The Great Depression — Play It Again, Uncle Sam?

For once the ticker tape was not exaggerating.

Panicked traders scrambling to dump everything at once bellowed like a herd of wounded beasts. On the floor of the exchange Post Two descended into outright madness as General Oliver Bridgeman’s plummeting U.S. Steel stock flushed the entire economy away. Crouched down to scribble frantically on a pad of paper, Bridgeman leaped up shouting over the din in a vain attempt to stop the hemorrhaging prices.

At Post Four — Anaconda, Caterpillar Tractor, Southern Pacific, U.S. Pipe and Foundry, General Motors — a sweaty trader went insane, shrieking hysterical orders until friends took him by the arm and led him away.

Leading industrials dropped forty points and the Dow Jones Industrial Average plummeted a record 13% in a single day. With ruined investors committing suicide, a reporter announced that brokers were working “like shell shocked soldiers,” sweat pouring down their faces, their collars and shirts torn to shreds.

Outside the exchange, a hint of violence charged the air as a silent crowd stood on the steps of Federal Hall, hands in pockets, hats pulled low, eyes fixed grimly ahead. A strange noise arose from the streets — first a murmur, then a hum, finally a roar of stunned disbelief.

At the House of Morgan Thomas Lamont dangled his prince-nez and addressed a mob of reporters: “There has been a little distress selling on the Stock Exchange . . .” Representatives of thirty-five of the largest wire houses on Wall Street issued a joint statement claiming that the market was “fundamentally sound” and that “the worst has passed.”

So occurred the Great Crash of 1929. The reason was a growing disequilibrium between capitalism’s immense productive capacity and its aggregate purchasing power. In the twenties low wages and high profits caused industrial productivity to outstrip consumer purchasing power. By the end of the decade a microscopic minority of investors possessed far more wealth than it could productively spend or invest while 70% of non-farm families lacked sufficient income with which to sustain an adequate diet. Six million families, 42% of the total, earned less than $1,000 a year and could not make the profit system respond to their unmet needs.

Soaring productivity exacerbated the problem as mechanization, increasing sophistication of industrial processing, and greater specialization of the labor force produced more for less and concentrated wealth in ever fewer hands. Foreign investment, installment credit, and stock speculation postponed the day of reckoning for a short time, but when hugely inflated stock prices and proliferating numbers of stocks spooked buyers in October 1929, the market went into a deep crash.

Amidst the vast economic misery occasioned by the collapse, an increasingly militant working class resistance emerged, ushering in social democratic reforms that had been won decades earlier in more civilized societies. In 1932, the Norris-LaGuardia Act was passed, exempting unions from antitrust prosecution. Three years later the Wagner Act legalized the right to organize, elevating workers from an anonymous mass of productive atoms to a legitimate class whose grievances had to be negotiated. The same year the Social Security Act opened the door to government funded old-age insurance – over the screams of private industry. (Old age pensions had been enacted in Bismarck’s Germany in 1870, in Austria in 1881, Norway in 1894, Finland in 1895, Britain in 1897, and France, Italy, and Denmark in 1898.)

The upsurge of strikes, demonstrations, and factory occupations that made such changes possible alarmed the business community, which worried about revolution and the guillotine just a few years after having declared history over with an assumed permanent victory for the business classes. The National Association of Manufacturers warned in 1938 that “the newly realized political power of the masses” posed unprecedented danger. “Unless their thinking is directed,” it added, “we are definitely headed for adversity.” A corporate counteroffensive quickly developed new methods of strike-breaking, manipulative “human relations” policies in personnel, and enormous propaganda efforts dedicated to smearing union organizers as treasonous “Reds”.

Contrary to much mythologizing, President Roosevelt sought to harness the working class to capitalism, not emancipate it from the exploitative system, and he actually started out more conservatively than Herbert Hoover. He handed government authority to people who wanted to control workers and retain power in the business classes. He was sincere in his efforts to ameliorate the worst symptoms of the profit system, but only in order to stabilize it and prevent stronger measures from being undertaken by angry workers determined to find a permanent cure to the booms, busts, panics, and breakdowns that had plunged millions of workers into untold misery for generations. For example, the Wagner Act was designed to reverse labor’s radical direction and restore passivity and continuous production by institutionalizing the authority of conservative labor leaders over the rank and file. The goal was to direct labor militancy into legalistic procedure and way from sit-down strikes. In general, FDR’s labor laws sought to make labor “responsible” by inducing its leaders to become dependent on state and corporate support that could later be contracted or withdrawn.

