When the decade opened, the business slump that was to become theágreatest depression in history, the Great Depression, was two monthsáold. The preceding boom, fed by a government policy of cheap credit,áand in its later stages by frantic stock speculation, had ended ináearly 1929, and the stock market had started down even before theáfateful crash of October 29.
In the past such declines, considered simply as the inevitableádownside of the business cycle, had been self-righting. The last one,áin 1920, had wrung itself out within a year. It was expected that thisáone would do likewise. It didn't. The stock market continued to slide,átaking the rest of the economy with it.
To this day, nobody knows what really caused the Great Depression,áthough many theories have been advanced. Some analysts think PresidentáHerbert Hoover, by continuing into the 1930s the policies of the pastádecade--expanding the money supply through cheap credit and mitigatingáthe inflationary effects by keeping wages high--prolonged andástrengthened the decline. Others, conversely, blame the Federal Reserveáfor not increasing the money supply fast enough after the crash. Aáthird theory has it that wages were in fact too low compared toáindustrial productivity, and the stock market slide started anáirreversible contraction both in demand and in ability to pay. Theátheories, in any event, were hindsight. And as far as the FederaláGovernment was concerned, Hoover insisted on the classic fiscaláresponse of a balanced budget and reduced spending.
(March 31,1930)
In the other current of news, breadlines in New York City stretchedáout for blocks. The Bowery Y.M.C.A. was feeding 12,000 jobless per day.áManhattan's Church of the Transfiguration ("The Little Church Aroundáthe Corner") opened, for the first time since 1907, free meal countersáfor 1,000 unemployed per day. Mrs. Irving T. Bush set up a foodádispensary which lined up the jobless for two blocks. Demands onácharity organizations doubled. Colyumist Heywood Broun started aá"Give-a-job-till-June" crusade in the New York Telegram.
In Washington, before the Senate Commerce Committee, began hearingsáon bills offered by New York's Democratic Senator Robert FerdinandáWagner to relieve unemployment. Senator Wagner flayed the Hooveráadministration for what he charged was its attempt to produceá"prosperity by proclamation." He insisted that unemployment was farámore wide-spread and severe than the Department of Labor's statisticsáwould indicate. Against photographs of New York's breadlines he set aápicture of Citizen Calvin Coolidge being banqueted in California at aá"prosperity dinner."
(May 5, 1930)
The steps by which the Government endeavored to right matters haveábeen few and simple. Last December the President summoned some tycoonsáand many near tycoons to the series of conferences at which theyápledged no wage reductions, increased spending. Overstatement thrivedáat these meetings, but Panic received its first and greatest set-backáfrom them. Second of the steps was the formation of the Business SurveyáConference, which went too far at first in artificial bullishness, butáhas operated well as "a clearing house for information." Third was theáDepartment of Commerce's campaign to urge state and local governmentsáto sponsor public works, create industrial activity. Fourth was theáaction of Congress in appropriating $125,000,000 a year for roadáconstruction, another way of creating employment and demand forámaterials. Fifth was the policy of easy money.
One of the first concrete steps the U.S. did take was to jack up importátariffs, traditionally high, to their highest levels in history toáprotect suffering American businessmen. The Hawley-Smoot Tariff of 1930áwas a disaster, choking off trade that might have helped the U.S.áeconomy recover and spreading the Depression around the world.
(June 30, 1930)
A dozen steamers piled on extra steam crossing the Atlantic lastáweek, racing against time to save money. The Olympic, notable winner,ásaved $130,000 for its clients. At Manhattan and other ports, menáfighting noisily in the customs-houses raced to withdraw stored goodsábefore the zero hour when duties would be higher; Manhattan customsáreceipts for the day were ten times the average. The Hawley-SmootáTariff Bill had become law. Some ships, having lost the race, turnedáout of U.S. ports, took cargoes elsewhere. Conversely, piles of chicleá(for gum-chewers), piles of spice and other things nice on which theánew law reduced or revoked duties, after long waiting came officiallyáinto the U.S. from customs warehouses.
