American Experiment (247 page)

Indeed, the economic leadership of the country seemed to sponsor a market surge that in earlier days would have been discouraged by the likes of Andrew Mellon. Even the former high priests of fiscal conservatism, the directors of the House of Morgan, formed their own investment trust as stock prices skyrocketed. Columnist Arthur Brisbane, himself heavily involved in speculation, wrote glowing accounts of stock prospects for the Hearst chain. President Coolidge opined that Wall Street was “absolutely sound” and that stocks remained “cheap at current prices.” The Democrats chose the market operator John J. Raskob as their National Committee chairman.

The bull market pounded through 1928 and thundered into 1929. Trading on the New York Stock Exchange rose from 3.8 million shares a day to more than 6.6 million during 1928. Brokers’ loans—a measure of the activity of persons buying stock “on margin,” putting up only part of the purchase price—grew from around a billion dollars in the early 1920s to $5.7 billion in 1928, even as interest rates on them doubled. Few found it worth remarking that brokers’ loans had reached a total larger than the amount of actual currency circulating in the country. Herbert Hoover, who had entered the White House with vague intentions of trying to curb the boom, quietly abandoned his effort in the face of opposition from banking and business leaders.

In the summer of 1929, the speculative fever turned into a frenzy. Every market indicator shot up to unprecedented heights. Time and again the ticker in the New York Exchange fell an hour or more behind. Then, at the beginning of September, the upward surge suddenly halted. It was mysterious; there seemed to be no reason. For more than a month prices hovered shakily, as speculators debated whether to cut and run, or to wait in the hope that the boom would pick up again. Slowly, in the Wall Street psychology that had replaced economics and politics, the market edged downward as one investor after another sold out.

The stock market debacle of fall 1929 came not in one dramatic crash but in a series of sickening collapses and cruelly delusive rallies. The stock market broke early in September, recovered strongly, then weakened erratically over the next weeks. This period of uncertainty ended with sudden panic on Thursday, October 24—”Black Thursday.” Almost 13 million shares passed over the Wall Street counter that day, often at fractions of their previous prices. The forces building up the market earlier in the decade now went into reverse, destroying stock values at a geometric rate. The need to meet margin calls forced more and more speculators to sell at a loss, which fed the rising panic.

At noon of that day, word spread that Charles E. Mitchell, Thomas W. Lamont, and several other banking czars were meeting at the 23 Wall Street offices of J. P. Morgan and Company. This was immensely reassuring, for the elder Morgan, who had died in 1913, was reputed to have averted the panic of 1907. His son was in Europe, but Lamont was Morgan’s senior partner. There “has been a little distress selling on the Stock Exchange,” Lamont told reporters, “due to a technical condition of the market.” Prices already were firming. Then Richard Whitney—not present at the Lamont meeting—strode confidently onto the Exchange floor and moved conspicuously from post to post, buying shares. Brokers breathed easier. A sharp recovery followed.

Would the big bankers’ dam hold? Prices steadied during Friday and the short Saturday session, but plunged again on Monday. Once again the bankers met, but now their mood had changed. In the face of the panic to sell, the bankers now wished to protect themselves. No optimistic statements came out of the meeting; no Whitney appeared jauntily on the Exchange floor. There was an ominous silence.

On Tuesday, October 29, the hurricane struck. It was, John Kenneth Galbraith would write, “the most devastating day in the history of the New York stock market, and it may have been the most devastating day in the history of markets. It combined all of the bad features of all of the bad days before.” Under a four-column headline next day, the
New York Times
summed up the crisis in its lead story: “From every point of view, in the extent of losses sustained, in total turnover, in the number of speculators wiped out, the day was the most disastrous in Wall Street’s history. Hysteria swept the country....”

“The fundamental business of the country, that is production and
distribution of commodities, is on a sound and prosperous basis,” said President Hoover during these October days. His statement was intended mainly to reassure investors, but Hoover’s emphasis on production reflected his own economic philosophy. As a “practitioner of industrial rationalization” and a prophet of enlightened industrialism, he had seen the strength of the nation in its vast and efficient manufacturing capacity, and its economic weakness in unbridled speculation. Now he was presiding over an economy in which reckless investors—stock purchasers and sellers—appeared to be dragging industry into the chasm with them.

