The Great Depression


With the conclusion of World War I, much of the world lay in ruins and economic chaos. The United States emerged from the war as the leading economic power, with its infrastructure mostly intact and undamaged by the war. America enjoyed prosperity during most of the 1920s, but this prosperity was masking shaky economic conditions that would lead to a global depression that would begin at the close of the decade.

After World War I, the decade saw an increase in factory productivity and mechanization, financial prosperity, the invention of radio, the increasing appearance of the automobile on the nation's roads, and the popularity of jazz music. History has given the decade several names, including the "Roaring 20s" and the "Jazz Age". Confidence in America's businesses was high, and that confidence was reflected in the sharp rise in stock prices through the 1920s. Stocks became seen as an easy way to become rich, and even ordinary Americans borrowed heavily to pay for stock purchases. Banks were more than willing to lend the money, and by 1929, the average stock was selling for more than four times its price at the beginning of the decade.

America's factories produced large inventories of goods, and America's farms produced record harvests. But these bright spots in the nation's economy did not tell the full story. While many Americans became rich during the 1920s, the average worker did not. As more factories and farms mechanized, the need for labor dropped. The goods produced in America accumulated in warehouses and grain silos because they were being produced faster than America could consume them, and because their cost was often out of reach for the typical American. Stocks prices increasingly became inflated compared to the actual value of the companies they represented. A downturn in the price of agricultural goods caused a strain on farmers beginning in the early 1920s.

The Federal government practiced a policy of "laissez-faire" during the 1920s. Both the Coolidge and Hoover administrations felt that it was best to leave business unregulated and uncontrolled because the market would sort things out. Therefore, the speculative nature of the stock market and the heavy purchasing of stocks through margin loans went unchecked. Banks made many unsound loans to stock purchasers, unworried that stock prices could ever stumble. By the end of the decade the actual condition of the American economy became apparent.

The Global Depression

The problems with the American economy became evident in October, 1929, when the stock market experienced its largest crash in history. On Monday, October 28, the market fell 13%. On October 29, which would become known as "Black" Tuesday, 16,410,030 shares traded and the market dropped another 12%. Both days set records. The market lost 40% of its value during the months of September and October. By the end of November, investors had lost $100 billion. The market finally bottomed in July of 1932 when the Dow fell to 41.22, down 89.2%. It would take 22 years for the market to recover.

No business sector escaped undamaged. Farmers, for example, saw the prices of their crops drop dramatically. In order to raise more money, the agricultural community attempted to recover by producing higher yields. This simply flooded the market with even more goods than could be absorbed by an already weakened demand, and prices fell further. Many farmers lost their land when they could not pay their mortgages. Overproduction also rendered many soils unfertile, creating a large "dust bowl" of 150,000 square miles in the Midwest.

Factories could not raise funds to expand or even cover day-to-day expenses. An estimated 30,000 business failed in 1932. Businesses still operating cut wages. By 1932 as many as 15 million Americans were unemployed, and the suicide rate had increased 30%. Many families became homeless as jobs were lost.

The effects of the stock market crash occurred slowly, and many in the Patterson area were not affected by it for some time. This ad for a Danbury furniture store makes light of the crash and uses it as an opportunity for a sale. This ad appeared in the November 29, 1929 edition of the Putnam County Courier, just a month after "Black Tuesday". Danbury was - and remains - a major shopping area for eastern Putnam County. By 1932, the effects of the Depression had affected everyone in the Patterson area. This ad for the same Danbury furniture store reflects the change in attitude, but still uses it as a creative opportunity for a sale.

The American banking system collapsed along with the stock market, since much of the banks' money was tied up in stocks and margin loans. Depositors lost their money because the banks had used that money to make the loans that were now uncollectible. Because the global markets had become dependent on American investment and capital, it did not take long for the American depression to spread throughout the world. By 1932, 5000 U.S. banks had failed.

Much of the world was still in an economic slump after World War I. The collapse of the American economy was felt throughout the world, and by the early 1930 nearly every nation of the world experienced economic misery. The belief that external forces were the cause of each nation's economic problems led to the rise of fascism and nationalism throughout Europe, particularly in Italy and Germany. Germany was particularly weakened by its burden of war reparations payments to England and France. By 1932, Germany's unemployment rate reached 30%. Fascism offered order to the chaotic conditions in the defeated nations of World War I. Nationalism offered the hope of economic improvement and helped unify the populations. Britain's economy slumped as the economies of its colonies slumped. The breakup of the Hapsburg monarchy after World War I left Austria an economic mess, and the Austrian central bank collapsed in 1931. Russia was in a slightly better position because the Communist revolution had left it isolated from the rest of the world.

