Looking for a quick great depression summary? It was the worst U.S. economic crisis in modern history, running from the 1929 stock market crash until World War II began in 1939. Here is what happened and why.
This page is one chapter in the broader story of us history.
| Item | Value |
|---|---|
| Usual starting point | The October 1929 stock market crash |
| Shares traded on Black Thursday (October 24, 1929) | 12.9 million, a record at the time |
| Americans looking for work but unable to find it, 1931 | 6 million |
| Unemployment at Roosevelt’s inauguration (March 4, 1933) | 25% |
| Date Hoover set up the Reconstruction Finance Corporation | January 22, 1932 |
| Span of the crisis, per HISTORY | 1929 to 1939 |
The figures come from the HISTORY.com overview and the Hoover Presidential Library exhibit. Historians revise and round these numbers, so check the source before you rely on them.
What caused the Great Depression?
No single event caused it. The HISTORY.com overview lists slowing consumer demand, mounting consumer debt, decreased industrial production and reckless stock market expansion. The nation’s total wealth more than doubled between 1920 and 1929, a period dubbed the Roaring Twenties.
Several weaknesses were building underneath that boom:
- Speculation: the stock market reached its peak in August 1929, even though production had already declined and unemployment had risen (HISTORY).
- Buying on margin: the Dow Jones Industrial Average doubled between 1928 and 1929, but most of that growth was fueled by purchases made on margin (EBSCO Research Starters).
- Fragile households and farms: wages were low, consumer debt was growing, and farming struggled with drought and falling food prices.
- Tight credit: the Federal Reserve raised credit rates and tightened the money supply, when easier credit would have helped borrowers repay lenders.
The economy had already slipped into a mild recession during the summer of 1929, as consumer spending slowed and unsold goods piled up. Stock prices kept climbing anyway, according to HISTORY.
The 1929 stock market crash
On October 24, 1929, known as Black Thursday, nervous investors sold overpriced shares in a rush and a record 12.9 million shares changed hands. Five days later, on October 29, some 16 million shares were traded after another wave of panic, as HISTORY recounts.
The Hoover Presidential Library says the market dropped by almost half of its recent record highs in less than a week. Investors who had borrowed to buy stocks were wiped out, and millions of shares ended up worthless.
The damage spread beyond Wall Street. Consumer confidence vanished, factories slowed production and began firing workers, and those who kept their jobs saw wages fall. The gold standard, which tied countries to fixed currency exchange rates, helped carry the troubles from the United States around the world, especially to Europe.
Hoover’s response, 1929 to 1933
President Herbert Hoover did not sit idle, though his approach leaned on business rather than direct aid. The Hoover Presidential Library traces his main steps:
- In November 1929 he summoned business leaders to the White House and won promises to maintain wages.
- In October 1930 he created the President’s Emergency Committee for Employment to coordinate state and local relief.
- In August 1931 that committee was reorganized as the President’s Organization on Unemployment Relief.
- On January 22, 1932, he established the Reconstruction Finance Corporation to make emergency loans to businesses in danger of default.
- In July 1932 he signed the Emergency Relief Construction Act, letting the RFC lend $300 million to the states for relief and $1.5 billion for public works.
Hoover also asked Congress for a $160 million tax cut, according to the Hoover Presidential Library. Yet HISTORY notes that he believed government should not directly intervene in the economy or take responsibility for creating jobs. EBSCO Research Starters adds that he had no such qualms about aiding businesses.
Events outran these measures. The first of four waves of banking panics began in the fall of 1930, and bank runs returned in the spring and fall of 1931 and the fall of 1932. By early 1933, thousands of banks had closed their doors.
The human cost of the Depression
By 1930, 4 million Americans looking for work could not find it, and the number rose to 6 million in 1931. Industrial production had dropped by half, and bread lines, soup kitchens and rising numbers of homeless people became common in towns and cities (HISTORY).
People lost jobs, homes and savings, and even previously middle-class families were reduced to scavenging for food and coal. Many who were forced out of their homes built campsites of shoddy shanties in public places, which became known as Hoovervilles, says EBSCO Research Starters.
Farm families suffered too. Some farmers could not afford to harvest and left crops rotting in the fields. In 1930, severe droughts in the Southern Plains brought high winds and dust, and the Dust Bowl pushed many people toward cities or the West Coast in search of work.
Minorities often faced the worst of it. The same research starter notes heightened discrimination during the Depression, part of a longer struggle that the civil rights movement timeline follows.
Roosevelt and the New Deal
By the summer of 1932, many Americans still blamed Hoover. Franklin D. Roosevelt, the Democratic candidate, promised a New Deal and won in a landslide that November, according to the Hoover Presidential Library.
Four long months passed before his inauguration, and the banking system was near total collapse by March 4, 1933, with unemployment at 25%. Within days Congress passed the Emergency Banking Relief Act, which stemmed the panic and restored confidence. It was almost identical to legislation Hoover had proposed weeks before.
The New Deal then brought unprecedented programs for relief, recovery and reform, per Wikipedia. The same article says the economy hit bottom in the winter of 1932-1933, followed by four years of growth until the recession of 1937-1938 brought back high unemployment.
Counts differ by source. HISTORY says unemployment topped 20 percent by 1933. The Hoover Library gives 25% at Roosevelt’s inauguration, so treat any single figure as an estimate.
How did the Great Depression end?
The Hoover Library says the Depression persisted seven more years after the New Deal began, until World War II stimulated the economy with increased demand for commodities and war materials. HISTORY agrees that it ultimately took wartime manufacturing increases to end it.
Sources also date the period differently. EBSCO Research Starters gives 1929-1941, and Wikipedia says recovery came in 1940.
The legacy lasted far longer. EBSCO describes the crisis as the worst national crisis in American history since the American Civil War, a conflict you can explore through the causes of the civil war. It adds that the Depression reshaped the government’s role in economic regulation and established lasting social safety nets.
Frequently asked questions
When did the Great Depression start?
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The stock market crash of October 1929 is the usual starting point, and the Hoover Presidential Library says the market dropped by almost half of its recent record highs in less than a week. HISTORY dates the crisis from 1929 to 1939.
How bad did unemployment get?
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HISTORY reports that millions of Americans were jobless in the first years of the Depression. The Hoover Presidential Library says unemployment reached 25% by March 4, 1933.
Was Hoover to blame for the Depression?
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He was widely blamed for not doing enough, and he lost the 1932 election in a landslide, as Wikipedia notes. Still, his administration created the Reconstruction Finance Corporation in 1932, and the causes ran deeper than one president.
What finally ended the Great Depression?
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Per HISTORY, it took the manufacturing production increases of World War II. New Deal programs helped, but they did not end the crisis on their own.
