Modern Boston History Class Exam 2

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Lecture 3.2 The Great Depression History 385

Julie de Chantal

The Great Depression In module 1 this week, we discussed briefly the invention of credit during the 1920s. Credit helped to extend the people’s ability to purchase goods and services up to a pre-determined limit. This caused an increase in the manufacturing of goods. As they run out of available credit, Bostonians spent less. Overproduction started to show in 1928, and by the summer of 1929, the economy was already in recession. Some commentators began to notice, and talked about the issues that could emerge, but few people seemed to listen.

Between 1928 and 1929, stock market price rose by 40%. Investors reinvested their profits, and soon got caught in a speculative frenzy. On Black Thursday October 24, then again on Black Tuesday October 29th, the bubble burst. Million of shares changed hand in panic trading, and stock value fell from a peak $87 billion to $55 billion.

Quickly, regular people who had no ties to the financial system started to feel the effect of the market crash.

• Farmers were already in bad shape. They earned as little as $273 per year compared to most other occupations which earned as much as $750 a year. Because they accounted for about ¼ of the population of the nation, their buying power dragged the economy lower.

• Railroad and Coal industries: With the rise of automobile and truck transportation, the railroad industry was already in decline. The need for railroads diminished, pushing companies which did not adapt into bankruptcy. The same kind of difficulties happened to the coal industry as their share of the market slowly taken over by the hydroelectric, oil, and natural gas markets.

Unequal distribution of wealth During this time, the top 5% of the population received approximately 30% of the national income while the bottom 50% received less than 20% (which they spent mostly on basic necessities). This made the recovery even more difficult.

Banks The crash wiped out the savings of thousands of individual investors giving a huge blow to the banks. Those banks were the ones which had invested heavily into corporate stock or lended money to speculators. Hundreds of banks failed because bank deposits were uninsured. When regular people started to see banks failing, they withdrew all of their money, forcing even more banks to close. Within months, consumption dropped by 18%, construction dropped by

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78%, 9,000 banks closed, 100,000 businesses failed, and the consumer price index declined by 25%. Corporate profit fell from $10 billion to $1 billion. Unemployment rose from 3.2% to 24.9%.

President Hoover At the time, Hoover attempted to rectify the situation as best as he could. He encouraged US banks and companies to reduce their foreign investments, which disrupted the European financial System and cut the demand for American products. He signed the Hawley-Smoot Tariff in 1930, restricting the borders even more. The tariffs encouraged European countries to impose similar restrictions on their own markets. The crisis soon became an international crisis.

In 1929, the USA produced 40% of the world's manufactured products, and imported a large portion of raw materials. The cut on the importation of international products affected Argentinian cattle, Brazilian coffee, Chinese silk, Mexican oil, Indonesian rubber, and African minerals, and other raw materials.

New England and the Great Depression In 1929, Boston was important to the health of the country and the region. Boston depended on New England for pretty much everything (food, industries, investments, etc). In the 1920s, New England was in decline, compared to other regions in the United States (for example the Midwest and the Mid-Atlantic regions are gaining traction). New Englander’s income declined substantially compared to other regions, yet, people residing in New England were still relatively wealthy.

The region ranked 8th in population in the country in 1929. The Northeast was 3rd in pretty much everything financial: payments to the IRS, production turned out by the mills, wages, and bank deposits.

Massachusetts Massachusetts had a head start in terms of manufacturing, banking, and commerce. The Commonwealth contained more manufacturing establishments, provided jobs to a greater number of workers, produced more goods than the other five states of New England combined, and paid out the most wages. But the standing of the state eroded during the 1920s. Rhode Island and Connecticut increased the number of wage earners in manufacturing, while the number of Massachusetts manufacture workers dropped from 695,000 to 557,000 between 1920 and 1929. It further dropped to 481,000 in 1930. It was the largest decline in any of the 48 states. During the same decade that Connecticut doubled its output, Massachusetts lots $1 billion -> shrinking 25%.

Between 1928 and 1929, the number of boot and shoe establishments fell from 948 to 817. Textile lost similar ground to the point where the President of the United Textile Workers’ Union said that “there is perhaps more destruction and misery in the mill towns of New England today

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than any where else in the United States.” Overall, Massachusetts had begun to hurt before the Great Depression started.

Boston By the end of the 1920s, the population of the city reached approximately 781,000 people. The city relied a lot on the economy of Massachusetts and of New England. Compared to the state, where the industrial productivity decreased by 16%, Boston’s industrial productivity only decreased by 9%.

