- Great Depression Essay Example
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The Great Depression
Background of the great depression, some historical facts, causes of the great depression: essay basics, economic history of the great depression, stock market crash, how did it happen, failure of business, effect on farmers, what about small farmers, the issue of unemployment during the depression, unemployment rate in the u.s., what did they do, the gold standard and the great depression, government’s regulation: increase of state involvement, social issue: racism, discrimination, the conclusion of the great depression: essay ending.
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The Great Depression is one of the most tragical economic phenomena that took place in the American history and in the world history. It destroyed the economy, crashed the market, caused the high rate of unemployment. It took work from millions of people of America.
During Depression stock markets crashed, which affected all fields of economy, money was depreciated, prices increased, banks, other enterprises, and companies began to go bankrupt. Due to actions and events held by the government in order to be involved in the economic system, and their effects, the country’s economy was destroyed during the short period of time.
The beginning of the Depression was caused by the empowering of government involvement in the economy of the country and in the life of society. It was a period of big despair and big crash. Depression made people forget about the wealth, growth and prosperity of last decade and face new and economically unfair conditions of doing business and living circumstances.
- Time frames of The Great Depression: 1929 – 1939.
- It is the longest and the strongest period of Depression which the Western world has ever experienced.
- The start of the Depression was marked by the Black Tuesday (October 29, 1929). It was the last day of the stock market crash, it became the official start of the Depression period.
- Having its start in the USA, the Depression influenced almost every country in the world. It caused a sharp decline in production, materials consuming and distribution volumes brought economic growth to a stop, raised the unemployment rate, etc.
Researchers distinguish 5 major causes of the Great Depression, essay will disclose them.
- The crash of Stock Market in 1929. Today we remember this "Black Tuesday," the day when the stock market crash of October 29, 1929, occurred. It was the cause of the Depression and subsequent sad events.
- Failures of Banks: all markets including banks felt stock market crash. Almost 700 banks collapsed during a couple of months of the depression. More than 3,000 banks failed in 1930. Individuals lost their money, speculation started, society was shocked, people started to withdraw their money fast which hit the banks and forced them to close. The end of the decade was commemorated by 9,000 closed banks.
- Purchasing Reduction - it was an additional huge problem, investments became worthless, savings were diminished, consumer demand decreased. It caused overproduction, a big number of companies stopped their production. In response workers of factories and plants were laid off en masse.
- Economic Policy - the Depression influenced lives of nations, the government had to react and to act. In 1930 Congress passed the Tariff Act to give a protection to American industry from foreign competitors. It was based on high taxes on a big product range of imported goods. After this paper, world trade fell greatly, the companies could not supply anymore, and trade had no chance not to fall. It lasted until Franklin Roosevelt with a Congress passed new law according to which the president could negotiate lower tariffs.
- Drought. Nature and environment made their contribution. America suffered from a years-long drought which together with poor farming experience caused big losses.
It is obvious that the Great Depression influenced different countries in different ways, in a different time and rates of severity. The hardest influence was experienced by the American and European economies. Japan and Latin America suffered less.
Big enterprises, small companies, farmers, families around the countries suffered from the crisis which caused banking panic, the decline in the consumer demand. Improper policies of the government led the fall of the output in the United States, while the so-called gold standard, which gave fixed currency exchange rates to almost all countries transmitted downturn from the USA to other countries and made the crises international.
Interesting that the Gold Standard abandonment together with the ensuing monetary expansion made the recovery possible.
The impact of the Depression was huge. It included both huge changes in economic policy and extreme suffering of the people.
The stock market crash that happened in 1929 was not the only cause of the Depression, it became a kind of acceleration of global economic crisis, it started irreversible processes. By the year 1933, almost half of the American banks failed, and the unemployment rate was high - 15 million people didn’t have jobs.
The stock market failure was the official beginning of the Great Depression. During Depression money of the investors which were in the market for the investments was lost in one moment which caused huge financial losses of clients, the banks were forced to close down. They depended on stock markets deeply that’s why it caused such a big panic and extreme withdrawal of their money.
- The market began to decline in September having the highest record in the history.
