American History

The Great Depression was the most severe meltdown of economic powers in the 20th century. It began sometime in 1929 and ended for most by the late 1930 s. The Great Depression is also considered as the longest economic setback of modern times.

The start of the Great Depression can be traced to the United States. Shortly after North America experienced a drastic decline in the economy, the rest of the world followed. It affected the larger part of the industrialized world, including the whole of Europe and major countries of Asia.

This event has been studied and analyzed many times in history. Out of those studies made by the most famous of historians, several conjectures as to how it began surfaced. The Great Depression was not a result of only one unfortunate event. It was in fact a result of many different factors working together to cause such economic devastation. This paper will review these factors that caused the Great Depression. It will identify five events that had major involvements in this dark period of history. This paper will shed light on each of these events. It will also try to reveal their contributing factor in the aggravation of this decade long economic crisis.

The paper will also show how the Great Depression affected the free world. It will thrash out the different results this event had in the lives of the people. For this purpose the paper will talk about four direct effects of the Great Depression. In doing so it will consequently uncover the events leading to the end of the Great Depression. At the same time show what steps were taken in the hopes of alleviating the situation early on.

Historians believe that the Great Depression began with the crash of the stock market in October 29, 1929. This day will go down in history as Black Tuesday. It is the day the New York Stock Exchange experienced its biggest collapse.

For a time the stock market flourished after World War I. Investing on stocks was considered the best way to achieve financial independence. Many people trusted the stock market and placed their life savings into it. When it looked like the market was going down, people panicked. Soon after, people started unloading stocks to minimize their losses (Dinkins). However everyone was selling and no one was buying. As a result stock prices went down further.

Many economies were tied to that of the United States. Many of the world s financial frontrunners also invested heavily in the US. When the New York Stock Exchange dived so did these economies. More than half of the industrialized world suffered. This caused the worldwide economic downfall.

Early on Hoover s administration tried to rally the nation. They assured people that this was just a temporary setback and in time will normalize. However in the next two years the stock prices continued to drop. By 1933 the value of stocks was down to less than one fifth of its original cost (Nelson).

The stock market surge prior to Black Tuesday encouraged many to borrow from banks to invest. The crash incapacitated many of the investors thus were not able to pay off bank loans (Colin). This was one of the major reasons why many of the banks were forced to close on the onset of the crash. Another reason for banks closing was their failure to protect them and their depositors. Many of the banks that time did not insure deposits. The sudden drop of the market substantially affected banking flow. With so much lost, there was no other way but to cease operations. By 1933 11,000 of the 25,000 banks in the United States were forced into insolvency (Nelson).

As banks started closing, people became even more wary of the situation. The result was that people held on too tightly to what was left of their meager resources. There was general fear of poverty. Under-consumption was widespread as spending significantly dropped. Demand for goods fell considerably. Production went down as well. When all this happened there was a surplus of inventory all around because people were not buying. It consequently led to massive unemployment. There was simply no need for more production. It became a vicious cycle that further aggravated the situation.

To help ease the fall of the stock market and allow some breathing room for US businesses, the Hoover administration implemented the Smooth-Hawley Tariff (Rothbard 241). The aim was to impose higher taxes on foreign products thus protecting domestic production. Inadvertently however, this caused the considerable decrease in foreign trade. At the same time local farmers who were dependent on export markets lost a great portion of their business because of it. It was an indirect retaliation to the new tariff laws enforced by the government.

1929 was not a good year all around for the country. At the wake of Black Tuesday, the United States was fighting another problem, drought. The bigger part of the farming community was suffering not only from massive drought but also hit by countless dust storms. This phenomenon was called the  Dust Bowl . It is a result of poor farming practices and years of continuous drought. Its effect is demoralizing more so in 1930 when the nation was going through the market crash.

Farming became impossible because of the unpredictable blows of the dust storms. Farms became useless pieces of uncultivated land. As a result farmers were unable to raise crops. Thus small farmers suffered greatly. Many of them had to give up their land. Banks had to foreclose those who were unable to pay their loans. Many farmers became homeless, as they were unable to provide for their families. The dearth of work in the south compelled many to move to neighboring regions, disrupting the natural spread of population.

While the  Dust Bowl  was not a direct cause of the Great Depression it was a huge contributor to the overall economic collapse of the country.
 
The Great Depression was, as in the words of Thomas Hall and J. David Ferguson, a time of  widespread human misery  (1). It remains one of the darkest hours of modern times. The Great Depression completely changed the economic and political landscapes of the nation. However the event was not isolated to the United States. The effects of the Great Depression were felt all over the world.

One of the most telling results of the Great Depression was unemployment. When the stock market failed people panicked. Consumer spending went way down rapidly. With very little demand for products, manufacturing was no longer needed. The disproportion between productivity and demand pushed many of the businesses to close. Almost immediately after factories shut down a big chunk of the population lost their jobs. For a long time the limited number of jobs available had thousands of people competing for them. Three years into it, in 1932, about 13 million Americans were unemployed. It was the highest unemployment rate experienced by the nation.

Unemployment spun other effects that further increased anxiety among the population. Once people started losing their jobs, life became extremely hard.  Shortly after, poverty followed. During the Great Depression it was common to see long lines at food banks and soup kitchens. 34 million was under the poverty line. That was about 60 of the entire population (Colin). The struggle for basic needs became a part of daily life.

As poverty increased, people lost their homes. Families were thrown out of their homes. The parents fought for the very limited source of livelihood while the kids were out of school. It was a tragic breakdown within the family structure. The Great Depression recorded at least 2 million families losing their homes.

The general feeling at the time of the Great Depression was discontent. People were poor, hungry, and homeless. Consequently they were frustrated, hopeless, and angry. A general distrust towards the government was felt. The Great Depression spelled doom for then President Herbert Hoover. The nation s loyalty shifted and by the next election in 1932, Hoover was defeated in a landslide by Franklin D. Roosevelt. This is the most evident effect of the Great Depression in American politics.

The economic crisis came within months of Hoover s proclamation as President. Despite his confidence in trying to turn things around for the nation, many of his policies failed. Hoover s administration simply did not have the tools to battle the problem. It was apparent that the nation lost confidence in Hoover s leadership. The country clamored for a fresh start personified by Franklin D. Roosevelt.

The moment President Roosevelt stepped into office in 1932 he implemented many programs to help ease the situation. His new set of policies went under the umbrella known as the  New Deal . It included the rehabilitation of banks through the declaration of bank holidays. A large number of new public works projects were approved to provide employment for many. More importantly the Social Security Act was signed to assist individuals as the road to recovery began.

President Roosevelt was seen as a hero by the nation. While his intervention measures were widely applauded, they were not totally effective to fully combat against the Great Depression. In fact it took another devastating event in history to allow complete recovery. The World War II ensued in 1939. It was ironic that while the nation was gearing for war, it also found a way to rapidly heal.

The war required many industries to open. There was a big demand for artillery, protective gear, transportation, and food. This meant that many people would be needed for production. Hence when the United States actively joined the war in 1941, unemployment was down to less than 10. It is arguably accepted that World War II was the major factor as to what ended the Great Depression.