HIST212: Origins of the Great Depression

This video is a lecture used in HIST212 as part of our History area of study on

Today we’re going to be focusing on the origins of the great depression of the 1930s in the last lecture we looked at america’s consumer society and some of the other trends of the 1920s and in a way the consumer society of the 20 certainly played a role in contributing to the origins of the great depression in the 1930s today we’re going to be focusing on some of

The long-term factors that led to the depression we’re also going to discuss some of the short-term causes of the depression and we’re going to look at the long-term consequences of the depression and what happened as a result of this economic collapse that begins in the year 1929 and continues really through the end of the 1930s so before we get too much further

Into this we need to take a step back and discuss some of the long-term factors that led the united states economy which was a pretty strong and stable economy during much of the 1920s to suddenly collapse to almost in a sense fall off a cliff and go into free fall for a period of really almost three years and an economic collapse that really is only rivaled by

The economic collapse that took place in 2008 through 2010 in the american economy and so this is a very dramatic dramatic economic collapse that affects every american americans of all walks of life to focus on it we have to speak about of course the long-term causes of the depression the pressure begins in 29 but you can certainly see the causes going back well

Into the 1920s partly they were a response to how republicans who were running the nation during the 1920s the presidency and in congress were running and regulating the economy and since that they were really hands off they were approaching the economy from a very hands-off perspective which of course allowed corporations and corporate leaders to pretty much do

Whatever they wanted to and one of the certainly the factors was a lot of corporate fraud in the 1920s corporations uh cooking the books uh you know in saying that they were making money when they weren’t or using money inappropriately or irresponsibly uh mismanaging money in many different ways another of these long-term concepts had to do with banking and that

Many banks during the 20s were playing fast and loose with the money that was being deposited in them by hard-working americans they were issuing too many loans they weren’t keeping enough money back in reserves in order to give people their money back if people went into the bank in large numbers and wanted their cash banks should always be able to give back

The money that people have invested but banks were playing with the money they were making questionable loans or they were taking the money and playing with it in the stock market and doing all sorts of irresponsible practices that meant that they were becoming over extended and in any case where a bank has ever extended the least little bit of economic trouble

Can lead that bank to collapse and that’s exactly what happened to many banks after the beginning of the great depression a couple of the other factors had to do with as i mentioned a few minutes ago americans spending practices in the 1920s americans living on credit americans spending huge amounts of their income on um fashion and on purchases that were not

Necessary and or in some cases just using uh credit for those purchases uh when they really shouldn’t have been doing so finally certainly there were international factors international long-term factors that played a big role in the great depression as well and certainly some of these had to do with um in europe there was a collapse by the end of the 1920s in

Demand for american products and so europeans just weren’t spending money on american products anymore which meant that american corporations weren’t making as much money and were having to sort of cut back production there was a growing sense in europe of protectionism which meant that european nations were passing laws that made it more expensive by american

Goods and americans in response for passing laws to make it more expensive by european goods which of course meant that for everybody he was making it expensive to buy internationally and so people were buying less or they were simply buying domestic which had an impact on the world economy and then finally this issue of war reparations that germany at the end

Of the war was tasked with paying back a huge amount of money to england and france for its responsibility in the war and germany in order to do so was buying borrowing huge amounts of money from american banks and so the u.s banks were giving money to germany who’s in turn giving money to the united kingdom in other words england and france who are then paying

Back loans to the united states it was just creating one big money circle that the reality was was not necessarily helpful for the overall economy in fact it made it pretty unstable because at some point in the late 20s germany began to have economic problems had a harder time paying their loans back to uk and france um which meant that they had a harder time

Paying it back to the united states and so american banks were getting hurt in this kind of international money circle that had developed well these are some of like i said some of the long-term consequences that made both the united states economy and also the world economy far less stable by the end of the 1920s than it had been at the very beginning of the

1920s but the crisis itself the crisis that brings about the great depression really took place in 1929 and what happens in 1929 is that on october 24th the united states new york stock exchange the new york stock market just collapses here we have a graph that shows it going up and up and up and up and then suddenly here in 1929 it just collapses uh black

Thursday is the 24th of october black tuesday is the following tuesday when there’s a second huge market drop and then as you can see in the long term here the market just drops and drops and drops and drops until it hits basically 1933 at the bottom the only way to describe this is the sense that people who began the day as millionaires at least on paper ended

Day bankrupt the value of stocks just collapsed stocks values are based on how many people want to purchase that stock so stocks that were worth a hundred dollars a share because people were willing to pay that to gain a share of the corporation in the day at 10 cents a share and so if you bought lots of stock at 100 a share and then the price just falls because