- On October 24, the market plunged at the opening bell, which caused an enormous panic.
- That day investors managed to dwell it, 5 days later the market fell and crashed decisively.
- It lost 12% of its price, investments in the amount of $14 billion were lost.
- In 2 months stockholders lost $40 billion USD that meant that the economy was desolated.
Great Depression became a worldwide business slump of the 20th century. It is one of the worst and longest years of low business activity in the USA. All industries and companies were affected by the crisis. It is the reason for their mutual work, cooperation with the stock market, they depended on stocks. The companies lost their capital, savings which allowed them to do business in the country, in fact, it started their bankruptcy, the industrial collapse.
The companies didn’t have any money to save the workforce and had to fire workers, reduce wages, all other costs. The stock market failure affected all Americans as the customers: they stopped getting the salary, they stopped spending money, buying goods as much as they did before because they didn’t have this opportunity anymore. These trade issues influenced all the companies, reduced sales, income.
The Great Depression had a highly unfavorable effect on farmers, it should be noticed that for U.S. farmers, the downturn started after World War I and ended only after two decades. Depression became one of the greatest challenges for them, here are the reasons:
- Farms were located mostly at the territory of Great Plains. This territory is famous for its dust storms, droughts. They are destructive factors in nature for the agricultural industry;
- For some time farmers were overgrazing the lands, and at one moment they faced drought. This incorrect business policy destroyed them;
- They had no crops, no food for animals, they had heat, dryness, other problems that left them with no money for making payments;
- Some farmers were capitalized on the stock market. Due to the stock market, bank failures, farmers lost their money, capital.
They had more disadvantage, suffered greatly - this was the matter of scale and capabilities, the large-scale farmers of the country had more opportunities and larger business purposes. Thousands of small farmers took agricultural equipment from the governments.
They rented it according to some programs, they had to pay money for the renting these tools. At one moment they were not capable to pay the debts, some of them had loans, the issues that occurred in the economy made them go bankrupt. As a result, they lost their lost business, all means of subsistence on a large scale.
This enormous financial crisis had a momentous impact on employment in the U.S. and other countries. The unemployment rate was rising unquestionably in big industrialized cities, in those areas where people were working in one particular industry.
Factories, plants, stores were shut down around the country from California to New York, a lot of workers lost their jobs and ability to live. Before the Great Depression has started, people refused to go on government welfare.
Only the last resort could become a reason for this decision, newspapers published the names of people who got the welfare payments, and it was considered as a disgrace. After facing real starving times, men started to sign up for government social payments that were a painful decision for the majority of the people.
The unemployment rate rose to 25% in the USA at it was the highest rate during the time of Depression. It was difficult to survive. It means that a quarter of all population didn’t have any means of subsistence even though plants and factories were doing their best to save their workforce.
Losing a job was leading to the inability to buy food and provide other basic needs, unemployed people could not live like this for a long time.
- They had to sell their houses and settle together with other members of the families, living conditions were going down every day.
- They tried to save their families. It was the time when people stopped getting divorced, it was impossible because of the money, it was hard to live separately, people could not afford the rent.
- Asked for social payments from the government.
The Great Depression had its start during the Herbert Hoover, American people blamed their President for everything that happened. They didn’t listen to his positive public speech, instead of it, they tried to spread some humiliating jokes, metaphors. For example, they called the land which suffered from the most severe influence Hooverville.
What is the connection between the Great Depression and the Gold Standard? Was the Gold Standard the cause of the Great Depression? There are lots of the research on this question and several points of view. On the one hand, the Gold Standard can be considered as a cause of Great Depression.
It is often blamed as one of the accelerators of crisis prolongation. The reason is the next: in the period of the Gold Standard, the central banks were not able to expand credits in order to influence the deflation. The country didn’t have any money for investments, at the same time interest rates went down. People didn’t use the fixed exchange rates because of the floating rates introduction.
Blaming the Gold Standard eventually ignores the role of significant monetary manipulations made by the Federal Reserve System together with governmental institutions. Those policies would be impossible if the country had not abandoned basic important elements of the standard. The USA had to cope with costs coming up due to unemployment and social compensation.
