PAUL SCHWIETERING
The beginning of the Depression sounds all too familiar

September 2nd, 2011    Author: Paul Schwietering    Filed Under: Opinion

Paul Schwietering


It can fairly be said that the United States has faced two great crises in its history. One was the Civil War. The second was the Great Depression.

The Depression was caused by a “perfect storm” of factors which combined to produce the most severe economic crisis America ever experienced. A combination of insider trading, stocks purchased “on margin,” fraudulent promotion of worthless stock, and an overall lack of rules and regulations to ensure a fair and transparent market (sound familiar?) caused the stock market to crash in the autumn of 1929. This, in turn, wrecked the national economy, which already had some fundamental problems with wages and farm commodities. The stock market crash was the final factor that pushed America into an economic downturn.

However, it would be a mistake to think that after the stock market crash, the Depression immediately reached its full depth. Although the effect of the crash was felt at once, unemployment didn’t reach its peak until 1932-1933. The Depression gradually became worse during its first couple of years. At its peak unemployment was 25 percent during the Depression, but even that number doesn’t fully convey the economic hardship of the time. Families were bigger back then, and households with eight or nine children were not uncommon. Also, it was much more uncommon for married women to hold a job outside the home. Therefore, a single layoff often represented nearly a dozen Americans relegated to destitution.

Those who had jobs were constantly haunted by the fear that they could be next. During the Depression reporters wrote articles about deprivation that can only be classified as shameful in what was “the richest country on earth.” One oft-cited article described a garbage dump in Chicago where people picked through it looking for things to eat. The reporter wrote about one elderly lady, who was very properly dressed, carefully removing her glasses before eating any of the articles she found so that she wouldn’t see the maggots that infested them.

I relate the aforementioned story not to make you sick, but so that you might understand the anger that gradually built as the American people watched the response of President Herbert Hoover to the disaster. First he summoned many of the barons of Wall Street, who were largely responsible for causing the crisis, to Washington to consult with him. He wanted to find out if they had any ideas for solving this catastrophe. They didn’t. Hoover’s Secretary of the Treasury opined that the Depression might turn out to be a good thing because it would purge society of the weak and unfit.

Hoover himself, by 1931, was in a state of denial. A delegation of businessmen who had made an appointment at the White House to discuss possible measures to deal with the crisis were startled to be told by Hoover, “Gentlemen, you are 90 days too late, as the Depression ended 90 days ago.”

When Hoover told some reporters that the Depression was over, one of them asked, why, if the Depression was over, did he see so many men selling apples on street corners? Hoover replied that these men had found that they could make more by selling apples on a corner than they could at a regular job!

The Reconstruction Finance Corporation was created by the Hoover administration to help large corporations, particularly financial corporations that did business on Wall Street. Under Roosevelt, the RFC would be modified and would offer loans to homeowners in danger of foreclosure, but that was not its original purpose and it did none of that during the Hoover administration. The RFC provided federal loans to Wall Street corporations, relying on the theory that if they did well, the benefits would spread throughout the whole economy (sound familiar?)

The RFC, in its Hoover administration incarnation, may have helped Wall Street but the rest of the economy remained stagnant. Hoover refused to use federal funds to directly help citizens in need, saying that it would destroy the moral fiber of the country. In the election of 1932, an angry electorate kicked the Hoover administration out by a landslide. No administration that helped Wall Street with federal funds but refused to help hungry families was going to be re-elected in 1932, nor did it deserve to be.

In those days, a new Congress was sworn in on January 20th, but the President was not sworn in until March 4th. Meanwhile, concerned citizens took over a food warehouse in the south and distributed food free of charge to hungry people of their town. In Iowa, farmers had blocked off roads and were seizing truckloads of milk headed to market and dumping it on the ground. An anxious nation waited for the new President to be sworn in.

Paul Schwietering is a resident of Union Township.

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