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The Great Depression always seems to play out to us in black and white. Images are seared in our collective history — from the migrant farm families to crowds huddled during a bank run to long food lines in major cities and tattered Hoover towns. They are dark, depressing, distressing.
Those black-and-white photos reflect a somber reality: 25% of the workforce couldn’t find a job, a third of all banks failed, and the US GDP contracted 30%. Hundreds of thousands of farms were foreclosed upon. For those who could find a job, wages fell over 40%. Unlike other crises, the Great Depression lasted over a decade. Part of the pain of this era was simply how long it lasted.
And its impact was woven into the culture of the 1930s. Al Capone, who “couldn’t stand it to see those poor devils starving,” set up a soup kitchen serving 2,200 Chicagoans daily with a sign that read “Free Soup Donuts and Coffee for the Unemployed” — and, in turn, enhanced his Robin Hood reputation. Three years into the struggle, in 1932, Bing Crosby and Rudy Vallee were crooning “Brother, Can you Spare A Dime?”
Even the Monopoly makers chose to represent the Great Depression with a worn-out boot token.
But from a historical standpoint, the Great Depression also represents something else: the resilient American spirit even when the American Dream is challenged. Ours is a story of financial ups and downs. From the panics of the 1700s to the depressions and recessions throughout the 1800s and 1900s to the crises of the 2000s, volatility is woven into the fabric of who we are.
Juxtaposed against this darkness, the American drive and ambition were still there. Dance contests played across the country, with contestants hoping they would be the one to dance the longest and win a cash prize. The game of Monopoly became the rage with the dream that one could make and achieve wealth. And Americans were caught up in the idea that a superhero like the Green Hornet could take on evil.
In total, we’ve had 48 recessions across 250 years, and the average has lasted 17 months. That means the US economy has been in a challenging moment around 25% of the time. Yet whenever the chips are down, our financial prosperity finds a way to bounce back.
And The Great Depression is the Before and After in US economic life, a dark time that generated the two cornerstones for American prosperity. In those moments we learned what steps were needed to shape American life.
The biggest lesson learned was simple: In order to survive and thrive, we need to evolve our institutions. Social Security was created to be a social safety net. The devastating effects of the Great Depression meant that many older Americans’ savings were wiped out. One-third of them faced destitution and their only financial backstop, if there was one, was family and friends.
While the idea of a government benefit for retirement seemed novel, it was also idea that went as far back as the Romans and modernized by the Germans in the 1880s. And unlike other government intervention, Social Security did not immediately start paying out in 1935 when FDR signed it into law. Rather, payroll taxes began being collected in 1937, with the first benefits paying out in 1940 to over 8.3 million Americans who were over age 65. Could you imagine us having the same restraint today?
But Social Security wasn’t the only institution that evolved. To this day, we still have the Tennessee Valley Authority and the National Labor Relations Board. Stronger bank and financial regulations helped protect the average American, including the creation of the FDIC to insure bank deposits and the SEC to oversee markets and prevent manipulation.
And the government learned that intervention can make a difference. During the Covid-19 pandemic, stimulus checks, the development of the Paycheck Protection Program (PPP), and mortgage and student loan abatement programs made the difference for millions of Americans.
There may be some who don’t agree with this level of federal intervention, but what is often missed is something very special: It is an American Superpower. Whenever there is a global crisis, other countries lag behind the United States in recovery. With the 2008 economic crisis, our economy officially exited the recession in June 2009, while Europe’s recovery dragged on for years.
In the Great Depression, we didn’t have this power yet. And now, we take for granted that we can pass go and collect $200, just like in Monopoly.
But the lessons of the era weren’t only economic — they were also about true leadership. One of the most surprising aspects of the Great Depression is that the man who understood finance was unable to solve it. Herbert Hoover was phenomenal with money. In fact, he was one of our wealthiest presidents. But he had built that wealth through intelligence and bootstrapping; the Great Depression required a different approach.
The Great Depression taught us that it isn’t just financial decision making and solutions that saves us. It is vision.
So it’s rather apt that, on the anniversary of our country, we stand again at a crossroads of financial troubles. Our citizens want to believe that the American Dream is still alive, yet the affordability crisis threatens to drown the average American. The transition to the AI age is rocky and, for many, frightening.
What history tells us is that, like in the Great Depression, it is the right leader and the right institutional evolution that can pull us out of this crisis and salvage the American Dream.
Megan Gorman is the author of “All the Presidents’ Money: How the Men Who Governed America Governed Their Money.”
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