Historians believe that the diversification of the city’s economy explains the difference. Not one of the city’s most important manufacturing occupations employed more than 4% of the total labor force of 335,000 people. Not one sector engaged more than 15% of the 76,000 workers who, in 1929, earned their living from manufacturing enterprises. Small clothing shops, many of them in downtown lofts off Washington Street, turned out endless racks of dresses and suits. Boston was a large publishing center, with the publishing of the Atlantic Monthly magazine, and of book publishing. Most Boston industries ranked among the leading industries of the nation, especially in food processing, tailoring, and shoemaking.

Yet, Boston’s greatest economic activity was concentrated in the trade, hence why the city acquired the nickname of the Hub. Boston-based companies handled 53,8% of New England’s trade, with some 3,700 firms employing 49,000 workers, and paid $104,000,000 in income a year. Net sales reached approximately $2.4 billion dollars. With that amount, Boston, which was the 9th largest city, ranked 3rd in retail sales behind New York City and Chicago. (Chicago was the home of Sears Roebuck and sold large amounts of materials nationwide through catalogues).

Retail With luxury shops on Newbury Street and exotica at Haymarket Square, retail was vital to the city’s economic health. More than 10,000 merchants with 66,000 employees paid $94M in wages and netted $672M in sales. Only 5 cities in the United States surpassed Boston in total retail volume.

Fishing industry In 1929, the city still was 1st among all fishing ports in the Western hemisphere. Nearly 500 vessels annually brought in cod, flounder, mackerel as well as mollusks and sea food. Boston had the largest fish freezing plant in the world. Yet prices dropped in the 1920s, and by the end of the decade, ship captains threatened to dump their cargos instead of getting the prices that they were offered in the port.

Port During the 1920s, the port of Boston slowly began to lose its importance compared to New York City and Philadelphia. Boston did not have a competitive railroad line that connected the port to the rest of the nation. The port also faced what the industry called the unfavorable load factor.

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This meant that the ships were coming into the port full but leaving with their cargos half empty. As a result, the value of the cargo coming to Boston diminished through the years. The passenger fares did not compensate for the loss of cargo value.

White collar sectors Overall Boston employed a large number of white collar professionals in financial, service, educational, and medical organizations (doctors, profs, traders, dentists, etc). These professionals also provided jobs to a large number of subprofessional white collar jobs (secretaries, telephone operators, etc).

Banking Industry The First National Bank of Boston and the National Shawmut bank handled more resources (i.e. money and personnel) than any other city, except for NYC, Philadelphia and Chicago. Banks in Boston handled more loans by 1929 than any other cities save for New York and San Francisco. Their total equaled the loans extended in Detroit, Baltimore, St. Louis, Minneapolis, Cleveland and Buffalo combined. Investment houses in the city tapped on one of the richest securities market in the world. Insurance companies had their headquarters in the city (For example the John Hancock Insurance Company)

Hospitals Patients made special trips to come to the Massachusetts General and the Boston Lying-In Hospital. With all of the medical schools located in the city, patients flocked to get the latest medical treatments.

Wealthy Boston Throughout the 19th Boston, wealthy families had opted for low risk investments. Most of their investments were in trusts, protected from fluctuations. Most of them had really conservative commercial practices, and did not want to jeopardize their fortunes. Estates were bound with legal safeguards, protecting their trustees. While a lot of people laughed at them because they felt that they were stuck in an old world, their fortunes remained relatively protected when the crash took place.

Stock Crash On October 23, 1929, traders relentlessly liquidated their stock in the Boston and New York Stock Exchanges. The Boston Globe said that “the public was in a blue funk.” On the 23rd, it took an 2 hours extra to close the day because of the number of transactions that needed to be compiled (12,9 million shares). Bankers rushed to the offices of J.P. Morgan to try to shore up the market. At the end of the day, half a dozen brokers collapsed due to the emotional and physical shock of the trades, and were taken to the hospital. Ruined speculators broke down in tears.

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Tuesday the 29th was an even bigger day with 16,4 million shares liquidated. People assembled at the Brokerage houses in Boston. Even women, who usually could not stand the heavy cloud of cigar smoke, went to see the tickers flash reports of the disaster. The market reopened the next day, picked up a little, then closed again. It reopened on November 4 for a series of three-hour sessions, there were more loses. The market finally reached rock bottom on November 13. Some folks did not feel the crash in Boston. The diversity of the economy made it such that entire sectors of the economy could collapse and leave others unaffected. The impact was still felt across the city but not all at once.

Federal Level Most policies which attempted to resolve the situation took place at the federal level. Elected in 1928, Hoover had campaigned by saying that his presidency would be the final triumph over poverty. After the crash, when it becomes apparent that things would not get any better, he argued that the downturn was temporary. In 1930, he announced that Depression was over at a delegation of business executives. (It was far from over!) Instead of resolving the situation, his strategies to restore the economic health of the country had the opposite effect.