A Putnam County Courier editorial cartoon from June 12, 1931. Among the dark clouds surrounding the flag is the business depression. A Putnam County Courier editorial cartoon from November 13, 1931. The effects of the Depression have now hit the area hard.

Latin America saw the rise of Populism, which emphasized protectionism via the severing of economic ties to the United States and Europe, and the development of industry and trade within Latin America. The richer nations of the world, which relied on exports to drive their prosperity, were now blocked from exporting their goods to Latin America. The stage was set for the rise of nationalistic dictators.

Many nations, including the United States, sought to protect their industries by enacting protectionist tariffs, which simply caused other nations to retaliate by enacting import restrictions of their own.

The European colonies in Europe and Asia saw the beginnings of independence movements, particularly in India, Burma, and Vietnam.

The New Deal

The American banking system had largely ceased to function by the time Franklin D. Roosevelt assumed the Presidency. The Roosevelt recovery plan, called the "New Deal", was quite the opposite of the hands-off business policies of the Coolidge and Hoover administrations. Roosevelt inaugurated tight controls on the banking and financial communities. Many of the programs and government agencies we take for granted today are the direct result of the Depression, and were created by Roosevelt. The Federal Deposit Insurance Corporation (FDIC), for example, insures depositors' funds and provides protection should a bank default. The Securities and Exchange Commission (SEC) regulates the Stock Exchange and stock trading. Roosevelt also inaugurated an aggressive series of public works programs to create jobs for the masses of unemployed Americans. The New Deal has often been criticized for it socialist policies and high deficit spending, and some economic experts believe the Depression would have ended sooner without government intervention. As evidence, these economists note that the recovery that began during the early Roosevelt years was followed by a second Depression in 1937, often referred to as the "Roosevelt Depression". Unemployment again rose above 20%. But it is clear the various public works programs gave needed jobs to Patterson's unemployed, and the work done under the auspices of those programs can be seen throughout the region. Conditions began to improve by the end of 1938.

The Depression Reaches Patterson

The Stock Market crash did not have an immediate effect on most Patterson residents. Those that lost the most money were those that were the most heavily invested in stocks: the wealthier Americans. But it is their investments that provided the capital that businesses needed to expand, and without that capital, the common worker was eventually affected. Businesses needed to conserve money, and lowered wages and cut jobs. In July, 1930, an example of this "trickle down" occurred. The Putnam County Courier reported in its July 4 edition: "The depression is beginning to be felt in this section among the mechanics in the building trade..." The paper reported that the New York Central, whose Harlem Division serviced Patterson via its Towners and Patterson stations, was cutting jobs in all divisions. "All or nearly all of the extra time for station agents and assistants has been abolished, and many of them discharged along the line."

Area businesses respond to the area unemployment rate in these two ads. The first appeared in the Putnam County Courier on November 20, 1931. Associated Gas & Electric was an affiliated company of New York State Gas & Electric, which still supplies electric and gas service to Patterson. The second ad appeared in the Courier on March 11, 1932, and is from the New England Furniture Co. in nearby Danbury, Ct. Danbury remains a popular shopping area for Patterson residents.

The increasing effect of the Depression was evident in the annual figures reported by the Putnam County Welfare Agency. In 1929, 17 families were receiving relief in the form of food, fuel, rent money, hospitalization, and other necessities. As the Depression worsened, 75 families required County support in 1930. In 1931, the number doubled to 141. In December, 1931, the Putnam County Board of Supervisors, the governing body of Putnam County before the County Executive / County Legislator form of government was adopted in 1979, met with representatives of the New York State Temporary Relief Commission to discuss cooperative efforts to provide jobs and funds for the County unemployed. The State Legislature passed the Emergency Relief Act in September, 1931, and the Temporary Emergency Relief Administration was created to coordinate relief efforts with local governments. With the winter coming, the need to provide relief for the unemployed and their families was acute. The State would provide funding to be used to pay men for public works projects in the County during the winter. The state suggested that Putnam County establish a work bureau where men could apply for jobs. The Supervisors made the astonishing admission that no survey of unemployment had been taken in the County, and the number of unemployed was unknown. From November 1931 through March 1932, New York State paid almost $16,000 for unemployment relief work. The funding provided 44 jobs for County men during the winter, such as a gypsy moth control program in Fahnestock State Park. The State Temporary Emergency Relief Administration would reimburse Putnam County up to 40% for relief given to families since November, 1931 in conjunction with funds received from the private State Charities Aid Association.