But industry was still the fundamental strength of the nation; Hoover and the economic leadership assumed that the financial panic would pass, after a healthful cleansing, and then the economy would right itself. This is what had always happened in the past. But, to the bewilderment of Administration and business leaders, this was dramatically not happening in 1930. On the contrary, the first half of that year brought a massive drop in consumer spending that in turn closed shops and factories. The Gross National Product, the measure of all goods produced in the country, fell from $103.1 billion in 1929 to $90.4 billion in 1930, $75.8 billion in 1931, and $58 billion in 1932. Unemployment in the same years rose from 1.55 million in 1929 to 4.34 in 1930, 8.02 in 1931, 12.06 million in 1932. National income, $81 billion in 1929, shrank to $68 to $53 to $41 billion in 1932. The three years 1930–32, according to Dixon Wecter, “took a toll of eighty-five thousand business failures with liabilities of four and a half billion dollars and the suspension of five thousand banks. Nine million savings accounts were wiped out….”

The nation’s great industrial centers—the sinews and pride of American capitalism—were especially hard hit. By 1932, a million were jobless in New York City, 660,000 in Chicago; in Cleveland, 50 percent of the working force lacked work, in Akron 60 percent, in Toledo 80 percent. It was estimated that, during the three years after the crash, an average of 100,000 workers were laid off every week. The huge steel furnaces were banked down; the automobile industry by 1932 was operating at one-fifth of its 1929 capacity.

Farmers were hit even harder. Agriculture had been ailing long before the crash, as prices of farm products declined steadily through the decade while maintaining a precarious parity with the fall of other price levels in the economy. But not for years had farmers faced such a cataclysm as 1930. Within a year the price of December wheat at Chicago plummeted from $1.35 to 76 cents a bushel, of July wheat from $1.37 to 61 cents. Millions of farmers plunged deeper into debt, many of them into bankruptcy. And
as usual in depressions, it was the weakest, poorest people on America’s farmlands—tenant farmers, migratory workers, blacks, women—who were most vulnerable.

President Hoover had been neither uncaring nor inactive in the days following the crash. He summoned to meetings the leaders of the “solid” part of the economy—top industrialists, railway and utility managers, farm spokesmen, union heads. To halt the deflationary spiral, he asked the industry leaders to agree not to cut wages or payrolls. His guests responded with optimistic statements, pep talks, and promises. Henry Ford, acting with his usual well-publicized boldness, left with Hoover a pledge to hike auto workers’ pay to seven dollars a day. In the hope of expanding the supply of credit enough to offset the contraction, the President took steps toward tax reduction, increased spending on public works, and a Federal Reserve cut in the discount rate.

Hoover also tackled the psychological aspect of the problem. So earnestly did he believe in the importance of confidence, according to David Burner, that he “attended a World Series game in Philadelphia simply to make an example of his own serenity.” And he made a point of using the term “depression” because he feared people would be frightened by such blunt words as “panic” or “crisis.”

When the stock market recovered in the winter of 1930, it appeared that Hoover’s policies might be working. “I am convinced we have passed the worst and with continued effort we shall rapidly recover,” said the President. Then the market slide resumed, week after week, month after month. Skepticism rose. Hoover’s tax reductions, it was noted, grossly favored the rich. The industrialists forgot the promises they had made in Washington when they returned to their bleak factory towns. Congress resisted measures that might unbalance the federal budget.

Increasingly, people saw an economic crisis and called it that. And they were less and less concerned about Hoover’s serenity, which appeared intact, than about his wisdom and compassion.

In later years, memories of the Great Depression would take their shape from photographs of long breadlines, people selling apples, men living in shacks called Hoovervilles, emaciated women and children, the jobless clustering by the hundreds in front of factory gates. But perhaps the most remarkable aspect of the depression at the time was its invisibility. Walking through an American city, Frederick L. Allen wrote, you “might notice that a great many shops were untenanted, with dusty plate-glass windows and signs indicating that they were ready to lease; that few factory chimneys
were smoking; that the streets were not so crowded with trucks as in earlier years, that there was no uproar of riveters to assail the ears, that beggars and panhandlers were on the sidewalks in unprecedented numbers (in the Park Avenue district of New York a man might be asked for money four or five times in a ten-block walk). Traveling by railroad, you might notice that the trains were shorter, the Pullman cars fewer—and that fewer freight trains were on the line. Traveling overnight, you might find only two or three other passengers in your sleeping car.” Otherwise things might seem to be going on much as usual.

