Depth Study: 3. What Were The Causes And Consequences Of The Wall Street Crash?

Question 1

What were reasons for the Wall Street Crash?

Answer 1

Overproduction: the market became saturated.
Poverty: almost 50% of American families had an income of less than $2000 a year. 5% of the country was receiving 33% of the income in 1929.
Trade: European countries were still paying back war loans. Businesses couldn’t trade because of the high tariffs.
Speculation: by 1927 fewer new houses were being built and the sales of cars was beginning to decline. In the 1920s ordinary people invested in any company with no experience therefore shares rise out of proportion to their real value. A lot was bought on the margin which led to mass consumerism, however many people were unable to pay back the loans. Some experts started selling their shares leading to smaller investors panicking and doing the same.

Question 2

What impact did the Wall Street Crash have on the US economy and society?

Answer 2

• businesses and banks went bust: 20000 companies went bankrupt and 11000 banks stopped trading.
• the economy had to adjust to a general reduction in trade and demand for American goods.
• businesses had to reduce their production and operations so workers were fired and had their wages reduced.
• less money in the economy meant people could not afford to buy goods.
• by 1933 the economy was producing 20% of what it had been in 1929.
• 1/4 of the workforce was unemployed: 12000 per day.
• 23000 people committed suicide.
• international trade fell from $10 billion in 1929 to $3 billion in 1932.
• 1/20 farmers were thrown off their land.
• no welfare benefits = Hoovervilles

Question 3

Why did Roosevelt win the election of 1932?

Answer 3

The failures of Hoover:

• Hoover interpreted the depression as normal economic down turn, therefore any action he did eventually take was seen as too little too late.
• in 1932 when thousands of veterans asked for their promised bonuses early (the “Bonus Marchers”) peacefully protested, the army destroyed their camp with the use of tanks, machine guns, and tear gas. Two veterans were killed and thousands were injured.
• he was against the government providing benefits as he thought it would undermine America’s rugged individualism.
• all he did was more of the same: Hawley-Smoot Act increased tariffs.

Roosevelt’s strengths:

• he was the Governor of New York and spent $20 million of tax money helping the unemployed in New York. (+pensions and help for farmers)
• he wanted advice from experts including factory owners and union leaders.
• he promised a “new deal” which was deliberately vague. He travelled the country by train (around 30000 km) and made 16 important speeches.
• he battled with polio and had a more likeable personality…

Roosevelt won by 7 million votes.

Question 4

What were Roosevelt’s inauguration and the ‘Hundred Days’?

Answer 4

Banks:

• a four day bank holiday was announced in which the Emergency Banking Act was passed. 5% of banks were seen as unsound so we’re closed whilst the others were helped with grants and advice.
• he asked those with savings to return their money to banks in his fireside chats restoring public confidence.

Unemployment:

• in 1933, 25% of the workforce was unemployed.
• the Civilian Conservation Corps (CCC) was set up and provided voluntary employment for those aged 18-25. This provided 2 million men with work.
• the Public Works Administration (PWA) initiated major construction projects like 70% of American schools. It spent $7 billion within 6 years but provided millions of jobs to workers with skills.
• the Civil Works Administration (CWA) provided temporary work for four million people over the winter of 1933-4. (40 cents an hour for unskilled work).

Farmers:
-the Agricultural Adjustment Agency (AAA) paid farmers to reduce their livestock and take part of their land out of cultivation. Within 3 years, farmers’ incomes doubled. (Farm labourers became unemployed)

Industry:

• the National Recovery Act (NRA) set up the National Recovery Administration (NRA) which stabilised prices and improved working conditions by creating voluntary codes which enabled employers to regulate prices, output, hours, and wages. Businesses which signed up received a NRA badge which consumers were encouraged to buy from. These favoured larger firms.
• the Tennessee valley authority (TVA): 33 dams were built, 650 mile waterway so 3.2 billion kWh of electricity each year.

The poor:
-the Federal Emergency Relief Administration (FERA) had a budget of $500 million to assist those in desperate need. The money was used to fund soup kitchens, provide clothing and bedding, and set up work schemes.