The Great Depression and the New Deal on African Americans

Introduction

The Great Depression was a by-product of the roaring twenties. During the 1920’s the United States economy flourished and the American people spent money freely. In October of 1929 the free spending ended. The stock market suddenly crashed and people throughout the United States were affected. There were four major contributing factors to the stock market crash and the ensuing Great Depression. A combination of stock speculation, buying stock on margin, an inequitable distribution of wealth, and economic nationalism led to a nightmarish reality check for investors. An era of fast money and lavish living quickly changed to an era of economic hardship in which people had to struggle to stay financially solvent.

The first factor that led the country to the Great Depression was stock speculation, that is, investors buying stocks only because they felt they could make a quick turnaround. Through most of the 1920’s the stock market consistently rose. Many Americans felt the urge to invest their money in a surefire method of success. By 1929 almost 4 million people owned stocks in the United States. (Badger) The investors were not conducting thorough investigations of their purchases; they were quickly investing their savings on a stock in hopes of reselling it rapidly for a tidy profit. Unfortunately, people were ignoring the potential risks involved in stock speculation. As a result, people who could ill afford a financial setback actually lost much of their savings. The inexperienced investors were unprepared for the possibility that they could lose their investment. The stock market was an inherently dangerous place to risk a person’s entire economic portfolio. The risks involved in placing a substantial portion of one’s savings in the stock market would soon become apparent to many investors.

The second factor that pushed the United States towards the Great Depression was the over – willingness of financial corporations to extend credit to people who wished to invest. One popular option was the process of buying stock on margin. The thought behind buying stock on margin was that an investor would purchase a stock for 10 – 25 percent of the purchase price. (Edsforth) As the value of the stock increased, the investor would then sell his stock and repay the loan company. The system functioned as long as the price of stocks continued to rise, allowing the investor to pay off the loan. Regrettably, when the stock market crashed, the stock investments did not grow in value; they actually shrank. Therefore many people ended up owing more money than they had invested. The results would be disastrous for the people of the United States. (Kennedy)

The third factor that led to the Great Depression was an inequitable distribution of wealth amongst American citizens. The wealthiest Americans basked in the glory of the roaring twenties while the majority of the American population struggled to reach material success. Between 1918 and 1929 the share of the national income that went to the wealthiest 20% of the population rose by more than 10% while the share that went to the poorest 60% of the population fell by 13%. (Edsforth) The 1920’s emphasis on material goods such as automobiles, refrigerators, radios, and a general desire to feel good led people to purchase goods they could not afford. As people became increasingly involved in debt from credit companies, the ability for them to financially succeed was inhibited at the onset of the Great Depression. People were shocked by the sudden loss of their investments and savings. (Kennedy)

The last factor that contributed to the Great Depression was economic nationalism. In 1930 the United States Congress passed the Hawley – Smoot Tariff Act, which established the highest protective tariff in the country’s history and raised duties from 32% to 40%. The new tax was placed on the final ticket price of an imported product and affected 75 agricultural products and 925 manufactured goods. (Badger) The government believed that they were safe guarding important American companies through protective tariffs. In fact the government was actually hurting the consumer by discouraging competition. The tariff reduced the flow of goods into the United States because foreign competition was no longer contributing to the economy. The government was driving up the prices of goods and eliminating competition. Foreign governments, unhappy with the new United States tariff policy, placed their own tariffs on incoming American goods. In effect, the government was restricting the economy at a time when it needed to be expanded. (Mcgovern)

In early September 1929 the United States stock market began to falter. Consumer confidence in the market quickly dissipated as knowledgeable investors quickly pulled their money out of the market. On October 29, 1929, a date that would become known as “Black Tuesday” the stock market collapsed. On this day, many people and corporations attempted to pull out of the stock market simultaneously. In fact there were 16 million shares of stock traded as the market continuously fell. By the middle of November 1929, the stock market lost $30 billion. As 1929 came to the close the price of stocks had fallen by 50% from their September high, while within three years $74 billion of wealth had simply disappeared from the United States economy. (Edsforth) The American economic system was thrown into disarray as more than 100,000 businesses went out of business and the unemployment rate reached 25%. (Badger 13-19)

The factors that led to the United States entrance into the Great Depression existed throughout the country. Likewise, the side effects of the depression resounded throughout the land. Thousands of people were unemployed as businesses cut back on employees or closed down all together. People went hungry as family breadwinners lost jobs. Unemployed Americans lost their homes to foreclosure. So called “hoovervilles” sprung up in many big cities. These were large shantytowns that the poor built in available land to house their families, in Canada people began to eat dogs and gophers to survive. (Kennedy)

Timeline of Events

1928 – November – Herbert Hoover, Republican, wins presidential election over Al Smith, Democrat.

