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The Great Depression
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.
Background of the Great Depression
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.
Some historical facts
- 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.
Causes Of The Great Depression: Essay Basics
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.
Economic History of the Great Depression
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.
Stock Market Crash
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.
How did it happen?
- 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.
Failure of Business
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.
Effect on Farmers
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.
What about Small Farmers?
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.
The Issue of Unemployment during the Depression
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.
Unemployment rate in the U.S.
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.
What did they do?
- 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.
The Gold Standard and the Great Depression
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.
Government’s Regulation: Increase of State Involvement
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.
Social Issue: Racism, Discrimination
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 Conclusion of the Great Depression: Essay Ending
The Great Depression became a huge blow to the economies of many countries. In a conclusion of the Great Depression essay 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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