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THE WALL STREET CRASH
What caused the Wall Street Crash.
In the 1920s share prices in the USA rose year after
year. Many Americans believed that they could make money easily by investing
in shares. The selling and buying of shares was almost uncontrolled
in the USA. Many people bought shares without realising that they could
lose all of their money.
Share prices went up because companies encouraged people to go on buying
on credit. Hire purchase was easily available, but few people realised
that it was very dangerous to go on selling on credit. Eventually people
would not be able to make the repayments.
Some companies that people invested their money in were bogus; they
simply did not exist. Other companies did not tell the truth. It was
difficult for investors to know what they were buying.
The US government did not believe that it had any responsibility for
what was happening. The presidents in the 1920s, Warren Harding and
Calvin Coolidge, believed that it was not their job to interfere.
Some Americans predicted that a crash was coming, but very few people
took them seriously. Most people believed that the USA was so wealthy
and so powerful that it could not happen. They were wrong.
In what ways the lives of Americans
were changed by the Wall Street Crash.
The crash led to a massive loss of confidence on the part of the millions
of Americans who had invested on Wall Street. Instead of investing and
spending, people now began to save. All over the USA people drew their
money out of banks and kept it at home.
Many banks collapsed as people withdrew their money and many companies
went bankrupt as people stopped spending. Millions of people were thrown
out of work and by 1933 unemployment was at 13,000,000.
The unemployed often lost their homes and were forced out onto the streets.
Many began to live in huge shanty-towns on the outskirts of US cities.
Here families lived in old crates and shacks put together from orange
boxes. One family lived in the box that a grand piano had been delivered
in. These shanty-towns became known as "Hoovervilles" after
President Herbert Hoover, who did little to help the unemployed.
Hoover believed in "Rugged Individualism", he did not believe
that it was the responsibility of the Federal Government to provide
help, people should help themselves. When he eventually offered some
help in 1931, it was only in the form of loans.
When large numbers of ex-servicemen gathered in Washington in August
1932 to ask for the bonuses they had been promised for their war service,
Hoover had them forced away by the US Army. So when Hoover stood for
re-election in November 1932, he was defeated very easily by Franklin
Roosevelt.
Franklin Roosevelt was elected President of the USA in November 1932.
He was then re-elected in 1936, 1940 and 1944. He was the only man to
be elected President on more than two occasions
President Roosevelt
tried to tackle the Depression.
During the campaign
for the presidency, Roosevelt had spoken of a "New Deal" for
the American people. He said,
"I
pledge you, I pledge myself to a new deal for the American people."
Roosevelt wanted
to restore confidence in the Federal government. He did this by closing
all the banks for four days to stop people drawing out their money.
He made radio broadcasts, called "fireside chats", which told
the American people what he was trying to do. He ordered that all letters
sent to the President should be answered and help given if possible.
Roosevelt then wanted
to offer three things - Relief, Recovery and Reform. To do this he set
up a series of government agencies. They were called the "Alphabet
Laws", created to offer help to Americans.
- The
Civilian Conservation Corps (CCC) gave work in the countryside, clearing
wasteland and planting forests. 4,000,000 people were given short-term
jobs.
- The
Public Works Administration (PWA) built new public buildings, libraries
and hospitals.
- The
Tennessee Valley Authority (TVA) built dams to provide electric power
and to control flooding.
- The
Agricultural Adjustment Act (AAA) gave farmers guaranteed prices for
produce.
- The
National Recovery Administration (NRA) encouraged employers to pay
fair wages and accept trade unions.
- The
Social Security Act gave workers unemployment pay.
Eventually,
Roosevelt did manage to restore confidence in the Federal government.
Unemployment fell from 13,000,000 in 1933 to 8,000,000 in 1940. But
it was the Second World War that really ended the Depression in the
USA. When the USA declared war in December 1941, unemployment quickly
disappeared.
To many Americans Roosevelt was a hero, but some Americans hated him:
Some Americans regarded
Roosevelt as a traitor to his own class. As a very wealthy man they
expected him to help the rich. In fact he raised taxes on the very rich
and ignored their protests.
Some people refused
to say his name. They just called him "that man in the White House."
Big business did
not like Roosevelt or the New Deal. They saw it as the government interfering
in things that were none of its business. Henry Ford hated Roosevelt.
When Roosevelt visited one of Ford's factories during the Second World
War, Henry Ford hid from him. He only agreed to meet Roosevelt when
his son made him.
Roosevelt was accused
by some people of being a dictator. He tried to force the Supreme Court
to accept laws and used the president's powers to issue Executive Orders.
Others regarded Roosevelt as a Communist - they believed he was taking
away from people in taxes what they had earnt for themselves.
The Depression
affected Britain.
There was high unemployment in the heavy industries
such as shipbuilding, coal, steel and textiles. Shipbuilding was very
badly hit as orders for new ships dried up. As world trade fell, no
new ships were needed. This in turn affected the coal and steel industries,
which depended on shipbuilding for many of their orders.
Textiles, cotton and wool suffered because India and Japan began to
produce these goods more cheaply. Cotton and wool were also affected
by the development of man-made fibres, such as dacron and rayon. These
were cheaper, easier to wash and longer-lasting.
The collapse of these industries led to extreme hardship in the areas
of Britain where these industries were concentrated, e.g. south Wales,
the north-east around Newcastle, central Scotland, and the north-west
in Lancashire and Cumbria. The worst affected towns were places such
as Maryport, Whitehaven, Abertillery and Merthyr Tydfil, but the best
known of all was Jarrow. Here unemployment reached 80% at one point.
The Depression
affected Germany.
Germany was the country worst affected by the Depression.
This was because Germany depended upon the Dawes Plan for loans from
the USA to help repay the Reparations set by the Treaty of Versailles.
When the depression began, the Dawes Plan was replaced by the Young
Plan.
Unemployment in Germany rose very quickly, reaching 6,000,000 by the
end of 1932. This gave Adolf Hitler and the Nazi Party the chance that
they had been waiting for. Hitler was able to use unemployment to gain
support in the general elections from 1930 to 1933. He posed as Germany's
"last hope". As Germans became more and more desperate, they
became more and more ready to listen to Hitler. His rise was helped
by the fact that Weimar Germany used proportional representation. This
meant that all governments were coalitions and were unable to take effective
decisions. He was able to pose as a strong leader who would be able
to sort out Germany's problems.
The Wall Street Crash gave Hitler a second chance. Without it he would
probably not have been able to become Chancellor of Germany.
Summary
On
the 24th October and again on the 29th, share prices on Wall Street
(the New York stock exchange) fell dramatically. This fall became known
as the Wall Street Crash and it led to the Depression, which hit the
USA in October 1929 and then spread to most countries in the world.
Answer !
What caused the Wall Street Crash?
In what ways were the lives of Americans changed by the
Wall Street Crash?
How did President Roosevelt try to tackle the Depression?
How did the Depression affect Britain?
How did the Depression affect Germany?
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