1929 – Year of record prosperity; real GNP (value of all goods and services, adjusted for price changes) is up 38 percent over 1922; unemployment rate is 3.2 percent of work force, an all-time low; common stock values have tripled since 1922.

September 3 – Values on New York Stock Exchange peak; they have doubled since July 1926.

October 29 – Black Tuesday; after several trading days of decline, stock market falls disastrously. By year’s end market has lost one-third of its value at the peak.

1930 – Real GNP falls by 10 percent; unemployment rises to 9 percent; common stocks fall to half their value in September, 1929.

Smoot-Hawley Act substantially increases U.S. tariffs on imports.

1931 – Real GNP falls by another 8 percent; unemployment rises to 16 percent; common stocks continue to fall.

April – Congress passes Bonus Bill, providing partial payment of sums due veterans at later date, over Hoover’s veto.

June – Hoover proposes year-long moratorium on inter-governmental debt payments; final agreement not secured until August.

October – November American banking system increasingly threatened; Hoover proposes and bankers establish National Credit Association.

1932 – Real GNP declines to 71 percent of 1929; unemployment rises to 24 percent; common stocks fall to approximately 15 percent of value at 1929 peak.

January – February Hoover proposes and Congress enacts Reconstruction Finance Corporation (RFC) and other measures to bolster banking and financial system.

July – Emergency Relief and Construction Act provides federal money to states for unemployment relief and federal public works.

Bonus Expeditionary Force (BEF) routed from Washington by General Douglas MacArthur.

November – Franklin Delano Roosevelt (FDR) wins presidential election by wide margin over Hoover.

1933 – Real GNP declines slightly; unemployment at 25 percent; stock values rise to one-third of 1929 level. The bottom year of the Great Depression.

February – Congress enacts Twenty-First Amendment, repealing prohibition of alcoholic beverages and sends to states for ratification.

February – March Runs by depositors threaten to bring on collapse of banking system nationally; governors declare bank holidays.

March 4 – FDR inaugurated; promises bold leadership and declares he will ask Congress for emergency powers as in wartime if necessary.

March 9 – The “One Hundred Days” begin as Congress assembles; Emergency Banking Act swiftly passed at president’s request, restoring confidence in banks and enabling government to reopen most of them almost immediately.

March 12 – Economy Bill enacted, signaling Roosevelt’s New Deal will be fiscally responsible.

March 31 – Civilian Conservation Corps created to provide employment in conservation projects for young men.

May 12 – Federal Emergency Relief Administration created; provides $500 million to states for unemployment relief.

May 27 – Securities Act enacted to compel Wall Street disclosure of information concerning new stock issues.

June 13 – Home Owner’s Loan Corporation created to prevent home foreclosures; will lend over $3 billion over next three years to refinance home mortgages.

June 16 – President signs National Industrial Recovery Act (N.I.R.A.), creating National Recovery Administration (NRA) empowered to approve industrial codes that stabliize prices and wages; Section 7(a) guarantees workers right to organize.

June 16 – Glass-Steagall Act divorces investment from commercial banking and creates Federal Deposit Insurance Corporation (FDIC).

July–August – NRA administrator Hugh Johnson stimulates national wave of marches and rallies supporting NRA codes and hope of quick industrial recovery.

November – Civil Works Administration (CWA) created to provide direct federal work relief for unemployed; 4 million men will be employed before CWA is dismantled in spring of 1934.

1934 – Real GNP rises marginally and unemployment declines to 22 percent; stock values up by 9 percent.

