Despite serious problems in the industrial and agricultural economies, most Americans in 1929 and 1930 believed the nation would bounce back quickly. President Herbert Hoover reassured an audience in 1930 that “the depression is over.” But the president was not simply guilty of false optimism. Hoover had made many mistakes. During his 1928 election campaign, he had promoted higher tariffs to encourage consumption of U.S.-produced products and to protect American farmers from foreign competition. Spurred by the ongoing agricultural depression, Hoover signed the highest tariff in American history, the Smoot-Hawley Tariff of 1930, just as global markets began to crumble. Other countries retaliated and tariff walls rose across the globe. Between 1929 and 1932, international trade dropped from $36 billion to only $12 billion. American exports fell by 78%.

Although the crash stunned the nation, it exposed deeper, underlying problems with the American economy in the 1920s. The stock market’s rise did not really represent the health of the overall economy, and the overwhelming majority of Americans had no personal stake in Wall Street. The market’s collapse, no matter how dramatic, did not by itself destroy the American economy. Instead, the crash exposed factors such as rising inequality, declining demand, rural collapse, overextended investors, and a bursting speculative bubble that all combined to plunge the nation into the Great Depression. Despite resistance from Populists and Progressives, the gap between rich and poor had widened throughout the early twentieth century. In the aggregate, Americans were better off in 1929 than in 1919 and both production and consumption had grown. Per capita income had risen 10% for all Americans in the 1920s, but 75% for the wealthiest. The return of conservative politics in the 1920s had reinforced federal policies that exacerbated this divide. High import tariffs, low corporate and personal taxes, easy credit and low interest rates overwhelmingly favored wealthy investors who spent their money on luxury goods and speculative investments in the rapidly rising stock market.

The exact causes of the Stock Market Crash that began the Great Depression is still being debated by economists and historians, but most agree that a huge speculative bubble had formed during the Roaring Twenties. Although most Americans had little savings and only the richest 2.5 percent invested in stocks, those who did often borrowed to do so. Most stock purchases were made on “margin”, which meant shares could be bought with money borrowed from brokers. Often, margin accounts allowed buyers to borrow 90% to 95% of the money they needed to complete a transaction. That meant a speculator could buy $1,000 in shares for $50 or $100. This was a great deal if the value of the shares rose quickly. If a trader could make a 10% gain on $1,000 in shares (or $100) that had only cost her $50 and a couple of dollars in interest on the loan, she would be way ahead. And share prices seemed to be rising steadily. One reason for this, of course, was the demand generated by all this  margin buying, which also meant that everybody was able to buy ten to twenty times more shares than they could actually afford.

Although the belief that economic prosperity was universal was exaggerated at the time and has been overstated by many historians, excitement over the stock market and the possibility of making speculative fortunes permeated popular culture in the 1920s. A Hollywood musical, High Society Blues, captured the hope of instant prosperity. Ironically, the movie didn’t reach theaters until after the market crash. “I’m in the Market for You,” a musical number from the film, used the stock market as a metaphor for love: You’re going up, up, up in my estimation / I want a thousand shares of your caresses, too / We’ll count the hugs and kisses / When dividends are due / ’Cause I’m in the market for you. But just as the song was being recorded in 1929, the stock market reached its peak, crashed, and brought an abrupt end to the seeming prosperity of the Roaring Twenties. The Great Depression had arrived.

Skills mattered less and less in an industrialized, mass-producing economy, and their strength as individuals seemed ever smaller and less significant when companies grew in size and power and managers gained wealth and political influence. Long hours, dangerous working conditions, and the difficulty of supporting a family on meager and unpredictable wages compelled workers to organize armies of labor and battle against the power of capital.

Soldiers moved from town to town, suppressing protests and reopening rail lines. Six weeks after it had begun, the strike had been crushed. Nearly 100 Americans died in “The Great Upheaval.” Workers destroyed nearly $40 million worth of property. The strike galvanized the country. It convinced laborers of the need for institutionalized unions, persuaded businesses of the need for even greater political influence and government aid, and foretold a half century of labor conflict in the United States.

The wealthy president of the Pennsylvania Railroad, Thomas Andrew Scott, who had been Assistant Secretary of War for Abraham Lincoln during the Civil War, is often named as one of the first Robber Barons of the Gilded Age. Scott suggested that if striking workers complained they were hungry, they should be given “a rifle diet for a few days and see how they like that kind of bread.”

“The Depression”.