 1937-38" Journal of
Political Economy, Vol. 56, No. 3 (Jun., 1948) , pp. 239-248
- Gary Dean Best, Pride, Prejudice, and Politics: Roosevelt
Versus Recovery, 1933-1938 (1990) pp 175-216
- Robert Higgs, "Wartime Prosperity? A Reassessment of the U.S.
Economy in the 1940s," Journal of Economic History, Vol.
52, No. 1 (Mar., 1992), pp. 41-60
- Theodore Rosenof, Economics in the Long Run: New Deal
Theorists and Their Legacies, 1933-1993 (1997)
- Great Depression and World War II. The
Library of Congress.
- Paul A. C. Koistinen, Arsenal of World War II: The
Political Economy of American Warfare, 1940-1945 (2004)
- Jensen (1989); Edwin E. Witte, "What The War Is Doing to Us,"
Review of Politics, Vol. 5, No. 1 (Jan., 1943), pp. 3-25
- Harold G. Vester, The U.S. Economy in World War III
- Hans Kaltenborn, It Seems Like Yesterday (1956) p.
- Q&A: Lessons from the Great Depression, By
Barbara Kiviat, TIME, January 6, 2009
- About the Great Depression
- The Great Depression: The sequel, By Andrew
Leonard, salon.com, April 2, 2008
- Economic Recovery in the Great Depression, Frank G.
Steindl, Oklahoma State University
- Great Depression, The Concise Encyclopedia of
- Overproduction of Goods, Unequal Distribution of
Wealth, High Unemployment, and Massive Poverty, From:
President’s Economic Council
- A reign of rural terror, a world away, U.S.
News, June 22, 2003
- American History - 1930-1939
- Persons Obtaining Legal Permanent Resident Status
in the United States of America, Source: US Department of
- The Facts Behind the Current Controversy Over
Immigration, by Allan L. Damon, American Heritage
Magazine, December 1981
- A Great Depression?, by Steve H. Hanke,
- The Great Depression and New Deal, by Joyce
Bryant, Yale-New Haven Teachers Institute.
- 1931 U.S Census Report Contains 1930 Census
- Bernanke, Ben. Essays on the Great Depression
(Princeton University Press, 2000) Chapter One available online -
"The Macroeconomics of the Great Depression" at
- Bernanke, Ben. "Money, Gold, and the Great Depression" - Speech
given March 2, 2004; transcript at
- Best, Gary Dean. Pride, Prejudice, and Politics: Roosevelt
Versus Recovery, 1933-1938 (1991) ISBN 0275935248
- Best, Gary Dean. The Nickel and Dime Decade: American
Popular Culture during the 1930s. (1993) online edition
- Blumberg Barbara. The New Deal and the Unemployed: The View
from New York City (1977).
- Bordo, Michael D., Claudia Goldin, and Eugene N. White , eds.,
The Defining Moment: The Great Depression and the American
Economy in the Twentieth Century (1998). Advanced economic
- Bremer William W. "Along the American Way: The New Deal's Work
Relief Programs for the Unemployed." Journal of American
History 62 (December 1975): 636-652 online in JSTOR
- Cantril, Hadley and Mildred Strunk, eds.; Public Opinion,
1935-1946 (1951), massive compilation of many public opinion
polls online edition
- Chandler, Lester. America's Greatest Depression
(1970). overview by economic historian.
