The great depression was a worldwide economic crisis that severely affected the whole nation and was symbolized by the stock market crash in the United States on Black Tuesday, October 24, 1929.
This worldwide economic downturn began in 1929 and lasted until about 1939. It caused a steep decline in the American economy and stock market, and the average family income dropped, which led to extreme human suffering.
The Great Depression affected every country and created a great loss. This was the longest, deepest, and most widespread depression of the 20th century.
Here Are Some of the Great Depression Facts
1. Stock Market Crash might have been the start of the great depression
The initial phase of the Great Depression began around September 4, 1929, and was known worldwide on Black Tuesday, marked by a stock market crash on October 29, 1929. Between 1929 and 1932, the worldwide GDP rate (gross domestic product) fell by 15%. The backlashes of the Great Depression were seen till World War II.
All sectors of the people were affected, International trade fell by 50%, and more, unemployment in the US rose to 23%, and in some countries rose by 33% and more. Heavy Industries were hit hard, and farming communities and rural areas also suffered as the crop prices dropped by 60%. Areas dependent on the primary sector also suffered.
Some historians considered the stock market crash the start of the great depression, but some think of it as a symptom rather than a cause of the Great Depression.
The Dow Jones Industrial Average dropped from 381 to 198 over 2 months immediately after the Wall Street Crash of 1929. The decline of the American economy pulled in and affected other countries too.
By the mid-1930, interest rates dropped low, and the deflation and reluctance of people to borrow kept consumer spending and investment low.
By May 1930, automobile sales declined even below the numbers in 1928, and prices in general also started scaling down, eventually leading to the deflationary spiral in 1931.
Farmers’ communities face worse, with a crippling economy, and adding to it was a severe drought at the beginning of the mid-1930s that even ravaged the agricultural heartland of the US.
2. Economic Indicators And Causes.
Two classic economic theories were put up during the Great Depression, the Keynesian (demand-driven) and the Monetarist. A general agreement among demand-driven theories was that it led to a sudden reduction in consumption and investment spending. Once the deflation started, people started to avoid further losses by keeping them clear from the markets.
On the other hand, the Monetarists believed that the Great Depression started as an ordinary recession. The money supply started shrinking and aggravated the economic situation and stock market. The continuous recession, stock market loss, and descent led to the Great Depression.
There were varying causes of the Great Depression.
The wall street crash (1929) shook and shattered the American Economy, which resulted in devastating effects on spending and investment.
Banking panics in the 1930s eventually caused the banking system to fail as many banks had decreased the pool of money available for loans.
The gold standard required foreign central banks to raise the rates for interest to counteract trade imbalances with the United States and depress the investing and spending ratio.
The Smoot – Hawley Tariff Act was imposed in 1930 to decline tariffs, and many industrial and agricultural goods started retaliatory measures that ultimately reduced output and caused global trade to contract.
3. Effect On American Economy was the worst of all.
The United States was the worst hit by the Great Depression, a historic moment in American history. Industrial production dropped by 47 percent, Gross Domestic Product (GDP) fell by 30 percent, the unemployment rate fell by more than 20 percent, and 20 percent of banks during 1930 failed by 1933 because of banking panics.
4. High Unemployment During Great Depression was at a rate of 24.9%
The height of the Depression was at its peak in 1933, with 24.9 percent of the workforce being unemployed. Although excluding farmers’ unemployment, the steep decline in farm commodity prices resulted in losing lands and homes and facing a lot of economic hardships from the farmer’s end.
Many American workforces and farming communities started to migrate, which eventually caused families to split up in search of work. Shanty towns, also known as Hooverville, had sprung nationwide; these towns were built of packing crates, abandoned cars, and other scraps.
The depression intensified in the Great Plain areas, where residents faced drought and dust storms, so the farmers abandoned their farms and headed to California, hoping to find the ‘land of milk and honey.’
Unemployed youth groups who could no longer support their family rode rails as hobos searching for work. The people of America searched for work, but no place could lift them from their economic hardship.
5. International Trade Breakdown.
Governments worldwide were facing a financial crisis and decreasing the expenditure of money on foreign goods. Various steps were considered, such as the imposition of tariffs, quotas, and exchange controls. Not all governments have the same rules and regulations.
Some governments drastically raised tariffs and imposed severe restrictions on foreign exchange, while some imposed restrictions marginally.
