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such as treasury bonds and bank accounts. As the prices continued to rise, some economic

analysts began to warn of an impending correction, but they were largely ignored by the

leading pundits. Many banks, eager to increase their profits, began

speculating dangerously with their investments as well. Finally, in October 1929, the

buying craze began to dwindle, and was followed by an even wilder selling craze.

On Thursday, October 24, 1929, the bottom began to fall out. Prices dropped

precipitously as more and more investors tried to sell their holdings. By the end of the day,

the New York Stock Exchange had lost four billion dollars, and it took exchange clerks

until five o’clock am the next day to clear all the transactions. By the following Monday,

the realization of what had happened began to sink in, and a full-blown panic ensued.

Thousands of investors–many of them ordinary working people, not serious players–were

financially ruined. By the end of the year, stock values had dropped by fifteen billion

dollars.

Many of the banks which had speculated heavily with their deposits were wiped

out by the falling prices, and these bank failures sparked a run on the banking system.

Each failed bank factory business and investor contributed to the downward spiral that

would drag the world into the Great Depression.

By 1930, the slump was apparent, but few people expected it to continue; previous

financial panics and depressions had reversed in a year or two. The usual forces of

economic expansion had vanished, however. Technology had eliminated more industrial

jobs than it had created; the supply of goods continued to exceed demand; the world

market system was basically unsound. The high tariffs of the Smoot-Hawley Act (1930)

exacerbated the downturn. As business failures increased and unemployment soared–and

as people with dwindling incomes nonetheless had to pay their creditors–it was apparent

that the United States was in the grip of economic breakdown. Most European countries

were hit even harder, because they had not yet fully recovered from the ravages of World

War I.) The deepening depression essentially coincided with the term in office (1929-33)

of President Herbert Hoover. The stark statistics scarcely convey the distress of the

millions of people who lost jobs, savings, and homes. From 1930 to 1933 industrial stocks

lost 80% of their value. In the four years from 1929 to 1932 approximately 11,000 U. S.

banks failed (44% of the 1929 total), and about $2 billion in deposits evaporated. The

gross national product (GNP), which for years had grown at an average annual rate of

3.5%, declined at a rate of over 10% annually, on average, from 1929 to 1932.

Agricultural distress was intense: farm prices fell by 53% from 1929 to 1932. President

Hoover opposed government intervention to ease the mounting economic distress. His

one major action, creation (1932) of the Reconstruction Finance Corporation to lend

money to ailing corporations, was seen as inadequate. Hoover lost the 1932 election to

Franklin D. Roosevelt.

The depression brought a deflation not only of incomes but of hope. In his first

inaugural address (March 1933), President Franklin D. Roosevelt declared that “the only

thing we have to fear is fear itself.” But though his New Deal grappled with economic

problems throughout his first two terms, it had no consistent policy. At first Roosevelt

tried to stimulate the economy through the National Recovery Administration, charged

with establishing minimum wages and codes of fair competition in every industry. It was

based on the idea of spreading work and reducing unfair competitive practices by means of

cooperation in industry, so as to stabilize production and prevent the price slashing that

had begun after 1929. This approach was abandoned after the Supreme Court declared the

NRA unconstitutional in Schecter Poultry Corporation V. United States (1935).

Roosevelt’s second administration gave more emphasis to public works and other

government expenditures as a means of stimulating the economy, but it did not pursue this

approach vigorously enough to achieve full economic recovery. At the end of the

1930s, unemployment was estimated at 17.2%. Other innovations of the Roosevelt

administrations had long-lasting effects, both economically and politically. To aid people

who could find no work, the New Deal extended federal relief on a vast scale. The Civilian

Conservation Corps took young men off the streets and sent them out to plant forests and

drain swamps. The government refinanced about one-fifth of farm mortgages through the

Farm Credit Administration and about one-sixth of home mortgages through the Home

Owners Loan Corporation. The Works Progress Administration employed an average of

over 2 million people in occupations ranging from laborers to musicians and writers. The

Public Works Administration spent about $4 billion on the construction of highways and

public buildings in the years 1933-39. The depression years saw a burst of union

organizing, aided by the National Labor Relations Act of 1935. New industrial unions

came into existence through the efforts of organizers led by John L. Lewis, Walter

Reuther, Philip Murray, and others; in 1937 they won contracts in the steel and auto

industries. Total union membership rose from about 3 million in 1932 to over 10 million in

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