Similarly, federal relief was implemented to cool off mass protest, defeat Norman Thomas’s bid for the presidency as the Socialist Party nominee, limit violent upheaval, and banish the threat of revolution. Wherever organized labor was strong, the New Deal offered concessions, but where it was weak it declined to help; and when militant upheaval abated, aid was sharply cut, imposing suffering worse than any since the Crash itself.

Such policies were only to be expected from FDR’s appointees, most of whom were decidedly anti-working class. His first Secretary of State, Cordell Hull, was from the overtly racist and anti-labor wing of the Democratic Party. Jesse Jones, a conservative millionaire newspaper owner, headed the Reconstruction Finance Corporation and later the Commerce Department, and was a great friend of the monopolists. War Secretary Henry Stimson was a Wall Street attorney who negotiated General Somoza into power in Nicaragua. The under-secretary of State was Edward Stettinius, a U.S. Steel millionaire. The Chief of the National Recovery Administration was General Hugh H. Johnson, who went to San Francisco and declared the 1934 general strike there a “menace to the government,” which it certainly was. But he offered no clue why government that ushered in economic collapse shouldn’t be menaced with workers’ control.

New Deal reforms did go well beyond prior legislation, but they never contemplated far-reaching changes in the system that had created the disaster. The Roosevelt Administration’s reforms called not for a realignment of classes, but for industry cooperation in implementing government-directed reforms. As a result, men were paid to rake leaves and build mausoleums, but not to work idle machines producing the means to feed and clothe themselves. Only massive public enterprise could have moved the U.S. fully into the era of social democracy, but the New Deal shunned social planning and rejected government responsibility for full employment, in favor of high joblessness and unemployment insurance. Charity for workers and entitlement for the corporations that held them down continued to be the operative values.

In fact, the New Deal was a boon to private industry. The “code authorities” of the National Recovery Administration were drawn heavily from the ranks of big business. They restricted production and set prices that benefited major corporations at the expense of their smaller rivals,, and primed the production pump by funneling torrents of public cash into the hands of financial elites. In nine years the Reconstruction Finance Insurance Corporation extended big business $15 billion in loans.

The federal housing program awarded subsidies to construction firms and insured the loans of mortgage bankers. Agricultural price supports and production cutbacks aided large producers while displacing tenant farmers and sharecroppers when federal acreage rental programs withdrew lands from cultivation. The Civilian Conservation Corps provided subsistence jobs for just 250,000 of the 15 million people out of work.

The Works Project Administration sporadically employed 9 million people at wages below the norm in private industry. Of twelve million people working for less than 40 cents an hour, only half a million benefited from the minimum wage law – just over 4% of them. The Social Security Act covered but half the population and offered no medical insurance or protection against pre-retirement illness. Welfare programs were funded not by a wealth tax, but by regressive payroll and sales taxes.

Finally, only the massive war orders of the 1940s lifted the economy out of the Depression, so if anyone deserves credit for curing that catastrophe it is Adolf Hitler, not Franklin Roosevelt.

As for the grotesquely lopsided distribution of wealth that precipitated this and every other economic crisis under capitalism, researchers have found that income inequality persisted unchanged through the Hoover, Roosevelt and Truman years.


Professor Frank Stricker, Causes of the Great Depression, California State University Dominguez Hills course materials 1993

Howard Zinn, A People’s History of the United States (Harper, 1995)

Michael Parenti, Democracy For the Few (St. Martins, 1995)

Daniel R. Fusfeld, The Economic Thought of Franklin D. Roosevelt and the Origins of the New Deal (Columbia, 1954)

I. F. Stone, The War Years, 1939-1945 (Little Brown & Company, 1988)

Noam Chomsky, Deterring Democracy (Hill and Wang, 1991)

Noam Chomsky, Year 501: The Conquest Continues (South End, 1993)

Richard O. Boyer and Herber M. Morais, Labor’s Untold Story (Cameron Associates, 1955)

John Spritzler, The People As Enemy — The Leaders’ Hidden Agenda in World War II (Black Rose, 2003)

Gardner, Lloyd C., Safe For Democracy: The Anglo-American Response to Revolution, 1913-1923 (Oxford, 1984)

Wiesen-Cook, Blance, Eleanor Roosevelt — The Defining Years, 1933-1938 (Penguin, 1999)

Michael Smith is the author of "Portraits of Empire." He co-blogs with Frank Scott at He co-blogs with Frank Scott at Read other articles by Michael.

10 comments on this article so far ...

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  1. HR said on October 14th, 2008 at 5:45pm #

    I am so sick of the suicide myth associated with the crash of 1929. A few people did so over the years, but the crap about brokers and investors jumping out of windows is just wishful thinking … then and now. I simply cannot finish reading articles that begin with this promotion of fantasy.