The rate of a government involvement in the economy increased substantially. The government focused on financial markets, rich, popular fields of industry. Several institutions were established for regulation function.
People lost their jobs, had no money, could not pay for the rent, they had to live in the shanty areas. Some people didn’t have even something to eat, to wear. A competition in a job market was huge, the market was full of highly experienced specialists who didn’t have any work. The discrimination grew that’s why African Americans could not get a job in many cases. Racism became a strong issue as well. People became more aggressive against the background of hunger, lack of money and despair.
The Great Depression became a huge blow to the economies of many countries. In a conclusion of the Great Depression we should notice that a lot of people, companies, and businesses suffered from this economic crisis. Everybody experienced big losses. And although the USA and other counties experienced different significant economic downturns after it, nothing could be compared with the severity of the Great Depression.
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Cause and Effects of The Great Depression
The great Depression took place in America during the 1920s and its effects were unprecedented as it caused poverty and suffering upon the society.
Many believe that that the depression was caused by the U.S. stock-market crash that took place in 1929. Nonetheless, there is no consensus on its cause as other factors are also acceptable. The economic devastation of the 1920s led to the Great Depression and brought a tragedy for the whole society.
Causes of The Depression
Many causes have been put forward to explain the causes of the great Depression over which the economists have disagreed. However, one thing that cannot be disputed is that the Depression had major impacts upon the country and the lives of people.
Crash of stock market
The crash of the stock market in 1929 ushered in the Great Depression. The capital in America was represented by stocks. There were easy-money policies that caused the stocks prices to go very high and this led to a big speculation that made people invest all their money in the stock market.
Eventually, the price of the stocks went down sharply and people started selling their stocks in panic. The number of stocks available for sale was higher that the number of people willing to buy and eventually the market crashed (Great Depression, 2008).
Uneven distribution of prosperity
The 1920s saw the American economy rise but the prosperity was unevenly distributed and the farmers as well as the untrained laborers were largely excluded. It therefore led to the nation having a greater production capacity and could not match in consuming the products.
Moreover, the policies of the Republican administration in regards to war-debts and tariff had led to a decline in market for the American goods (Great Depression, 2008).
Effects of The Depression
The effects of the Great Depression were felt both at home and abroad. No one escaped its reeling effects. For example, countries in Europe were affected greatly as their economies were hit hard. In Germany, the economic blow led to social dislocation that is alleged to have played a major role bringing Adolf Hitler to power (Great Depression, 2008).
When the Great Depression set in many people lost their jobs. The unemployment levels rose as many factories closed and up to about 16 million people had lost their jobs between 1932 and 1933 (Great Depression, 2008). The Great Depression compares to the economic recession that took place in 2007 in American and its effects felt on a global scale.
For instance, the following words by president Obama show the similarities “Even though economists may say the recession officially ended last year, obviously for the millions of people who are still out of work… it’s still very real for them” (Hill, 2010).
Consequently, job losses and loss of money in the stock market the people fell into massive levels of poverty. The people did not have a source of income and suffered a great deal. The country’s economy suffered too” The gross national product declined from the 1929 figure of $103,828,000,000 to $55,760,000,000 in 1933” (Great Depression, 2008, par. 2).
The suffering led economic hardships as well as physical, emotional, emotional and cognitive sufferings to the people because the Depression was a big tragedy hence they exhibited signs that people going through other crises exhibit (Barr, 2005).
The Great Depression led to untold suffering to millions of Americans as well as the devastation of the country’s economy. The effects extended to other countries as well due to international trade just as it happened during the recent economic down turn. No country is in isolation and its activities affect other countries too even if they do not have a hand in causing the problems.
It therefore follows that countries must take precautions to prevent an event like the Great Depression by learning its causes as well as its effects in order to minimize future damage or suffering in case of a similar tragedy.
Barr, J.G. (2005). Predicting and Managing Crisis Behavior.
Great Depression. (2008). Retrieved from EBSCOhost database.
Hill, P. (2010). Recession over a year, but recovery not felt. The Washington Times . P1, 1. Retrieved from https://www.washingtontimes.com/news/2010/sep/20/recession-over-for-a-year-americans-dont-feel-it/
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What Caused the Great Depression?
