Great Depression

Annie Lee | Jul 3, 2022

Table of Content


The Great Depression is the global economic crisis that began on October 24, 1929 with the stock market crash in the United States and lasted until 1939 (most severely from 1929 to 1933). The 1930s are generally considered the period of the Great Depression.

In Russian historiography the term "Great Depression" is often used only in reference to the economic crisis in the United States. In parallel, the term world economic crisis is used.

The period of the early twentieth century was characterized by a series of "epochal events" in the history of the United States and humanity as a whole. World War I, mass immigration, race riots, rapid urbanization, the growth of giant industrial holdings, the advent of new technologies - electricity, automobiles, radio and cinema - along with new social phenomena such as Prohibition, birth control, the sexual revolution and emancipation (including suffrage for women) changed the way of life. This period also includes both the emergence of the advertising market and the consumer credit system.


Immigrants settled in all the states, but were poorly represented in the South - largely based in the industrial area of the Northeast. Unlike the first waves of immigrants, they were overwhelmingly "not drawn to the land" (they did not settle on their own farms, but in apartment buildings in large cities. With their arrival, urban America became a "multilingual archipelago," set in a predominantly Anglo-Protestant "sea" of rural America. Thus nearly a third of Chicago's 2.7 million residents in the 1920s were not born in the United States; more than a million of the city's residents were Catholic, and another 125,000 were Jewish. New Yorkers in those years spoke 37 languages, and only one in six New Yorkers attended a Protestant church.

Almost everywhere, immigrant communities clustered in ethnic enclaves where they sought, often unsuccessfully, both to preserve their cultural heritage and to become Americans. Unfamiliar with America before their arrival, they sought to be near those with whom they shared language and religion. Jewish neighborhoods, "little Italy" and "little Poland" became part of American cities while forming their own worlds: immigrants read newspapers and listened to radio programs in their native languages; they shopped in stores kept by their former compatriots; kept money in banks and dealt with insurance companies that catered exclusively to their ethnic group. Church services were also conducted in Old World languages; their children were educated in ethnic parochial schools, and the dead ended up in ethnic cemeteries. Immigrants often paid dues to mutual aid societies, which could help them in the event of "black days.

Moving to another continent was often not easy: immigrants mostly took the first job they could find, usually low-skilled work in heavy industry, garment production, or construction. Isolated from mainstream Americans by language and religion, they had both "scant" political representation and little participation in public life in general. Many of them returned to their homeland: almost a third of the Poles, Slovaks, and Croats gradually returned to Europe, as did almost half of the Italians; more than half of the Greeks, Russians, Romanians, and Bulgarians also returned to the Old World.

Many U.S.-born Americans continued to think of foreigners as a threat in those years. The influx of newcomers, markedly different from earlier waves, caused marked anxiety: the ability of American society to adjust to them was not evident. The revival of the Ku Klux Klan in 1915 was one extremist response to the "threat": "Klan riders" now rode in cars, and many of their victims were Jews or Catholics. By the early 1920s, the Klan, which claimed about five million members, dominated politics in two states, Indiana and Oregon. In 1929, public sentiment was reflected in legislation: the U.S. Congress legislated an era of virtually unlimited entry into the country. As a result, many of America's ethnic communities began to "stabilize.

City and countryside. The Agricultural Crisis

In many ways the rural ways of life in the United States at that time remained untouched by modernity and 50 million Americans lived in what Scott Fitzgerald called "the great gloom outside the city" - their lives continued to follow agricultural rhythms. In 1930, more than 45 million villagers had no running water or sewage, and almost none of them had access to electricity. Street toilets, wood stoves, and oil lamps were still in use; elements of subsistence farming (making soap, for example) were also part of daily life. The growing gap between urban and rural life in the late 19th century helped "ignite the populist agitation" (see Country life movement) that prompted President Theodore Roosevelt to create in 1908 the Commission on Country Life, headed by botanist Liberty Hyde Bailey.

By the 1920s, the prolonged agricultural depression, a product of world war and technological change, had markedly exacerbated rural problems. With the outbreak of hostilities in Europe in August 1914, American farmers began to actively supply food to the world market. They began to increase both farmland and yields (thanks to more intensive cultivation, especially with the advent of tractors). The number of motorized agricultural machines increased fivefold during the war years, to 85,000. With the advent of peace, this trend only intensified, and by the end of the 1920s about a million farmers owned tractors. And as machines replaced horses and mules, another 30 million acres of former pastureland were freed up for growing food and grazing dairy cattle.

Meanwhile, after the armistice of November 1918, world agricultural production gradually returned to familiar prewar patterns, leaving American farmers with huge surpluses on their hands. Prices for their produce fell sharply: cotton fell from its wartime high of 35 cents a pound to 16 cents in 1920; corn fell from $1.50 a bushel to 52 cents; wool fell from nearly 60 cents a pound to less than 20 cents. Although prices increased somewhat after 1921, they did not fully recover until after the new war. American farmers found themselves in crisis, both because of overproduction and because of the debts they had incurred to expand and mechanize their farms. Ruins grew and more and more former landowners became tenants; rural depopulation also increased (cf. the Soviet "Price Scissors").

The American Congress repeatedly tried to find a remedy for farmers throughout the 1920s. After the agricultural depression crossed its ten-year mark, the federal government in Washington decided to regulate commodity markets artificially: a federal agency was created to provide financing for agricultural cooperatives, but with very limited funds. During that period Congress twice passed - and President Calvin Coolidge twice vetoed - the McNary-Haugen Farm Relief Bill (see McNary-Haugen Farm Relief Bill). The bill envisioned that the federal government would become the "buyer of last resort" for surplus farm produce, which it would then "dispose of" in foreign markets.

President Herbert Hoover understood that the problems of American farmers were urgent: in fact, his first act as president was to call a special session of Congress to solve the agricultural crisis. In 1929, Hoover issued the Agricultural Marketing Act of 1929, which created several "stabilization corporations" funded by the government and empowered to buy surplus farm products from the market to maintain higher prices. But when the agricultural depression of the 1920s "merged" with the general depression of the 1930s, these corporations quickly exhausted both their storage capacity and finances. With the onset of the Great Depression, the already "shaky" U.S. farms became its key victims.

Southern states of the United States. African Americans

The U.S. South in the 1920s was the most rural region in the country: none of the Southern states met the definition of "urban" in 1920-the majority of its population lived outside cities, which included localities with at least 2,500 residents. The region "from the Potomac to the Gulf" has changed little since the Reconstruction of the South in the 1870s. The region was characterized by scarcity of capital and an abundance of cheap labor: Southerners planted and harvested their traditional crops-cotton, tobacco, rice, and sugarcane-with mules and men, as their ancestors had done for generations before them. As in the nineteenth century, racial strife continued to "bleed" throughout the region.

During World War I, about half a million blacks from the rural South became workers in northern factories. In 1925, with immigration restriction, northern industry began to look for new sources of labor: and many African Americans (as well as about half a million Mexicans, who were exempted from the new immigration quotas) took advantage of the opportunity to move. As a result, by the late 1920s another million African Americans had left the former slave states to take jobs in the Northeast and Midwest (only about a hundred thousand Negroes lived west of the Rocky Mountains). In the North, they worked in metal shops, automobile plants, and packing houses; the migration had political consequences - in 1928, Chicago Republican Oscar de Priest became the first black man elected to Congress since Reconstruction (and the first black congressman from the North).