Year of mounting political unrest and vocal opposition to Roosevelt program; Huey Long founds Share Our Wealth Society advocating radical redistribution of income and wealth. Labor unrest grows; over 2,000 strikes erupt, many involving confrontation and violence.

July – General strike in San Francisco.

September – Textile workers strike from Maine to Georgia.

November – Democrats sweep midterm congressional elections.

1935 – Real GNP up to 87 percent of 1929; unemployment down to 20 percent; stock values steady.

April – Emergency Relief Appropriation Act provides $4.8 billion for relief; president creates Works Progress Administration (WPA) under Harry Hopkins, which will provide work relief for millions of the unemployed over the next several years.

May 27 – Supreme Court declares NRA unconstitutional.

June – FDR abandons NRA approach to recovery and reform; the “Second Hundred Days” begin in which legislation shaping a “Second New Deal” emerges.

National Labor Relations Act, authored by Senator Robert Wagner of New York, establishing the National Labor Relations Board (NLRB) empowered to protect workers’ right to organize and bargain collectively, becomes law.

July–August – Social Security Act creates federal old-age pensions through a payroll tax; joint federal-state system created for unemployment compensation and aid to the dependent.

Wealth Tax Act sharply raises tax rates on high personal incomes and large inheritances and on corporate profits.

Public Utility Holding Company Act, requiring reorganization of inefficient utility “pyramids,” under threat of “death sentence,” becomes law.

Banking Act centralizes control of Federal Reserve System in presidentially appointed Federal Reserve Board.

November – Committee on Industrial Organization (CIO), later named the Congress of Industrial Organizations, formed; will spearhead organization in mass production industries.

1936 – Real GNP climbs to 97 percent of 1929; unemployment down to 17 percent; stock values soar by one-third to 60 percent of 1929 level.

Supreme Court rules AAA unconstitutional.

Union Party formed and nominate William Lemke as presidential candidate.

November – FDR wins smashing victory over Alf Landon, Republican presidential candidate, by taking 61 percent of popular vote; “New Deal Coalition” has been created.

December – United Auto Workers (CIO union) begins “sit-down” strike against General Motors.

1937 – Real GNP equals 1929 level; unemployment still high, at 14 percent; stock market is steady.

January – FDR, believing recovery is at hand, begins cuts of federal spending; WPA rolls cut in half by summer.

February – FDR, fearing Supreme Court will throw out New Deal reforms, submits plan giving him control of it disguised as plan for federal court reform; quickly becomes known as “court-packing” plan.

March–May – In reversal, Supreme Court majority forms that approves state minimum wage law and upholds Wagner Act and Social Security Act.

March – UAW wins recognition from GM, initiating wave of victories for CIO unions.

August – Stock market sharply declines, signaling steep downturn of output and employment that continues into 1938; unemployment rises sharply until recovery begins in mid-1938.

November – FDR calls Congress into special session but fails to secure passage of wage-and-hour bill and other important New Deal proposals.

1938 – Real GNP falls by 5 percent; unemployment rises by 5 percent, to 19 percent; stock values plunge by 25 percent.

March – FDR appoints Thurman Arnold head of Antitrust Division.

April – FDR asks Congress for emergency work relief funds and asks for investigation of monopoly power, signaling new policy—deliberate deficit spending to bolster employment together with renewal of antitrust policy.

May – Congress establishes Temporary National Economic Committee to investigate concentration of economic power.

June – FDR secures congressional approval of Fair Labor Standards Act, setting minimum wage and maximum hours in industry.

November – Republicans rebound in congressional elections; FDR’s attempt to “purge” conservative Democrats in primaries largely fails.

1939 – Real GNP surpasses 1929 by 7 percent; unemployment falls to 17 percent; stocks improve only slightly.

1940 – Real GNP rises to 113 percent of 1929; unemployment falls to 15 percent; stocks down. Congress passes Selective Service Act.

November – Roosevelt elected for a third term.

