Thunder On The Left - The United States in the Great Depression and Beyond

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Thunder On The Left
The United States in The Great Depression and Beyond

By Alexander Warren

Table of Contents

The Hoover Administration
Prelude - The Stock Market Crash of 1929
Chapter I - Poor Solutions and Weak Prospects

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Prelude - The Stock Market Crash of 1929

The most critical event in the entire history of the United States was to occur in October of the Year 1929. In late October of that year the Dow Jones Industrial Average dramatically fell from its peak of 321.17 only a few weeks before. Within hours over eleven prominent investors had committed suicide due to the crash.

Despite attempts by prominent Wall Street bankers such as Thomas W. Lamont, Albert Wiggin, and others, the crisis worsened on the 28th – Black Monday. Newspaper reports had ignited panic over the weekend, culminating in a massive rush to sell stocks on the floor. In the resulting financial explosion the Dow Jones lost over 13% of its value in a single day. The next day it was even worse, losing another 12% of its value despite attempts to salvage the rapidly deteriorating situation by William C. Durant and certain members of the Rockefeller family. The rush of sales had driven almost every stock price dramatically down, General Motors for instance quickly saw its stock fall by more then 50% during the rush. Less then three years after the event the Dow Jones was to rest at a mere 41.22 points or about 280 points down from its peak of 321.17.

Panic was to grip Wall Street in wake of the crash

Rapid falls in prices set in motion a deadly economic spiral of never before seen proportions. With prices falling at around 10% per year, investors calculated that they would earn less profit investing now than by waiting to invest until next year when their dollars would be worth much more. Facing an increasingly uncertain future, firms and consumers both cut back on their purchase of goods and increased the severity of the crisis in the process. Banking panics and the collapse of the world monetary system cast doubt on everyone's credit, and reinforced the belief that now was a time to watch and wait to see what would happen. Unemployment would precipitously throughout the United States in the coming months.

The Great Depression, with all of its consequences that would be felt for every generation of Americans to come, had begun.

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Chapter I - Poor Solutions and Weak Prospects

Known by the name the Panic of '29 to many at the time, the beginning of the Great Depression came with a massive type of financial bust not yet seen in the history of world affairs. The stock bubble which had been filling since the end of the Great War finally burst, sending banks, businesses and the American worker into a seemingly endless financial free fall. "These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again." said John D. Rockerfeller on financial crises. After one year, however, the price level remained in a free fall, Gross investment had fallen by 35%, and unemployment was reaching new highs. Prosperity, whether defined as for the businessman or the American worker, had shown no signs of returning for anyone.

Al Smith would be the first Democratic Candidate to perform lackluster in the usually firmly Democratic South

President Herbert Hoover was in 1929 only fifty-five years old. The first President to hail from California, Hoover had won the Republican nomination a mere year and a half before the events of Black Tuesday. Son of a Quaker, the Republican candidate had boldly pronounced in Kansas City that "we in America today are nearer to the final triumph over poverty than ever before in the history of this land... We shall soon with the help of God be in sight of the day when poverty will be banished from this land." Facing him was Al Smith, an Irish Catholic from New York. Several issues were to ensure the Democratic loss including perceived connections to the Tammany Hall political ring, but more importantly an anti-Irish and anti-Catholic sentiment throughout most of the United States. In the election Hoover was to win a large electoral victory, 444 to 87. Smith was to win only a few Southern and isolated Northeast states (that had a Catholic majority naturally). More importantly, the usual Democratic stronghold in the south suffered deeply from perceived “Papal Plots” should a Catholic win. Hoover, as a result, entered office pledging to continue the economic windfall seen under Calvin Coolidge, going so far as to promise "A chicken in every pot and a car in every garage.”

After the initial shock of the Crash, contrary to common belief among certain historians, President Hoover did more than issue optimistic statements. He organized conferences to get Businesses agree not to cut wages, called for tax cuts, and managed to even get certain business leaders, including Henry Ford famously, to raise wages. Despite these gallant efforts by the President in face of crisis, the Economy continued to collapse, and the efforts even proved counter-intuitive. Wage-maintenance, rather then helping ease the pain of the average American, significantly worsened their situation when corporations decided to reduce payrolls rather than wages.[1]

Even worse, despite the optimistic outlook taken at Hoover's business conferences, many businesses expected the worst and prepared for it. Businesses retrenched prices and payrolls which further contributed to the deflationary spiral the economy had become entangled within. By as early as May 1930 even the optimistic Henry Ford, who had actually raised wages, began to see cracks in the wage maintenance front set up by the President. By October 1931 Ford had very quietly decided to cut his pay rates.