The capitals of Europe, South America, Australia swarmed with angryáactivity which had its repercussions in Washington. Parliaments andáministers talked of retaliatory legislation against the U.S. Alládiscussed an international trade alliance to combat U.S. protectionism.áAll feared that the U.S., greatest producer of comestibles, motors,áradios and whatnot, not only would not buy in their markets, but wouldáflood them with vast surplus stocks, bringing about a world panic.
The problem was that the Republicans did not want the government toáprovide direct relief for the jobless and destitute; that would be "theádole," regarded where it was widespread, as in Britain, as somehowáundermining the nation's moral fiber. So Hoover wrung his hands, calledáendless numbers of conferences, preached prosperity and saw theáRepublican congressional majority reduced to zero in the 1930 mid-termáelections.
(November 3, 1930)
Hopeful as were these predictions of better times by U.S. tycooneryáthey did not help President Hoover solve the immediate problem ofáUnemployment. The President's estimates showed 3,500,000 persons out ofáwork. Of these it was figured that a million were in transit from oneájob to another or voluntarily idle and that another 500,000 were inácommunities of less than 3,000 population where they would be cared foráby friends or relatives. The remaining 2,000,000 jobless representedáabout 800,000 families. The President's view was that this was aáserious but not critical situation.
To relieve it directly there was little President Hoover could do.áThe Federal Government had no funds for charity; that must comeálocally. Federal public works were admittedly only a "drop in theábucket" of U.S. construction. For psychological purposes though, theáWhite House kept them to the fore as an example to states & cities.áAlso the President continued to jack up Industry with requests to pusháits heavy construction, stagger its employment, maintain its wages.
(December 8, 1930)
The third week in November, 1929, he, aged 39 and having a wife and twoáchildren, lost his job. He had been earning $37.50 a week as clerk ináthe accounting department of a manufactory. He had put $1,413 in theásavings bank, so he was equipped for a short layoff, and he had boughtáhis last suit (for $32.50, at a sale) just two months before. He wentáhome in November to his by-the-year lease apartment, cheered up hisáwife, chaffed the children. But he began earnestly to look for anotheráposition.
After two unsuccessful weeks, he felt a little out of it when he metáhis employed friends. He would say: "Oh, I'm all right. I'm just tryingáto decide if I'll take this job or that." But after two weeks more heáwas ducking around corners to avoid the same people, for he was proud.áAt the end of three months, he stayed away from the reproachful glancesáof his family as much as possible, though in mid-summer of this year heásuffered the humiliation of moving them into two furnished rooms. InáSeptember, his savings were all gone. Now for the first time he wasáwilling to accept manual labor, any labor. He was lonely, afraid,áundergoing a mental and moral breakdown. But he could not find a job.
Last week Jim Jobless in most U.S. cities shivered in the year'sáfirst real cold snap as he joined the breadseeking or jobseeking lines.áBut relief work everywhere was getting under way and Jim Jobless couldáread the following in the news:
In New York City, with 300,000 idle, Banker Seward Prosser'sácommittee had raised $2,512,000, given park-cleaning jobs to 10,000áJims. Police distributed 1,500,000 lb. of food in 65-lb. portions.
Detroit, with 86,000 idle, had found 11,000 jobs, expended moreáthan $2,000,000 in relief, but the number of unemployed was 4,000ágreater than when Mayor Frank Murphy's campaign started about sevenáweeks ago.
The hardest hit and most immediate sufferer was the American Farmer.áThis was partly because the U.S., with no mechanism for reducingáacreage and regulating prices, had been plagued by agriculturaláoverproduction since the mid-1920s. By the 1930s, prices that collapsedáto as little as one-tenth of their 1920 level were coupled with severádrought in many areas. The result was that those farmers withádecent-sized crops could not get fair prices for them, and many farmersáhad no crops to sell at any price. The only thing that they could thinkáof to do in such circumstances was to go back out and plant biggerácrops than ever, greatly aggravating their situation.
(July 21, 1930)
Last week it was 110 in the wheat fields of Kansas and Iowa.áPolitically it was even hotter as wheat prices slumped to the lowestálevel in 17 years. 60 cents per bu. locally, 86 cents at Chicago. Toáescape a brassy sun harvesters worked by moonlight. By day, horsesáheaved and died by the score. The grain turned white, the groundácracked open. But the threat of a burned crop and reduced productionáwas not sufficient to revive wilting prices.