Blacks in the South "thus represented an extreme case of rural poverty in a region that was itself a special case of economic backwardness and isolation from modern life. Thus sociologists hired by Hoover found that infant mortality rates for blacks were nearly twice as high as for white children in 1930 and that the average life expectancy of blacks was fifteen years less than that of whites (45 years vs. 60). The lives of average African Americans in the South differed little from those of their ancestors during slavery; at the same time, white Southerners shared "the common firm conviction - that the U.S. South is and will remain a white man's country.

City Life. Car

To those Americans who had been born white and lived in the city, both blacks and farmers seemed, in Professor Kennedy's view, something distant. Southern routines and small-town life in the Midwest, much of it religious, were but the subject of many jokes and anecdotes. New national magazines like Time, first published in 1923, the American Mercury, edited by Henry Louis Mencken in 1924, and the New Yorker, first published in 1925, positioned themselves as "sophisticated" magazines (indicative of the new cultural power that was gaining momentum in the major American urban centers). In Kennedy's view, urban America was convinced that the city was the new master of the status quo to which rural America should pay its respects.

But already in those years it was clear that such a successful production strategy had its limits: mass production made mass consumption necessary. But the growing wealth of the 1920s was distributed disproportionately: large incomes "flowed" to the owners of capital. Although the incomes of "working people" were growing, the rate of growth did not match the rate of growth of industrial production in the United States. And without widely distributed purchasing power, the mechanisms of mass production could not work. And the automobile industry, a pioneer of "Fordism," was one of the first where this logic began to be felt in practice. Thus a spokesman for General Motors Corporation in 1926 admitted that "it seems unlikely that huge annual growth will continue in the future"; he added that he rather expected "healthy growth, in accordance with the increasing population and wealth of the country, and - with the development of the export market. According to Kennedy, this was one of the first recognitions of the fact that even an industry as "young" as automobile manufacturing can quickly reach "maturity.

By the end of the 1920s, it was obvious that the automakers had (over)saturated the domestic American market available to them. Consumer credit or "installment buying", was first applied by General Motors Corporation back in 1919 - through a specially created company General Motors Acceptance Corporation. It was another attempt to expand the market, since customers were spared the need to pay the full price in cash immediately at the time of purchase. "Explosive" growth of the advertising market, which emerged in its modern form around the 1920s, further heightened experts' fears that the limits of "natural demand" had already been reached. General Motors alone spent some $20 million annually on advertising - in an attempt to develop consumers' desire to consume more. Although credit and advertising supported automobile sales for a time, it was already clear that without new (foreign) markets or a major redistribution of purchasing power within the United States - with the rural half of the country in circulation - the limits of growth were either near or had been reached.

Virtually all Americans living in industrial centers raised their standard of living significantly during the period following World War I. While the standard of living for farmers declined in the 1920s, real wages for industrial workers rose by nearly a quarter. By 1928, the average per capita income among non-farm workers was four times the average income of farmers. For urban workers, "prosperity" became very real: they had more money than ever before and could enjoy the food variety of the "roaring twenties"-not only cars, but also canned goods, washing machines, refrigerators, synthetic fabric products, telephones, movies (after 1927 became sound) and radio. People who lived in the non-electrified countryside did not encounter modern conveniences.


By 1930 there were 38 million men and 10 million women working in the U.S.: and while in 1910 agricultural workers constituted the largest category of employment, by 1920 the number of workers in manufacturing and engineering exceeded those in agriculture. At the same time, although the length of the average non-agricultural worker's workweek had declined since the turn of the century, it was still close to 48 hours. The near-continuous work regime was a legacy of farm life: it had been "imported" into factory workshops in the early days of industrialization and changed very slowly. It was not until 1923 that the United States Steel Corporation "reluctantly" abandoned the 12-hour workday in its steel mills. Two-day "days off" were not yet widespread, and the concept of "paid vacation" was virtually unknown to workers - as was such a concept as "retirement.

Irregular employment also had social consequences: a study of life in Muncie, Indiana, looked in detail at the multidimensional consequences in different employment patterns, both personal and social. The researchers found that the main factor by which the "working class" and "business class" differed was uncertainty about future employment, as potential job loss was associated with a change in life itself. The business class was "virtually immune to such interruptions" in employment, while among the working class layoffs were a regular occurrence. Constant interruptions in employment were a major (defining) characteristic of belonging to such a social group as "workers" - more so than, for example, income. Those members of the Munsi community who possessed a certain degree of job security almost never fell under the definition of "workers": they had a "career," not a "job. The social life of "career" holders was markedly different: it was they who created and maintained a network of local clubs and organizations, participating in the political life of the city as well. Even in the absence of active discrimination, "workers" could not participate in such activities. Workers without job security lived in what researchers have called "a world in which there seems to be neither a present nor a future" - although they occasionally earned a substantial income, they could do little with their working conditions and, as a consequence, shape "the trajectory of their lives.

In the 1920s few employers and no government (state or federal) provided any form of insurance to mitigate the effects of unemployment. And in 1929 the American Federation of Labor (AFL) strongly opposed the advent of public unemployment insurance - even though it was already an established practice in a number of European countries. AFL leader Samuel Gompers repeatedly denounced unemployment insurance as a "socialist" idea, unacceptable in the United States. At the same time, union membership fell: from a wartime high of 5 million, it fell to 3.5 million by 1929.

The very structure of the AFL, with its members divided into professions and reminiscent of the "craft guilds" of the Middle Ages, was ill-suited to the new industries. Considering themselves representatives of the "labor aristocracy," the unionists largely ignored the problems of their unskilled colleagues. Ethnic rivalries compounded the problems: skilled workers tended to be U.S.-born white Americans and unskilled workers tended to be immigrants from Europe and the American countryside. Often the work contracts themselves obliged individual workers never to join unions (see Yellow-dog contract), and in 1917 the U.S. Supreme Court upheld this practice (see Hitchman Coal & Coke Co. v. Mitchell). It was not until 1932 that the Norris-La Guardia Act of 1932 legally prohibited federal courts from issuing judgments designed to ensure that employees did not join a union.

During the same years, Frederick Taylor's ideas began to become popular among hiring managers, and many corporations - usually large and "anti-union" - began to win the loyalty of their workers by creating "yellow unions" and offering workers bonuses in the form of company stock. Companies also offered life insurance, built special recreational facilities, and set up retirement plans. Since control of all these programs remained in the hands of the corporation, they could change or end them at any time; when the depression hit, the employers' "generosity" came to an abrupt halt.

Women and Children. Education

The use of child labor gradually declined: while in 1890 nearly one in five children between the ages of 10 and 15 was working, in 1930 only one in 20 was. The Supreme Court repeatedly stood in the way of the federal government trying to impose a total ban on child labor in the country. In the 1920s, for the first time, nearly half of high school age students remained in school to continue their education: since 1900, there had been an eightfold increase in high school enrollment - which was "evidence of the most successful concrete effort the U.S. government has ever made."