  2. Deadbeat said on October 14th, 2008 at 6:49pm #


    I think you have it on something. There are a lot of myths surrounding the Great Depression. One that I have heard that “protectionism” deepened the Depression. It is clear that was caused the depression was that the working class was bogged down with credit that it stifled their demand. If there is going to be a depression that will be the real cause.

    In the U.S., working people had to keep up by using credit. They needed credit not just for maintaining day-to-day consumption but I know people who took risk with that credit because they do not have DEFINED BENEFITS like a pension. They have the bogus 401k and their investments was under water way before the sh*t hit the fan. Now what are they going to do for a retirement.

    It is clear that the problem is that working people do not have access to the wealth that they produce. That wealth is stolen by the “markets”. and used to generate wealth for those that control and are involved in the financial markets. That wealth needs to be reclaimed by the people.

    Look at how Treasury is using the bailout money — to buy shares in the failing banks rather than a MASSIVE redistribution program that puts that money into the hands of citizens.

  3. Max Shields said on October 15th, 2008 at 6:35am #

    I think the comparison, though understandable, of today’s economic unraveling to the Great Depression is misplaced.

    The debt trends (along with several other key indicators) are a completely different animal then when the GD happened.

    It is clear given the continued issuing of paper money backed by nothing that the US of A is insolvent. Our trade relationships are more like those a third world nation has – we export soybeans to China and they export computer components to us. In other words, we are exporting raw goods (which is what “third world” nations do) and we import finished products.

    “To paraphrase the late economist Kenneth Boulding, anyone who thinks this a winning long-term econmic strategy is either a lunatic or a neoliberal economist.”

    American workers (and workers throughout the world) work to provide wealth for a few. That wealth is not “money” but the privatization of the means of wealth – land and natural resources.

    The other little secret (myth) is that we play this game as if we (US) actually have assets. The continent of the US is hardly a bargaining tool or marker for an economy. Our human assets are depleted as we’ve kept Americans at best ill-educated on all levels – hence the kind of pathological elections that support the worst policies from a two party system. One example (and there are countless) just look at the healthcare system – for delivery and cost and outcomes arguably the worst in the world.

    The fact that we use the GDP to gauge the well-being of this economy while wages plummet and the gap between the wealthy and the rest widen to a point unknown in this country’s history, tells it all. GDP has nothing to do with 99% of American quality of life. This is all based on consumer economics which is literally a DEADend.

    But the expotential growth of our use of natural resources, environmental degradation, and debt – together, bears NO relationship to the Great Depression. This trend over time doesn’t begin until the 70s and ramps up in the late 80s and 90s slopping ever upward in an almost perpendicular fashion through the early 21st Century. It cannot continue…

    This aint your Grandma’s depression. We are in unchartered waters that has little to do with our catch phases and analogies of “fixing” it.

  4. brs said on October 15th, 2008 at 8:18am #

    The maldistribution of wealth and income was recognized at the time as one of the primary causes of the Depression. The other was speculation which started bordering on fraud and passed way beyond that border. Both of these situations are exactly as we are experiencing today.

    Misuse of land and resources today far exceeds anything then. That means we have less of a safety net. Another safety net which is absent today is that far fewer people know how to take care of themselves. Many do not have basic skills like sewing, growing food, mechanics or construction. When their real estate sales license does not support them they are helpless.

    People like Uncle Miltie Friedmann made their names and fortunes rewriting history to blame monetary policy or protectionism for the Great Depression. They are hacks or servants of vested interests trying to move attention away from the real causes of the crash, which were speculation and imbalance of wealth.

    Wealth must be spread around for society to function. Like manure piling it up in a great heap, it poisons the ground it sets on. Money is of no value unless it is circulating. Money has no intrinsic value. It cannot be worn or eaten. And speculation is of no more value to society than casino gambling. Talk of a finance “industry” or financial “products” is nonsense. They produce nothing and are of no value unless they operate in support of someone who does.

    Abraham Lincoln said Labor is prior to and independent of capital. All capital proceeds from labor. Those words have been forgotten today as capital is made into a god.

  5. Max Shields said on October 15th, 2008 at 5:11pm #

    “Misuse of land and resources today far exceeds anything then. ”

    My point is this is much more than not a trivial matter. There are 3 E’s completely different variables in where we’re at based on the choices/decisions made over the last 60 years (most over the last 35).

    These are Economic Debt, Energy, and Environment. We’re hitting a WALL. That wall is defined simply – NET ENERGY.

    You can print money and create all the debt around totally unbacked loans (gold standard was eliminated in 1973); but you can’t beat the WALL.