The decreasing popularity of President Herbert Hoover because of the Depression led to the election of New York Governor Franklin D. Roosevelt in 1932 by a wide margin of votes. Heavily Republican Patterson voted for Hoover by a 456 to 328 margin. Roosevelt faced quite a challenge in a country severely weakened by economic chaos. Putnam County Welfare Commissioner Eliza W. Dean reported 282 County families were receiving public assistance in the first ten months of 1932. Unemployment was growing and families were exhausting their savings. Private charitable organizations such as Catholic Charities provided more funding for assistance. Other groups included the Public Health Association, which provided medical, emergency, and dental aid, and milk in cases of malnutrition. The King's Daughters provided aid in such forms as bedding and clothing. The Salvation Army provided shoe repair. The Red Cross provided two allotments of 400, 25-pound sacks of flour, 3,000 yards of cotton material to be made into clothing for the needy, collected used clothing, staffed clothing distribution centers in Brewster, Carmel, and Lake Mahopac, and opened a thrift shop in Cold Spring. New York State allowed a limited amount of firewood to be taken from Fahnestock State Park for winter heating. The Federal government provided clothing supplies at low cost. Putnam County operated a County farm, and food was grown for the needy. To cut expenses, workers at the farm cut wood to be used for heating County farm buildings in place of coal. The farm also canned hundreds of jars of jam, vegetables, pickles, and other items. The farm was located on the site of the present Putnam County Park on Gipsy Trail Road in the town of Kent.

This editorial cartoon in the January 6, 1933 edition of The Putnam County Courier focuses on the plight of the farmer. Farmers saw their prices plunge, while the cost of production remained high. New York State ran a series of newspaper ads to promote the dairy industry. This ad appeared in the Courier on August 24, 1934.

Patterson still had many dairy farms during the Depression years. Farmers were particularly devastated by the Depression. The Roosevelt "New Deal" proposed the Farm Relief Plan to aid farmers, but dairy farmers were not included in the proposed Plan. Putnam Rep. Hamilton Fish, Jr. fought to extend the Plan's benefits to dairy farmers, citing the importance of dairy farming in the State, and the 1,250,000 unemployed in New York State. Farmers were large consumers of manufactured goods, and their financial distress cascaded down to other businesses and industries.

In February, 1933, the Putnam County Board of Supervisors met in a special session to approve a resolution to borrow $20,000 to provide work relief for County residents. The Emergency Work Committee was also charged with the administration the funds and the coordination of work programs. New York State had also provided additional funds to employ 100 men for three days per week for three months. By March, over 616 men had applied for work at the County Work Bureau in the County Office Building, including 18 from Patterson - the smallest number from Putnam's six towns. 30 Putnam men were hired to construct a short 500-foot span of macadam-paved road from the Towners Road to NYS Route 22, which had just been built with a concrete surface. Wages of $3.20/day were paid. Other men were hired for projects in the Town of Carmel.

Confidence in banks waned after the stock market collapse in October 1929. Many banks collapsed because of the rush of withdrawal requests made by frightened customers. To prevent further bank collapses, and to give time to develop a plan to save the banking industry, President Roosevelt declared a "bank holiday" on March 6, 1933, during which banks closed. All area banks were affected. Customers could not access their accounts, and the flow of withdrawals was temporarily halted. On March 12, the soundest banks were allowed to reopen. By March 13, deposits at those banks exceeded withdrawals, and the banking panic had ended. The Federal Deposit Insurance Corporation (FDIC), another innovation of the Roosevelt Administration, was created in 1933 to insure the accounts of bank customers. The Putnam National Bank of Carmel and the Mahopac National Bank became FDIC members in January, 1934. FDIC helped create confidence in the U.S. banking system, and encouraged a return of deposits to the bank, allowing the banks to make loans to ailing businesses.

The Putnam County Courier announces the end of the bank holiday in the March 17,1933 edition. The Courier reports a novel way to cope with the Depression, in the April 21, 1933 edition. The story was reported on the evening broadcast of famed radio broadcaaster Lowell Thomas, a resident of Pawling.

President Roosevelt created the National Recovery Administration (NRA) in 1933 to promote business growth by enforcing a code of conduct ("fair competition") in the business community, which regulated wages, prices, working conditions, and credit terms. Businesses that participated in the program were allowed to work in a business environment where anti-trust laws were relaxed. Employees of participating businesses were allowed to form unions and enter into collective bargaining agreements with their employers. The NRA also gave Roosevelt the power to regulate interstate commerce, a power that had formerly been given to Congress. A Putnam County NRA board was formed in 1933, and organized a membership campaign to enlist local businesses. In Patterson, the board's vice chairperson, Mrs. Sarah Austin, reported that 99% of Patterson's businesses were cooperating in the program. The NRA was criticized as giving too much power to the President, and for bringing the country close to socialism. In 1935, the Supreme Court ruled the NRA unconstitutional.