Some countries remained on the gold standard and kept fixed currencies. These countries were more likely to restrict foreign trade. To restore policies and strengthen the balance of payments, they imposed these restrictions on holding off the economic decline.
Some countries freed up monetary policy, helping the central banks to lower interest rates and to act as a lender of last resort so that their balance of payments strengthens.
They abandoned the gold standard and allowed their currencies to depreciate to strengthen their balance payments. They controlled through the best policy instruments to fight the Great Depression.
The intensity of a country’s economic downturn and its ability to recover is related to how long it remained on the gold standard. Countries that abandoned the gold standard faced mild recessions and early recoveries, while countries that remained on the gold standard faced severe recessions and prolonged slumps.
6. Hervert Hoover was blamed for being the cause
When the great depression hit, Herbert Hoover was the President of the United States. Many blamed him for the Great Depression and even named the shantytowns Hoovervilles. After him, Franklin D. Roosevelt was elected in 1933 as the new President of the United States.
7. New Deal was put into place.
While everyone was deeper into depression, the American government sought assistance from Herbert Hoover but was dissatisfied. So, after Franklin D. Roosevelt, often referred to as FDR, was elected, he proposed the New Deal. After his inauguration as President of the United States on March 4, 1933, the federal government implemented this New Deal.
This New Deal was a series of laws and programs that placed regulations on the stock market, banks, and businesses. They helped people to get work and helped houses and feed the poor. These laws are still in place today, like the Social Security Act.
In the first phase of the new administration, FDR pushed Congress to design legislation that helped people overcome the Depression. FDR declared a banking holiday and created new federal programs administered by ‘alphabet agencies.’
The New Deal paved the path toward economic recovery through federal organizations, employment, price stabilization, and by making the government an active partner with the American economy and people.
9. The Alphabetic Agencies.
AAA, Agricultural Adjustment Administration, 1933
BCLB , Bituminous Coal Labor Board, 1935
CAA, Civil Aeronautics Authority, 1938
CCC, Civilian Conservation Corps, 1933
CCC, Commodity Credit Corporation, 1933
CWA, Civil Works Administration, 1933
FCA, Farm Credit Administration, 1933
FCC, Federal Communications Commission, 1934
FCIC, Federal Crop Insurance Corporation, 1938
FDIC, Federal Deposit Insurance Corporation, 1933
FERA, Federal Emergency Relief Agency, 1933
FFMC, Federal Farm Mortgage Corporation, 1934
FHA, Federal Housing Administration, 1934
FLA, Federal Loan Agency, 1939
FSA, Farm Security Administration, 1937
FSA, Federal Security Agency, 1939
FWA, Federal Works Agency, 1939
HOLC, Home Owners Loan Corporation, 1933
MLB, Maritime Labor Board, 1938
NBCC, National Bituminous Coal Commission, 1935
NLB, National Labor Board, 1933
NLRB, National Labor Relations Board, 1935
NRAB, National Railroad Adjustment Board, 1934
NRA, National Recovery Administration, 1933
NRB, National Resources Board, 1934
NRC, National Resources Committee, 1935
NRPB, National Resources Planning Board, 1939
NYA, National Youth Administration, 1935
PWA Public Works Administration, 1933
RA, Resettlement Administration, 1935
REA, Rural Electrification Administration, 1935
RFC, Reconstruction Finance Corporation, 1932
RRB, Railroad Retirement Board, 1935
SCS, Soil Conservation Service, 1935
SEC, Securities and Exchange Commission, 1934
SSB, Social Security Board, 1935
TNEC, Temporary National Economic Committee, 1938
TVA, Tennessee Valley Authority, 1933
USEP, United States Employment Service, 1933
USHA, United States Housing Authority, 1937
USMC, United States Maritime Commission, 1936
WPA, Works Progress Administration, 1935
WPA, Name changed to Works Projects Administration, 1939
10. The Turning Point.
Most countries began to recover from the Great Depression in 1933, and in the US, the recovery began in early 1933 but still had an unemployment rate of about 15% in 1940.
Based on reports, economists have no general agreement regarding the American economic expansion that happened during the president Roosevelt years.
The common view among most economists is that the New Deal by Roosevelt either caused or accelerated the recovery. Some economists also pointed out FDR’s nominal interest rates and actions.