What were the major causes of the Great Depression? Among the suggested causes of the Great Depression are: the stock market crash of 1929; the collapse of world trade due to the Smoot-Hawley Tariff; government policies; bank failures and panics; and the collapse of the money supply. In this video, Great Depression expert David Wheelock of the St. Louis Fed discusses the leading theories.
David Wheelock discusses the Great Depression as part of an economic education workshop at the St. Louis Fed. This is Part 5 of that presentation. Recorded July 11, 2013.
David Wheelock : Now, what caused this mess?
Well, the stock market crash is everyone's kind of popular cause of the Great Depression. We had a stock market crash in the fall of 1929, immediately we had the Great Depression, therefore if — I used to know the Latin for that, it's whatever it was — post hoc ergo propter hoc — one followed from the other. Therefore, the first one caused the second one.
For this, there's some truth to it actually. The stock market lost 80%, or 85%, of its value from the peak in September 1929 to the trough in July 1932. Now, what could (the) that wipeout of the stock market have done?
Well, it destroyed a lot of wealth. There's the so-called wealth effect. So if you were an investor in the stock market, and in the 1920s a lot of kind of middle-class people got into the stock market for the very first time, there was a lot more buying of stocks on credit. It was the great credit boom. And so a lot of ordinary folk like us got into the stock market, but it was still pretty much a rich man's game. Rich men lost a lot of money. Some of them jumped out of windows on Wall Street, and they certainly, with their decline of wealth, could afford to buy a lot less goods and services than they did before. So there's a wealth effect that matters. Uncertainty about the economy, even if you are not an investor in the stock market, but you saw the smart rich guys jumping out of windows on Wall Street, you have to be wondering ... What in the world is happening here? Is this really healthy, an indication of a healthy economy? Well, probably not.
So what are you going to do? What's the logical thing to do if you've got a little money in the bank? Keep it there, save. You're not going to go out and buy a new car or a new refrigerator, go on a vacation. You're going to hunker down and be as conservative as you can until the clouds have cleared away and you have a better sense of the future of the economy.
Christina Romer — some of you may know that name, she's an economic historian who teaches at University of California, Berkeley — and she was, for a time, President Obama's chairperson of the Council of Economic Advisers. Christina wrote a paper that was published a few years ago looking at this uncertainty effect of the stock market crash. Her research found that after the stock market crash, there was a lot less spending on consumer durable goods, like cars and refrigerators, all those newfangled inventions that had come along in the 20s. But the level of spending on food and fuel and basic necessities kept right on steady. So people kept buying their daily necessities, but they really pulled back on the big-ticket spending.
And so it did have a measurable effect. That is, the stock market crash did have a measurable effect on spending. And then there's the role of banks. Banks were heavily involved in lending to investors in the stock market; many banks subsequently failed. So there's this connection as part of the financial fabric was involved here.
So the consensus among economists — excuse me, economic historians — is the stock market crash had some effect. However, as big as it was, still not big enough to have caused the Great Depression. Without the stock market crash alone we would have had a pretty severe recession, but we would not have had the Great Depression. So there must be more to the story than that.
Some people point to the Smoot-Hawley Tariff, enacted by Congress in 1930, signed by President Hoover against a petition signed by hundreds of economists at the time saying "don't do this, it's a mistake."
Well, big business and agriculture, they wanted protection from foreign competition. They didn't like the fact that there were cheap imported goods of rice and wheat and corn and and manufactured goods coming in from abroad. And so they petitioned Congress to raise tariffs to block those imports or to make them more expensive to discourage consumers from buying the goods and services.
Well, what happens when one country raises its tariff? They all did — it was retaliatory. Canada raised their tariffs, United Kingdom raises its tariffs, France raises its tariff. So everybody's putting up these walls against trade to try to protect their domestic industries from foreign competition and everybody ends up losing.