Debt and taxes. Democrats and Republicans

The federal government also greatly increased its tax collections - much of the new revenue went not to pay for social infrastructure, but to service the debts incurred during the World War (about $24 billion, ten times the amount owed after the Civil War). Paying interest on the national debt became the largest item of general government spending, absorbing one-third of the federal budget. If you add up debt payments with spending on veterans' benefits, interest payments accounted for more than half of the U.S. budget. Expenditures on the Army of 139,000 men and the Navy of 96,000 sailors accounted for virtually all remaining expenditures.

The Democratic Party did not have a common program: representing a commodity-producing region, its members favored lower import duties; on other issues there was marked disagreement, including both the treatment of Prohibition and the role of labor unions. In 1924 the choice of the all-party candidate for president, John Davis, took the Democrats 103 ballots.

Republican Herbert Hoover's decisive victory over Democrat Al Smith in 1928 was "overshadowed by religious bigotry" against the Catholic Smith, "a symbol of urban immigrant culture. Hoover even managed to "split the South": he won support in five states of the former Confederacy. In doing so, Smith gathered a majority of votes in dozens of major U.S. cities - thus foreshadowing the urban coalition that became one of the foundations of Roosevelt's future New Deal. After a period of support for reform in the early twentieth century, in the 1920s the Republican Party took a conservative stance, although a number of its members (such as Harold Ickes or Senator George Norris) tried to advocate reforms aimed at greater government involvement in the redistribution of economic growth - "social planning for laissez-faire".

But mostly the government was used to end strikes (the Great Railroad Strike of 1922) and pursue traditional American policies of protectionism. So in 1922 the Fordney-McCumber Tariff system was introduced, which raised import duties to a "prohibitive" level. The development of the U.S. hydroelectric system - particularly on the Tennessee River - using public funds was also not supported. The Teapot Dome and Elk Hills scandal led to the first-ever member of the U.S. government, Secretary of the Interior Albert Bacon Fall, going to prison in 1923 after being convicted of corruption.

"Thrift and non-interference" formed the basis of U.S. federal policy in the 1920s. President Coolidge personally canceled Herbert Hoover's river control projects in the West - he found them too expensive. For the same reason, Coolidge vetoed proposals to help farmers and speed up "bonus" payments to war veterans; he also resisted efforts to restructure the debts of U.S. Entente allies owed to the Treasury. "In the domestic sphere there is calm and contentment," Coolidge informed Congress on December 4, 1928, in his last State of the Union message.

"Seemingly plausible" in 1928, these optimistic judgments ignored several factors: in addition to years of agricultural "agony" and a slowdown in auto production, housing starts to decline as early as 1925. Thus the Florida land boom of the 1920s was hit by a devastating hurricane in September 1926. As a result, bank settlements in the state fell from over a billion dollars in 1925 to $143 million (1928). In addition, inventories began accumulating as early as 1928: by mid-summer 1929, they had quadrupled to more than $2 billion.

What President Hoover would later call "the orgy of mad speculation" began in the U.S. stock market in 1927. According to economic theory at the time, stock and bond markets reflected and anticipated "fundamental realities" in the creation of goods and services; but by 1928, U.S. stock markets had become markedly detached from reality. While business activity was steadily declining, stock prices were rising rapidly. Radio Corporation of America (RCA) stocks, symbolic of the expectations of new technology, were leading the price race.

Affordable Money Policy

The "affordable money" policy was largely due to the influence of the Governor of the Federal Reserve Bank of New York, Benjamin Strong: it was a response to the decision made by Winston Churchill, head of the British Treasury, in 1925 to return Britain to the prewar gold standard with the old rate of $4.86 per pound. Such a high level of British currency limited British exports and increased imports, soon threatening to deplete the Bank of England's gold reserves. Strong's reasoning was to use the low dollar to "move" gold from London to New York - and thereby stabilize an international financial system still reeling from the world war. This decision by Strong was further exploited by Hoover, who developed the notion that the subsequent depression had its roots in Europe, not in the United States.

As of 2001, no researcher has been able to pinpoint the "spark" that started the "fire" of the 1929 stock market crash. A number of researchers placed much of the blame for the overall market situation on the "helplessness" of the Federal Reserve, which failed to tighten its lending policies as speculative growth took hold; however, Federal management hesitated, fearing that a rise in the discount rate would "punish" non-speculative borrowers channeling funds into business development as well.

The Beginning of Ruin

The first fall in the stock market occurred in September 1929: then stock prices both suddenly plummeted and quickly recovered. Then, on Wednesday, October 23, came the first massive liquidation: more than 6 million shares changed hands in one day, and the market capitalization fell by $4 billion. There was "confusion" in the market as prices were transmitted from New York across the country via the telegraph, which was almost two hours behind. On Black Thursday, October 24, the market opened with a sharp drop; a record 12,894,650 shares were sold during the day; by noon the losses reached $9 billion. Nevertheless, when the day ended, the market even recovered slightly from its intraday lows. The next Tuesday, October 29, 16,410,000 shares had already been sold ("Black Tuesday" began a period of almost uninterrupted two-week price declines. By mid-November, capitalization was down by an incomplete $26 billion-which was about a third of the value of the stock in September.

The relationship of collapse and depression

Subsequently, the "dramatic" market crash of the fall of 1929 began to "grow its own mythology": one of the most enduring myths was the perception of the stock market crash as the cause of the Great Depression, which continued throughout the decade that followed. However, the most authoritative studies of the events of 1929, as of 2001, have been unable to demonstrate a significant causal link between the stock market crash and the economic depression - none of the researchers held the stock market collapse solely responsible for the ensuing events, and most authors denied its primacy among the many causes of the economic downturn; some authors argued that the crash played virtually no role in the formation and development of the global depression:

On October 25, 1929, Hoover declared that "the main business of the country, that is, the production and distribution of goods, is on a sound and prosperous footing. This statement became popular among subsequent critics of the president's policies, although in retrospect it seemed quite logical-as the slowdown in business growth could be detected from the midsummer of 1929, and by November it was difficult to see it as anything more than a normal decline in the economic cycle. "Abnormal" for Hoover was rather the situation in the stock market, whose collapse he saw as a correction he had long predicted: in the economic thinking of the time, such a correction should only have cleared the economic system.

Farmers and tariffs

The inauguration of President Hoover on March 4, 1929, in the United States was an emotionally stirring event in which a variety of political forces pinned great hopes on the engineer-educated president for "restructuring" the country. On April 15, Hoover announced that he would not support the McNary-Haugen Farm Relief Bill: instead, he proposed a different regulatory instrument capable of "moving the agricultural question from the realm of politics to the realm of economics.

Just three months later, on June 15, the president signed the Agricultural Marketing Act of 1929, which created the Federal Farm Board with a capital of $500 million to be used for the development of agricultural cooperatives and agricultural stabilization associations. The plan was for cooperatives to regularize commodity markets - primarily cotton and wool - through voluntary agreements among producers of these commodities; if cooperatives were unable to regulate prices in their markets, the funds could be used to buy surplus produce. At the first meeting with the leadership of the new body, Hoover drew attention to the unprecedented power and financial resources at the disposal of federal officials.

This law embodied a key principle of Hoover's - the principle that government only encourages voluntary cooperation, and that direct government intervention in the private economy is possible only when such cooperation is manifestly inadequate. In other words, the role of government was not to "arbitrarily and irrevocably" replace voluntary cooperation with coercive bureaucracy--which, according to Hoover, was the first step toward tyranny. The future president's previous initiatives bore the traces of such attitudes: in 1921 he successfully held the first Presidential Conference on Unemployment, where he advocated collecting data on the number of unemployed in the country (two years later he successfully forced the American steel industry to abandon the 12-hour workday, without resorting to formal legislation.

