The Great Depression was a major global economic depression that lasted from 1929 to 1939. That was the worst economic crisis in the history of the developed nation. The Great Depression began in the United States on September 4, 1929, after the stock market crash of October 1929, which sent Wall Street into a frenzy and wiped out many investors. During this time, there was a decrease in consumer and investment spending in the United States, which resulted in a decrease in industrial production and a decrease in American unemployment. This was causing the worst separation to Americans which against their country’s wish and promise of a better flourishing economy and creation of employment. Most of the companies were failing and were laying off workers. It was by 1933 that great depression was at its lowest point leading to unemployment of approximately 15 million Americans and nearly half of the country’s banks started to fail during this period. It was the deepest, longest and the most widespread depression of the 20th century.
The country’s economy and employment was promising to he Americans, a very bright future lay ahead of the Americans. Murray, a historian says, ‘’throughout the 1920’s, there was a great and rapid expansion of the U.S economy. The total wealth of the nations was more than double of the 1920 and 1929’’.This was a period which came to be known as the roaring twenties. A period of a vibrant growing economy with the country leaving to its citizen’s ideals and promises.
The causes of great depression are explained by demand-driven and monetary theories. Demand-driven gives an explanation that loss of confidence in large scale led to consumption reduction and investment spending among the Americans. Holding money by the Americans became more profitable because prices were dropping lower and more goods were bought by a given amount of money leading to drop in demand. Monetarist explains that great depression started like an ordinary recession. Through money supply shrinking greatly affected the economic situation which led to descending of recession into Great Depression.
The New York stock exchange is where the stock market centered, on the Wall Street in New York City. This was the place where everyone in the country from millionaire tycoons to janitors and cooks made reckless speculations and would poor their savings into socks. Due to these savings by Americans in the stock exchange, there was a rapid expansion which reached its peak in August 1929.
The great depression effects were devastating in both poor and rich countries. According to Lionel, ’’Tax revenue, personal income, profits all dropped. International trade was plugged by more than 50%.At this time there was a decline in the country’s production and also there was raise in the rate of the country’s unemployment to 25%. Stock prices having higher prices than their actual market value’’. Construction in America was virtually halted, American wages were getting low, the country’s agricultural sector which had a lot of employees was also struggling as a result of falling prices of food and its products, there was a proliferation of consumer debt and banks had large loans that were excess and ones that could not be liquidated. There were few job sources alternatives, people were depending on primary sector industries such as logging and mining. It was a period of hard economic struggle to the Americans and they were getting lost in the government promises of a better America.
In 1929 the economy of America underwent a mild recession because the spending of consumers slowed and there was piling up of unsold goods which in turn slowed production of country’s factories. There was a continuation of rising stock prices and at the end, the prices had reached levels that were not able to be justified by future expected earnings.
Overpriced shares were sold on October 24th, 1929 by nervous investors and this was called the stock market crash. During the black Thursday, a record was set by trading 12.9 million shares. In the wake Five days later after the black Thursday, millions of shares ended up being worthless as and those stocks which had been bought by investors were wiped out completely. As a result, factories started firing workers, there was a decrease in borrowing power and too, wages decreased.
There was severe racial discrimination in America in almost all spheres of life through the 1920s.Murray says, ‘Racial minorities including Mexican Americans, Black Americans, Asian Americans and American Indians suffered a lot and they were pushed out of unskilled jobs. The black’s unemployment rate rose to 50% compared to the whites with 30% or below. The wages of the blacks were at least 30% below the ones for the white workers’’. During the Great Depression, there was great widespread of racial discrimination making minority workers be the first to lose jobs at both farm and business. They could be denied employment in public works which was a program specifically designed and available to the needy citizens. Sometimes, due to racial discrimination, the minority workers would be threatened when applying for assistance or work. Even there are some charities that would refuse to provide food to the needy minorities especially the southern blacks. There was violence during Depression period as the whites competed for jobs which were held traditionally by minorities. They were not allowed to join a union. Union influenced Congress to keep requirements of antidiscrimination out of New Deal laws. Hamilton says, ‘’the prolonged economic stagnation brought a drastic change in many American customs, beliefs, practices, lifestyles and behaviors. There were great divisions in the American society in relation to social effects such as health, unemployment, living conditions, education and quality of life. Such had a great impact on families and individual lives’’.
In 1932.America elected Franklin D. Roosevelt as the president. Americans were promised by the president of a federal government programs in order to end the great depression He took immediate actions in addressing the country’s economic problems. His immediate actions to recovery were announcing closing of all the banks for four days for Congress to pass legislation on banks and open them when laws for making them successful and sound in management are passed. He also started addressing to the public directly especially over the radio aiming at restoring the public confidence. He signed the New deal into law within 100 days of his office which aimed at stabilizing agricultural and industrial production, job creation and stimulating recovery. In some programs federal programs, Roosevelt ended racial discrimination and set aside large amounts of relief in order to assist the blacks. He also appointed several blacks to federal positions.
The New Deal which was established created 42 new agencies which were designed to creating jobs, providing insurance for the unemployed people and allowed unionization. Up to date many of these programs exist including the securities exchange commission, social security as well as the federal deposit insurance corporation. These were aimed at protecting depositor’s accounts and regulating stock market and prevent abuses that led to 1929 crash. To safeguard America’s economy and prevention of future depression, these programs were necessary. The economy showed early signs of recovery beginning 1933 and continued improving the following three years to a GDP of an average rate of 9 percent per year.
Murray, R. America’s Great Depression: Ludwig Von Institute, 1972.
Lionel, R. The Great Depression: Ludwig Von Mises Institute, 2007.
Hamilton, C. Great Depression: People and Perspectives: ABC-CLIO, 2009.