1941 – Real GNP is 130 percent of 1929 level; unemployment falls drastically to 10 percent, but stocks decline again, to 38 percent of 1929 level. (Public Broadcasting Service)

African Americans in the Depression and the New Deal

The Great Depression of the 1930s worsened the already bleak economic situation of black Americans. Again the first to be laid off from their jobs, they suffered from an unemployment rate two to three times that of whites. In early public assistance programs blacks often received substantially less aid than whites, and some charitable organizations even excluded blacks from their soup kitchens. Black people naturally hoped that the programs of Franklin D. Roosevelt’s New Deal would be constructed in such a way as to assist their recovery. They were encouraged by the president’s 1932 campaign promise that Negroes would be included “absolutely and impartially” in his new deal for the forgotten man. (Edwards)

Impact of New Deal’s Programs

President Roosevelt’s program was so diverse and multifaceted that it is difficult to generalize about its impact on Negroes. Some New Deal programs were clearly advantageous, others less so, and some aggravated the condition of black people. Yet on the whole, the New Deal was as notable for its lost and rejected opportunities as for its actual achievements. Its recovery program was limited and cautious, of more benefit to organized workers and to those who had fallen from relative affluence than to those at the very bottom of society. Despite its deficiencies, however, the New Deal offered Negroes more in material benefits and recognition than had any administration since the era of Reconstruction. (Powell)

The early New Deal efforts at economic recovery starkly revealed the institutional and structural determinants inhibiting salutary change for black southerners. Afro-Americans played no role in the planning or implementation of the programs handled by the National Recovery Administration (NRA), the Agricultural Adjustment Administration (AAA), and the Tennessee Valley Authority (TVA). They had no influence with the officials who managed these matters. And they could hardly gain from policies, which callously neglected those at the bottom rungs of the economic ladder. (Edsforth)

The programs fashioned by the Roosevelt administration were in a large measure directed to helping the lower third of the population—those who were poorly housed, poorly clothed, and poorly fed—and the Negro was more than proportionately represented among these groups. While many Negroes did not benefit from some of the New Deal measures, and while a considerable number were actually injured by others, on balance the major recovery and reform measures proved an advantage to them. (Sears)

Blacks also benefited directly from many New Deal programs. The Civilian Conservation Corps was the program which, because it provided a change of environment, good food, and fresh air, the Negro himself most lauded; between 1933 and 1942, 200,000 black youths worked in the CCC; a boy’s literacy level was raised, he learned valuable skills, and most of all he was kept off the streets—a large job in itself. Blacks were also quick to see how they were benefited by Social Security, particularly its provisions for unemployment, aid to dependent mothers and children, assistance to the blind, and care of crippled children. (Kirby)

Blacks benefited greatly from New Deal programs, though discrimination by local administrators was common. Low-cost public housing was made available to black families. The National Youth Administration and the Civilian Conservation Corps enabled black youths to continue their education. The Work Projects Administration gave jobs to many blacks, and its Federal Writers Project supported the work of many authors. (Sears) The New Deal’s low-rent housing project was really a bright spot in the many programs beneficial to blacks. Two programs that involved thousands of blacks and immeasurably advanced black status were the Works Progress Administration (WPA) and the National Recovery Administration (NRA). It is difficult to imagine that by 1939 the WPA provided basic earnings for one million black families, or approximately one-seventh of the nation’s black population.  (Kirby)

NRA served to weaken the wage differential based on color, and from the outset every effort was made to employ non-whites equitably in Public Works Administration construction.30 When NRA was found unconstitutional, a front-page editorial told black readers that “NRA had something to do with sweat shops, child labor, low wages, and long hours” and that “The NRA will come back because the people want its benefits.” (Kirby 81-2) In the realm of jobs—comparing what the black expected with what he received—one could easily believe that America was entering a new social order.