So there's a tremendous collapse in world trade. I stole this picture, I mean I borrowed this picture [audience laughter] from a book called The World in Depression by Charles Kindleberger, who is an economist and economic historian at MIT. And he investigated the collapse of world trade during the Great Depression and I thought this was a cool chart because it just shows this downward spiral of world trade that was going on during the Depression, from about three billion dollars’ worth of trade in 1929, it collapsed by two-thirds to less than a billion dollars by 1933. So the global economy that is trading shrank by two-thirds, whereas the U.S. economy shrank by one-third, so that was a much bigger collapse than the total amount by which the U.S. economy collapsed.
However, the U.S. was much of a what we call a "closed economy" in the 1930s. International trade accounted for a relatively small part of domestic U.S. production, so despite the fact that the Smoot-Hawley Tariff was was not helpful at best and other countries retaliated, the decline in world trade, the decline of U.S. exports was not big enough to have caused the Great Depression, although it was another contributor.
There's a professor at UCLA, Lee Ohanian, recently has a paper blaming Herbert Hoover for the Great Depression. Now Hoover has often long been blamed for the Great Depression. He was blamed as this sourpuss who didn't care about people. "Heck, it's all right, people get laid off. I'm going to put the water cannons on him or worse, if they're in trouble." Now, Hoover has been a much-maligned individual over the years. He was a great humanitarian during World War I and he basically fed the country of Belgium during the war. He was also — he was an engineer by training, he was really an interventionist in the economy and was one for using the government to help solve problems.
One thing he did when he saw the Great Depression come on is he asked the big corporations not to cut wages, which was their traditional inclination when the demand for their products fell, they would cut wages. Prices fell, they'd cut wages.
Man in audience : But they keep people employed.
Wheelock : That's the difference. So according to Ohanian, Hoover brought all these guys in that said don't cut wages because if you cut wages, then people won't have income to spend. Well that — there is some logic to that, but in a macroeconomic sense that doesn't hold up. So what happens, as you pointed out, instead of cutting wages, they laid people off instead. So it's great if you're one of the 75% who kept a job but it was not so great for the 25% who went from the wage to nothing.
That's Ohanian's argument. Now it's not a widely accepted view. I'm rather skeptical that Hoover had as much power as Ohanian ascribes to him to actually get big business to come in and do what he wanted them to do. But it is true, the wages did not fall very rapidly at the beginning of the Depression. As I pointed out, in talking to Ohanian, you wouldn't have had this problem if we didn't have deflation. If prices weren't falling, because the prices of the cars that Ford was trying to sell or General Motors was trying to sell, if they weren't falling, then Ford, General Motors wouldn't have had any reason to cut wages or lay people off. So the deflation was kind of the problem, it wasn't Hoover so much. And there, where I get to the meat of my story, which is to blame the Fed, and bank failures, and the monetary collapse .
I've been monologuing it here for 40 minutes so I'm happy to take a break and stop and answer any questions as we go. Particularly if anybody's completely lost or asleep at this point. I don't see more than half the room is not asleep despite having that dessert but...
Woman in audience : I think I saw your original presentation here...
Wheelock : So you're really bored then, you've seen the whole thing [audience laughter]. You want it to quit right now, then...
Woman in audience : I really need a lot of economics support, but um... as I remember it and not jumping ahead too far, and what I share with my students generally is the Fed's inaction to do anything with monetary policy is what exacerbated it. Is that...?
Wheelock : Yep, you got the story. You really can leave now [audience laughter].
Woman in audience : But I guess, if you — I need that explained to me again, so I shouldn't leave.
Wheelock : OK.