Nor were people as militant and activist as later generations might have expected. The desperate men lined up quietly in the soup lines. People were evicted from their homes or farms and resignedly went off somewhere. The unemployed demonstrated, but only infrequently. Some workers struck, but no more than before; the number of strikes remained about the same during the depression, and union membership even declined. Workers gathered before factory gates not to take over the plant, or to burn it down, but in hope of a job. The dominant emotion was not anger or hostility but resignation or fear. Instead of rising up, people hunkered down. People in Cincinnati wore buttons: “I won’t talk depression.” During the depression, billboards appeared reading, “Wasn’t the Depression Terrible?”

This social passivity rested on the profoundest of psychological forces that swept pervasively through the population—loss of security and lack of self-esteem. A wiped-out bank account did not send people out onto the streets or even to the bank; it was too devastating. Losing a job, seeking a job, being denied a job—these meant constant blows to self-esteem. “Anonymous” wrote for
Outlook
magazine about how “I Lost My Job.” In the spring of 1929, he had left a $65-a-week staff job with a New York newspaper to become a public relations man for a big eastern railroad at three times that pay. A year later the public relations department was wiped out in a merger.

What Anonymous then endured would come to be familiar to millions of families: dispossession from his apartment for failure to pay the rent—moving with his wife and baby into the home of her family, to the latter’s intense annoyance—getting ample free advice from the family to sell brushes or silk stockings—studying the Help Wanted columns and starting the dolorous rounds of nonemployment—borrowing on insurance policies—earning a few dollars by selling Christmas cards, mainly to kind friends—losing his final cash reserve in the closing of the Bank of the United States—earning $30 on jury duty—watching his job application blank torn up by a clerk when he had the temerity to inquire about the
job—contemplating suicide but lacking the courage—having to move his father from a home into a “poorhouse”—appealing for help to relatives he hardly knew on his mother’s side of the family—receiving $10 from them—taking a furnished room with wife and baby—left with $12 at the time of writing his article.

Some took the drastic way out that Anonymous flirted with. Reports of bankrupted millionaires jumping out of skyscraper windows after the crash became part of the legend of the Great Crash. The suicide rate was relatively low in late 1929, but it did rise during the next three years. But it was not brokers but unemployed workers who were more likely to contemplate or threaten suicide, like the former Youngstown steel operative who, begging for a job in 1932, said, “If you can’t do something for me, I’m going to kill myself.”

As usual, women were highly vulnerable to economic threat, whether as wives or workers or both. Marriage, divorce, and birth rates all fell sharply in the early 1930s. It was often too expensive to get a divorce or to have children. There was evidently a decline in sexual relations owing to fear of pregnancy, psychological demoralization following loss of a job, and women fatigued by having to work both outside and inside the home. Married women were tempting targets for legislators and organizations. Of 1,500 school systems contacted in 1930–31, over three-quarters would not hire married women and almost two-thirds dismissed women teachers if they were married. Although the unemployment rate for women was 4.7 percent in 1930 compared to 7.1 percent for men, this was partly because many women held low-income jobs for which men could not or would not compete.

And as usual, blacks were most vulnerable of all. They had little seniority and only a weak, semiskilled status at best. Working mainly in service and unskilled industries, they were the classic “last hired, first fired.”When skilled white workers lost their jobs, they often slid into the dirtier, more demeaning jobs, displacing blacks. A social worker in Atlanta noted that white men “have taken over such positions as elevator operators, tradesmen, teamsters, expressmen, bill posting, city sanitary wagon drivers … stewards, cooks, waiters and bell boys in hotels, hospital attendants, mechanics at filling stations, delivery boys from drug stores” and even chauffeurs and maids. Sometimes whites forced blacks out of jobs through intimidation, sometimes through force. In the southwestern division of the Illinois Central, black firemen were lured from their cabs with flares and then shot down.