The great depression was one of the most catastrophic times of our economic history. It was such a significant event that it changed the political and economic landscape of the United States and was felt across the world. Many people lost their jobs and savings during this time and soon found their selves in a destitute situation. The Great Depression lasted around 10 years in the United States, but the length of the depression varied across the world. There are many theories as to when it actually began and what caused it; however, it is most often linked to Black Tuesday. cv writing service leeds
The roaring 20??™s appeared to be great. Businesses were booming, investing in stocks was the new get rich quick solution and times were looking up. Industrialization was on the rise and allowed for new innovations in the market to take root. The banking industry made it easy for people and companies to conduct business. People were using credit from the banks to invest in stocks, purchase farms, seeds and the next new household appliance. However, the economy was producing more than it consumed, there were many inequalities in the work force and a blanket of prosperity had fallen over many eyes. According to Livingston (2009):
The underlying cause of that economic disaster was a fundamental shift of income shares away from wages and consumption to corporate profits that produced a tidal wave of surplus capital that could not be profitably invested in goods production??”and, in fact, was not invested in goods production. (p. 4)
The stock market crash that occurred on October 29, 1929 and commonly referred to as Black Tuesday can be found in almost every American history book. In the days before the crash, the stock market appeared to be riding a grade 4 river in an inflatable raft. There were highs and lows throughout. As investors got nervous, stocks started selling at an alarming rate. Fear spread like wild fire throughout the market and it soon bottomed out. This event not only shocked and rocked the nation but seemed to have appeared out of nowhere.
After World War I, many foreign allies were in debt to the United States. Central banking decisions led to many issues with money. The Federal Reserve Board, which was created to help prevent situations such as depressions, raised interest rates in 1929 and the money supply was inflated. The government was also debating the Smoot-Hawley Tariff in hopes of protecting American jobs from foreign competition. As retaliation to the Smoot-Hawley Tariff, several other countries threatened to enact their own tariffs. Europe was also suffering during this time as they recovered from World War I and found their selves in an economic slum just a great as the United States. Many Americans feared that the United States would have severe repercussions if the tariff was passed. A petition was created and signed by 1000 economists pleading congress not to pass it. This was ignored and the tariff passed on June 17, 1930.
Once the stock market crashed, a domino effect occurred. Banks were failing across the nation because they did not have any money to distribute as people started withdrawing their savings. Many people started making withdraws from fear of losing their money. Since many people started using credit to make purchases, they were not able to pay their debt after they lost their jobs.
A lot of the bank??™s money was also invested in stocks either by borrowers or the banks their selves; therefore, very little was available after the crash. The banks could not keep up with the rampant withdraws and unchecked debt that accumulated so quickly. Once the money ran out, they had to close their doors leaving many of their customers sitting by the wayside with nothing but the change in their pockets and the little bit of cash hidden under their floorboards.
As stock plummeted, companies realized they had more products and services than they had in the people who wanted them. They were no longer worth near as much as they were when running full swing. Several companies decreased their workforce by laying people off. As conditions worsened, some companies could not keep their heads above the ever rising economic tide and had to shut their doors not long after everything fell apart.
The most obvious culprit in the economic downfall, in many people??™s eyes, was President Herbert Hoover. Blaming the president is a common theme in the United States since they are the policy makers and closely linked to certain decisions that can either spell disaster or bring about wonderful changes. President Hoover rejected federal relief payments to individuals in fear that they would become spoiled and rely solely on the government to take care of them. President Hoover did try to help alleviate the effects of the depression by providing tax cuts and approved the Federal Home Loan Bank Act to encourage new home construction. Americans felt that these relief efforts came too late in the game to help with their financial woes.
Millions people suffered throughout the great depression. Families that lost everything stood in lines for hours to get what meager rations were available from charity organizations. Several families that were already in dire situations to begin with ended up living on the outskirts of towns in what some dubbed as Hoovervilles after President Herbert Hoover. They used whatever material was available to construct crude shacks to give them some kind of protection from the weather.
The Great Depression also saw the era of box car boys and girls. The box car kids were made up of teenagers that had little to hang around for and were more of a burden to the families as an extra mouth to feed and clothe than anything else. Many schools had to shut down for lack of funds, so there was little to nothing holding these teens to their roots. Many hopped onto trains and rode the rails looking for work wherever it could be found. This gave some impoverished teens a sense of direction or hope that they could find something better than what they had already been handed.
Farmers also suffered greatly during this period. A drought hit states from Texas to North Dakota in the 1930??™s. On top of the drought, the land was environmentally taxed from years of overgrazing and plowing. There was severe wind erosion and hardly any rain to help alleviate the problems. As conditions worsened, Mother Nature released her fury. Clouds of dust picked up from the loose soil blew through the areas and blanked the land. This catastrophic epidemic became forever known as the Dust Bowl.
These dust storms forced farmers to pick up and leave in order to find work in other areas. Their farms were destroyed. Unfortunately, the grass was not greener on the other side and there was little work to be found. Many worked at extremely low wages that barely kept them fed. Some of the damage may have been prevented if the farmers had treated the environment better. Instead of encouraging the farmland to grow back over during winter months, farmers left them bare and burned what was left. This caused an extensive amount of erosion during the windy months and deprived the soil from nutrients. When the winds kicked up there was nothing left to keep the soil in place and away she blew.
The next presidential election was held in 1933, not long after the Great Depression hit the nation. Herbert Hoover was ousted by Franklin D. Roosevelt. America had hopes that Franklin Roosevelt was the key to their relief and recovery. According to Eggertsson (2008):
On the monetary policy side, Roosevelt abolished the gold standard and announced an explicit policy objective of inflating the price level to pre-Depression levels. On the fiscal policy side, Roosevelt expanded real and deficit spending which helped make his policy objective credible. The key to the recovery was the successful management of expectations about future policy. (p.1)
Under President Roosevelt??™s term the New Deal was enacted. Most of his monumental decisions were completed in the first 100 days of his term. The New Deal??™s main goals were to provide the much needed relief and help in recovery during the depression. The New Deal was made up of several economic programs such as the Federal Deposit Insurance Corporation and the Economy act. The FDIC was created to insure bank accounts and the Economy Act cut government salaries and veteran pensions. President Roosevelt has created programs that helped farmers and welfare programs such as the Federal Housing Administration (FHA) that are still in use today.
Most will agree that World War II was one of the biggest cards the world was dealt that helped raise the economy out of the Great Depression. As the war raged, production increased across the nation to help with the much needed supplies. Jobs were created and people began to see the light of day. There have been many theories on what really caused the Great Depression; however, most everyone agrees that it was one of the most dreadful periods in our history.
Medina, C. (2010). Infamous Environmental Disasters of the Past. Texas Public Health Journal, 62(3), 25-27. Retrieved from EBSCOhost.
Livingston, J. (2009). Their Great Depression and Ours. Challenge (05775132), 52(3), 34-51. Retrieved from EBSCOhost.
Eggertsson, G. (2008). Great Expectations and the End of the Depression. American Economic Review, 98(4), 1476-1516. doi:10.1257/aer.98.4.1476