October 24, 1929, is considered the start point of the Great Depression, which was initiated after the stock exchange collapse. The main factors of this occasion are the overproduction of goods, speculation in the securities market, increased lending, lack of proper government regulation, and problems with the reorientation of military industries. The closure of businesses, the ruin of the agricultural sector, the crash of the banking system, and the withdrawal of money by investors led to the economy’s collapse. With the starting of the Great Depression, life for most U.S. citizens changed dramatically. According to Benmelech et al. (546), already in 1931, the U.S. economy contracted by more than 31% due to a fall in industry and agricultural prices by more than 50%.
The consequence of all this was the drop in the nominal mass of money by 30%. By 1931, the income of the entire population of the country had halved, and only 10% of the employed remained full-time. Simultaneously, there was no social insurance system, which meant for people the lack of assistance from the state. Poverty and vagrancy spread throughout the country. Benmelech et al. assert that in 1931 in New York, about 2,000 people died of hunger. The crisis significantly impacted the country’s demography: the birth rate fell, and emigration doubled. People adapted to new economic circumstances and reached a new level of frugality in everyday life. People kept vegetable gardens, patched up worn-out clothes, and spent time at home playing board games.
President Hoover believed that the U.S. economy would soon stabilize on its own. Therefore, during the entire period of the crisis, the government strongly objected to state regulation of socio-economic processes. The President’s main actions were calls for more private charity to help those in need, raising customs barriers, lowering taxes by a third, and establishing the Reconstruction Financing Corporation to issue loans to save railways, banks, building credit associations, and other financial institutions. The policies of President Hoover’s administration did not correspond to the scale of the crisis, which led to a decline in the influence of the Republican Party.