Aspects of the Great Depression:
Its Causes, the Struggles of the Unions, and the Plight of the Unemployed
By Tania Springer
This research paper focuses on three aspects of the Great Depression: why it happened, the relationship between workers and unions, and how the Depression affected the jobless.
It was the summer months of 1929 that industrial production declined, business slumped and depression began in the United States. Rising unemployment, falling incomes, increasingly underutilized capacity, the drop in primary-product prices and the collapse of international trade combined to depress the international economy. Property owners felt depressed because their assets were shrinking, manufacturers had to deal with declining sales, building operators experienced a crippling lack of demand, railroad managers were desperate because fewer people utilized the rails, farmers were ruined by deflated prices, wage-earners were facing unemployment and successive wage cuts. Everybody fought the long and arduous, discouraging battle for subsistence.
WHY IT HAPPENED
The Great Depression of the 1930s was a worldwide phenomenon, composed of an infinite number of separate but related events. And it seemed indisputable that there was a pattern to the trend of events nearly everywhere. At the time, this developing pattern was not immediately clear. The people of every country were, however, aware that the same forces were at work everywhere and that these forces had caused an economic catastrophe of unprecedented proportions. If the Great Depression was the same everywhere, international cooperation was necessary for ending it. But despite the urgings of economists and statesmen, the nations were singularly unsuccessful in coordinating their attempts to overcome the depression. Most countries adopted nationalistic policies, some deliberately aimed at benefiting their own people at the expense of the people of other nations. According to Ohlin insufficient cooperation lay at the root of much suffering. If the nations had cooperated with one another better in dealing with their economic problems, they could have avoided or at least ameliorated the terrible economic losses that all of them suffered during that decade of depression.
At the time, a substantial majority of Americans and nearly all foreigners who expressed opinions on the subject believed that the Wall Street Stock Market crash of October 1929 had triggered the Depression, thereby suggesting that the United States was the birthplace of the disaster. The Wall Street downfall triggered declines in other securities markets and led bankers to make borrowing more difficult, which caused a further decline of already depressed commodity prices. In any case, most scholars tend to locate a majority of the underlying causes of the Depression in American events. One thing that the experts at the time did agree on was that the Depression was the downward phase of the business cycle. Awareness that the economic activity went through periodic difficulties that were essentially self-generating first emerged in the nineteenth century. These cycles were a product of the Industrial Revolution. There were periods of economic growth and relative prosperity, others of stagnation and decline. Demographic trends, the opening of new lands, and climatic changes produced these shifts. Random events such as wars, droughts, and epidemics could also alter economic conditions in dramatic fashion.
In addition, economists divided business cycles into four stages: expansion; crisis (or panic); recession or contraction; and recovery. Although all economists claimed to know what business cycles look like, they did not entirely agree about what caused them. Some attributed cycles to the effects of the weather on agriculture. Some economists also claimed that climatic changes had subtle psychological effects on masses of people, at times causing them to be optimistic, at other times to be depressed, with corresponding effects on their economic behavior. Most economists, however, saw a more direct connection between economic activity and the cycles. Some located the source of change in banking practices. These experts reasoned as follows:
When banks had large reserves, they lowered interest rates. Cheaper loans encouraged manufacturers to invest in new equipment and hire additional workers. The resulting expansion of production caused an upswing of the cycle. But, the increased borrowing eventually reduced the banks' reserve, causing them to raise interest rates. That discouraged investment and slowed the economy down.
Another explanation blamed maldistribution of wealth for the cycles. During the prosperous times, the rich were unable to spend all their income. They saved more, which resulted in increased investment, more production, and eventually in more goods than the rest of the society had the money to consume. Then goods piled upon shelves and in warehouses, prices fell, production was cut back, and workers were discharged. As a result, the economy entered the depression phase of the cycle.
Other elements were related to production. But, many insisted that the main reason why the Depression had not ended was that monopolistic corporations and cartels, labor unions, and government controls were interfering with the free functioning of market forces. Rigid prices, rigid wages, and government regulations such as tariffs had stifled new investment, kept inefficient producers from going bankrupt, and prevented prices from falling low enough to stimulate demands. These many explanations of the business cycles differed mainly in emphasis. They complemented rather than contradicted one another.
