Great Depression was undoubtedly a most significant (and influential) economic disaster in American history. It still fascinates and shocks everybody who discovers what happened back then. It is no wonder that it provides a whole array of topics for essays and other academic works spanning over various disciplines and all academic levels. It would be next to impossible to cover them all in one article — so instead, we will provide you some general pointers to get your Great Depression essay going.
Great Depression is a major tragedy that the American nation had to experience. It took away money, jobs, homes, families, or even lives of hundreds of thousands, if not millions of Americans. US economy was devastated, its market was destroyed, and, consequently, the unemployment rate skyrocketed. It affected the whole nation, regardless of age, race, gender, or class.
The stock market crash led to currency depreciation, which had its toll on all spheres of the economy. The galloping increase in prices led to mass bankruptcy of banks and multiple enterprises. Government measures proved to be not only ineffective but even harmful, accelerating this devastating effect even further. This economic decline was the fastest in history.
Investigations have shown that a major cause for Great Depression was the growing governmental involvement in the economy and other spheres of life. This involvement was often too situational, inconsiderate, and opportunistic. Entrepreneurs, as well as basically anyone involved in any economic activities, had to adapt to any new rules caused by government-led innovations which were not always fair. This led to an instability that forced too many companies to shut down.
Officially, Great Depression is considered to have spanned over a decade, between 1929 and 1939.This constitutes the longest economic crisis that any Western country has ever seen. The official starting point of Great Depression was October 29th, 1929, dubbed Black Tuesday.
Since the US economy had ties with many other economies internationally, Great Depression hit them hard too. It was a global economic decline.
Today, researchers point out five commonly accepted events that ultimately resulted in Great Depression:
Although we tend to analyze Great Depression’s influence on the American economy and people’s lives, we must remember that other countries got affected as well. The nature of effects, their timing, and their severity varied from one state to another. One can state that European economies suffered more than Latin American ones and Japan, but adverse effects in these states were explicit nevertheless.
The initial panic in the financial sector affected all layers of the economy — from large corporations to small companies and, of course, households and families. Meanwhile, the government’s inconsiderate reaction and irresponsible policies escalated this crisis further. The Gold Standard dictated fixed currency exchange rates, so the American economy collapse undermined international trade worldwide. In turn, refusing from the Golden Standard, among other economic innovations, accelerated the recovery later on.
Even though the stock market crash was not the sole cause of this economic crisis, it launched further processes. It became the starting point of the Depression, after which it was irreversible. In just four years after the crash, half of the US banks went down, and around 15 million employees were left without a job.
Panic in the banking sector, spurned by investors’ loss of their money, spread to the public when more and more people began withdrawing their deposits. Banks already experienced a massive loss of stock money, so they could not possibly cope with such pressure. That’s exactly what led to such mass collapse.
Still, it’s impossible to state that the financial sector started to decline on Black Tuesday. Five days before that, stocks opened with a radical plunge, fueling the already ongoing panic — as the market was already showing the most drastic fall in recorded history.
The market was able to manage the crisis for a few days but not more. On Black Tuesday, it finally crashed irrevocably.The investors lost $14 billion which equaled 12% of the market. Within two months from there, financial losses grew to $40 billion, which marked the collapse of the state economy.
Great Depression was a major worldwide financial crisis of the 20th century. Economic activity in the US was almost non-existent for an entire decade. Because no business can work in total isolation, there was no company or industry that didn’t suffer the consequences. They depended on their cooperation, just as they depended on stock and finances. Since so much of their budget was lost, the damage became critical and global. Massive amount of bankruptcies forced every industry to collapse in their entirety.
Without any budget left, businesses had to reduce all their expenses, including wages, leading to mass unemployment. As such, households and individuals were losing their income and had to reduce their expenses as well. Getting fired, former workers couldn’t spend as much money on goods and services as they had before. This radical decrease in customer demand was yet another nail in the coffin of every business that couldn’t sell its product anymore. There was no business that didn’t suffer these severe effects.
Crisis effect on farmers was arguably the most graphic one. Notably, agriculture in America began declining right after the First World War. Combined with Great Depression, its crisis lasted two decades. There are several reasons to explain why Great Depression hit farmers particularly hard:
City dwellers relied on their jobs and their income from it. Most of them had been working for industries that were forced to shut down and fire their employees. This effect was equally visible in larger cities with many factories and small towns where all or almost all of their population would be employed in just one industry. Sometimes, an entire town would become dead. Such areas were called “Hooverville,” — after President Herbert Hoover whose governance was marked with the beginning of Great Depression.
From New Your City to San Francisco, all sorts of businesses — big factories and small stores alike — had to shut down. Jobless, people couldn’t sustain their living. Before the crisis, welfare was the last resort. People who applied for it would have their names published in newspapers, and it was decisively frowned upon. Now, government welfare programs became in high demand. In the face of a hungry death, people were forced into this compromising decision and would line up to apply for welfare.
Peak unemployment rate in the USA during this decade was 25%. To cut down their losses, businesses would fire everyone they could, contributing to this number. A quarter of the population lost their sustenance. It is an utterly unpleasant experience when one has to live through it for a short period. When this period gets prolonged, life becomes downright impossible.
Most financiers agree that one of the primary underlying factors contributing to the emergence of a crisis was the Gold Standard itself. Some researchers, however, disagree. So, there is an ongoing discussion whether it’s justified to blame the Gold Standard in this case.
One cannot argue, however, that it accelerated the process and made it longer than it may have been. Under this Standard, banks could not expand credits or otherwise influence the amount of money circulating in an economy. They could only do so much as adjust the rates, which could not be of much help when there was no possibility to issue extra cash to sustain the investments. Additionally, frequent adjustment of investment rates went in discord with a fixed currency exchange rate which is another feature of the Gold Standard.
However, holding the Standard as a scapegoat doesn’t seem entirely fair because such approach ignores the inconsiderate interference by various state institutions — most notably, the Federal Reserve System — that had to handle the growing demand for social payments. The state’s interference was supposed to handle market instability as a whole. Instead, these newly-established governmental institutions chose to focus on the wealthier, more sustainable sectors of the economy, i.e. those that needed it least.
As the job market imploded, people grew ever more desperate to secure any job whatsoever. They were no longer in a position to discard jobs that they had previously overlooked. These lesser-paid and often harder jobs had previously been occupied by underprivileged social groups — such as people of color. Now, people of color would lose even those lousy jobs that they could previously count on at least. So, among other things, Great Depression fueled the preexisting racial tension further. Additionally, the overall instability in all spheres of life predictably contributed to all sorts of conflict.
Since Great Depression, neither national nor global economy suffered a bigger blow. There was no company, town or person that could go through it unharmed. However, since such devastating experience never repeated, it looks like we’ve learned our lessons.
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