Reasons and Causes Behind the Great Depression
The Great Depression was a period of economic downturn that lasted from 1929 to 1939. It was the longest and most severe depression in the history of the United States and the industrialized world. The Great Depression affected millions of people, causing widespread unemployment, poverty, hunger, and social unrest. But what were the reasons and causes behind this devastating event? In this blog post, we will explore some of the main factors that contributed to the Great Depression, as well as some of the effects and consequences that followed.
The Stock Market Crash of 1929
One of the most immediate and visible causes of the Great Depression was the stock market crash of 1929. The stock market had been booming in the 1920s, fueled by speculation, easy credit, and overconfidence. Many investors borrowed money to buy stocks, hoping to make quick profits. However, this bubble burst on October 29, 1929, known as Black Tuesday, when the stock market lost about 12% of its value in one day. This triggered a panic among investors, who rushed to sell their stocks at any price. The stock market continued to decline for several months, wiping out billions of dollars of wealth and eroding consumer confidence (Bordo and Landon-Lane 2017).
The Banking Crisis
The stock market crash also had a ripple effect on the banking system. Many banks had invested in the stock market or lent money to investors. When the stock market collapsed, many banks lost their assets or faced massive withdrawals from depositors who feared for their savings. Moreover, the banking system at that time lacked adequate regulation and insurance, which made it vulnerable to runs and failures. Between 1930 and 1933, about 9,000 banks failed in the United States, accounting for about one-third of all banks in the country. This reduced the money supply and credit availability, which further contracted the economy and reduced spending (Calomiris and Mason 2003).
The Smoot-Hawley Tariff Act
Another factor that worsened the Great Depression was the Smoot-Hawley Tariff Act of 1930. This act was intended to protect American farmers and industries from foreign competition by raising tariffs on thousands of imported goods. However, this backfired as other countries retaliated by imposing their own tariffs on American exports. As a result, international trade declined sharply, hurting both exporters and importers. The Smoot-Hawley Tariff Act also contributed to the rise of nationalism and isolationism in the world, which undermined international cooperation and stability (Eichengreen and Irwin 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer).
The Drought and Dust Bowl
A natural disaster that added to the misery of the Great Depression was the drought and dust bowl that affected the Great Plains region in the 1930s. The drought was caused by a combination of climatic factors and human activities, such as overgrazing and overplowing. The drought dried up the soil and created dust storms that swept across the land, destroying crops and livestock. The dust bowl forced many farmers to abandon their farms and migrate to other areas, especially California, where they faced discrimination and hardship. The drought also affected urban areas, as food prices rose and water supplies dwindled (Worster 1979).
The Effects and Consequences of the Great Depression
The Great Depression had profound effects and consequences on various aspects of society, such as:
– Unemployment: The unemployment rate in the United States rose from about 3% in 1929 to about 25% in 1933. Millions of people lost their jobs, incomes, and homes. Many people had to rely on soup kitchens, bread lines, or public relief programs for survival. Some people resorted to crime or suicide out of desperation (Fishback et al. 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer).
– Poverty: The poverty rate in the United States increased from about 19% in 1929 to about 33% in 1933. Many people suffered from malnutrition, disease, or homelessness. Children were especially affected by poverty, as they faced health problems, educational setbacks, or child labor exploitation (Margo 1993).
– Social Movements: The Great Depression also sparked various social movements that demanded change or reform. Some examples are:
– The labor movement: Workers organized unions, strikes, or protests to demand better wages, working conditions, or rights. Some notable examples are:
– The Bonus Army: A group of veterans who marched to Washington D.C. in 1932 to demand early payment of their bonuses for serving in World War I.
– The Flint Sit-Down Strike: A strike by auto workers in Flint, Michigan in 1936-1937 that resulted in the recognition of the United Auto Workers union by General Motors.
– The civil rights movement: African Americans faced discrimination and segregation in many aspects of life during the Great Depression. Some of them challenged these injustices through legal action, activism, or cultural expression. Some notable examples are:
– The Scottsboro Boys: Nine young black men who were falsely accused of raping two white women in Alabama in 1931 and faced a series of unfair trials and convictions.
– The Harlem Renaissance: A cultural movement that celebrated the artistic and intellectual achievements of African Americans in Harlem, New York in the 1920s and 1930s.
– The feminist movement: Women also faced discrimination and inequality during the Great Depression. Some of them fought for their rights, opportunities, or recognition. Some notable examples are:
– The Women’s Emergency Brigade: A group of women who supported the Flint Sit-Down Strike by providing food, supplies, or protection to the strikers.
– Eleanor Roosevelt: The First Lady of the United States from 1933 to 1945, who advocated for social justice, human rights, and women’s issues.
– The New Deal: The most significant response to the Great Depression was the New Deal, a series of programs and policies enacted by President Franklin D. Roosevelt from 1933 to 1939. The New Deal aimed to provide relief, recovery, and reform to the American people and economy. Some of the major achievements of the New Deal were:
– The Social Security Act: A law that established a system of social insurance for the elderly, disabled, or unemployed.
– The Federal Deposit Insurance Corporation: A agency that insured bank deposits and prevented bank runs.
– The Tennessee Valley Authority: A corporation that provided electricity, flood control, and economic development to the Tennessee Valley region.
– The Works Progress Administration: A program that employed millions of people in public works projects, such as building roads, bridges, schools, or parks.
– The National Labor Relations Act: A law that guaranteed workers’ rights to organize unions and bargain collectively.
– The Fair Labor Standards Act: A law that established minimum wage and maximum hour standards for workers.
Conclusion
The Great Depression was a complex and multifaceted phenomenon that had various causes and effects. It was a time of hardship, suffering, and change for millions of people around the world. It also shaped the course of history and influenced the development of society, politics, and culture. The Great Depression was a challenge that tested the resilience and creativity of humanity.
References
Bordo, Michael D., and John Landon-Lane. “The Banking Panics in the United States in the 1930s: Some Lessons for Today.” Oxford Review of Economic Policy 33, no. 3 (2017): 475-496.
Calomiris, Charles W., and Joseph R. Mason. “Fundamentals, Panics, and Bank Distress During the Depression.” American Economic Review 93, no. 5 (2003): 1615-1647.
Eichengreen, Barry J., and Douglas A. Irwin. “The Slide to Protectionism in the Great Depression: Who Succumbed and Why?” Journal of Economic History 70, no. 4 (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer): 871-897.
Fishback, Price V., William C. Horrace, and Shawn Kantor. “Did New Deal Grant Programs Stimulate Local Economies? A Study of Federal Grants and Retail Sales During the Great Depression.” Journal of Economic History 70, no. 1 (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer): 36-71.
Margo, Robert A. “Employment and Unemployment in the 1930s.” Journal of Economic Perspectives 7, no. 2 (1993): 41-59.
Worster, Donald. Dust Bowl: The Southern Plains in the 1930s. Oxford University Press, 1979.