However, the most nearly universal example of a counterproductive government policy that tried to counteract the Depression was the effort that nations made to keep their budgets balanced. Doing so proved next to impossible. The Depression caused tax revenues to decline at the same time that the governments were being forced to spend more on relief for the unemployed and others in need. With prices falling, unemployment high, and economic activity stagnating, deliberated deficit spending would have provided "salutary simulation to their economies." Flaws in the international financial system were a major cause of the collapse, and errors made by bankers and politicians in trying to repair the damage prolonged it.
Most economists and scholars neither claim that the United States alone was responsible for the Depression. American financial policy had little to do with the underlying imbalances in the world economy of the 1920s, principally the persistent, pervasive slump in the prices of agricultural commodities and of nearly all raw materials. This structural imbalance hampered economic growth in non-industrial countries and deprived the industrial countries of potential markets. The war debt and reparations tangle, for which the United States was only partially responsible, also had much to do with the severity of the Depression. In any case, the Great Depression occurred and ran its course.
WORKERS AND UNIONS
It is important to keep in mind that during the Great Depression, people who had full time jobs were usually better off, at least economically, than they had been before 1929. This was true because in nearly every nation, the cost of living fell faster and further than wages fell. It is also worth noting that at all times, a large majority of the work force was employed. Put another way, the unemployed, although numerous, were always a minority. Another important fact to remember is that unemployment, for a minority of those who suffered the experience, tended to be a temporary condition.
In the middle and late twenties, real wages were rising and working conditions improving in most industrial regions. The percentage of white-collar and service industry jobs was increasing, which meant that more workers have adopted middle class values and expectations. When workers moved up the economic and social ladder, places opened for others to take the jobs they had vacated. For example, American blacks from Southern farms to factory jobs in Northern cities were examples of this.
Thus, the onset of the Depression brought to an end what had been a period of relatively
good times for most workers. Even those who continued to work steadily after 1929
were bound to find the change in the economic climate unsettling. The social and economic
mobility characteristic of the previous decade slowed to a halt. Fewer workers could
feel safe when ever-larger numbers of their colleagues were out of work, and no end
to the hard times was in sight. In addition, the Depression caused labor unions, which
had been losing member even in the 1920s, to suffer still further declines. Workers
tended to drop out of unions when they lost their jobs because they could not afford
to pay dues, but also because the attitudes of most unions was less fully supportive
of the jobless. Especially in countries that had government insurance and relief systems,
the help that unions provided for their idle members was chiefly "rhetorical".
As for the unions, most adopted extremely conservative policies. The largest, the American Federation of Labor (AFL), was determinedly apolitical. Its branches were organized on trade rather than industrial lines and consequently had done almost nothing in the 1920s about organizing unskilled workers in the expanding mass production industries such as electrical appliances, chemical, and automobiles. Nearly all the AFL locals discriminated against blacks. In 1928, for example, only 81, 000 of the three million AFL members were black.
In addition, the unions were for the unemployed all-out. But doing something for the unemployed was more often than not another matter entirely. Most unions outside the United States favored government relief programs and unemployment insurance systems. They opposed cuts in benefits and in welfare payments to workers whose insurance benefits had been exhausted. But the unions did so in large part out of self-interest. Welfare and unemployment insurance took some of the pressure off union members in the sense that without this kind of assistance, unemployed people would be forced to seek work at any wage at all. And the unions resisted government proposals to increase worker contributions to the insurance funds. They did so without regard for the steady decline in the cost of living, which was causing the real wages of full-time workers to rise.
During the Depression, job security was of enormous importance to workers. When layoffs occurred, last hired, first fired was an almost universal union policy. The stress on seniority discriminated against younger workers and in most instances against women. Also, unions tended to tighten rules governing the admission and training of apprentices. They also advocated keeping young people in school longer and lowering the retirement age, both socially desirable policies but ones that if adopted would put some people out of work for the benefit of others. In a way they attacked the unemployment problem by redefining who was unemployed, not by finding new jobs for the idle. Unions also favored getting married women out of the workforce, which was not socially desirable at all, and strictly selfish national policies such as high protective tariffs, "buy American," and measures aimed at sending foreign workers "back to where they came from."