The U.S. shift toward autarkic policies did not go unnoticed outside the country: leaders of other states perceived the new legislation as a manifestation of the "beggar-thy-neighbor" principle. A thousand American economists signed a petition urging Hoover to veto the bill; banker Thomas Lamont recalled that he "almost got down on his knees to ask Herbert Hoover to veto the stupid idea (asinine) of raising tariffs. This law intensified nationalism around the world." In June 1930, Hoover signed into law what political columnist Walter Lippman called "a wretched work of a mixture of stupidity and greed." At the same time, the effects of the new tariff policy were barely noticeable in the first weeks after it was passed--and most commentators were much more impressed by Hoover's "vigorous" response to the stock market crash of October 1929: according to the New York Times, "no one in his place could have done more; very few of his predecessors could have done as much as he did."

The answer to the stock market crash

The orthodox economic theory of the 1920s argued that recessions were an inevitable part of the business cycle. In periods of "economic malaise," the theory prescribed that the government should refrain from interfering in the natural process of economic recovery - a vocal proponent of such views was, in particular, the influential U.S. Treasury Secretary Andrew Mellon, who had held office since 1921 and believed that during the crisis "people would work harder, lead more moral lives. The laissez-faire advocates, ironically dubbed "lazy fairies" by economist William Trufant Foster, were the most influential group of economists at the time - though Hoover did not share their views.

The president believed that the federal government "must use its powers to alleviate the situation... The primary need is to prevent the bank panic that has characterized previous economic recessions, and also to alleviate the effects on the unemployed and farmers. The business community did not support the president in 1929 - on the contrary, "for some time after the collapse, businessmen refused to believe that the danger was greater than the usual, temporary downturn," which had happened more than once before.

Promising on the campaign trail to become an "innovative, creative leader," Hoover sought to prevent the "shockwave" of the stock market crash from sweeping the economy as a whole. He intended to restore confidence in the economy - by emphasizing the existence of "sound industry and commerce" in the United States. Beginning on November 19, 1929, the president began meeting with banking executives, railroad executives, manufacturing executives and public utility officials, all for less than two weeks, "ritualistic statements" about the basic stability of the economy and their optimistic view of the future.

Words were not the only weapons. On December 5, 1929, Hoover publicly analyzed the results of his November meetings before a large audience of four hundred "key men" of the business world. Noting that business leaders were uniting for the first time to achieve "public welfare," he said that the Federal Reserve had already relaxed its lending policies while denying funding to those banks that had previously made loans to play the stock market. In addition, during the White House meetings, industrialists made a concession and agreed to keep workers' wages unchanged: they agreed with the president's position that "the first shock should fall on profits, not wages." In Hoover's view, this was to maintain the purchasing power of the population - a point of view that later became prescribed by Keynes as "revolutionary" in economic theory.

The Federal Farm Council's support of farm prices was the third element designed to put the brakes on the unfolding deflationary spiral. At the same meeting, Hoover said he hoped to revive the economy by expanding construction: railroad and utility executives agreed to expand their construction and repair programs. In addition, the president instructed state governors and mayors of major cities to propose construction projects that could "provide further employment. To provide all of these measures, Hoover asked Congress for about $140 million in additional funding.

In later historiography, the common view was that the November White House conference ("business meetings") was merely an indication that Hoover was holding private business, state and local governments responsible for economic recovery. A number of authors have suggested that Hoover's "non-business meetings" served only a ceremonial function, and that the president himself was unwilling to retreat from outdated laissez-faire policy dogma. Thus, immediately after the meetings, The New Republic magazine saw in Hoover's activities an attempt to put the "steering wheel of the economy" in the hands of businessmen themselves. Later authors, including economist Herbert Stein, have drawn attention to the relatively small size of the U.S. federal government at the beginning of the depression and the fact that the Fed was legally independent of the executive branch.

Federal construction spending in 1929 was $200 million; the states spent an order of magnitude more-almost two billion dollars-mostly on highway construction. Private industry spent about $9 billion on its construction projects in 1929 alone. For a further (sharp) increase in spending by the federal government, there were significant limitations: Washington had neither the appropriate bureaucratic apparatus nor projects ready for implementation - only by 1939, already under the Roosevelt New Deal, the authorities managed to add another 1.5 billion to their spending in this area. Already postwar calculations showed that the net stimulating effect of federal, regional and municipal policies was greater in 1931 than in any subsequent year of the decade.

Elections and the Opposition

By the end of 1930 the situation for Hoover and his party began to deteriorate markedly: the congressional elections held in November (see 1930 United States House of Representatives elections) resulted in the Republicans losing majorities in both houses. Characteristically, many of the candidates were much more vocal about Prohibition (and the prospect of repealing it). Although the Republican Party lost 8 seats in the Senate-which now consisted of 48 Republicans, 47 Democrats, and one member of the Farmer-Labor Party-the loss was much greater because, according to Hoover, "we didn't really have more than 40 real Republicans." The rest, he argued, were "irresponsible" in calling for large federal budget deficits and direct aid to the unemployed by the federal government.

The situation in the House of Representatives was markedly worse: while both parties had gained 217 seats each on Election Day, by the time of the first sitting, in December 1931, 13 elected representatives - most of whom were Republicans - had died. The Democrats thus gained a majority in the lower house for the first time in 12 years and chose Texas Representative John Nance Garner, nicknamed "Mustang Jack" (sometimes "Cactus Jack") by Washington journalists, to be speaker. Garner believed a balanced budget was the foundation of stability and regularly made glowing statements: including that "the great problem of our time is that we have too many laws.

Garner claimed that his party "had a better program of national reconstruction than Mr. Hoover and his party. Hoover believed that-if such a program existed-Garner and his colleagues never disclosed it: "His chief program of public welfare was to drive out the Republicans." Most of the Democratic congressmen, mostly of Southern and agrarian backgrounds, were more "right-wing" than the president in those years, including Senate Democratic leader Joseph T. Robinson, Senator from Arkansas, and the party chairman, former Republican and a very conservative industrialist, John Raskob. The latter had as his primary goal the repeal of the Prohibition, because restoring liquor tax revenues would alleviate the need for a progressive income tax scale. Garner, on the other hand, supported the introduction of an explicitly regressive nationwide sales tax, believing that the new tax would be a measure to eliminate the budget deficit.

As the depression worsened, in 1931-1932, the main goal of both Garner, Robinson, and Raskob was to prevent the president from taking any action: so that the Democratic candidate could win the upcoming presidential election. Thus the Democratic senator from North Carolina said that Democrats should avoid "tying our party to a certain program." Raskob hired an experienced publicist, Charles Michelson, to regularly "humiliate" Hoover in the press: Michelson "methodically hung responsibility around Hoover's neck" for the effects of the Depression:

On the opposite side of the political spectrum, Hoover could draw support from a number of progressive Republicans. But his own caution about the role of government, especially in the area of helping the unemployed, often led him into conflict with progressive legislators as well. For example, George W. Norris of Nebraska refused to support Hoover as a presidential candidate back in 1928, which only hardened their mutual animosity. Differences of opinion about the prospects for building and operating hydroelectric plants built with federal funds (see Hoover Dam) began to shape this feud long before the Depression: and in 1931, Hoover vetoed Norris' bill to build a power plant on the Tennessee River, in the Muscle Shoals region, yet again.

