Illinois before the Great Depression
The 1920s was a prosperous period for many businesses. Nonetheless, the economy was fundamentally unsound. The corporate and banking structure was unhealthy. Foreign trade was, too. Income was distributed unevenly; five percent of the population received about one-third of all personal income. The nation eventually entered the worst and longest period of high unemployment and low business activity in modern times. For example, prices of farm products fell about forty percent in 1920 and 1921, and they remained low through the twenties. Some farmers lost so much money that they could not pay the mortgages on their farms. These farmers had to either rent their land or move. Bank failures increased. Most of them occurred in agricultural areas because farmers experienced such poor conditions. From 1925 to 1929 the average price of common stocks on the New York Stock Exchange more than doubled. Rising stock values encouraged many people to speculate—that is, to buy stocks in hope of making large profits following future price increases.
On October 29, 1929, optimism crashed. The bullish market gave way to violent trading on Wall Street resulting in total losses, total turnover, and speculators' ruin. Within two weeks of the crash, the nation had lost an estimated $30 billion.
Whether the stockmarket crash started the Depression or the Depression made the market crash is argued by economists. What is unarguable, however, is that in the three years following the crash the whole American economy ran steadily downhill.
The expansion of Illinois' population, which had been spectacular for a century, almost stopped during the Depression decade. Chicago gained only 20,370 residents during the Depression, and the census bureau found that rural Illinois increased 4.6 percent while urban areas grew only 3.1 percent.
Factories, stores, and offices laid off help and sometimes closed their doors. Family savings were depleted, if not wiped out. However, the manufacturing and agricultural diversity of Illinois delayed for a year the full effect of the Depression. During 1930 payrolls dropped thirty percent, and unemployment caused alarm that winter. As many as 700,000 were out of work, with the situation most critical in Chicago and the mining counties of Franklin and Williamson. Ben Isaacs, who lived in Chicago during the Depression described what happened to him: "I was in business for myself, selling clothes on credit. . . . But . . . banks closed down overnight. We lost every thing.. . . I couldn't pay the rent.... I sold my car for $15 in order to buy food for my family.. . . I would bend my head low so nobody would recognize me."
Government costs became a terrific burden since sales and property tax levels did not fall in step with wages, and before the Depression was over almost all of the taxing bodies in Illinois had defaulted on some debt issue. But there also were signs of heroism amidst the economic tumult. Chicago school-teachers, unpaid for months by a bankrupt Board of Education, taught on; some fainted at their desks from hunger.
President Hoover believed that business, if left alone to operate without government supervision, would correct the economic conditions. He vetoed several bills aimed at relieving the Depression.
Hoover declared that state and local governments should provide relief to the needy. Illinois Governor Louis Emmerson appointed a state committee on unemployment and relief, but he hoped the people would be fed and sheltered without the state becoming directly involved. The problem of the jobless persisted, and it became apparent that the people of Illinois could not be fed and sheltered without the state's help. In February 1932 lawmakers created a seven-member Illinois Emergency Relief Commission and voted a $20 million appropriation in expectation that it would pay the bills for a year. The money lasted only six months. Finally, Congress approved Hoover's most successful anti-depression measure, the Reconstruction Finance Corporation (RFC). The government agency provided some relief by lending money to banks, railroads, and other institutions whose failure would have made the Depression even worse. Yet, most Americans believed Hoover did not do enough to fight the Depression.
Most people recall the hard times and recovery during Roosevelt's New Deal. However, the economy gave some indication in the 1920s of potential trouble, and the response of the Hoover and Emmerson administrations are important forerunners of the government relief programs.—[From Robert Mcllvaine, Down and Out in the Depression; Cabell Phillip, From the Crash to the Blitz, 1929-1939; William H. Stuart, Twenty Incredible Years; Studs Terkel, Hard Times.]