At the very start of the Great Depression, Hollywood entered a "golden age" due to the new medium of talking pictures and the unprecedented amount of people flocking towards theaters in order to distract themselves from the dark times of hardship, unemployment, and money loss. Between 60 and 80 million people purchased tickets for films each week even in the worst of the early depression. Movies in the 1930s were not just a feature film, one ticket included a cartoon, a newsreel, a B-feature and the main film all lasting about four hours for the price of a pack of cigarettes, so people were not reluctant to spend whatever money they had left at the theater because they knew that it would be a lot of time diverted from their difficult lives.
Movies at this time were not all lavish and romantic in order to distract people from their misery, in fact many movies that Hollywood put out were gritty and cynical and very reflective of the difficult times that everyone was going through. Many movies produced by Columbia and Warner Brothers had scripts adapted from the depressing articles of contemporary newspapers. These films often featured a wronged hero who was struggling under the forces of the depression that they could not control because they were very relatable to the audience.
The most popular characters featured at this time were the street raised rouges who never cowered under the weight of the depression and took opportunities to turn the hard times to their advantage. Because people now resented the government and law, they reveled in the portrayals of organized criminals who outsmarted the law enforcement. Warner Brothers championed this gangster genre with overnight stars Edward G Robinson and James Cagney appearing in films such as "Little Caesar" and "Public Enemy". Films like these were originally criticized for having poor taste and little morality, but quickly the public fell in love with these troubled characters, such as the famous Humphrey Bogart, because they were an outlet for the rage against authority of the time.
Comedies were even mocking of the government and whatever the public believed landed them in the depression. Monogamy, marriage and patriotism, hallmarks of American domesticity at this time, were attacked by writers of early comedies such as "Animal Crackers" and "Duck Soup". Audiences ate up the bitterness of these films because laughing at the poor situation of the country was a way to cope with their unhappiness and fear of the future.
Although Hollywood thrived after the stock market crash due to the public need for distraction, eventually the economic slump took its toll as the studio's large debts of the movies made from 1929-1933 were catching up to them. When unemployment reached its height in 1933, not enough people were coming to the movies to pay them off, so the studios were unable to repay their loans and had to shut down production. When attendance fully recovered in 1940, Hollywood had been put in a box with what movies it could make because of the new League of Decency which banned films attacking American ideals, so depression style movies were no longer made.
Sources : http://www.independent.ie/entertainment/movies/how-the-great-depression-inspired-hollywoods-golden-age-26481978.html
http://xroads.virginia.edu/~ug03/comedy/historicalcontext.html
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