Norris and a number of his congressional supporters convened a "Progressive Conference" in Washington in March 1931: three dozen delegates discussed both electricity and agriculture, as well as tariffs and unemployment relief. The "meager" results of the discussion, almost a year and a half after the stock market crash, showed both the lack of seriousness with which the depression was perceived and the lack of organized opposition to Hoover's policies (New York Governor Franklin Roosevelt declined an invitation to attend the conference, even though he had sent the gathering a letter of approval of their actions). Thus, the events in Congress reinforced Hoover's commitment to fighting the economic crisis not through laws, but through the mediation of voluntary cooperation among economic agents.

The collapse of the banking system

Up until the last weeks of 1930, Americans still had reasonable grounds to assume that they were caught up in another downturn in the business cycle. But in the final days of the year, unprecedented events began to unfold in the U.S. banking system. Even during the economic boom of the 1920s, about 500 banks went bankrupt in the United States each year; in 1929 there were 659 such bankruptcies, not much out of the norm. In 1930, about the same number of banks closed before October; and in the last sixty days of the year, 600 banks went bankrupt at once.

At the heart of the weakness of the American banking system at the time was both the sheer number of banks themselves and the confusing structure of how they operated, a legacy of Andrew Jackson's "war" on the very concept of "central banking. As a result, by 1929 there were 25,000 banks in the United States operating under 52 different regulatory regimes. Many institutions were clearly undercapitalized: so Carter Glass, the founder of the Federal Reserve, called them nothing more than "pawnbrokers," often run by "grocers who called themselves bankers. Creating a network of branches of major banks might have solved the problem, but the formation of such a network was a perennial target for "populist attacks" by regional politicians who saw such a network as an extension of central power to their states. As a result, in 1930, only 751 American banks operated at least one branch, and the vast majority of banks were "unitary" institutions - they could only turn to their own financial resources in case of panic. About a third of the banks were members of the Federal Reserve, which, at least in theory, could help them in times of need.

Even in the twenty-first century, researchers have not been able to determine what exactly "ignited the flames" in which the American banking system "burned down. What is known is that the disaster began in November 1930 at the Kentucky National Bank in Louisville - then the panic spread to groups of subsidiary banks in neighboring states: Indiana, Illinois and Missouri. After that, banking panic spread to Iowa, Arkansas, and North Carolina. As crowds of depositors withdrew their savings from the banks, the banks themselves tried to get liquidity by borrowing and selling assets. As banks were "desperate" for cash, they dumped their bond and real estate asset portfolios into the market. The market, which had not yet recovered from the 1929 crash, was depressing asset values - and thereby endangering the rest of the credit institutions. In other words, there was a classic liquidity crisis of "monstrous" proportions.

The first victims of the panic were the rural banks, which were already in constant trouble. But on December 11, 1930, the Bank of the United States of New York, a bank owned and operated by members of the Jewish diaspora, closed its doors; it held the deposits of thousands of Jewish immigrants, many of whom were employed in the clothing trade. Some observers at the time, along with later scholars, attributed the bank's downfall to the deliberate refusal of the old Wall Street financial institutions - especially the refusal of House of Morgan to heed the Fed's call to come to the aid of a competitor.

The suspension of the Bank of the United States was the largest commercial bank failure in U.S. history: about 400,000 people held funds in the bank, losing a total of about $286 million. More important than the direct financial losses was the psychological effect: the name of the bank misled many Americans and foreign observers alike into believing that it was an official agency of the national government. At the same time, the Fed's inability to organize a bailout "shook the credibility" of the Federal Reserve as such. As a result, banks began to "desperately" fight for survival, disregarding what the consequences of their actions would be for the banking system as a whole.

There is an ongoing debate in the literature as to whether the collapse of the Bank of the United States was the beginning of the depression or whether its very collapse was the result of the economic crisis. If the difficulties of Midwestern banks could be explained by years of agricultural depression, the collapse of the New York bank was perceived by many observers at the time as a delayed consequence of the 1929 stock market crash (the Securities Division of the Bank of the United States was found to have speculated in dubious stocks and two of its owners were later imprisoned). More modern research concludes that it was the banking panic of the early 1930s that caused the depression, a depression that, until 1931, was concentrated only in the United States.

Global banking panic and war debts

Hoover asserted that "the main forces of depression are now outside the United States" as early as December 1930: if at the time such a statement sounded premature and absolved him of responsibility, events soon led commentators to recall his words. Until early 1931, Hoover acted as an assertive and confident fighter who went on the attack on the economic crisis; gradually his main goals became "damage control" and preserving the economy as such. And at the end of 1931, he explicitly stated that "we are faced not with the problem of saving Germany or Great Britain, but with the problem of saving ourselves.

Since the spring of 1931, a recurring theme of Hoover's speeches has been that the deep causes of the "calamity" lay outside the American continent. By that time one can also relate to the general understanding among key players that the Depression was not just another phase of a cycle, but was a "historic watershed," the consequences of which would be more far-reaching than one might have thought (see World War II). An unprecedented event must also have had, according to Hoover, unprecedented causes: the president discovered them in a key historical event at the beginning of the century - so he began his memoirs with the phrase: "In a broad sense, the primary cause of the Great Depression was the war of 1914-1918. He believed that "the malign forces resulting from the economic consequences of the war, the Treaty of Versailles, the postwar alliances ... the insane public programs to fight unemployment, leading to unbalanced budgets and inflation, all broke up the system

Hoover's words were well grounded: in September 1930, new forces arrived on the world political scene - the Nazi party managed to use mass anger over reparations and dissatisfaction with the German economy to achieve impressive results in parliamentary elections in the Weimar Republic. The Nazi success on the other side of the globe set off a chain reaction that changed life in the remotest corners of the United States: Americans "had to learn about the economic interdependence of nations through their own bitter experience (poignant experience), which knocked on every door. "In an effort to take away from Hitler the basis of his appeal to the voters, Chancellor Heinrich Bruning proposed in March 1931 a customs union between Germany and Austria. The French government regarded Bruning's idea with suspicion, seeing the customs alliance as a first step toward the annexation of Austria, something that the defeated Germans and Austrians had actively advocated in 1919 and which the terms of the Versailles Peace Treaty expressly forbade them. The prospect that France might begin to press Austrian banks--trying to frustrate Bruning's plan--caused a banking panic in Vienna: in May, depositors rioted outside Austria's largest bank, the Creditanstalt (Creditanstalt), owned by Louis Rothschild, and the bank closed its doors. The panic then spread to Germany, increasing in scale (after Germany, bankruptcies followed in neighboring countries.

Complicating the chain of interconnectedness of the European economy was the "tangled" problem of international debts and reparation payments resulting from World War I. One obvious way to break the chain reaction was to give up these debts: the United States could lead the way by forgiving or restructuring the $10 billion it was owed by the Entente allies (mainly Britain and France). On June 5, 1931, banker Thomas Lamont called Hoover with such a proposal; the president himself had already explored the idea, but reminded the banker of its "political explosiveness." Meanwhile, the Weimar Republic had already revised the Versailles terms twice, changing the payment schedule under the "Dawes Plan" of 1924 and achieving a further rescheduling, along with a reduction in the total amount owed, under the "Jung Plan" of 1929.