WHAT IT DID TO THE JOBLESS
To contemporaries, persistent, high unemployment was the most alarming aspect of the
Great Depression. In every industrial nation, more people were out of work than in
any period in the past. It has been estimated that in 1933 about 30 million workers
were jobless, about two-thirds of these in three countries-the United States, Germany,
and Great Britain. But little can be gained by citing numbers.
Beyond the difficulty in counting the unemployed, there are all sorts of variations to be considered that affected the significance of unemployment to the unemployed and to the societies they inhabited. It made great difference whether a person was unemployed for a few weeks or months or for a longer period. Unemployment affected men differently in most cases than women, old people differently than young, married people differently than single. Such obvious matters as the number of children in a breadwinner's family and the existence and amount of unemployment insurance or welfare also affected the meaning of joblessness for its victims. So did the amount of unemployment in the community.
Furthermore, the trends obscured what was happening to many individuals. After all the unemployed were a relatively small minority of the population. The steep decline of food prices, a result of the agricultural depression, meant that most people with jobs could improve their diets during the Depression years. But in order to obtain enough to eat, unemployed people had to cut down on relatively expensive items like meat and fresh fruit. Even milk and other dairy products cost more than many could afford to buy in adequate amounts. The failure of many poor people to manage their meager resources efficiently complicated the problem. They had nothing to eat their evening meals but bread and coffee. The margin for poor people was so thin that it was difficult even with the management to provide a good diet. Routine medical and dental care tended to be neglected by the unemployed in favor of more pressing needs.
Many of the unemployed suffered from a lack of proper clothing and from poor housing. Social workers often reported that children of their clients could not go to school because they had no shoes. Many families suffered cruelly in winter because they had no money for coal or wood. Landlords frequently allowed destitute families to remain in their homes out of pity. But the newspapers were full of stories of people evicted for non-payment of rent or forced to part with their homes because they could not meet mortgage payments. There was a big increase in vagrancy as people lost their homes and as the jobless took to the road in search of work. Lodging houses operated by local governments and by charitable organizations such as the Salvation Army took care of many of these unfortunates.
Moreover, attention was also paid to the effects of unemployment on the families of the jobless. Members of families that suffered serious financial setbacks substituted their own labor for goods and services previously obtained with money. In some cases, unemployment caused trouble within families. In other instances, it brought family members closer together. Some men enjoyed having more time to be with their children, others found that being around the children for prolonged periods of time to be extremely stressful. Some men became absorbed in doing chores around the house; some took up new hobbies. Some took to drink; others sulked.
One of the few general effects of unemployment on family life was its strong tendency
to increase the influence of women, both as wives and as mothers. What form this influence
took and its impact on husband-wife and mother-child relationships varied considerably.
Some wives were very supportive of their jobless spouses, others scornful. Some found
jobs, leaving their husbands to take care of home and children. When these situations
were shaky to begin with, unemployment was likely to make them worse. Examples of
this are: 1) male resentment at loss of dominance, especially if the woman became
the breadwinner; 2) loss of prestige (and the power to control by dispensing of allowance
money) in the eyes of the children; 3) social isolation, caused by lack of money to
entertain, by shame, and eventually by apathy; and 4) sexual problems, caused by such
things as decline in physical energy, apathy again, and fear of pregnancy.
Finally, what to do about the unemployed was part of the larger question of how to end the economic collapse that had caused so many workers to be laid off. It was agreed that ending the Depression would solve the unemployment problem or at least bring unemployment down to manageable levels. There was also, however, the more immediate problem of what to do about the unemployed people who needed help merely to survive. Whether the efforts to aid the unemployment would help end the Depression or make it worse was a matter of controversy.
The origins of the Great Depression, which began in 1929, placed an impossible strain, directly and indirectly, upon the world economy. The economical and financial structure, which had developed during the 1920s, was fragile and many economies were moving into a recession in 1929; therefore, when the U.S. boom broke, the general collapse was inevitable. The weaknesses varied from country to country but problems were closely related; once the Depression began, a chain reaction set in and there was no international body or individual state which was able to halt it. The Depression left a deep psychological scar on all nations- even those, which were among the most fortunate; the poverty, the insecurity and despair are still remembered in the urban and rural communities who experienced the mass unemployment or the steep decline in agricultural incomes.
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