Nobody is willing to buy that stock you end the day with nothing and you can’t do anything with that stock because nobody’s going to buy it so you’ve just lost all the money you spent money just evaporates people panic they just freak out um in some cases people even commit suicide don’t jump off the windows of the buildings because they’ve lost everything in

This market crashes billions and billions of dollars probably close to 10 billion dollars in value billion with a b disappear between black thursday and black tuesday and ultimately what happens is panic sets in people just panic because many people have invested their life savings in the stock market and they’re now bankrupt many corporations had put a lot of

Money in the stock market and banks in particular put a huge amount of money into the stock market and they had nothing and they had nothing to show for it and there were lots of people who were investors who wanted their money back in these banks and they couldn’t get it because the banks are out of business people you know again panic as we’re here somebody’s

Being willing to sell this very fancy car for a hundred dollars because he had loans to pay off because he borrowed all this money to invest in the stock market and this was the story for a lot of people is that they had spent money they shouldn’t have spent they had made risks and gamble and they had gambled money away that they should have gambled and when the

Market crashed in 1929 they were absolutely out of luck the the broader impact of course of this market crash is more than just the people who were investing money in the new york stock exchange because it led to a decline in consumer confidence people began to start worrying about the economy they start worrying about their jobs and because they start worrying

About their jobs they don’t spend as much money they stop buying things that they don’t absolutely need but once they stop spending money many businesses have to cut back because they’re not selling as much and industry has to cut back because industry is not not selling as much and so they don’t want to make as much and when they stop when they cut back of

Course people lose their jobs or their wages are cut or their hours are cut and it’s a vicious cycle because once again as jobs are cut and they decrease it has an impact on consumer confidence and so consumer confidence just drops it plummets beginning in 1929 and through the early 1930s but more than that of course they’re real impacts because not only are people

Not willing to spend money but in many cases they lose their jobs and they’re unable to spend money they can’t pay their loans back for the cars they purchased or the homes they purchased or the consumer goods that they purchased they can’t pay the banks back and so as a result the banks don’t have any money to lend or they don’t have any money to give back when

People come to the bank and want the 500 or the thousand dollars they have in their in their checking account or in their savings account the bank simply say we can’t pay because we don’t actually have any money to pay and so as a result the banks begin to fail and it’s sort of like a domino effect one domino tips over the next domino and pretty soon the entire

American economy is on the verge of collapse certainly by the early 1930s by 1931 and 32 the american economy is just in horrible horrible shape and as a result the con the depression deepens and deepens it gets worse and gets worse until by about 1932 america really hits rock bottom give you a sense of the numbers 11 million unemployed 11 million people without

Work and that equates to about a 25 unemployment rate huge unemployment rate of course because people had no money to spend prices collapsed people couldn’t you know companies couldn’t sell stuff because nobody want to buy prices drop by over 40 but again people don’t have any money so they can’t buy anything america’s gnp our gross national product that’s the

Value of all the stuff sold in the united states falls by nearly a third just a dramatic collapse in the amount of money that was being made by the american economy and of course while millions of people are out of work millions and millions more are underemployed or basically are scraping by um you know can’t afford their mortgage can’t afford their rent can’t

Afford to buy food and as a result of this people lose their homes they lose their businesses they lose their farms you know they’re forced to sell out and move on and the number of unemployed and homeless or kind of barely employed and on almost homeless climbs and we have examples of people at coffee and donut kitchens or selling apples on the street for a

Nickel i try to at least make some money so they could help with their kids um and this joke here we have you know excuse me buddy is this a bread line in other words this is the place to get food or is it a run on the bank is it is it people panicking because they hurt banks gonna go out of business and they’re trying to get all their money out before the bank

Collapses and this was the sort of sort of grim humor that people could talk about in this time because things were so bad that it was hard to tell whether it was indeed a breadline for unemployed people trying to get some food or it was people trying to get the last few dollars they could out of a bank before that bank collapsed and so as a result the american

Population is just in horrible horrible shape by the early 1930s unemployment rate here we have um 29 august 29 just before the stock market crash and it peaks in august of 1932 and this is where you have this 11 million people are employed and it only gradually declines until world war ii begins actually this is shortly after world war ii begins well one

Of the consequences of this is that in a sense the american way of life this sort of this notion that americans have developed in 1920s about how people should live you know everyone should have two cars in their garage should have three full meals a day and you know the mothers should stay at home and take care of the kids the kids go to school parent father

