AP US History
Focus Essay Due 4.11.08
The U.S. Economy Before and After Black Tuesday
During the two years before October 1929, the United States stock market had reached record highs, stimulated by easy credit, manipulation, and the optimism of the American populous. The two months before “Black Tuesday”, the stock market suffered severe checks but they paled in comparison to the crash that occurred October 29, 1929. On this day investors sold their stocks at any price, trying to make any profit, throwing away the previous year’s gains. This day began a slide into a depression that lasted ten years: the Great Depression. The economy leading up to the stock market crash was extremely different than that of the United States after; recovery during FDR’s administration was never fully realized by the nation.
The economy before the stock market crash had several serious challenges set before it; however these challenges were much different than what it faced during the depression. The United States had left the Progressive Era of the nineteen-teens and had entered the Roaring Twenties. These times saw a heightened interest in leisure activities and entertainment. A new generation of America was leading society: women known as “flappers” challenged stereotypes set by earlier generations. But while great leaps were being made, the economy was far from perfect. During World War I, agriculture had boomed, and after it had ended, farmers had expected the boom to last indefinitely; however this was not the case. Prices in agricultural products dropped drastically low and farmers were struggling to make ends meet. As seen in Document G, farmers bought new equipment like tractors, expecting the profit from their produce to pay off the debt. Instead in many cases they lost money because of extremely low prices, and had no way to repay their debts to the banks, adding even more pressure to the farmer’s lives. Clearly a large issue during the Roaring Twenties was the poverty farmers were entering into due to falling produce prices and rising debt for previous purchases on credit.
Another large issue during the 1920’s was the disparity of wealth. The upper two to five percent of the American population held up to fifty percent of the entire wealth in the United States. The other fifty percent was divided up between approximately ninety-eight to ninety-five percent of the population. Prohibition also played a large part in the twenties though it didn’t directly affect the economy. The eighteenth amendment prohibited the production, sale, and consumption of alcohol in the states. However drinking actually increased during the twenties! Bootlegging became common, and gangs in the cities fought over territory to sell their illegal product. Americans who ignored the prohibition amendment spent outrageous prices on liquor that could have been put into the American economy; however this was not so. Prohibition increased crime, meaning that the government had to spend funds to control gang wars and angry people. Indirectly prohibition added to the economic issues before the stock market crash as did the disparity of wealth.
After the stock market crash the economy entered the Great Depression. President Hoover was in office and like the republicans of the twenties believed in laissez-faire. The worst thing for him to do was to leave the economy alone. He instead needed to be increasing the expenditures of the federal government to help balance the lack of money in the economy. Shantytowns cropped up around the nation called Hoovervilles in “honor” of Hoover. The American people blamed the depression on the president. In 1932 the Bonus Army (seen in Document C) marched on Washington to ask for their pensions early because they needed money to survive the hard times of the Great Depression. Hoover denied their requests and also sent the army out to disperse the Bonus Army. The army...