The Great Depression, which ran from 1929 to 1939, was the greatest economic downturn in US history. The stock market crash of October 24, 1929, is credited by economists and historians as the commencement of the slump. But the truth is that the Great Depression was triggered by a combination of factors rather than a single event.
The Great Depression devastated Herbert Hoover’s administration in the United States, leading to Franklin D. Roosevelt’s election as president in 1932. Roosevelt would become America’s longest-serving president, promising the country a New Deal. The global economic downturn touched the most industrialized world, not just the United States. The rise to power of the Nazis in Germany, which sowed the seeds of World War II, was one reason for Europe’s misery.
Many farmers lost their farms during the Great Depression. Simultaneously, the “Dust Bowl” in the Midwest was created by years of over-cultivation and drought, devastating agricultural production in a once productive region. Thousands of unemployed farmers and other employees relocated to California, searching for work.
What Was the Cause?
The Crash of 1929 in the Stock Market
The stock market crash of October 29, 1929, which is recognized today as “Black Tuesday,” was neither the sole cause of the Great Depression nor the first crash that month, but it is remembered as the most visible sign of the Depression’s start. In September, the market began to fall after reaching record highs earlier that summer.
The stock market fell at the opening bell on Thursday, October 24, generating panic.
Though investors could stop the decline, the market plummeted five days later on “Black Tuesday,” losing 12% of its value and wiping out $14 billion in assets. Stockholders have lost more than $40 billion in just two months. The economy was decimated, even though the stock market recovered part of its losses by 1930. The United States officially entered the Great Depression.
The stock market meltdown has far-reaching consequences for the whole economy. In the latter months of 1929, about 700 banks failed, and more than 3,000 failed in 1930. Because federal deposit protection was unheard of, consumers lost all of their money when banks collapsed. People panicked, creating bank runs as they desperately tried to withdraw their money, forcing more banks to close.
More than 9,000 banks had failed by the end of the decade. Surviving institutions remained hesitant to lend money because they were unclear about the economic situation and worried about their survival. This aggravated the issue, causing consumers to spend less and less.
Purchases are being cut across the board
Consumer and business spending came to a halt as people’s investments became worthless, their savings dwindled or vanished, and credit became scarce or non-existent. As a result, a large number of employees were laid off. As many lost their employment, they could not keep up with payments on products they had purchased on installment plans, resulting in repossessions and evictions. As time went on, there was an increasing amount of unsold merchandise. The unemployment rate surpassed 25%, implying that even less money will be spent to assist the economy’s recovery.
Economic Policy in the United States and Europe
The government was forced to act as the Great Depression tightened its hold on the country. Congress passed the Tariff Act of 1930, sometimes known as the Smoot-Hawley Tariff, to safeguard American industry from foreign rivals. The policy levied near-record tax rates on a wide range of imported items. Several American trading partners replied by levying duties on American-made goods. As a result, between 1929 and 1934, global trade plummeted by two-thirds. President Franklin D. Roosevelt and a Democratic-controlled Congress had passed new legislation allowing him to negotiate much lower tariff rates with foreign countries by that time.
Conditions of Drought
Environmental damage exacerbated the Great Depression’s economic catastrophe. Years of drought and farming practices that did not apply soil-preservation strategies resulted in the Dust Bowl, which spanned from southeast Colorado to the Texas panhandle. Huge dust storms engulfed cities, destroying crops and cattle, poisoning people, and incurring millions of dollars in damage. As the economy collapsed, tens of thousands of people abandoned the region, as John Steinbeck portrayed in his classic “The Grapes of Wrath.” The region’s environment would take years, if not decades, to recover.
The Great Depression’s Aftermath
Other variables contributed to the Great Depression, but these five are often regarded as the most important by historians and economists. They resulted in important governmental reforms and new federal programs, some of which are still in effect today, such as Social Security, federal support for conservation tillage and sustainable agriculture, and federal deposit insurance. Although the United States has undergone substantial economic downturns, none have been as severe or as long as the Great Depression.
Reasons Why Another Great Depression Isn’t Likely:
Even though anything can happen, it’s unlikely to happen again. Like other central banks across the world, the Federal Reserve has learned from its mistakes. There are greater safeguards in place to protect against disaster and monetary policy improvements aid in the management of the economy. The Great Recession, for example, had a far smaller effect.
Some think that the US national debt and current account deficit are large enough to cause an economic disaster.
Climate change, according to experts, could result in significant losses.
Most Commonly Asked Questions (FAQs)
When did the Great Depression come to a close?
Although the Depression’s lowest point occurred in 1933, the sluggish economy persisted for much longer. After the Great Depression, the United States did not fully recover until World War II.
During the Great Depression, how many people died?
The number of persons who perished due to the Great Depression is impossible to estimate. According to a 2009 study, life expectancy increased by 6.2 years during the financial crisis. This is in line with data that show that economic prosperity has more negative health consequences for the population than a recession. 22 Suicide deaths, on the other hand, surged by 22.8 percent between 1929 and 1932, reaching an all-time high.
In the end
The Great Depression and the New Deal had a considerable impact on Americans’ perceptions of the government’s role, especially at the federal level. In the 1930s, polls showed that the New Deal and its big government programs, interventions, and regulations were popular. However, since the Great Depression, public support for federal interventions has not been as high.