    Energy and the Environment (natural resources) will not tolerate the expotential upswing. Energy requirements are massive. Hover and FDR had nothing comparable to the massive use of fossil. Americans depend utterly on fossil. While I’m for solar and wind, this in no way touches the insatible demand for petro. It touches every human invention, every city, every home, your food, your cloths, EVERYTHING.

    The WALL is there. Peak oil is not a theory. It happens when it costs more to pull fossil from the belly of the earth. That very simply is Net Energy. We depend on enough net energy for our so-called “way of life”.

    None of that was at issue during the Great Depression. Yes, there was speculation, and the banks producing money, etc. But the US had barely entered the World stage when the GP happened.

    The GDP (the excellorator when the break is called for) was not even in place when the GD hit. GDP has kept us on an unsustainable path as we use it to speak to our “growth”. We equate “growth” with “prosperity” as we’ve excelerated our dependency with less and less energy sources. Add to this the growth of population which is straight up on the map.

    The “baby boom” never existed during GD. The bulge further puts all bets off.

    No, this is not the 1930s, not even close. We have to get use to the fact that we are navigating blind.

    The WALL will force the species into another track. Hopefully one that brings about a better, saner, and more sustainable living arrangement on the planet.

  6. Max Shields said on October 15th, 2008 at 6:31pm #

    Just to clarify, peak oil:

    The aggregate fossil in terms of wells, has peaked world-wide. There is still oil in those wells, but the cost to extract it is far exceeds the energy produced from the oil.

    This is true of every energy source. The dependency on fossil is much more than a political slogan. It is a reality that is at the root of the long declining American economy. GDP is a phony and much doctored indicator.

    Technology is not an energy source. And Americans have been lulled into thinking there’s a technological fix to a absolute finite resource.

    To think that this is a “replay” of the Great Depression is to face one of the dire situations human-kind has had to face as a species.

    The dependency on fossil is not about changing the channel on your TV to something else. It is what James Howard Kunstler calls the Long Emergency and it’s being treated with business as usual fixes that have never worked and are now exaserbating the deep problems; one that is, I think, beyond many people’s comprehension.

  7. MrSynec3 said on October 16th, 2008 at 4:36am #

    Let us give Frankllin Rosevelt his dues. Yes, he was a believer in capitalism and wanted to save capitalism from itself, but he enacted good laws and serious reforms. He was very serious against antitrust
    and monopoly. There was real open bids and absense of corruption
    in awarding government contracts. In WWII war profiteering was dealt
    with harshly and was kept to a very minimum. Social Security was
    overdue he enacted it.

  8. Michael said on October 16th, 2008 at 10:01am #

    I didn’t claim that anyone jumped out of windows, merely that investors commit suicide in the wake of the Crash. That’s a common claim in accounts of the Depression, but maybe only because it makes an entertaining story, not because it’s true. In any case, that detail is not essential to the article, which deals with the mythmaking around FDR, and I don’t mind deleting it in future writings on this topic.

  9. Smitty said on October 18th, 2008 at 11:17am #

    I’ve keyed in on a single sentence from this rant and saved myself a lot of time. Your statement that the Civilian Conservation Corps provided “subsistence jobs for just 250,000” is either a typo or an outright lie. If your research – or proofreading – is so flimsy on a single point, there’s no reason for me to read anything else in your post. I believe your figure of “250,000” refers to the initial enrollment figure. Roosevelt’s goal was to put a quarter million men in the CCC camps by mid 1933. (That initial goal was actually surpassed.) The end total is far, far higher than the number you cite.

    By the most conservative estimate, some 2 MILLION enrollees passed through the Civilian Conservation Corps between 1933 and 1942 – most estimates put the total at closer to 3 million. Add to this the hundreds of thousands of people who got jobs working in the camps as educators, foremen, and supervisors and the number of jobs provided easily passes into the low millions. But it doesn’t stop there. Because of the CCC, hundreds of thousands of folks went to work making uniforms, photo books, camp supplies, uniform insignia, patches and so forth. More new candy bars were introduced during the CCC era than any other time before or since because of the increased demand for candy in the camps. Who do you think was making that candy?

    Say what you want against the New Deal as an overarching system or program, but don’t try to argue that the CCC wasn’t a successful program in its own right.

  10. Michael said on October 18th, 2008 at 12:12pm #

    My source on the CCC figure was Michael Parenti. 250,000 may have been a typo on my part, or it could have been the initial enrollment figure. In a later edition of his “Democracy For The Few” (2002) Parenti states that CCC gave jobs at subsistence wages to three million of the 15 million unemployed – in short, 20% of them.

    I’m not ranting, merely pointing out that the New Deal was designed to remedy the “excesses” of capitalism, not cure the disease itself.