Initiatives Hoover turned to corporate leaders, asking them to keep the wages and production pre-crash level in order to rebuild American's confidence in the capitalist system. At the federal level, he cut federal taxes to boost private spending and corporate investments (similar to Regan era policies). He asked local & state governments to provide jobs by investing in public works.

He then passed the Revenue Act of 1932 which raised tax rates across the board. The income tax went from 25% to 63%. The estate tax doubled and corporate taxes went up by 15%. He completely choked the economy.

Furthermore, Hoover refused to consider direct federal relief for unemployed. (There were no unemployment programs at the time). Instead, he asked cities to provide relief with the collaboration of private charities. However, unemployment was too massive for private initiatives.

In the city James Michael Curley was sworn in for his 3rd term in office in January 1930. He promised Boston its own prosperity program with progressive undertones. He upped the number of salaried municipal employees. He asked the state legislature to give Boston the right to take on 50% more debt, to increase its tax limit, and to control its own finances. He advocated for the creation of a Boston Metropolitan area to get the suburbs to share the responsibility of the inner city services and to increase his influence. (roads, electricity, sewer, etc). A Cambridge official at the time said that “Metropolitan Boston is Curley gone Napoleon.”

His ideas made sense if you look at them from an economic stand point. Public works for the unemployed, home rule, and a metropolitan government made sense in times of recession. So did

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his decision to invest and spend money in the city’s development. He promoted the idea that federal state, and city government should work together to resolve the situation. In his plan, Businesses and philanthropists would complement the efforts of the city.

He devised $7.5 million worth of programs, to fund city projects, and asked the state to support nearly $17.5 million dollars in other projects. Because he knew that projects could be delayed and that several Bostonians need work immediately, he did everything that he could to make programs work.

For example, he announced that the jobless would clean up the city for the tercentenary celebrations. He set up crews to sandblast highways and to wash them with acid. He approved the use of day labor instead of contract labor on all city projects and eliminated overtime, even if it increased the cost of labor by 12%. During a snow storm, he invited people to shovel in exchange for $5 a day. When some thirteen hundred men crammed into every available inch of space at the Municipal Employment Bureau, breaking doors and windows, the city hired a thousand workers, seven hundred more than planned. Curley encouraged businesses to keep employees on, and not to cut wages. Yet unemployment worsened as the country got deeper into the depression

Unemployment No one has official statistics about unemployment for the first years of the depression. Modern data collection methods used in this kind of situation were invented at a later date. However, it is estimated that unemployment ranged between 11.5% to 28.5% of the active working population in the city. Statistics however, do not represent how people live on the ground.

In January 1930 (you have to remember that the deepest point of the depression is in 1933), a man collapsed in downtown Boston, and died of hunger. At Faneuil Hall, Navy Yard workers rallied to protest the layoffs. Harvard solved its problem with the state minimum wage commission by dismissing 20 charwomen (cleaning ladies) instead of raising their salaries from 35 to 37 cents a hour. When strike breakers were arrested, members of the other unions who were jobless stood in line to replace them. The Musician Union opened a soup kitchen, and the Typographers Union set up a fund to help their own unemployed members.

The first full scale Depression disturbance came on March 6, 1930. At the time 4000 men and women gathered at the Parkman Bandstand on the Common. One of the spokespersons said, “We are determined not to starve.” Obviously, the police denounced the march, alleging that that protesters were communists. (On a side note, the Great Depression is the time during which the Communist party saw the largest number of members in history in the United States). During the Spring, more employment “riots” took place in the city and Curley branded all demonstrations as communist inspired.

Since he knew that everyone wanted a show of strength in the circumstances, he took an even more aggressive stance against communism. May Day, and the anniversary of the execution of

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Sacco and Vanzetti, proved to be difficult as many protesters got into altercations with the police. In October, the city used proto-“SWAT teams” (police with machine guns, bulletproof vests, and tear gas bombs), to handle a meeting of the American Federation of Labor.

Structure of help in the city Throughout the first part of the 1930s, Bostonians frowned upon direct aid to the unemployed (unemployment benefits for example). Until 1935, there was no unemployment insurance at the federal, state, or city level. Curley turned toward the federal government to advocate for assistance. He claimed that the country maintained “people on the borderland of starvation,” pushing the idea that the wealthy did not contribute enough to relief.