Into this Midwest oven last week went Secretary of Agriculture ArthuráMastick Hyde and Chairman of the Farm Board Alexander Legge to preacháthe gospel of wheat acreage reduction. Before they left Washington theyásolemnly warned wheat producers that ahead of them lay seven lean yearsáwith "world wheat prices...appreciably lower than in the last sevenáyears."
Messrs. Legge and Hyde opened their campaign at Hastings, Neb. Theáthermometer stood at 100. Declared Chairman Legge: "Reduce the acreageáof wheat, without regard to what is done with the land thus released.áYou can put this land into grass for the benefit of your children. Doáanything with it but don't raise wheat on it....If a great majority ofáproducers could act collectively, adjustment in production becomesáeasy."
(August 25, 1930)
To the White House last week John Farmer of the Midwest looked foráhelp from the drought. After months of dry, parching weather 270,000áfamilies of him and his like were so "bad off" that the President ofáthe U.S. had taken notice and was trying to do something.
The White House seemed a long way from John Farmer's withered littleáacres but he was hopeful. His corn was gone. His well was dry. Hisápasture was a tinder box. His cows were hungry. His vegetable patch wasáa mass of brown weeds. His supply of cash was dangerously low. Heáalready owed the county bank more than he could pay this year or next.áTyphoid fever had broken out nearby. John Farmer faced a bad winter.
With high hope John Farmer watched the Governor of his Statte startáfor Washington to see the President.
The President opened the conference in the Cabinet room. For threeáhours they talked. Most of the governors had come to Washington witháthe idea of securing Federal funds for drought relief. But PresidentáHoover had no Federal cash to give the states. He explained that theáRed Cross had made $5,000,000 available for emergency suffering, thatáthe Farm Loan Board might supply, $700,000 in credits, but that statesáand local banks would have to shoulder the major burden of relief foráthemselves.
(January 12, 1931)
City dwellers last week were sharply reminded of the Drought when 500áhalf-starved farmers and their wives raided the food stores of England,áArk.(pop.2,408). Most of these hungry citizens were white; had beenáfairly prosperous husbandmen until last year. Their crops had beenáruined. Their provisions were gone.
Assembling in England with guns tucked in their clothes they demandedáRed Cross relief. When this was not forthcoming because the supply ofáRed Cross requisition blanks had been exhausted, they threatened toáloot the stores. One George E. Morris, attorney, tried to pacify themáwith a speech, was constantly interrupted by cries of: "We want foodáand we want it now! We're not beggars, we're not going to let ouráchildren starve." Women sobbed, children whimpered.
To avert a riot, England's merchants hard-pressed themselves by theáDepression, began to dole out food to the hungry. More than 300 wereáeach supplied with a ration worth $2.75.
Kansas farmers, in the midst of harvesting a record-breaking crop ofá200,000,000 bu. of wheat last week were getting 25 cents per bu. casháfor their product. On the Chicago Board of Trade July futures dipped toá50 1/4 cents, the lowest figure since the exchange first opened ináApril 1848. Around Hutchinson, Kans. the country was dotted with greatámounds of wheat -- 10,000 bu. to the pile -- which had been dumped outáof doors for lack of elevator space. At Bucklin, one Forrest Kennettágot his name in the papers by scorning a 27 cents per bu. offer,ádecorating his truck with jackasses labelled "Farm Board" and "WheatáFarmer," and driving away with the tail board down so his load dribbledáout through the town's streets. Here & there growers plowed their cropáunder rather than take the loss of harvesting it.
Such was the price wheatmen in Texas and Oklahoma as well as Kansasáhad to pay for their bull-headed refusal to heed the Federal FarmáBoard's plea to reduce acreage. Over & over had they been warned thatáthe bottom would drop out of their staple market if they persisted ináover-production. Now they were literally reaping as they had sowed.