African Americans in Rural Areas

More than half of the nation’s Negro population lived in rural areas during the 1930s, but less than 20 percent of the black farmers owned the land they worked. Most were employed as tenants and wage hands with yearly incomes of less than $200, and any attempt to describe how Negroes were affected by the Roosevelt administration’s agricultural policies must focus on the extent to which these impoverished, landless farmers shared the benefits of the various programs. The most important of these programs, that of the Agricultural Adjustment Administration (AAA), was essentially an attempt to increase farm purchasing power by sponsoring acreage and production control. (Edwards) But, never intending to reform landlord-tenant relationships, the AAA eschewed safeguards to protect the exploited landless peasantry that contituted a quarter of the southern population. (Mcgovern)

It was thought that crop reduction would lead to higher farm prices, and thus the AAA was authorized to disburse government benefit payments to farmers who voluntarily promised to cultivate only a portion of their acreage. All farmers – owners, tenants, blacks, and whites – had suffered as a result of disastrously depreciated crop prices during the depression, and it was assumed that they all would profit from a general rehabilitation of the rural economy. The purpose of the AAA, then, was not to redistribute income within agriculture but to increase general farm prices and farm income through crop reduction. (Edsforth)

The New Deal did not substantially improve the material life or opportunities for southern rural blacks. Its farm subsidy programs benefited largely white landowners while costing their black sharecroppers cabins and commissary security as owners cut back their production of cotton; many were forced to enter the labor market at lower levels as wage laborers with paltry incomes, and were employable only when the farm cycle required extra labor. Those displaced frequently moved into nearby farm towns and gradually began to improve their income with an occasional job in the off-season or supplements from New Deal relief or work-relief programs, though blacks were often underrepresented on relief rolls and often received lower relief rates as well. (Mcgovern)

Still other blacks, 500,000 in all, many from the rural South, migrated to the North and Midwest, where they were also heavily dependent on New Deal welfare programs. The New Deal may have conducted a “very quiet revolution” for southern rural blacks in substituting federal paternalism for that of the white planter, but genuine choices and improved ability to participate in the country’s social and economic system would, for once rural blacks, depend on later economic development and events. (Kirby)

Political and Public Life

By 1936 blacks had to admit that the Roosevelt administration had made the greatest effort since Reconstruction to elevate their economic and cultural status. Yet neither the protest vote against Hoover nor the expectation and realization of a bettered economic status wholly explain the relationship between black voters and the New Deal. Pro-Roosevelt political and religious leaders, the black press, and organizations such as the NAACP and Urban League, along with Roosevelt’s charisma among blacks also helped place the Afro-American firmly in the Democratic party. (Greenberg)

The Roosevelt administration’s accessibility to black leaders and the New Deal reforms strengthened black support for the Democratic party. Many black leaders, members of a so-called “black Cabinet,” were advisers to Roosevelt. Yet the New Deal also offered some reason to hope. Federal relief checks came to blacks as well as whites. Some jobs existed in the Works Progress Administration. African Americans were appointed to federal offices, and there was even a “black” cabinet of highly placed officials who advocated change in race relations. (Kirby)

Although the president would not support an antilynching law, he acknowledged, with regret, the reality of white terrorism. And his wife, Eleanor Roosevelt, became a champion of civil rights, supporting black women leaders such as Mary McCleod Bethune, resigning from the Daughters of the American Revolution when they denied the black opera singer Marian Anderson the right to sing at Constitution Hall—even testifying by her physical actions to her convictions about equal rights. (Greenberg) When told at a Birmingham meeting of the Southern Conference on Human Welfare that she would have to take her seat on the “white” side of the room, separated from black delegates, she carefully placed two of the four legs of her chair on each side of the dividing line, showing her contempt for the whole concept of Jim Crow. (Sears)

National black organizations in the 1930’s consisted primarily of the NAACP and the Urban League. Both were building a reservoir of good will by championing individual blacks in cases of discrimination. The NAACP published, beginning in 1910 under the editorship of W.E.B. DuBois (later Langston Hughes), a monthly magazine of small circulation, the Crisis. (Greenberg 43-6) The tenacity of this publication in the wake of the severe financial stress of the Depression is to its credit. Except for the fact that DuBois was idolized, the magazine might have folded. Later under Hughes it achieved a more sprightly style, increased circulation, and greater influence. The Urban League in 1923 began publication of the quarterly Opportunity. Both of these organizations devoted their major efforts to civil rights, including voting privileges, and in 1936 Colonel J. E. Spingarn, president of the NAACP and life-long Republican, endorsed Roosevelt. (Greenberg) Generally, however, the two organizations advised a selective or “split” vote to achieve black goals, rather than recommending a specific party.