The situation was complicated. After the war the U.S. became an international creditor for the first time in its history: Thus private American banks actively lent Germany large sums in the 1920s, some of which the Weimar Republic used to pay reparations to the British and French governments, which, in turn, used them to pay their war debts to the American treasury. This kind of "financial merry-go-round" was very unstable, and the stock market crash at the end of 1929 knocked the most important link out of the chain - the flow of American credit. For their part, the Allies repeatedly offered to reduce their demands on Germany, but only if their own obligations to the United States were reduced: thus the French Chamber of Deputies in 1929 linked its payments to the United States directly to reparation payments from Germany, a gesture that angered the American government. And as frustration grew in the postwar decade over President Woodrow Wilson's "futile and misguided" departure from the isolationist policy that had occurred when the United States entered the World War in 1917, ordinary Americans were in no mood to even think about what they would end up paying for the European war effort of 1914-1918.

The position of Wall Street, which actively advocated the cancellation of the war debt, was rather resented by ordinary people, not least because the forgiveness of government loans benefited the bankers who actively lent to Germany afterwards. In other words, the idea of "sacrificing taxpayer dollars to protect bankers" did not find political support. In addition to the financial and political sides, the problem of debt became a psychological problem - the debts symbolized the disgust of American commoners with "corrupt Europe" and regret that the U.S. had intervened in the European war at all.

In an isolationist and anti-European atmosphere, on June 20, 1931, Hoover still proposed a one-year moratorium on all payments on intergovernmental debts and reparations. Although Congress eventually ratified the proposal, Hoover himself was viciously attacked for introducing it: one Republican congressman described the president as an "Eastern despot, drunk with power," calling Hoover a "German agent"; Senator Hiram Johnson called Hoover an "Englishman in the White House. Norris, expressing the concern of many politicians, suggested that the moratorium was a precursor to a total debt forgiveness--Norris' suspicion was eventually confirmed, providing the basis for even stronger isolationist sentiments that spread over the next decade. The French authorities, after difficult negotiations, also agreed to a moratorium. Hoover supplemented his initiative with a "suspension" agreement under which private banks also pledged not to tender German securities. But now Britain was in trouble.

Britain and the gold standard

Most countries of the world in 1929 adhered to the gold standard and - with a few exceptions - most economists and statesmen "worshipped gold with a mystical devotion resembling religious faith. Gold was supposed to guarantee the value of money; moreover, its presence guaranteed the value of national currency beyond the borders of the state that issued it. Therefore, gold was considered indispensable to international trade and to the stability of the financial system. National governments issued their currencies in quantities backed by available gold reserves. In theory, producing or receiving gold from abroad was supposed to broaden the monetary base, increasing the amount of money in circulation and thus raising prices and lowering interest rates. The leakage of gold implied the opposite effect: a shrinking monetary base, shrinking money supply, deflation, and rising interest rates. Under the gold standard, the country losing gold had to "deflate" its economy - lower prices and higher interest rates to stop capital flight. Economists of the time assumed that all this would happen almost automatically; practice suggests otherwise. So creditor countries were not obliged to issue gold when it came to them - they could "sterilize the surplus" gold and continue their previous policies, leaving the countries from which the precious metal was leaving to solve their own problems.

By linking the world economy into a single whole, the gold standard provided a "transmission of economic fluctuations" from one country to another: it was supposed to keep the global economic system in equilibrium. In the crisis realities of the early 1930s, the cohesion of economies became a problem: fear for the future of national economies led to a panicked flight of gold from countries and entire regions. Fighting a depression in the economy, governments were not prepared to increase deflation because of the loss of gold: to protect themselves, they were rather prepared to raise import duties and impose controls on capital exports. By the end of the 1930s, almost all countries had abandoned the gold standard itself.

On September 21, 1931, Britain was the first country to break commitments beyond economic theory: the British government refused to fulfill its obligation to pay gold to foreigners. Soon more than two dozen countries followed Britain's example. Keynes, who was already actively engaged in the "heretical" theory of a "managed currency" for its time (but the vast majority of observers saw the British refusal as a disaster - Hoover compared the British situation to a bank going bankrupt and simply closing its doors to depositors.

Britain's refusal to pay gold brought world trade to a standstill - in effect, the international economy ceased to exist. Thus Germany soon announced a policy of national self-sufficiency (autarky). Britain, on the other hand, under the 1932 Ottawa Accords (British Empire Economic Conference), effectively created a closed trade bloc - the so-called Imperial Preference - isolating the British Empire from trade with other countries. World trade fell from $36 billion in 1929 to $12 billion by 1932.

The United States in those years was far less dependent on foreign trade than most countries. But the British rejection dealt a new blow to the American financial system: American banks held about $1.5 billion in German and Austrian obligations, the value of which effectively went to zero. Investors' fear for the safety of their funds also permeated the U.S.: foreign investors began to withdraw gold from the U.S. banking system. American depositors followed suit - and a new panic eclipsed the panic of the last weeks of 1930. Thus 522 banks went bankrupt in just one month after the British abandonment of the gold standard; by the end of the year the number of such banks was 2,294.

Guided by economic theory - to stop the outflow of gold - the Federal Reserve raised the interest rate: in just one week the rate was raised by a full percentage point. Believing that without a link to gold, the value of national money was arbitrary and unpredictable, Hoover believed such action was justified: in his view, without a gold standard, "no merchant could know what he would receive as payment by the time his goods were delivered. Keynes's alternative theories were not finally formulated until 1936.

Tax Increase

Thus, at the end of 1931, the American authorities faced a more serious crisis than the year before. Hoover changed his tactics: he began to make efforts to balance the federal budget by raising taxes. This policy was roundly criticized by economists who later analyzed the Great Depression; based on Keynes, they believed that to fight the depression one should not balance the budget, but rather increase spending - even by increasing the deficit. The idea that government deficits could compensate for downturns in the business cycle was familiar to Hoover: in May 1931 Secretary of State Henry Lewis Stimson recorded in his diary that Hoover was arguing with administration members who favored balancing, comparing the economy to "times of one dreams of balancing the budget.

Hoover justified the tax hikes with his understanding of the causes of the depression, which had already become the Great Depression: he suggested that the crisis arose from the breakdown of European banking and credit structures "distorted" during the World War. European problems were transmitted to the U.S. through the gold standard; the Fed's tight monetary policy added to the problems. In the end, he concluded that it was tax hikes that could stabilize the banking system - and thus fill the economy with the money it needed. Hoover's critics, then and later, insisted that this "indirect" approach was insufficient, and that only direct stimulus, through massive government spending, would have any real impact. The difference of opinion about who should be financed, businessmen or workers, was reflected in the debates in Congress. Even Keynes himself at the time believed that a return to a "state of equilibrium" should focus on the interest rate - that is, on easing lending.

A balanced budget would also have reassured foreign creditors and stopped the withdrawal of gold, because it showed the government's commitment to a strong dollar. And raising revenues through taxation-not borrowing-would have spared private borrowers from competing with the government in already tight credit markets; it would have helped keep interest rates low. In turn, low interest rates helped preserve the value of bonds, which made up a significant part of banks' investment portfolios - which should have eased the pressure on banks. To use Herbert Stein's expression, the government was proposing a "bond support program," which should be seen in the context of "the Fed's unwillingness or inability to support bonds by printing new money in the fall of 1931.

