UW project explores Great Depression's impact on state

A year ago, University of Washington history professor James Gregory started getting the question: Was our nation and state entering a second Great Depression?

Huge layoffs at Microsoft, Boeing and Starbucks. The end of Washington Mutual, the biggest U.S. bank in history to fail. Home prices falling and bankruptcy filings in Washington reaching 90 per day.

"I started thinking there might be lessons that could be learned from the Great Depression," Gregory said. "The 1930s are arguably the most important decade in the building of Washington state as we know it today."

With funding from the university's Simpson Center for the Humanities and the Harry Bridges Center for Labor Studies, Gregory, his colleagues and their students began their research last year and launched the project publicly Thursday, with a staged reading of a Depression-era play about a taxi-workers strike.

The Great Depression in Washington State Project describes the crisis as it played out in Seattle, Yakima and other places.

Through archival photos, Google maps and research reports, the project examines how the economic crisis ushered in permanent changes in state politics.

It also portrays the state as having emerged stronger as a result of massive public works, such as the Grand Coulee Dam and Lake Washington Floating Bridge, and thousands of smaller ones, too, such as Deception Pass Bridge and 2,000 feet of Bremerton's sewer system.

Students are learning about several striking parallels:

• Before the 1929 crash on Wall Street, there was a run-up in building activity, housing prices and mortgage debt, just like before the 2008 market plunge.

• Then and now, the federal government intervened in the crisis with massive stimulus spending to get people working and revive the economy.

• By the Depression's third year, the jobless became a potent political factor in elections, and voters threw out incumbents.

"The Hoovervilles of the Great Depression are the Nickelsvilles and tent cities of today's recession," said UW graduate Magic Demirel, a history major who now counts herself among the underemployed.

Depression much worse

Gregory is quick to acknowledge the Depression was much worse than the present crisis.

"The dimensions of distress in the '30s were much more severe," he said.

At least one-third of the state's work force was unemployed at the Depression's peak in 1933, Gregory said.

In the current crisis, Washington state's unemployment rate hasn't topped 10 percent. If discouraged and underemployed workers are included, the state's average rate in 2009 was about 16 percent, according to federal estimates.

And while governments and colleges have trimmed payrolls in the current crisis, the cuts aren't as deep as they were in the 1930s. In 1932, Seattle's mayor ordered the budget slashed by one-third and salary reductions of as much as 25 percent, city records show.

The same year, the University of Washington slashed salaries and wages 32 percent, and the head football coach asked for assurances he'd keep his job, according to a 1975 study.

As more people's incomes dropped and homeless encampments called "Hoovervilles" expanded, the city's street, water and electricity departments came under pressure to hire day laborers and delinquent utility customers who were willing to work off their bills.

While people then and now became delinquent on their mortgages, and some were evicted because of foreclosure, the problem affected virtually everyone in the Depression era.

By 1934, about half of the nation's urban homes with mortgages were delinquent, according to the Federal Reserve Bank of St. Louis.

Friday, the Mortgage Bankers Association reported that 15 percent of the nation's home loans were delinquent or in foreclosure, the highest percentage recorded since the association survey began in 1953. (In Washington state, the association said the combined rate of delinquency and foreclosure is 9.75 percent.)

Yet the causes of the delinquencies sound familiar: While many families during the Depression couldn't pay their mortgage because of unemployment, federal officials blamed short-term loans, high-interest second loans, "shoestring equities" and faulty appraisals.

"Before the depression, it was common practice in many communities for appraisers to judge the value of a house from the running board of an automobile," wrote John Fahey, chairman of the Federal Home Loan Bank, in a 1934 report.

Home prices plunge

And, in one respect — housing prices — the economic carnage of today bears similarities to the Great Depression.

According to an analysis last fall by Julie Stackhouse, senior vice president of the Federal Reserve Bank of St. Louis, home prices fell 16 percent nationally during the Depression and in the current recession were 20 percent off their 2007 peak.

It's because of the hardships experienced during the Depression — and the government's response to it through the New Deal — that today's jobless have unemployment insurance and bank depositors have deposit insurance, Gregory said.

The 1932 election, in which Democrats were swept to power in state houses and Franklin Delano Roosevelt became president, began a new era of massive federal spending on public works and social-welfare programs.

"Everywhere you look in the state, you see something that was built or improved as a result of the New Deal," Gregory said.

The biggest project: In 1933, Roosevelt appropriated $63 million for the construction of the Grand Coulee Dam on the Columbia River. The dam, completed in 1942, made electricity affordable and aluminum production possible in the Pacific Northwest — ultimately giving Boeing in Seattle the edge to become a player in aerospace.

"Boeing could not have made planes out of aluminum if it were not for the electricity coming out of those dams," Gregory said.

With the New Deal projects, "we turned from a state that has people working basically in the woods," in lumber and farming, "to a state that becomes an industrial powerhouse."

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com