Related Great Depression Videos
Part 1: Why Do We Still Study the Great Depression? (5:55)
Part 2: Key Economic Terms (7:03)
Part 3: How Bad Was the Great Depression? Economic Impact (3:06)
Part 4: The Great Recession vs. the Great Depression (6:25)
Part 5: What Caused the Great Depression? (9:59)
Part 6: The Role of Bank Failures and Panics (11:33)
Part 7: Where Was the Fed? (6:48)
Part 8: What Caused the Recovery? (3:47)
Part 9: Lessons Learned and Concluding Remarks (3:01)
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During the Great Depression, Franklin D.Roosevelt stated, “The only thing we have to fear is fear itself.” As World War I ended and the 1920’s boom in the industry deteriorated, the Great Depression developed and the result was dreadful. The crash affected millions of people and lasted for about a decade. United States was in a state of despair, as banking systems failed, many people were unemployed, and prices drastically fell. War-producing factories shut down, farms/homes were lost to possession of land, and people starved to death. Lasting for almost a decade, it was known as the longest period of depression in the United States history. It started in the United States, and this alone had the capability of influencing most of the world. The negative impacts of this era resulted in recession and demobilization. The Great Depression had changed the way people think/behave and sometimes, for the worse. People in the United States and all over the world were highly affected by a numerous causes: financial crisis, bank failures, government actions, overproduction in agriculture/industry, and discrimination.
With this in mind, there was a large number of bank failures that occurred during this era. People deposited money in which they did not need for day-to-day expenses. On the other hand, banks did something erroneous. The banking system was not necessarily ready for recession, as there was no economic planning or agency that would help monitor the United States’s economy. The government failed to take actions at the right time to keep banks moving. They lended money to other businesses in order to earn interest. Bankers owed money to stockbrokers, but they could not repay the loans. Hence, the loans piled up and banks were reckless about keeping other people’s money safe. People panicked and went to banks to withdraw their funds. During 1930 and 1931, large numbers of people lost confidence in depositing money to local banks and so, banks ran out of cash and had to shut down. “An appalling 3,800 banks failed in 1931 and 1932, one-fifth of the banks that were in business in the United States in 1930 had gone out of business, and millions of people had seen their savings vanish.”
During the Great Depression, the government did very little to address the issues. In 1929, Herbert Hoover was elected as the president of the United States. Hoover was most qualified as a president. He was born at a time when poverty was a very notorious thing, so he knew how it felt. Hoover was very talented and used his great skills to make a change in government service. He had a belief in that economic recovery depended on the business community. During World War I, he was the head of a relief agency located in Belgium and was also the head of the Food Administration. However, at his time of presidency, Hoover faced great challenges with the economic crisis, as he was not prepared with what was occurring at the time. As the economy worsened, Hoover’s solutions were not strong enough to get rid of the economic crisis. Hoover tried to deal with failing banks by establishing an agency known as the RFC (Reconstruction Finance Corporation), to provide loans to banks, businesses, and farmers. Hoover’s attempt, however, declined the number of bank failures in a year. Although many criticized him for indirectly helping the needy by boosting economic growth, the corporation never invested enough money to save all the banks.
Another step that was taken by Congress was the Federal Reserve System. It managed the nation’s money supply and decided how much money is available among investors and producers and consumers. Following the stock market crash, the system kept interest rates very low and made borrowing easier. Instead of concentrating on expanding the money supply after the crash, the system allowed money to be spent. As the stock market crash was on the rise, taxes on American people increased drastically and put a lot of people in a state of debt. In 1930, United States raised taxes to 50% on imported goods. Increasing the demand resulted in massive unemployment. Factories shut down and created a type of a worldwide depression. After World War I, European countries owed United States banks a lot of money as their economies were ravaged due to war and had no ideal way to pay the money back. However, the American government refused to lower the cost and insisted their allies to pay the money. Then, in 1930, United States imposed the Smoot-Hawley Tariff Act in 1930, where high taxes/tariffs were placed so that Europeans were not able to sell products in United States markets and make money. This allowed the United States to protect industries by raising the cost of goods being imported from European countries. This affected United States negatively by stopping trade with other countries and slowed down their economy. In addition, homeless people built shacks and named them “Hoovervilles,” as a sarcastic thing, named after Hoover.