The Revenue Act, which would have doubled federal revenues, passed through Congress without the most controversial national sales tax proposal. As it passed, Speaker Garner asked those congressmen who, like himself, believed in the importance of a balanced budget to rise from their seats - not one representative remained seated.

Hoover's Second Program and the Road to the New Deal

If Hoover's commitment to the gold standard can be attributed to his "economic orthodoxy," from 1931 - with the new phase of the crisis - he also embarked on the path of "experimentation and institutional innovation" that would be continued by Roosevelt in the New Deal. On Sunday evening, October 4, 1931, Hoover, without drawing attention, went to the home of Treasury Secretary Mellon, where he attended a meeting with major U.S. bankers until morning. Here he urged the "strong" private banks to create a $500 million credit pool - to help the "weaker" institutions. Out of these talks arose the National Credit Association (National Credit Corporation). However, Hoover's bid for voluntary participation in the bailout of competitors did not find full support among the bankers themselves, "they kept returning to the suggestion that the government do it.

Gradually Hoover began to abandon his own principles: Hoover's "second program" against the Depression began to take shape, a marked departure from the system of earlier measures based on voluntary agreements. The new measures laid the groundwork for a major restructuring of the U.S. government's very role in national life. In the absence of direct support from the Fed, Hoover began to change American law: among his first initiatives was the Glass-Steagall Act of 1932, which greatly expanded the collateral eligibility for loans from the Fed. This allowed lending institutions to release a significant amount of gold from their reserve reserves. In November 1931, a network of mortgage banks, later known as Federal Home Loan Banks (FHLBanks), began: this law was also designed to unfreeze millions of dollars worth of assets. Unfortunately for Hoover, Congress weakened the bill (see Federal Home Loan Bank Act) by imposing higher collateral requirements than originally intended, and delayed its passage for several months.

Hoover's most "radical and innovative" initiative was the creation in January 1932 of the Reconstruction Finance Corporation (RFC), a response to the failure of the voluntary National Credit Association. The new structure was modeled on the War Finance Corporation, which had been designed in 1918 to finance the construction of military factories; the RFC became an instrument for providing taxpayers' money directly to private financial institutions. Congress capitalized the new agency at $500 million and allowed it to borrow up to $1.5 billion more. The RFC was to use its resources to make "emergency" loans to banks, building societies, railroad companies and agricultural corporations. Business Week magazine called the RFC "the most powerful offensive force the government and business could imagine"; even Hoover's critics agreed that "nothing like it had ever existed.

New York City Mayor Fiorello LaGuardia called the RFC "a benefit for millionaires"; but soon both he himself and other observers noticed that the corporation had become, above all, a "precedent. If the government can directly support the banks, why can't there be federal aid for the unemployed? Thus the president implicitly legitimized the demands of other sectors of the economy for federal aid as well.

During the third winter of the depression, economic hardship continued to intensify: in the countryside, crops rotted in the fields and unsold cattle died in stalls, while in the cities, hardworking men lined up in front of "soup kitchens" that handed out food. Tens of thousands of workers scattered across the country in search of work; those who did not leave continued to pick up unpaid bills at local grocery stores or rummage through garbage cans. In 1932, New York officials reported 20,000 malnourished children. Ethnic communities were among the hardest hit, as the lending institutions that served them were among the first to close: so Chicago's Binga State Bank (soon followed by Italian and Slovakian lending institutions. The Depression also began to have social consequences, changing the traditional role of men in the family at that time.

The prospect of widespread structural unemployment began to loom. Yet it had traditionally been the responsibility of regional and local governments, along with private charitable organizations, to help the destitute, but by 1932 their combined resources had been exhausted. A number of states whose governments tried to raise more money to help the needy through tax increases faced riots from angry residents. By 1932, almost all regional and local governments had exhausted their borrowing options, both legal and market. Pennsylvania's constitution, for example, expressly forbade state governments to take on more than $1 million in debt, and to levy a graduated income tax.

At the beginning of the crisis, Hoover tried to stimulate both local governments and charitable organizations to help the unemployed: in October 1930, the President's Emergency Committee on Employment was created (in 1931 the committee was succeeded by the President's Organization for Unemployment Relief, headed by businessman Walter Sherman Gifford). The organizations achieved a certain success: thus the municipal payments to help the poor in New York rose from 9 million dollars in 1930 to 58 million dollars in 1932, and private donations from residents rose from 4.5 to 21 million dollars. At the same time, these sums amounted to less than one month's lost wages for 800,000 unemployed New Yorkers; in Chicago the lost wages were estimated at $2 million a day, and emergency relief spending was only 0.1 million.

As the collapse of the traditional aid apparatus became more and more evident, the demand for direct federal aid became more and more insistent. Chicago Mayor Anton Cermak explicitly told a House committee that the federal government could either send financial aid to the city, or the government would have to send the army to the city: in the absence of help, "the doors to rebellion in this country would be thrown wide open. The loud claims of impending revolution were mostly "empty rhetoric" - most observers were struck just by the remarkable "docility of the American people," their "stoical passivity.

In 1932, citizens' passivity began to recede, giving way to a demand from the federal government for action: at the very least, direct aid to the unemployed. This demand was not new (legislative initiatives had already taken place in 1927), but the depression increased its visibility noticeably. In New York State, meanwhile, Governor Roosevelt had publicly approved unemployment insurance and pensions as early as 1930; in 1931 he secured a seven-month, $20 million regional program, the brevity of which was a result of the political danger of creating a public class that was in constant financial dependence on the authorities.

Explaining his actions by opposing budget deficits and the dangers of the entitlement system for democracy, Hoover vetoed the Garner-Wagner Relief Bill (he reluctantly agreed to compromise by signing the Emergency Relief and Construction Act on July 21, 1932, which authorized the RFC to fund public works for up to $1.5 billion and provide up to $300 million to the states. Despite the eventual signing, Hoover suffered a severe political defeat, as he began to appear in the eyes of public opinion as a man willing to help only banks and corporations: the depression became often called "Hooverian," and the unemployment settlements became "Hoovervilles" (using the army to expel the "Bonus Army" from Washington in late July 1932 was another episode in Hoover's path to electoral defeat.

Foreign policy also gave no reason to support the president: the cautious "Hoover Doctrine", which was a response to the establishment of a puppet government in Manchuria by the Japanese Empire in February 1932, received no support from Secretary of State Stimson or the press. And on November 8, 1932, during the election, Hoover won the support of the electors in only six American states: "The Great Engineer", who had triumphed four years earlier, became "the most hated and despised figure" in the country. His successor as president was Franklin Roosevelt.

Franklin Roosevelt

While "businessman" Hoover was known for his detailed knowledge of the U.S. banking system - down to the structure of the assets of specific banks - "politician" Roosevelt often asked visitors to draw a random line on a map of the United States: after that he would call by heart all the counties through which it passed, describing the political characteristics of each. The new president had been in politics for many years and managed to keep an extensive correspondence - most of "his" letters were certified by forged signatures professionally affixed by an aide, Louis McHenry Howe, who was responsible for the "message-writing factory". Believing that a Democrat could not become president "until the Republicans brought us into a serious period of depression and unemployment," Roosevelt confidently won election as governor of New York in 1929 - while he, known as the "master of conciliation," also retained the support of Southern voters.