On Hoover's right flank conservative businessmen and intellectuals fed him their views on what would bring about recovery. Treasury Secretary Andrew Mellon, notably based on a faulty memory of the course the Panic of 1873 had taken [2], recommended waiting for the natural forces of the market to bring about recovery on their own. He was, as John Kenneth Galbraith would observe, "a staunch advocate of inaction." Mellon was hardly alone in his beliefs and was joined by numerous officials, businessmen, and politicians, including Senate Democratic Leader Joesph T. Robinson, in his deflationary beliefs. Many, including both Henry Ford and Mellon, attempted to make out the Depression as "a wholesome thing in general."[3]

Secretary of the Treasury Andrew Mellon was well known as one of the the most staunch advocates of "doing nothing" on the Right

Despite the growing numbers of Mellon's on his right flank, Herbert Hoover was extraordinarily active in attempting to fight the Depression. Rather than providing direct relief or giving handouts, Hoover preferred to use the federal government as a catalyst for voluntary action on a massive scale. Over the early course of his presidency he created several agencies which put this volunteerism into action, including the Federal Farm Board, the National Business Survey Conference, and the National Credit Corporation. The economic disaster that had befallen the nation, however, proved too large a beast for volunteerism to take down. The Federal Farm Board, which had attempted to solve the crisis in the agricultural sector that had been persistent throughout the twenties and had just gotten worse with the Depression, was a colossal flop, and ended up lowering farm prices even more in addition to losing nearly $345 Million Dollars. The National Business Survey Conference proved woefully inaccurate at raising optimism. The NCC, which sought to be a voluntary channel by which businesses could shore up weaker ones, turned into a giant meeting full of pleas for government assistance. Volunteerism as a tool to lift the United States out of Depression had flopped and had left businesses and the millions of unemployed to their own devices.

Their was an underlying belief that blame for the Depression lay on European Events. During his campaign Hoover had expressed support for a Tariff to raise depressed Agricultural prices (this idea had been met with very limited and brief success during the Post War Depression of 1920-21) and followed through on this when he signed the infamous Hawley-Smoot Tariff Act[4] which raised tariff rates to an all-time high rate of 40%. Before signing the act a letter, signed by over 160 economists, had been sent urging him to veto the legislation. The plea had fallen on deaf ears and an international tariff hike war ensued. He drew further Eire of economists for the Revenue Act of 1932 which raised taxes in the middle of a deep depression and which doubtless contributed to the worsening of the crisis.

As the crisis worsened the Unemployed would gather into shantytowns dubbed "Hoovervilles" for makeshift housing

By June 1931, Hoover was actively denying that the Depression was worsening even as  the European Banking crisis had sunk the world into an even greater mire. The unemployment rate skyrocketing from three-percent to almost thirty in the space of two years meant many workers could not find the funds to provide their families with the most basic of services. In face of this situation, Herbert Hoover, once a symbol of philanthropy became a figure to be slandered and insulted in "Hoovervilles which was a nickname for shanty towns built by the Unemployed. His name was eventually attached to a variety of terms. Newspapers were used as privatize insulation, known by the early thirties as “Hoover Blankets”. Penniless workers mingled throughout the nation with their pockets turned inside out to make “Hoover flags”.

As the country soldiered through 1932 it faced a worsening financial crisis with no clear end in site. Unemployment was high, Banks were failing, and open talk of revolt had even begun to surface. It would take a series of serious disasters in 1932 to make Herbet Hoover any more unpopular than he already was an seal his fate with regards to reelection.

Up Next: Labor Unrest, The Bonus Army, and the tragedy that shook a Nation

[1] There is a term in both Keynesian and Neo-Keynesian Economics called "Sticky Wages" that explains and provides a framework for evaluating this phenomenon.

[2] The Panic of 1873 did not end quickly, but rather led to a period known to Economists as "The Long Depression" which was denoted by high unemployment and poor business conditions

[3] The actual quote was attributed to Henry Ford

[4] There is a lot of debate between different schools of economics about how much the Tariff War actually contributed to worsening the Depression

[Vazdul (Formerly Chairman of the Communist Party of Ontario)]

Yay! A new timeline!

This is excellent so far. Keep it coming!

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Yay! A new timeline!

This is excellent so far. Keep it coming!

Thanks. I've rarely been so motivated when writing an Alternate History piece. Be warned though, things are going to get nice and crazy when the POD happens.

Update forthcoming.