Towards the end of Hoover’s presidency, in 1932, when the Bonus Army veterans came to Washington D.C., they demanded of a pension (payment after one’s retirement). Hoover chose to ignore them and wanted them to go away. Some veterans, up to 10,000 of them, refused to leave, but many other veterans gave up and headed back home. That summer of 1932, Hoover lost during reelection and democrats nominated Franklin D. Roosevelt to be their president. In accepting the nomination, Roosevelt promised a “New Deal” to promote recovery. 1932 was one of the most desperate years in economic history, partly because of all the republican presidents, and the New Deal was a new ray of hope for the people, as it aimed to bring immediate relief from the Great Depression and replace a socialist system of government with an American capitalism system. During Roosevelt’s presidency, the economy got worse. Three months later, the Congress established the Glass-Steagall Act, in which commercial banking was separated from investment banking. It created an agency known as the FDIC (Federal Deposit Insurance Corporation) to guarantee bank deposits. In addition, Roosevelt created his “Brain Trust,” which guided his idea of the New Deal. During the first hundred days of Roosevelt’s presidency, Congress passed records of bills that provide “relief, recovery, and reform.”
In contrast to Hoover, Roosevelt supported the idea of “direct federal relief.” In the first hundred days of Roosevelt’s presidency addressed so many concerns by creating a series of acts, laws, and agencies to help stabilize the economy. For example, Congress passed the Civilian Conservation Corps to allow unemployed men to work in rural camps dealing with farming and architecture. In April 1933, Roosevelt removed the country’s gold standard and replaced it with currency backed by government pay. In May, Congress passed the Federal Emergency Relief Act which provided money to people who do not have money. The Agricultural Adjustment Act funded farmers to restrict production and balance supply and demand for farms so that prices would stay constant and not increase nor decrease. (Wessels) This helped to boost farm prices. Before end of May, Congress established the TVA (Tennessee Valley Authority) to build dams and provide cheap electricity and help prevent natural disasters. In summary, Roosevelt created a very huge impact by gaining public confidence in depositing money to banks, created new jobs, raised farm prices, and many more. The New Deal policies impacted the government, reduced unemployment, helped African Americans survive. Although, some things were not achieved from the New Deal such as including the fact that policies did not directly focus on liberties of African Americans, did not necessarily treat everyone the same, and/or accommodate for military forces.
By the 1920s, there were so many American factories part of mass-production, where factories were able to make more goods in very less time compared to the past. Companies usually liked high production because it led to high income. Although, trouble started to arise because there were not enough people to buy all of the products being produced and led to a state of overproduction. By 1929, the buying spree was coming to an end. Many Americans were unwilling to borrow money to buy more consumer goods. The wealthy were also borrowing less money because they had everything they needed. Soon, it led to a state of underconsumption. It is the situation in which people buy fewer goods than what the economy is actually producing. The problem of underconsumption spread to the industry very quickly and many businesses stopped production of goods. This affected labor because workers lost jobs and it led to massive unemployment. Businesses were not able to pay money for the workers’ wages and people who lost jobs were no longer able to buy products that the industry was producing.
Discrimination was highly present during the Great Depression, especially for African Americans. Competition was huge in the stock market, as the whole nation was suffering. Many African Americans were hired last and given the least amount of wages. During the New Deal, the National Recovery Act of 1933 was established by Congress, to help the country to recover. It promoted the idea of blacks and whites getting equal wages. However, this did not work according to plan and the New Deal helped blacks minimally to improving living conditions. African Americans could not sustain to helping their families, and many died because of famine and starvation. Furthermore, farmers were also highly discriminated. According to Teach TCI, the wealthiest 5% of American families received 33% of total money earned in the country. This was 60% more than what all other families earned and 40% of families were undergoing a state of poverty. Despite the prosperity during the 1920s, there was always income inequality by factory and business owners. Wealth was distributed unevenly and the gap between poor people and rich rose steadily. Workers’ wages did not go up for them to even buy what manufacturers were producing. For a certain period, people made up for unequal distribution by using credit to buy goods for the household. Buying spree was coming to an end and people were unwilling/unable to borrow money, including the wealthy.
As can be seen, the Great Depression negatively affected United States and other countries all over the world due to many causes including stock market crash, government actions, overproduction, unemployment, income inequality, and more. Roosevelt’s “New Deal” policies have helped Americans in need and attempted to end the era. The result of the Great Depression led United States to be more careful with the economy and protect the country to avoid problems that could arise in the near future. As a result, the Great Depression ended in 1939, but United States economy was still in a precarious situation and it was not till the end of WW2 that the Great Depression actually did end.
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