III.

Economic Collapse (1929-1933)

The stock market crash was just the first dramatic phase of a prolonged economic collapse. Conditions continued to worsen for the next three years, as the confident, optimistic attitudes of the 1920s gave way to a sense of defeat and despair. Stock prices continued to decline. By late 1932 they were only about 20 percent of what they had been before the crash. With little consumer demand for products, hundreds of factories and mills closed, and the output of American manufacturing plants was cut almost in half from 1929 to 1932.

Unemployment in those three years soared from 3.2 percent to 24.9 percent, leaving more than 15 million Americans out of work. Some remained unemployed for years; those who had jobs faced major wage cuts, and many people could find only part-time work. Jobless men sold apples and shined shoes to earn a little money.

Many banks had made loans to businesses and people who now could not repay them, and some banks had also lost money by investing in the stock market. When depositors hit by the depression needed to withdraw their savings, the banks often did not have the money to give them. This caused other depositors to panic and demand their cash, ruining the banks. By the winter of 1932 to 1933, the banking system reached the point of nearly complete collapse; more than 5,000 banks failed by March 1933, wiping out the savings of millions of people.

As people lost their jobs and savings, mortgages on many homes and farms were foreclosed. Homeless people built shacks out of old crates and formed shantytowns, which were called “Hoovervilles” out of bitterness toward President Herbert Hoover, who refused to provide government aid to the unemployed.

The plight of farmers, who had been in a depression since 1920, worsened. Already low prices for their goods fell by 50 percent between 1929 and 1932. While many people went hungry, surplus crops couldn’t be sold for a profit.

Natural forces inflicted another blow on farmers. Beginning in Arkansas in 1930, a severe drought spread across the Great Plains through the middle of the decade. Once-productive topsoil turned to dust that was carried away by strong winds, piling up in drifts against houses and barns. Parts of Kansas, Oklahoma, Texas, New Mexico, and Colorado became known as the Dust Bowl, as the drought destroyed the livelihood of hundreds of thousands of small farmers. Packing up their families and meager possessions, many of these farmers migrated to California in search of work. Author John Steinbeck created an unforgettable fictional portrait of their fate in the novel The Grapes of Wrath (1939).