October 28, 2025

In the election of 1920, Americans handed a landslide victory to the Republicans and their presidential candidate Warren G. Harding, giving them control of both Congress and the White House. After the moralizing of the Progressive Era and the horrors of World War I and the Spanish flu epidemic that followed it, Americans looked forward to an era of “normalcy.”

Once in charge, Republicans rejected the Progressive Era notion that the government should regulate business and protect workers and consumers. Instead they turned the government over to businessmen, believing they alone truly knew what was best for the country.

Treasury Secretary Andrew Mellon—one of the richest men in America—cut taxes on the wealthy to spur investment in industry. He also gave rebates and tax abatements: between 1921 and 1929 he returned $3.5 billion to wealthy men.

At the same time, Commerce Secretary Herbert Hoover, who had made a fortune as a mining engineer and consultant, expanded his department to fifteen thousand employees with a budget of more than 37 million dollars, working as a liaison between businessmen and the government and helping businesses to avoid antitrust lawsuits. He urged European countries to buy American.

Their policies seemed to work brilliantly. Between 1925 and 1926, more than twenty-two thousand new manufacturing companies formed. Industrial production took off. Business profits rose, and if wages didn’t rise much, they didn’t fall, either.

And oh, the changes the new economy brought! By 1929, more than two thirds of American homes had electricity, which brought first electric lights, then refrigerators, washing machines, vacuum cleaners, toasters, and radios. Consumers rushed to buy them, along with ready-made clothing, beauty products, and cars, all of which the new advertising industry, which grew out of the government propaganda campaigns of World War I, promised would bring them glamor, sophistication, romance, and power.

In the Roaring Twenties, it seemed that government and business had finally figured out how to combine government promotion with the efficiency of an industrial economy to benefit everyone. Business was booming, standards of living were rising, and Americans were finding the time to read, learn, invent, and improve. In 1928, Republicans tapped Hoover for president. He promised that continuing the policies of the last eight years would bring the U.S. “in sight of the day when poverty will be banished from this nation.” He won with a whopping 58.2% of the vote.

With Hoover in the White House, Americans wanted in on the inevitable growth of the economy. They invested in industries producing steel, coal, and consumer goods, and in utilities and transportation. Stock prices rose. And rose, and rose. By 1929 the rush to buy stocks had become a rush to speculate in the stock market. Prices that in spring 1928 had seemed too high to be real were laughably low by fall. Radio had been at 94½ in March 1928; by September 1929 it was 101 but had split so often that the holdings from 1928 were actually worth 505. And so it went, down the stock lists.

Those with less money to burn could get into the market by buying on margin, putting down 10 or 20 percent of the cost of a stock and borrowing the rest from a broker with the promise that the loans would be paid off by the anticipated increase in the stock’s value.

Those excited by the scene dismissed those who warned that stock prices were a bubble as ignorant, anti-American naysayers. “Be a bull on America!” boosters urged. “Never sell the United States short!”

October 24, a Thursday, was the beginning of the end. Heavy trading in the morning slowed the ticker tape that recorded trades. Brokers fearful of being caught sold more and more heavily. When the tape finally caught up after 7:00 that night, it showed that an astonishing 12,894,650 shares had changed hands. By afternoon, bankers managed to shore up the market, which regained the ground it had lost in the morning. But those dreadful early hours had wiped out hundreds of thousands of small investors.

The market seemed to recover on Friday and Saturday. But then, on Monday, October 28, prices slid far in heavy trading. And then, on October 29, 1929, it all came crashing down.

When the opening gong in the great hall of the New York Stock Exchange sounded at ten o’clock, men began to unload their stocks. The ticker tape ran two and a half hours behind, but that night it showed that an extraordinary 16,410,030 shares had traded hands, and the market had lost $14 billion.

Black Tuesday began a slide that seemingly would not end. Within two years, manufacturing output dropped to levels lower than those of 1913. The production of pig iron fell to what it had been in the 1890s. Foreign trade fell from $10 billion to $3 billion. The price of wheat fell from $1.05 a bushel to 39 cents; corn dropped from 81 cents a bushel to 33 cents or lower; cotton fell from 17 to 6 cents a pound. Prices dropped so low that selling crops meant taking a loss, so struggling farmers simply let them rot in the fields.

By 1932, over a million people in New York City were unemployed. By 1933 the number of unemployed across the nation rose to 13 million people—one out of every four American workers. Unable to afford rent or pay mortgages, people lived in shelters made of packing boxes.

Republican leaders blamed poor Americans for the Great Depression, saying they drained the economy because they refused to work hard enough. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Treasury Secretary Mellon told Hoover. “It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”

But the problem was not poor workers. The rising standards of living that had gotten so much attention in the new magazines of the 1920s mainly benefited white, middle-class, urban Americans. Farm prices crashed after WWI, leaving rural Americans falling behind, while workers’ wages did not rise along with production. The new economy of the 1920s benefited too few Americans to be sustainable.

Hoover tried to reverse the economic slide by cutting taxes and reassuring Americans that “the fundamental business of the country…is on a sound and prosperous basis.” But he rejected public works programs to provide jobs, saying that such projects were a “soak the rich” scheme that would “enslave” taxpayers, and called instead for private charity.

By 1932, Americans were ready to try a new approach. They turned to New York Governor Franklin Delano Roosevelt, who promised to use the federal government to provide jobs and a safety net to enable Americans to weather hard times. He promised the American people a “New Deal”: a government that would work for everyone, not just for the wealthy and well connected.

Under Roosevelt, Democrats protected workers’ rights, provided government jobs, regulated business and banking, and began to chip away at racial segregation. New Deal agencies employed more than 8.5 million people, built more than 650,000 miles of highways, built or repaired more than 120,000 bridges, and put up more than 125,000 buildings.

They regulated banking and the stock market and gave workers the right to bargain collectively. They established minimum wages and maximum hours for work. They provided a basic social safety net and regulated food and drug safety. And when World War II broke out, the new system enabled the United States to defend democracy successfully against fascists both at home—where by 1939 they had grown strong enough to turn out almost 20,000 people to a rally at Madison Square Garden—and abroad.

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Liza Donnelly of Seeing Things illustrated a short version of this letter:

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Notes:

You can find Liza's Seeing Things here:

Arthur M. Schlesinger, Jr., Crisis of the Old Order (1957; rpt. New York: History Book Club 2002), pp. 62-63.

Andrew W. Mellon, Taxation: The People’s Business (New York: Macmillan, 1924), pp. 129–130.

William E. Leuchtenburg, The Perils of Prosperity, 1914–1932 (1958; rpt. Chicago: University of Chicago Press, 1992), p. 109, 194–196.

Republican Platform of 1928, June 12, 1928.

Herbert Hoover, The Memoirs of Herbert Hoover: The Cabinet and the Presidency, 1920–1933 (New York: Macmillan, 1952), pp. 30-31.

Frederick Lewis Allen, Only Yesterday (New York: Harper & Brothers, 1931, p. 303, 315, 318, 332–333, 340–341.

John Kenneth Galbraith, The Great Crash: 1929 (1954; rpt. New York: Time Incorporated, 1961), pp. 20–21, 25–26, 43–44, 48–53, 97–98, 101–107, 171,

“22,000 Nazis Hold Rally in Garden,” The New York Times, February 21, 1939.

Ryan Bort, “When Nazis Took Over Madison Square Garden,” Rolling Stone, February 19, 2019.