In summary, then, the major reasons blacks abandoned the Republicans and voted for Roosevelt and the New Deal were the alienation by Hoover and the Republicans, the hope for a better life through employment to which the New Deal catered, the pro-Roosevelt black leadership, and the tremendous charisma of Roosevelt among blacks. No reflective black thought the New Deal could change racial attitudes overnight. “President Roosevelt cannot wave a wand and change the hearts and prejudice of white Mississippi and the rest of the South.” (Sears 93)

Summary

Although Roosevelt’s caring leadership and New Deal programs were very helpful, they do not explain adequately the remarkable stability of American society or the confidence manifested by Americans in the 1930s. Regardless of the Depression and independent of Roosevelt and the New Deal, the American people retained positive and hopeful attitudes about themselves and their country, and these attitudes helped to lighten the heavy pressures of the times and were essential to produce a relatively tranquil decade in America. Furthermore, the New Deal was hardly a panacea. Severely depressed economic conditions, after all, persisted in the first two years of the Roosevelt presidency and unemployment levels hovered at 15-20% after 1933 and throughout the 1930s, except in 1937. (Kennedy)

New Deal relief and work relief programs were typically underfunded. They failed to benefit sizable percentages of the unemployed and usually offered paltry sums – well below minimum standards for living – for those who did receive benefits. President Roosevelt himself was over cautious about these programs, calling off fiscal support for his own better relief programs, expressing fear that relief would foster dependency and even waffling on labor legislation supporting collective bargaining. Most indicative of his concern over welfare extravagance, he never worked for changes in the tax system to sustain a comprehensive and adequately supportive welfare system. At the tail end of the Depression, millions of Americans still experienced the same difficult conditions that characterized the early years of Roosevelt’s first term.

The relief and welfare operations of the New Deal, on the other hand, did assist black southerners to a significant extent. At the least, they enabled Afro-Americans to survive the depression. More sensitively administered, overall, these New Deal programs took some real strides toward ameliorating black distress. In the face of strident southern white opposition, such New Dealers as Will Alexander, Harold Ickes and Aubrey Williams battled for a fair share of relief for blacks. (Greenberg) Although their commitment proved salutary, their accomplishments remained limited. Black southerners endured, but did not advance in the 1930s. The New Deal could neither aid Afro-Americans to the extent their privation required nor vanquish Jim Crow in the South. (Sears)

World War II, however, that set in motion more dynamic and long-lasting grassroots change. The war jolted all Americans into new roles and responsibilities. More than two million blacks left the South for the North and West. The number of African Americans employed in manufacturing more than doubled, from 500,000 to 1.2 million. (Badger)  Black ballots were counted and mattered in the North, and politicians inevitably became champions of those who voted for them. Blacks enlisted at a rate 60 percent higher than their proportion in the population, and experienced, especially in posts such as England, France, and Hawaii, a warmth of reception and level of respect that gave credibility to the notion that a better world of race relations might someday exist.

Bibliography

Badger, Anthony J. The New Deal: The Depression Years, 1933–1940. New York: Hill and Wang, 1989.

Greenberg, Cheryl. “Or Does It Explode?” Black Harlem in the Great Depression. New York: Oxford University Press, 1991.

Edsforth, Ronald. The New Deal: America’s Response to the Great Depression. Malden, MA: Blackwell, 2000.

Kennedy, David. Freedom from Fear: The United States, 1929–1945. New York: Oxford University Press, 1999.

Kirby, John. Black Americans in the Roosevelt Era: Liberalism and Race. Knoxville: University of Tennessee Press, 1980.

Mcgovern, James. And a Time for Hope: Americans in the Great Depression. Praeger, 2000

Powell, Jim. “Did the New Deal Actually Prolong the Great Depression?” The American Enterprise, Vol. 13, March 2002

Edwards, Chris. Echoes of the Great Depression. USA Today (Society for the Advancement of Education), Vol. 134, November 2005

Sears, James. Black Americans and the New Deal. The History Teacher 10, 1 (Nov., 1976): 89-105.

Public Broadcasting Service. The Great Depression. Timeline, 2006 <http://www.pbs.org/wgbh/amex/rails/timeline/index.html>