These policies eventually reversed the reflation; one such contributing policy was the Banking Act of 1935, which effectively raised reserve requirements and caused monetary contraction that helped recover. The GDP returned to its upward trend in 1938.
The money supply because of massive international gold inflows was a crucial source of recovery for the American economy. The gold inflows were due to the devaluation of the US dollar and the deterioration of Europe’s political situation.
11. The non-working force was affected too.
Women’s primary role was to be homemakers, and their work of handling the house without a steady income became much more difficult. The great depression’s economic damage affected the non-working force too. Women’s work became more difficult as they now had to work hard managing food, clothing, and medical care.
The birthrate eventually fell as the families avoided children due to financial concerns. The average birthrate in 14 major countries fell by 12% in 1935. Roman Catholic women defied church laws in Canada and used contraception to avoid births.
Few women were in the labor force; however, there was a widespread demand to limit families to one paid job, because of which only husbands of the family were employed. Across Britain, it was a trend for married women to join the labor force, especially for part-time jobs.
In the United States, many agricultural organizations sponsored programs to teach homemakers how to optimize their gardens and raise poultry for meat and eggs. In rural and small towns, women expanded their vegetable garden work to include much food production. Many rural women also made feed sack dresses and other items for their families and children.
France had a prolonged population growth in the 1930s. There were welfare programs during the great depression that were focused on women in the family. The Conseil Supérieur de la Natalité campaigned for Code de la Famille, increased state assistance to families with children, and protected fathers’ jobs, even if they were immigrants.
In American cities, African American women enlarged their activities and promoted quilt making. Quilts were created for practical use and from various inexpensive materials, this increased social interaction among women and promoted personal fulfillment.
History also provides evidence that homemakers in cities handled shortages of money and resources. Strategies like cheap foods and beans were used, purchasing the cheapest cuts of meats and recycling the Sunday roast into sandwiches and soups.
The sewed and patched clothing was used, and new furniture was postponed till better days. Some women also worked outside the home, doing laundry and other work in exchange for cash or anything they could offer.
12. Recovery and World War II.
The Great Depression ended with the start of world war ii, as wartime boosted the economy and put people back to work. Many economists believed that governments’ spending during the war caused or at least accelerated the recovery of the economy.
The rearmament policies leading to World War II helped stimulate the economies of Europe from 1937- 1939. By 1937 unemployment rate in Britain had fallen to 1.5 million, and the mobilization of manpower from the outbreak of war in 1939 ended unemployment.
The United States entered the war in 1941, finally eliminating the last effects of the Great Depression and the unemployment rate of the United States was down below 10%. In the US, massive war spending doubled the economic growth masking the economic depression or the depression in general.
Businessmen ignored mounting national debt and heavy new taxes; instead, they redoubled their efforts for greater output to take advantage of generous government contracts.
13. Socio Economic Crisis
The very first measure to combat the great depression by Hoover Stew was to encourage businesses and not reduce the workforce, but businesses had little choice; hence wages were reduced, and workers were laid off.
In 1930, an act was passed by Congress to improve the economy, the Smoot Hawley Tariff Act, which raised tariffs on thousands of imported items. This act increased the cost of foreign goods, thus encouraging the purchase of American – made products and raising revenue for the government. In retaliation to this Act, other countries that traded with the US increased tariffs on American-made goods, thereby worsening the Depression.
In 1931, Hoover set National Credit Corporation, which urged big banks to help survive failing banks. But this act did almost nothing to solve the problem as the bankers hesitated to invest in failing banks.
1932, the unemployment rate reached 23.6% and peaked at 25% in early 1933. Drought was there during the great depression, and it eventually affected businesses, families, and the economy.
Thousands of Americans were homeless and therefore began settling in Shanty Towns. President Hoover and Congress approved the Federal Home Loan Bank Act to spur home construction and reduce foreclosures to resolve this issue.
The final act passed by Hoover Administration to boost the economy was the Emergency Relief and Construction Act [ERA], this included funds which would be used for public works such as dams and the creation of the Finance Corporation in 1932.
All the attempts failed, leading to a critical election, and came into power by Franklin D. Roosevelt. Soon after Roosevelt’s Presidentship, a new threat emerged called the Dust Bowl; drought and erosion caused millions of Americans to displace from their farms. Roosevelt reconstructed the economy and uplifted it; ultimately, War brought opportunities to an end to the depression.