Should work that entire notion of what the american dream was just collapses and as a result unemployment becomes the norm soup kitchens people depend on soup kitchens and depend on selling apples on the street and all these other kind of things to make do this population of homeless they have to go somewhere and people start setting up shanty towns around major

American cities the fancy name they call them hoovervilles after herbert hoover who we’ll talk about in just a minute who’s the u.s president um at the beginning of the president here we have the hooverville in new york city this is in central park this is outside seattle here’s the one in washington dc you can see the capital in the background in fact they were

Constantly catching on fire or in some cases local officials were setting them on fire to try to get rid of them because they didn’t want these homeless encampments these shanty towns growing up in the shadow of the u.s capitol building or in the shadow of these these giant towers along um you know this the outskirts of central park in new york city and so this

Was an embarrassment for many city officials um city officials of course were extremely frustrated too because they just couldn’t care for and deal with this mass of population of underemployed and unemployed these families who had probably had a house of you know a car before and are reduced to begging on the street or just trying to make do as best they can

And are in grim grim economic circumstances and as a result grim social and kind of health circumstances well as i said the initial response to the great depression beginning in 1929 is pretty lackluster it’s pretty pretty um unimpressive partly because of the american president at the time herbert hoover and hoover was a republican um certainly he was a very

Smart man he was very well educated had extremely uh extreme experience in government had been in government for years had a lot of experience in private industry he had been a very successful engineer working for mining interests around the world and he firmly believed that the economy would recover he was strongly of the pain that if he gave the united states

Enough time the economy would turn around people would go back to work businesses would start rehiring in and the economy and the essentially the depression would solve itself this the ship that was on the verge of sinking wood would eventually bail itself out and things would go along just fine but the reality was is that while the united did have this boom

And bust economic cycle and certainly in the 19th century their boom and bust periods the great depression was far worse than anyone had ever experienced and the economy was sort of in a permanent state of being broken it wasn’t just something that could turn around and fix itself and especially as the number of americans who are unemployed grows who are who

Are homeless jobless basically giving up hope and becoming a burden on many cities and many communities starts growing the situation gets worse hoover continues to be an advocate of letting the free market just fix itself not wanting to get the government involved he doesn’t think the government should try to solve this problem you know we have kind of a joking

Cartoon of hoover you know hoover prosperity here which is of course in other words to say no prosperity people began complaining about his his attitudes you know why can’t you give my dad a job why can’t somebody go back to work you know here we have this very ironic uh kind of uh image here taken the world’s highest standard of living yet you have people standing

In a soup line unemployment line trying to get food for themselves or for their family and so in a sense as by 1932 when the economy does hit rocklin herbert hoover does realize that that things are in bad shape and then he has to do something he has to get congress to do something to try to fix the economy and he finally kind of admits to himself and admits to

The general public that he needs to do something unfortunately what he does try to do to fix the economy is kind of too little too late in mid 1932 he creates a number of organizations he and congress create a number of organizations to try to help deal with the depression first of these is called the rfc the reconstruction finance corporation to help bail out

Failing banks and to help large corporations who are struggling to stay in business he also goes after people who couldn’t pay their mortgage creates a federal home loan bank to help americans who are behind on their mortgages uh be able to cover their mortgages so they wouldn’t lose their homes they wouldn’t contribute to the growing rank of the unemployed

And the homeless he also begins to spend on federal money on public works projects putting people to work on things like highway building and bridge construction but again it’s too little too late americans have just completely lost confidence in hoover when the fall of 1932 rolls around and there’s a presidential election uh people aren’t so much voting um for

Hoover’s opponent in the election as they are voting against herbert hoover because of his poor handling of the economy and so ironically hoover goes down in history as being a horrible president in some ways he was simply a president who was over his head who simply didn’t understand the gravity of the situation and just didn’t understand how to respond to it

Um but certainly this this great depression that begins in 29 and continues until continues through the 1930s um destroys his presidency and sort of destroys his reputation as a you know as a as a smart intelligent leader of the american people well the depression certainly continues beyond 1932 but as we’ll discuss in the next lecture in the fall of 1932 the

Presidential election takes place the american people reject herbert hoover and they turn to his opponent franklin d roosevelt who begins a series of projects to try to help the united states recover from the worst experiences and the worst aspects of the depression so next lecture we’ll discuss how the united states begins to turn around and recover from this

Horrible horrible condition of the great depression

Transcribed from video HIST212: "Origins of the Great Depression" By Saylor Academy