One large holdover from U.S. participation in World War I and theásubsequent peace talks was the system by which Germany borrowedábillions of dollars from U.S. banks at low interest rates (that cheapácredit) and paid it to the Allied powers as war reparations; the Alliesáin turn returned it to the U.S. as payment of their war debts. Theásystem had worked in prosperity, but in Depression, it threatened toáruin Germany and eventually all the others. To help everyone out,áHoover took what was for him a fairly controversial step.
(June 29, 1931)
Out of the commotion came word, vague at first, that President Hooveráhad started to Do Something about the world-wide Depression of which heáhad spoken so often. For weeks he had been mulling over the situationáin Germany, he knew, was in desperate straits. Ambassadors on recentáWhite House visits had told of the bog into which Europe's economy,áweighted by Germany, was sinking.
When all was quiet in the circular, greenish room, President Hooveráslowly read aloud a clear, articulate statement in which he proposed aáone-year moratorium on all War debts to the U.S. and on all Reparationsáfrom Germany.
The President's plan was simple: The U.S. would forego one year'sáprincipal and interest payments, totaling $245,000,000, from Britain,áFrance, Italy and the lesser Allied powers, plus $15,000,000 fromáGermany (for expenses of the Army of Occupation), provided the Alliesáwould collectively forego a total of $385,000,000 in Reparations fromáGermany under the Young Plan for a like period. By implication theáAllies were also to suspend debt payments among themselves. DeclaredáPresident Hoover:
"The essence of this proposition is to give time to permit debtorágovernments to recover their national prosperity. I am suggesting toáthe American people that they be wise creditors and good neighbors...."
By 1932, some 12 to 15 million people (no one really knows), aboutáone-quarter of the U.S. labor force, were unemployed. Business was atáunprecedentedly low levels --68.9% of the pre-1929 mark, by one index.áSlowly but surely, Hoover increased government intervention to promoteárecovery, but very little of it was in the form of direct relief, whereáit could do the most immediate good. More major public works wereácommissioned in Hoover's term than in the previous three decades,áincluding the San Francisco Bay Bridge, the Los Angeles Aqueduct frománorthern California, and the Hoover Dam. The biggest step to change theáeconomy was the Reconstruction Finance Corporation.
(January 25, 1932)
To inflate or not to inflate was no longer a question last week. Theáonly question: Will inflation succeed? Upon the answer (which manyáthink will soon be apparent) depends the immediate economic future ofáthe U.S. If it succeeds the downward spiral of deflation will beádefinitely checked. If it fails, historians may well look back uponá1932, with a shudder.
Forces for inflation worked busily last week in congress where theáHouse whipped through a bill to create a Reconstruction Finance Corp.,ákeystone of President Hoover's whole relief program. The vote wasá335-to-55. By a vote of 63-8 the Senate a week before passed a similarámeas-
ure. The thumping big Congressional majorities echoed the nation'ságreat expectations. What opposition there was came from literal-mindedágentlemen who could not find the word "food" in the relief bills.
Once organized, the R.F.C. directors will begin immediately toáaccumulate operating capital. Congress, as a starter, will vote aádirect appropriation of $500,000,000 from the Treasury. Then R.F.C.áwill move to raise $1,500,000,000 from the public by the sale of itsábonds, debentures, short-term notes.
With $2,000,000,000 in hand, R.F.C. will be ready to function as aácolossal credit agency.
Authorized borrowers: "Any bank, savings bank, trust company,ábuilding & loan association, insurance company, intermediate creditábank, livestock credit corporation, agricultural or farmers'áassociation or other bona-fide financial institution" -- and all theárailroads. Individual loans are limited to $200,000,000 and R.F.C.ádirectors are free to fix interest rates.
A sample case: a "sick" railroad comes before R.F.C. for help; itámust meet a $40,000,000 bond issue with in the month or go intoáreceivership; the Railroad Credit Corp. has advanced it $15,000,000áfrom the increased freight rate pool and taken its last shakyácollateral. Will R.F.C. let it have $25,000,000 on nothing more thanáits promise to pay? How R.F.C. directors answer that questions andáothers like it will depend in large measure the success or failure ofáR.F.C.
