As the 1920s drew to a close, Americans were confident in their well-being and in the prospects of even better times ahead. On the election trail in the summer of 1928, presidential candidate Herbert Hoover boasted of America’s optimism with these words:
We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us. We have not yet reached the goal, but, given the chance to go forward with the policies of the last eight years, we shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation.
Hardly a voice in the wilderness, Hoover’s words were typical of the confidence of the times; nearly everyone missed the emerging signs of a faltering economy. Indeed, many failed to recognize the magnitude of the decline even after the Great Depression was erupting in full force.
The Great Depression was the most important economic event of the twentieth century. Between 1929 and 1933, the economy of the United States collapsed. It is almost impossible to convey the sheer terror and misery that the depression produced, but numbers can suggest the dimensions. Real gross domestic product (GDP) fell 30 percent. Unemployment rose from 3.2 percent of the labor force in 1929 to 24.9 percent in 1933. Hunger and fear paralyzed the nation.
The central questions for economic historians are these: What caused this unprecedented collapse? Why did the economy remain depressed for so long? How can a repetition be avoided? As we shall see, scholars are still far from full agreement on all the issues. A consensus has been reached, however, on the key factors that contributed to the severity of the crisis, in particular the breakdown of the financial system. In this chapter, we concentrate on the dimensions and causes of the crisis. In chapter 24, we focus on the response of the Roosevelt administration to the depression and on the long-term consequences, particularly the emergence of the modern “mixed” economy in which the central government plays a major role in the allocation of resources.
World History