Like Roosevelt did a bit later when he implemented the New Deal, Curley assembled his “Brain trust” to think over solutions. He assembled people from MIT, labor organizations, reformers, and university professors to think about ways to resolve the crisis. Their deliberations led to the push for the 5-day week and for the increased expenditure for public works. Curley eventually claimed that Roosevelt took the credit for programs that he invented himself.

Early relief in Boston brought some questions to the forefront: • Should the city accrue debt to provide relief? Is so, how much was too much? • Should the city stop paying its employees to avoid debt? • Should the private sector take over relief at some point? • Should the city maintain control over relief?

Direct relief The first initiatives were mostly private initiatives. Soup kitchens all over the city provided a number of meals to people in need. (There was a debate in the newspapers saying that Boston never had the need for soup kitchens, however, there were a number of them all over the city).

There is a certain gender component to unemployment in the city. More men than women were unemployed. Given, more men usually supported their families than women due to the model of the male breadwinner with the wife staying at home to take care of the children. However, there is more to this equation. During the Great Depression, women could more easily find work as domestics in homes across the city. Their work was seen as a necessity that wealthier families still could afford. For that reason, women often became the primary breadwinner in the family during this period.

There was also a gender component in the relief to workers. Government officials perceived women as being able to make do with less. Women knew how to cook, how to sew, how to do laundry, etc. They could do things that men could not do on their own and had to pay for in order to receive. As a result, women received lower benefits, if any, compared to their male counterparts.

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Boston and the New Deal By 1933, the situation was untenable in the city. Unemployment was out of control. Unemployment reached 30% across the nation. It was even worse for Black workers who faced more than 50% in some places, and in the higher 60% in others. In Boston, the unemployment rates hovered around 20-25% for white workers and 30-35% for Black workers.

Banks were still closing rapidly due to bankruptcy. The governor of Massachusetts had planned on closing the banks to try to reduce the hemorrhage at that point. Hunger was widespread. Kids were even caught hunting pigeons in the Common to feed their families.

In 1933, Franklin Delano Roosevelt was elected president, and launched the New Deal program. The New Deal is often thought of two distinct forms of policies: One form stopped the recession from progressing, the other helped with the recovery through direct help with the country. I selected a few examples which particularly affected Boston.

Emergency Banking Act of 1933 The Emergency Banking Act of 1933 declared March 5th a national bank holiday where all banks were to close “permanently.” Only Federal Reserve-approved banks were allowed to reopen following an inspection, and allowed to operate. The Treasury Department inspection would show that the bank had sufficient reserves of cash to do business without collapsing. This measure was to rebuild the public’s confidence in the banking system. All of Boston banks received permission from the Federal to reopen on March 13, rekindling Bostonians’ optimism in the system and leading to more deposits than withdrawals in the city

Beer Bill In 1933, the Massachusetts legislature realized that it could allow the brewing industry to restart, and create hundreds of jobs. As a result, the state legislature expedited the passage of the Beer Bill, and the state governor signed a measure legalizing beverages with alcohol contents of 3.2%.

In the same way that prohibition had been passed as a war measure, the repeal of prohibition was pushed through as a New Deal measure. The idea was that relaunching the industry would create jobs for farmers who grew the grains, artisans (for example distillers, barrel makers, etc), blue collar worker jobs for the transportation of the goods, white collar jobs in sales, accounting, etc, etc. It would create jobs that were none before. In 1933, the federal government finally repealed the prohibition.

Civilian Conservation Corps The Corps was created to do reforestation and conservation work. It mobilized 250,000 young men to do the work. Some were recruited in Boston, and trained at Camp Devens. (See the pictures of the men peeling potatoes!)

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National Industrial Recovery Act The National Industrial Recovery Act was based on the principles of economic corporatism put forth by Benito Mussolini.

IMPORTANT NOTE: This was before the genocide and war in Europe. People LOVED Mussolini and his way of controlling the economy at the time. (+ people were still nativists).

Fascism's theory of economic corporatism involved management of sectors of the economy by government or privately controlled organizations (corporations). Each trade union or employer corporation would, theoretically, represent its professional concerns, especially by negotiation of labor contracts and the like. This method, it was theorized, could result in harmony amongst social classes. Authors have noted, however, that de facto economic corporatism was also used to reduce opposition and reward political loyalty.

The National Industrial Recovery Act created self-governing association in 600 industries (Some small, some huge). Through these organization, the industries regulated themselves by setting codes which fixed prices, ends child labor, and set minimum wages and maximum number of hours for adult workers. The NIRA guaranteed the right of workers to form unions and banned yellow-dog contracts (contract between employer and employee where the employee revoked his/her right to join a union).

Businesses which abided by the provisions of the associations were sent posters to display in their windows. (See the image of James Farley exhorting Bostonians to adhere to he codes of the National Industrial Recovery Act).

