The economic depression that fell upon the United States in the 1930s had devastating effects on the country. At the depth of the depression, in 1933, one American worker in every four was out of a job. The great industrial slump continued throughout the 1930s, shaking the foundations of Western capitalism.
Despite the seeming business prosperity of the 1920s, however, there were serious economic weak spots, a chief one being a depression in agriculture. Also depressed were such industries as coal mining, railroads, and textiles. Throughout the 1920s, U.S. banks had failed averaging of 600 a year along with thousands of other business firms. By 1928 the construction boom was over.
The U.S. stock-market crash that occurred in October 1929, with huge losses, marked
the beginning of, the most traumatic economic period of modern times. By 1930 the slump was apparent, but few people expected it to persist; previous financial panics and depressions had reversed in a year or two. The usual forces of economic expansion had vanished, however. Technology had eliminated more industrial jobs than it had created; the supply of goods continued to exceed demand; the world market system was basically crumbling. As business failures increased and unemployment soared and as people with dwindling incomes nonetheless had to pay their creditors, it was apparent that the United States was in the grip of economic breakdown.
The stark statistics scarcely convey the distress of the millions who lost jobs, savings, and homes. From 1930 to 1933 industrial stocks lost 80 percent of their value. In the four years from 1929 to 1932 approximately 11,000 U.S. banks failed (44 percent of the 1929 total), and about $2 billion in deposits evaporated. The gross national product, which for years had grown at an average annual rate of 3.5 percent, declined at a rate of over 10 percent annually, on average, from 1929 to 1932. Agricultural distress was intense: farm prices fell by 53 percent from 1929 to 1932.
President Hoover opposed government intervention to ease the mounting economic distress. His one major action, creation of the Reconstruction Finance Corporation to lend money to ailing corporations, was seen as inadequate. Hoover lost the 1932 election to Franklin D. Roosevelt. The depression brought a deflation not only of incomes but of hope. In his first inaugural address, President Roosevelt declared that \"the only thing we have to fear is fear itself.\" But though his New Deal grappled with economic problems throughout his first two terms, it had no consistent policy. At first Roosevelt tried to stimulate the economy through the National Recovery Administration, charged with establishing minimum wages and codes of fair competition. It was based on the idea of spreading work and reducing unfair competitive practices by means of cooperation in industry, so as to stabilize production and prevent the price slashing that had begun after 1929. This approach was abandoned after the Supreme Court declared the NRA unconstitutional. Roosevelt\'s second administration gave more emphasis to public works and other government expenditures as a means of stimulating the economy, but it did not pursue this approach vigorously enough to achieve full economic recovery. At the end of the 1930s, unemployment was estimated at 17.2 percent. To aid people who could find no work, the New
Deal extended federal relief on a vast scale. The Civilian Conservation Corps took young men off the streets and sent them out to plant forests and drain swamps. The government refinanced about one-fifth of farm mortgages through the Farm Credit Administration and about one-sixth of home mortgages through the Home Owners Loan Corporation. The Works Progress Administration employed an average of over 2 million people in occupations ranging from laborers to musicians and writers. The Public Works Administration spent about $4 billion on the construction of highways and public buildings in the years 1933-39. The depression years saw a burst of union organizing, aided by the National Labor Relations Act of 1935. The expanded role of the federal government came to be accepted by most Americans by the end of the 1930s.