From Wall Street Crash to Depression America

From Roaring Twenties to Bread Lines

In September 1929 the Dow Jones industrial average peaked at 381 points. By July 1932 it had fallen to 41 — an 89% collapse. Twelve million Americans were out of work; thousands of banks had closed; queues for free bread stretched around city blocks. The Wall Street Crash itself lasted only a few weeks, but the slump it triggered — the Great Depression — lasted into the 1940s. This lesson tracks how it began and what it meant for ordinary Americans.

Key Fact

Four main causes drove the slump: over-production by industry (factories making more than people could buy), under-consumption caused by 1920s inequality, speculation on the stock market (Lesson 2), and bank failures (around 9,000 US banks closed between 1930 and 1933).

The Wall Street Crash, October 1929

Share prices began to wobble in early September 1929 as economists like Roger Babson warned the market was overvalued. On Thursday 24 October — Black Thursday — nearly 13 million shares were sold and prices began to collapse. A consortium of bankers led by Richard Whitney intervened and steadied the market briefly, but on Tuesday 29 October — Black Tuesday — over 16 million shares were dumped and the market lost around $14 billion of value in a single day. Many speculators who had bought on the margin (Lesson 2) were ruined. Banks that had loaned them money lost their loans; banks that had invested customers’ deposits in the same shares lost those too.

A stock-market crash by itself need not crash the wider economy. What made 1929 different was the structure underneath. Roughly 5% of Americans had taken a third of national income (Lesson 2), so most households had little spare cash. Industry had been over-producing — factories were already making more cars and washing machines than the buying public could absorb. When share-buyers stopped spending, factories cut production and laid off workers; unemployed workers stopped buying; more factories cut production. Falling prices then trapped farmers further in debt.

Banks were the third multiplier. Around 9,000 US banks failed between 1930 and 1933, wiping out the savings of nine million depositors (deposit insurance did not yet exist). Each failure pulled small businesses down with it. The 1930 Hawley–Smoot Tariff (Lesson 7) added a fourth: by raising US import duties to record levels, it triggered retaliation that strangled what was left of international trade.

Unemployment and Hoovervilles

Unemployment rose from around 1.6 million (3% of the workforce) in 1929 to 12–13 million (25%) by 1932. In some industrial cities the figure was much worse: Toledo, Ohio reached 80% unemployment among union members. There was no federal unemployment benefit; relief was patchy and provided mainly by overstretched local charities and churches. Soup kitchens served free meals; the Salvation Army ran bread lines.

Evicted families built shanty towns of cardboard, packing crates and tin sheets in city parks and on waste ground. Bitter Americans named these settlements Hoovervilles in mockery of the president they blamed for their poverty. The largest, in St Louis, housed several thousand people. Newspapers used as blankets were called ‘Hoover blankets’; empty trouser pockets turned inside out were ‘Hoover flags’.

Farmers and the Dust Bowl

Farmers had already been struggling since 1921 (Lesson 2). The Crash made things worse: crop prices halved again, and the banks that foreclosed on farms collapsed before the farms could be sold. Then nature added a disaster of its own. From 1931 onwards, drought struck the southern Great Plains. Decades of intensive ploughing had stripped the topsoil’s natural cover; without rain, the soil turned to dust. Massive black storms — the largest, on 14 April 1935, was called Black Sunday — rolled across the prairies, swallowing whole towns. The disaster zone became known as the Dust Bowl.

Around 2.5 million people fled the southern Plains, many heading west to California. Mocked as ‘Okies’ whether or not they came from Oklahoma, they were channelled into low-paid migrant farm work. John Steinbeck’s 1939 novel The Grapes of Wrath made their story famous. The Dust Bowl explains why farm distress in the early 1930s went far beyond falling prices.

Businessmen and the Bonus Army

The Depression hit owners and workers alike. Around 25,000 American businesses failed in 1932 alone. Industrial production fell by nearly half between 1929 and 1932. The men in suits selling apples on street corners — a famous Depression image — were often former clerks and shop managers, not panhandlers.

In summer 1932 around 17,000 unemployed First World War veterans — the Bonus Army — marched on Washington with their families to demand early payment of a service bonus due in 1945. They camped on the Anacostia Flats just across the Anacostia River from the Capitol, building a shanty town that resembled a Hooverville. On 28 July 1932 General Douglas MacArthur led federal troops — including Major George Patton with cavalry — with bayonets, tear gas and tanks to clear the camp. Two veterans were shot dead and an infant died of tear-gas exposure. Hoover had ordered MacArthur to clear only the buildings, not pursue the veterans across the river; MacArthur ignored the order and burned the entire encampment. Newsreels of US soldiers attacking US war veterans destroyed what remained of Hoover’s public reputation, four months before the November election (Lesson 7).