Federal Emergency Relief Administration Finally, the Federal Emergency Relief Administration provided funds to the states for their relief programs. Over its two years of existence, the agency spent $1 billion on state relief. The states could then spend the money as welfare payments to support its residents. People, however, still had reservation over direct payment -> idea that no one can go on receiving relief without having their character affected.

Instead of giving to people directly, and to support the idea of individualism, states used the money to put people to work. Following the disbursement of the funds, Massachusetts created the Emergency Relief Administration. It was popular among the unemployed but controversial as a whole. The Massachusetts Emergency Relief Administration had the crucial task of approving projects which were to be funded on a matching grant basis by the federal Emergency Relief Administration. In addition, the ERA’S Emergency Finance Committee cleared all Public Work Administration projects submitted by the Mayor of Boston. The reason why it was controversial was because of the fact that Massachusetts relied on the federal government to fund its programs instead of being independent. (You can see projects by state and city here: https:// livingnewdeal.org/us/ The Goodell building at UMass was one of the WPA projects!)

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Obviously, I had to be selective in showing you some measures put in place during the New Deal. These measures were not the only ones. Bostonians received benefits through:

• the Social Security Act of 1935 • the Aid for Dependent Children • the Federal Writer’s Programs and other agencies

Discrimination under the New Deal Due to the ideology of the Male breadwinner, women only received a portion of the benefits that men received. Furthermore, women received benefits through their connections to a man: as a wife or as a widow, as a daughter, as a mother, all of those notwithstanding their own wage record. Mothers were considered unavailable to work, a widowed mother would only receive 3/4 of her husband’s pension. Benefits were eliminated if a woman remarried or if she earned a salary. Furthermore, most programs only allowed people to have 1 program job per family, hence favored hiring men over women.

Racial discrimination also plagued the New Deal and City programs. Specific workers, such as farmers and domestic servants (two predominantly Black professions at the time), were excluded from the programs, hence could not receive any benefits. Racial stereotypes guided the kind of work that Black people could do; African Americans were seen as unskilled workers, notwithstanding their training, hence pushed toward unskilled jobs. Black people also received lower benefits if they lived in “low-cost” areas (i.e. segregated neighborhoods).

Results Although it takes a long time, the different measures put forth during the New Deal helped Bostonians. You can see the number of people employed through the programs through the years in the slides.

Few more things to highlight for Boston

Tuberculosis In the 1930s, tuberculosis was omnipresent in the city especially in the poor neighborhood. As you can imagine, it is difficult to address the situation at a time as antibiotics to treat tuberculosis were not available until 1947. The Great Depression only complicated the equation as more and more people became impoverished. As a result, an increasingly large number of people suffered and died from the disease.

The only recourse that the city had was to open more sanatoriums to treat patients. The state allocated millions of dollars to build state of the art sanatoriums (It was a blessing in disguise considering that the state created jobs to build those building).

Abortion During the Great Depression, women attempted to reduce the number of mouths that they had to feed. Although some infanticide took place, women took advantage of birth control (condoms,

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diaphragms, sponges, not yet the pill) to prevent pregnancies. When these methods did not work, they turned to abortions in greater number, even if abortions were still illegal everywhere in the United States. During the Great Depression, understanding the burden of more children on the family, law enforcement was more lax. Abortions were legalized in 1973 with the Roe v. Wade Supreme Court decision.

Shanghai Printing Company To finish on a happy note, some companies managed to pull through the Great Depression without too much difficulty. In 1931, Henry Wong opened the Shanghai Printing Company on Oxford Street. For many years, the Shanghai Printing Company was the leading source for Chinese language printing in New England. The press produced civic documents and social announcements, laundry tickets, brochures for Chinese and Chinese-American students at local universities, and menus for Chinese restaurants across New England. Shanghai Printing’s ability to produce both Chinese and English texts was sought after by local universities to create documents for their Chinese and Chinese-American students and departments. In addition to his activities as a printer and publisher, Henry Wong worked for fair housing and improved labor practices in Chinatown. He also advised many residents through the immigration process at a time where the immigration of Chinese nationals was restricted at the federal level.

Where does that lead us? Great Depression affected the city in a different pattern from other cities. Yet, unemployment was still problematic, and triggered a debate as to what option the city could use to help its residents (direct relief or programs employing people). Curley opted for city spending and employment programs, and the federal government provided direct relief through the New Deal. Even if the programs worked, Boston faced a difficult recovery. Despite the fact that the governments pushed for the male breadwinner model, women are often took the responsibility as head of the family when men were unemployed. By the beginning of the Second World War, the recovery was still in progress.