The Great Depression is said to have lasted from 1929-1941, though some also say it’s true end was at the end of World War II. It is seen as the greatest financial disaster of the 20th century. The only event that even approached its disastrous nature was the Great Recession of the late 2000s. It started after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out lakhs of investors.
Some reports even suggest that the economic slowdown after the pandemic in 2020, might be as catastrophic as the depression in the 1930s, but until then the slowdown of the 1930s remains the worst hit to the economy that the world has faced.
The Great Depression of 1929 devastated the U.S. economy. One-third of all the banks failed. Housing prices dropped by 67%, international trade fell by 65%, and deflation rose above 10%. It took 25 years for the stock market to recover from the shock. It began on October 24, 1929, and the day is often called, ‘Black Thursday’. During the next four days, stock prices fell 22% in the stock market crash of 1929. The Great Depression had started earlier in August when the economy contracted. Unemployment rose to 25% and homelessness increased.
By the end of the 1920s, the United States had the largest economy in the world. With some destruction already brought on by World War I, Europeans struggled as Americans flourished. Upon taking over the Presidency, Herbert Hoover predicted that the United States would soon see the day when poverty was erased from its streets. Then, in a moment of apparent triumph, everything started to fall apart. The stock market crash of 1929 led to a chain of events that threw the United States into the longest, deepest economic crisis of its history.
It is far too simplistic to view the stock market crash as the sole cause of this depression. A healthy economy can recover from such a downfall. A series of long-term underlying causes sent the nation into a downward spiral of despair. During the 1920s, American firms earned huge amounts of profits and reinvested much of the funds they earned into expansion. Companies had expanded to the bubble point, by 1929. A slowdown was inevitable since the workers could no longer continue to fuel further expansion. While corporate profits skyrocketed, wages increased exponentially, which widened the distribution of wealth.
As the summer of 1929 started, the American economy entered a mild recession, consumer spending decreased and unsold items began to pile up, which in turn decreased the production from factories. Nonetheless, stock prices continued to rise, and by the fall of that year, they had reached stratospheric levels that could not be justified by expected future earnings.
Many Americans had to buy things on credit and fell into debt, and the number of foreclosures and repossessions increased slowly. The global adherence to the gold standard, which united countries around the world in fixed currency exchange, helped spread economic woes from the United States to the rest of the world, especially Europe.
In the face of such difficult times, Hoover’s administration tried providing support failing banks and other institutions with government loans; the idea was that the banks would later loan to businesses, which would be able to give jobs back to their employees.
Hoover, a Republican who had formerly been the U.S. secretary of commerce, believed that the government should not directly interfere with the economy and that it was not its responsibility to create jobs or provide economic relief for its citizens.
However, in 1932, with the country struggling with the consequences of the Great Depression and more than 15 million people (more than 20 percent of the U.S. population at the time) stood unemployed, Democrat Franklin D. Roosevelt won in the presidential election, with an overwhelming majority.
By Inauguration Day (March 4, 1933), every U.S. state had instructed all remaining banks to shut down at the end of the fourth wave of banking panics, and the U.S. Treasury didn’t have enough cash to pay for all the government workers. Nonetheless, FDR always had silent energy and positivity, famously declaring “the only thing we have to fear is fear itself.”
No nation could come out of this world-wide catastrophe without extreme social and cultural consequences. While many undesirable vices were connected with hopelessness were on the rise, many families were also strengthened during the crisis. Mass migrations reshaped American society. While many businesses deteriorated during the Great Depression, some actually emerged stronger. And newer forms of expression flourished in the culture of despair.
The Great Depression brought a rapid rise in the crime rate as many unemployed workers resorted to petty theft to put food in their stomachs. Suicide rates soared, so did the reported cases of malnutrition. Alcoholism was on the rise with Americans seeking outlets for escape, augmented by the repeal of prohibition in 1933. The smoking cigar also became too costly, so many Americans switched to cheaper cigarettes.
Higher education remained out of reach for more than half of the Americans as the nation’s schools saw their student bodies grow smaller during the first half of the decade. However, high school attendance was on the rise among males. Because the possibility of a young male getting a job was so incredibly low, many of them decided to stay in school longer than before. Public spending on education, however, declined sharply, causing many schools to open understaffed or ultimately shut down due to lack of funds.
The first New Deal started in 1933 and it was focused on improving the economy, on the banks, and farmers in an attempt to provide them with support. The Emergency Bank Act attempted to secure the banking system after hundreds of failures, while the Agricultural Adjustment Act and the Emergency Farm Mortgage Act were aimed at saving farmers, their farms, and their crops. The first New Deal also helped put an end to prohibition and put together public work projects like the Civilian Conservation Corps.
After some years of passing strategies to help save businesses and industries, in 1935 the “Second New Deal” was launched. These schemes sought to help poor, and unemployed, struggling Americans. Some programs continued to provide support to the farmers, even paying them to plant certain specific crops. Others wanted to improve the conditions for workers, like the National Labour Relations Act. Perhaps most importantly, the Second New Deal enacted the Social Security Act. In FDR’s second term, some programs were colloquially known as part of a “Third New Deal.” Programs introduced here would help fund affordable housing and provide workers with overtime pay.
Still, some say that it was instead World War II that actually ended the Great Depression. Government spending increased significantly when the U.S. became a part of the war, and unemployment fell below 1 million. After the war, American soldiers finally returned home to an economic boom.