Local merchants participating in the NRA program proudly displayed the NRA logo in their ads.

In November, 1933, Putnam County and its six towns allocated $65,000 for publics works projects to create jobs for the unemployed. The funds were allocated by another Roosevelt New Deal administration, the Civil Works Administration (CWA). The CWA money was to be used for labor only, and the local governments were required to pay for materials. The Putnam County Work Relief Bureau acted as local agent of the CWA, and the Rev. Horace E. Hillery of Patterson was named chairman of the County Welfare District. By December, 1,000 men had registered for work, but only 200 actually were hired. Putnam County was the first county in New York State to have projects approved and to get men to work. The following local projects were funded:

Widening, sub-basing and grading Bally Hack Road, town of Patterson $1,500
Sub-basing, grading and graveling road leading from Field Corners to Bullet Hole $1,000
Redecorating and repairing Town Hall, Patterson $1,000
Grading, sub-basing and graveling Fairfield Drive Road, Putnam Lake $1,000
Digging ditch, laying pipe for hydrants in fire district in the Town of Patterson $1,000
Grading, sub-basing and graveling Haviland Drive Road, starting at the corner known as the old well curb and running in a northerly direction for a distance of about one mile $1,500

With funding dwindling because of the numbers of unemployed, the CWA was forced to cut workers to 2 days work per week to keep within the available funds. Eight men from Patterson were employed in a mosquito control program that eliminated breeding grounds by draining swamps near densely populated areas.

In January, 1934, Federal surplus coal made its way to Putnam County. Several millions tons of coal were distributed to the needy by local coal dealers via the Putnam County Dept. of Public Welfare. In September, the National Reemployment Service announced employment for 100 men. The first project was to erect a new school building for the Joint School District No. 9 at Towners at an estimated cost of $7,000. The project was to employ 6 men for 5 months.

As the economy slowly improved, some lives returned to normal. This ad for the New York Telephone Company appeared in the January 26, 1934 edition of the Putnam County Courier. The Rev. Horace E. Hillery of Patterson served as chairman of the Putnam County Work Relief Bureau. In this 1935 article in The Putnam County Courier, Hillery explains the County work relief program. The First National chain participated in the NRA program. First National operated a grocery store in Patterson at the time this ad appeared in the May 24, 1935 edition of The Putnam County Courier.

By 1935 the nation began to recover from the Depression. In April, 1935, the local Putnam County office of the National Reemployment Service, citing a shortage of farm help, issued an appeal for farm workers from the remaining unemployed. Experienced workers were needed for pruning, spraying, to work in the nurseries and fields, to milk cows, to incubate, brood, and rear livestock, and to operate farm machinery. Employment was rising as businesses began to rehire. The Putnam County Reemployment Services Office placed 822 workers, but only 414 were placed via the Public Works Administration. Private placements were up for the third consecutive year since 1932. In July, 1936, The Putnam County Emergency Work Bureau met for the final time. All active projects were turned over the Federal WPA (Works Progress Administration). In August, 1936, the County announced that its relief rolls had dropped by 50% over the previous four months. 127 families were receiving aid, compared to 229 previously. Also, only 127 men were receiving work assistance, down from 460. Increases in private employment were cited as the reason. Putnam County showed the largest drop in relief expenditures of any county in the area. It is ironic that employment had improved to such an extent, that the Putnam County Welfare Dept. dropped three members of its staff, and one was placed on an unpaid leave of absence.

America's economic recovery stalled at the end of 1937, in what some called "Roosevelt's Depression". The Putnam County Welfare Dept. requested an additional $40,000 to meet the increased need for aid in 1938. Demand for public assistance increased almost 50% over 1937.

The Roosevelt administration would respond to the new economic downturn by a deficit spending program designed to stimulate the economy and create new jobs. The outbreak of World War II would finally break America free from any remnants of the Depression as America's factories converted to wartime production - and men were sent overseas to fight.

The Legacy of the Great Depression

The Great Depression demonstrated a need for economic reforms in the Unites States. Congress would pass new regulations controlling the banking and loan industries, and the stock market would also be scrutinized. Several of these reform programs are well known and still in existence today. The Banking Act of 1933 (the Glass-Steagall Act), for example, separated commercial and investment banking, and created the Federal Deposit Insurance Corp. (FDIC), which provides some protection for depositors in the event of a bank failure. The Securities and Exchange Commission (SEC) was created in 1934 to keep watch on the stock market and to protect investors. The Social Security Administration was created in 1935 to provide a basic pension benefit for Americans. In addition, many states also enacted legislation to regulate banks, insurance companies, and investment firms.