- Friedman, Milton and Anna J. Schwartz, A Monetary History
of the United States, 1867-1960 (1963) ISBN 0691041474 classic
monetarist explanation; highly statistical
- Grant, Michael Johnston. Down and Out on the Family Farm:
Rural Rehabilitation in the Great Plains, 1929-1945
- Hapke, Laura. Daughters of the Great Depression: Women,
Work, and Fiction in the American 1930s (1997)
- Hawley, Ellis W. The New Deal and the Problem of
Monopoly (1966), focus on NRA; by a conservative
- Himmelberg; Robert F. ed The Great Depression and the New
Deal (2001), short overview
- Howard Donald S. The WPA and Federal Relief Policy
- Jensen, Richard J., "The Causes and Cures of Unemployment in
the Great Depression," Journal of Interdisciplinary
History 19 (1989) 553-83 online in JSTOR
- Kehoe, Timothy J. and Edward C. Prescott. Great
Depressions of the Twentieth Century' Federal Reserve Bank of
- Kennedy, David. Freedom from Fear: The American People in
Depression and War, 1929-1945 (1999), wide-ranging survey by
leading scholar; online edition
- Klein, Maury. Rainbow's End: The Crash of 1929 (2001)
by economic historian
- Kubik, Paul J. "Federal Reserve Policy during the Great
Depression: The Impact of Interwar Attitudes regarding Consumption
and Consumer Credit" Journal of Economic Issues, Vol. 30,
- Lowitt, Richard and Beardsley Maurice, eds. One Third of a
Nation: Lorena Hickock Reports on the Great Depression
- Lynd Robert S., and Helen M. Lynd. Middletown in
Transition. 1937. sociological study of Muncie, Indiana
- McElvaine Robert S. The Great Depression 2nd ed (1993)
- Miller, Dorothy Laager "New York City in the Great Depression:
Sheltering the Homeless", 2009 Arcadia Publishing at
- Mitchell, Broadus. Depression Decade: From New Era through
New Deal, 1929-1941 (1964), overview of economic history
- Narasimhan, Krishnamoorthy. 2018. The Great Depression: a
corporate finance perspective. Thesis (Ph.D.) --Duke University,
- Parker, Randall E., ed. Reflections on the Great
Depression (2002) interviews with 11 leading economists
- Romasco Albert U. "Hoover-Roosevelt and the Great Depression: A
Historiographic Inquiry into a Perennial Comparison." In John
Braeman, Robert H. Bremner and David Brody, eds. The New Deal:
The National Level (1973) v 1 pp 3–26.
- Roose, Kenneth D. "The Recession of 1937-38" Journal of
Political Economy, Vol. 56, No. 3 (Jun., 1948) ,
pp. 239-248 online in JSTOR
- Rosen, Elliot A. Roosevelt, the Great Depression, and the
Economics of Recovery (2005) ISBN 0813923689
- Rothbard, Murray N.
Depression (1963), by leading libertarian economist
- Rothbard, Murray N.
America's Great Depression - Online PDF. URL
- Saloutos, Theodore. The American Farmer and the New
- Salsman, Richard M. “The Cause
and Consequences of the Great Depression” in The Intellectual
Activist, ISSN 0730-2355. Mr.
Salsman argues that the Great Depression was fundamentally
caused by statist government
policy, and ended only when government policy became less
statist and more laissez-faire.
- Part 1: “What Made the Roaring ’20s Roar”, June, 2004,
- Part 2: “Hoover’s Progressive
Assault on Business”, July, 2004, pp. 10–20.
- Part 3: “Roosevelt’s Raw
Deal”, August, 2004, pp. 9–20.
- Part 4: “Freedom and Prosperity”, January, 2005,
- Shlaes, Amity. The Forgotten
Man: A New History of the Great Depression (2007)
- Singleton, Jeff. The American Dole: Unemployment Relief and
the Welfare State in the Great Depression (2000)
- Sitkoff, Harvard. A New Deal for Blacks (1978).
- Smiley, Gene. Rethinking the Great Depression (2002)
ISBN 1566634725 economist blames Federal Reserve and gold
- Smith, Jason Scott. Building New Deal Liberalism: The
Political Economy of Public Works, 1933-1956 (2005).
- Sternsher, Bernard ed., Hitting Home: The Great Depression
in Town and Country (1970), readings on local history
- Szostak, Rick. Technological Innovation and the Great
- Temin; Peter. Did Monetary Forces Cause the Great
- Tindall George B. The Emergence of the New South,
1915-1945 (1967). History of entire region by leading
- Trout Charles H. Boston, the Great Depression, and the New
- Uys, Errol Lincoln. Riding the Rails: Teenagers on the Move
During the Great Depression (Routledge, 2003) ISBN
- Warren, Harris Gaylord. Herbert Hoover and the Great
- Watkins, T. H. The Great Depression: America in the
- Wecter, Dixon. The Age of the Great Depression,
- Wicker, Elmus. The Banking Panics of the Great
Depression 1996 online review
- White, Eugene N. "The Stock Market Boom and Crash of 1929
Revisited," The Journal of Economic Perspectives Vol. 4,
No. 2 (Spring, 1990), pp. 67-83, evaluates different theories
online in JSTOR
- Wheeler, Mark ed. The Economics of the Great Depression