The History Book

282

ANY LACK OF CONFIDENCE

IN THE ECONOMIC

FUTURE OF THE UNITED

STATES IS FOOLISH

THE WALL STREET CRASH (1929)

O

ver six desperate days

in October 1929, shares

on the New York Stock

Exchange crashed. The downturn

began on October 23rd, when

stocks from car manufacturer

General Motors were sold at a loss

and the market started to collapse.

Panic set in, and the next day the

market nose-dived.

On Tuesday October 29, which

became known as Black Tuesday,

stock prices plunged even lower.

In total, $25 billion, approximately

$319 billion in today’s market, was

lost. It was the biggest financial

catastrophe ever, and it plunged

the world into the Great Depression.

Roaring Twenties

The US had recovered quickly after

World War I, and factories that had

made supplies for the war effort

switched to producing consumer

goods such as cars and radios. The

growth of new technologies and

mass production saw economic

output increase by 50 percent; the

age of prosperity and consumerism

that resulted became known as

the Roaring Twenties.

Newspapers and magazines

were filled with stories of people

becoming rich overnight by

dabbling in the stock market, and

thousands of ordinary Americans

bought shares, increasing the

demand for them and inflating their

value. Between 1920 and 1929, the

number of shareowners rose from

4 million to 20 million.

By late 1929, there were signs

of trouble within the American

economy: unemployment was

on the rise, steel production

was declining, construction was

slowing, and car sales had dipped.

Still confident they could make

a fortune, some people continued

to invest on the stock market.

Speculators crowd around the

front entrance of the New York Stock

Exchange, deeply concerned about

their financial investments in the days

following the Wall Street Crash.

IN CONTEXT

FOCUS

The Great Depression

BEFORE

1918 The global economy

struggles to recover its

stability after the disruption

of World War I.

1922 The US economy starts

to grow rapidly as factories

mass produce goods.

1923 Prices in Germany spiral

out of control in hyperinflation

that destroys people’s savings.

AFTER

1930 Mass unemployment hits

the US, Britain, Germany, and

other countries.

1939 The advent of World

War II sees an increase in

employment and government

spending, speeding recovery.

1944 World leaders agree

to set up the International

Monetary Fund (IMF) and

World Bank to finance

economic development.

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283

See also: The California Gold Rush 248–49 ■ The Treaty of Versailles 280 ■

The Reichstag Fire 284–85 ■ The global financial crisis 330–33

THE MODERN WORLD

However, when the stock prices

began to drop in October 1929,

panic set in. The ensuing crash

triggered a worldwide recession

known as the Great Depression.

The Great Depression

In the US, factories were

closed and workers sacked. In

the spring of 1933, the agricultural

sector was on the verge of disaster:

25 percent of farmers were without

work, and many even lost their

farms. Unemployment went from

1.5 million in 1929 to 12.8 million,

or 24.75 percent of the workforce,

by 1933, a pattern seen around

the world.

Unemployment in Britain rose

to 2.5 million, 25 percent of the

workforce, with heavy industry,

such as shipbuilding, particularly

badly hit. Germany suffered greatly,

since its post-war economy was

supported by huge American loans

which it was unable to pay back.

A New Deal

The crash helped bring Democrat

Franklin D. Roosevelt into the

White House in 1932. His policy,

the New Deal, introduced a

program of social welfare

for the poor and government

expenditure on huge public

projects that created new jobs.

The Great Depression marked

the end of the United States’ post-

war boom. In Europe many turned

to right-wing parties, such as Adolf

Hitler’s National Socialist Party

in Germany, with its promise to

restore the economy. In many

countries, recovery came only

with the increase in employment

brought about by World War II. ■

Franklin D. Roosevelt

Franklin Delano Roosevelt

(1882–1945) was the only

president ever elected to

serve four terms in office. He

achieved this success despite

suffering from polio in 1921,

which crippled both legs and

almost led him to give up on

his political career.

Roosevelt won the election

to be the governor of New

York in 1929, and in 1932 was

nominated as Democratic

candidate for the presidency.

Pledging a New Deal for the

American people, he won a

landslide victory. In his first

100 days, he introduced a

program of social and

economic reform to combat

the Great Depression. These

immensely popular measures

won him a second landslide

victory in 1936.

In 1939, the US was

propelled into World War II,

and Roosevelt took his place

as one of the allied war

leaders. He was one of the

principal movers in the plans

for a United Nations but died

in March 1945, just before

the UN’s first meeting was

convened in San Francisco.

A worldwide recession

sets in.

Prosperity in

the US leads to

overconfidence

and reckless

investment.

The US

stock market

crashes in

1929.

Mass

unemployment

in the USA

results from

overproduction

and inadequate

demand.

Discontent in

Europe leads

to the fall of

governments and

the rise of

dictatorships.

US President

Roosevelt

introduces the

New Deal to

stimulate the

economy.

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