In Chicago, during his election as the Democratic candidate, Roosevelt uttered the phrase that gave the era its name: "I promise you, I swear to you, that I will make a new deal for the American people. Roosevelt's previous political activity made it impossible to establish what exactly he meant by "a new deal" (New Deal): subsequent researchers have drawn attention to his 1926 speech to university graduates, in which the future president both noted the "dizzying pace of change" and suggested combining it "with new thinking, with new values" - he urged his listeners not just to perform duties, but creatively seek new solutions. Meanwhile, reactionary party chairman Ruskob regarded Roosevelt's supporters as "a crowd of radicals whom I do not regard as Democrats.

At the same time, Roosevelt's political outlook, if it existed, was not clear even to his speechwriters; Hoover believed that the future president was as volatile as a "chameleon on a plaid:

Economists do not agree on the causes of the Great Depression.

There are a number of theories about this, but it seems that a combination of factors played a role in the emergence of the economic crisis.

In 1932, in Detroit, Henry Ford's police and private security forces shot up a procession of starving workers who were holding a hunger march. Five people were killed, dozens were wounded, and the unwanted were subjected to reprisals.

In 1937, during the Steel Strike in Chicago, the masses of striking workers were attacked by police. According to official data, the police killed ten workers and injured several hundred. In U.S. historiography, this event was called the Memorial Day Massacre.

Anti-crisis measures

To overcome the crisis, Roosevelt's New Deal was launched in 1933 - various measures aimed at regulating the economy. Some of them, according to modern views, helped to eliminate the causes of the Great Depression, some were socially oriented, helping the most affected to survive, other measures worsened the situation.

Almost immediately upon taking office, in March 1933, Roosevelt was faced with a third wave of bank panic, to which the new president responded by closing the banks for a week and preparing a deposit guarantee program during that time.

The first 100 days of Roosevelt's presidency were marked by intense legislative activity. Congress authorized the creation of the Federal Deposit Insurance Corporation and the Federal Emergency Relief Administration (FERA), mandated by the National Recovery Act of July 16, 1933. The tasks of the FEMA were: a) to construct, repair and improve highways and highways, public buildings and any other public enterprises and public conveniences; b) to preserve natural wealth and develop its extraction, including here control, use and purification of waters, prevention of soil and coastal erosion, development of water power, transmission of electric power, construction of various river and harbor facilities and prevention of floods.

The unemployed were actively engaged in public works. In total, between 1933 and 1939, public works under the auspices of the Public Works Administration (WPA) and the Civil Works Administration (the construction of canals, roads, bridges, often in uninhabited and swampy malarial areas) employed up to 4 million people.

Several bills regulating the financial sphere also passed through Congress: the Emergency Banking Act, the Glass-Steagall Act (1933) to distinguish between investment and commercial banks, the Agricultural Credit Act, and the Securities Commission Act.

In agriculture, the Regulatory Act passed on May 12, 1933, which restructured $12 billion in farm debt, reduced the interest on mortgage debt, and lengthened the maturity of all debts. The government was able to lend to farmers, and over the next four years the agricultural banks lent half a million landowners a total of $2.2 billion on very favorable terms. In order to raise the price of agricultural products, the law of May 12 recommended that farmers reduce production, cut acreage, reduce livestock numbers, and create a special fund to compensate for possible losses.

Roosevelt's methods, which dramatically increased the role of government, were seen as an attack on the U.S. Constitution. In 1935, the U.S. Supreme Court ruled that the National Industrial Recovery Act (NIRA) was unconstitutional. The reason was the act actually repealed many of the antitrust laws and established a monopoly on the hiring of workers for the unions.

The state decisively intruded on education, health care, guaranteed a living wage, committed itself to providing for the elderly, the handicapped, and the poor. Federal government spending more than doubled between 1932 and 1940. But Roosevelt feared an unbalanced budget and spending for 1937, when the economy seemed to have gained sufficient momentum already, was cut. This plunged the country back into recession in 1937-1938.

Now most neoclassical economists believe that the crisis in the U.S. was exacerbated by the wrong actions of the authorities. The classics of monetarism, Milton Friedman and Anna Schwartz, believed that the Fed was to blame for creating the "crisis of confidence," as banks were not helped in time and a wave of bankruptcies began. Measures to increase lending to banks, similar to those taken since 1932, in their opinion, could have been taken earlier, in 1930 or 1931. In 2002, Fed board member Ben Bernanke, speaking at Milton Friedman's 90th birthday party, said: "Let me abuse my status as a Fed official a little bit. I'd like to say to Milton and Anne : as far as the Great Depression is concerned, you're right, we did it. And we are very upset. But thanks to you, we won't do it again.

According to calculations by economists-researchers of the Great Depression Cole and Ohanian, without the Roosevelt administration's measures to curb competition, the 1939 level of recovery could have been reached five years earlier.

Interestingly, during the global financial crisis that began in 2008, the U.S. used very similar methods to deal with the course and consequences of the recession. There was a buyout of government bonds, as well as a permanent reduction of the Fed rate. The money supply was no longer tied to the gold reserve, which made it possible to turn on the "printing press".


  1. Great Depression
  2. Великая депрессия
  3. Ключевым источником информации о США в период непосредственно предшествовавший Великой депрессии является коллективная работа американских ученых, инициированная президентом США Гербертом Гувером в сентябре 1928 года. Двухтомник «Текущие социальные тенденции» («Recent social trends in the United States»)[8], вышедший в 1933 году, имел объем в полторы тысячи страниц, «плотно заполненных» статистическими данными практически обо всех аспектах американской жизни. Информации варьировалась от инвентаризации полезных ископаемых на территории страны до анализа преступности; книга включала в себя части об искусстве и здравоохранении, о положении женщин и чернокожих, о роли этнических меньшинств и изменениях в характеристиках рабочей силы, о влияния новых технологий на производительность и досуг, а также — о роли федеральных и местных органов власти. Профессор Кеннеди полагал, что данные позволяли составить образ людей, переживавших стремительные социальные, экономические и политические изменения — еще до того, как они были охвачены «мучительными переменами» эпохи Великой депрессии. Сами авторы полагали, что социальные и экономические силы того времени «с головокружительной быстротой уводили нас от дней Фронтира к водоворотам модернизма, который почти выходит за границы воображения»[9][10].
  4. ^ "Great Depression History". History. Retrieved May 20, 2022.
  5. ^ John A. Garraty, The Great Depression (1986)
  6. ^ Eichengreen, Barry J. (2015). Hall of mirrors : the Great Depression, the great recession, and the uses-and misuses-of history. New York, New York: Oxford University Press. ISBN 978-0-19-939201-8. OCLC 914481333. Archived from the original on December 25, 2021. Retrieved December 25, 2021.
  7. Kindleberger 1973, S. 39; Pressler 2013, S. 29.
  8. Editors of Life (2003). Life: 100 Photographs That Changed the World. [S.l.]: Liberty Street. pp. 176 (em inglês). ISBN 9781931933841  Adicionado em 16 de julho de 2019.

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