Great Depression: 1929 to 1939
The Great Depression lasted for ten years, and it has been marked as the worst economic recession that has been experienced in the industrialized world ever. It began exactly on 1929, October after the fall of the stock market. As a result, Wall Street was disrupted, and millions of investors were forced out of the stock market. The years that followed were characterized by dropping of investments and falling of consumer spending. There was a huge and steep decline on employment of resources and output that went hand in hand with the collapse of companies hence forcing them lay off workers. The lowest point of the economic downturn was reached in 1933 when almost over half of the American financial institutions had failed, and nearly fifteen million citizens were jobless (Crafts and Fearon 289). This paper will discuss the major Great Depression major causes, its consequences to the people and the long, tedious journey of the economic recovery.
Since the beginning of the 1920s, the United States economy was booming, and in fact, the country wealth increased extremely from 1920 to 1929. The New York Stock Exchange market attracted many investors who overwhelmingly injected their savings into shares. In return, the stock market experienced a dramatic growth reaching its summit in 1929. The period that followed immediately after economic boom was marked by the severe economic downturn that can be largely attributed to the stock exchange market crash (Kelly). 1929, October 29 gave birth to the “Black Tuesday” a term that marked the drastic decline of stocks by twelve percent (Kelly). The findings reveal that this percentage was equivalent to the investments worth $14 billion. Despite, the efforts to regain the economy towards the last months of 1930, the country had already entered into Great Depression, and the situation could not be remedied.
Financial institutions failures especially the collapsing of the big banks greatly contributed to the Great Depression. Almost over 700 banks closed in 1929, and over 3000 of them were wiped out in 1930 (Crafts and Fearon 288). As a result, the general public lost their monies. People panicked and in return desperately took quick measures to withdraw their savings with banks an act that forced many banks to close. In fact, it is indicated that over 9000 banks had closed by the end of 1939 (Encyclopedia.com). A few financial institutions that remained operational were reluctant to lend out money out of fears that the economic situation would worsen. The financial sector approach made the situation worse resulting in less spending in the county’s economy.
The decline of spending among the investors, businesses and the general public affected the country’s economic stability. It is important to note that during the Great Depression, the investments became worthless (Kelly). This means that investors were compelled to spend only on their savings which with time became depleted. Similarly, companies and consumers spending came to a standstill. Companies were forced to lay workers off as others were forced to close completely. The country was characterized by the large population that was jobless. People who had purchased items on hire purchase credit terms were no longer able to pay for them. As a result, the repossessions took place that was followed by rampant evictions. This trend was accompanied by accumulation of inventory that was influenced by the highest unemployment rate, and therefore, even little expenditure could not help to remedy the economic condition.
The United State Congress finds itself with a share of a blame for having taken actions that worsened the economic situation in the country (Grossman and Meissner 325). The government was concerned about the country industry. Therefore, with the efforts to save it from foreign competitors, the government resulted passing the 1930 Tariff Act that was aimed at imposing high taxes on imported goods. However, the policy did not work as the Congress had anticipated. Instead, the United States trade partners responded through adopting a similar trading policy on the America’s exported goods. This had severe impacts on the United States economy as the country’s international trade fell significantly from 1929 to 1934 (Grossman and Meissner 328). This economic situation become worse forcing the Congress to revise the 1930 Tariff Act, and as well Franklin Roosevelt, the then the United States president negotiated with the country trade partners to do so.
The extremes of Great Depression in the United States were made severe by the environmental damage. It is inarguable that when the country’s economic condition affects the industrial sector, agriculture can be an alternative that people can resort into. However, this was impossible in the event of Great Depression. The widespread environmental destruction brought in hazards that killed livestock and crops and as a result contributed to the huge economic damage. Thousands of people moved out of the regions where environment had been destroyed and ended up putting more economic pressure to other regions. This prolonged the period of Great Depression recovery. It took decades before the environmentally affected region could recover.As the effects of Great Depression continued to affect peoples’ daily lives, the government employed mechanisms to regain the economy. For example, the government initiated the programs of hydroelectric projects and dams to provide power to the marginalized in the society as well as control the flooding. These projects with other programs helped to mitigate the problem of unemployment. For example, the government initiatives helped to employ over 8.5 million jobless people between 1935 and 1943. These efforts have been applauded by many for having assisted greatly in recovering the country’s economy despite the hardships that were evident during the Great Depression (Kelly).
The signs of economic recovery started as early as 1933. However, it took the government and the country more than five years to move out of the situation. The economy improved consistently for the next three year, and as a result, GPD grew by nine percent contributing to the inflation adjustment (Encyclopedia.com). Even though the country experienced severe economic downturn, the government quickly responded by increasing the mandatory money reserve an action that saw the economy improve again in 1938. In 1939, the government employed another contraction approach, and in turn, Great Depression came to an end. The ending of Great Depression was marked by reduced unemployment levels and increase in production.
In conclusion, this paper notes that there many causes and consequences associated with the Great Depression in America. However, the ones discussed have been considered as the most significant ones by both the economic and history scholars. The Great Depression consequences on the United States people led the government to establish major federal reforms and programs some of which are still evident today, for example, Social Security. The United States has had other economic recessions after that, but no one can be equated to the Great Depression.