Great Depression
Great Depression — is a significant economic crisis in the first half of the 20th century. This crisis was accompanied by mass unemployment, poverty, and recession. The Great Depression mostly influenced the USA, but other European countries also were touched by this event. This crisis occurred between 1929 and 1941. The most well-known events of this period were the stock market crash and the banking panic.
Development of the Great Depression
The beginning of the 20th century was the time of rapid development of various industries and the consumer sectors. But the economy was already on the threshold of crisis. It was a crisis of overproduction. Most of the world’s population didn’t have enough money to buy numerous goods that were produced in the USA.
The second problem was the financial speculations. The financial market and stock trade were developing regardless of the emerging decrease in purchasing power. The economy has been idle for a long time. However, it was impossible to understand, since financial speculators, hoping to raise money for new profits, printed new stocks.
The “orgy of mad speculation” had started in 1927. According to the economic theory of those times, the markets of stocks and bonds reflected the situation in the market of goods and services. But in reality, the stock market was out of control. As a result, there were too many financial bubbles, fictitious speculative companies, and fraud. Shares were issued by all and sundry. All this had led to the sharp collapse of stock value.
In 1929 on October 24, the great panic occurred on the New York Stock Exchange. This panic had led to a catastrophic fall in the price of shares and an unseen dump in the history of trading. This day was called “Black Thursday”. It had launched the beginning of the Great Depression.
The stocks of major American companies like General Motors and Chrysler had depreciated. Millions of people had lost their savings. And without money, credits, and banking capital the industries can’t develop. The half of produced goods were no longer in demand.
The mass job cuts had begun. The fired people were on the verge of poverty, they couldn’t buy anything. This led to a further narrowing of the market, a reduction in production, and layoffs. The mass demonstrations of jobless people swept the country, people were demanding the government pay attention to them.
Then, the Great Depression started to spread all over the world. Austria, Germany, and Italy are also suffering from mass poverty, bank crisis, and unemployment. These export-oriented countries stagnated as the global market had shrunken.
Overcoming the Great Depression
In 1933 the new president Roosevelt won the election. He promised to lead the country out of the crisis. His program was called “New Deal”. This program included large-scale reforms in various sectors.
After the inauguration, Roosevelt announced the Bank Holiday, and their activity was frozen. He had ordained the law that generally suspended the activities of banks and allowed their work only after reorganization. This reorganization was carried out by special state bodies. They were determining the situation and decided whether a bank could function or not. If the bank could function, then it was provided with assistance from the government, and the bank was opened and continued to operate.
Then, the government adopted a range of laws concerning the regulation of labor legislation. The Wagner Act provided the workers the right to labor organizations and strike. The Social Security Act implied the general welfare and creation of a national pension system. The Fair Labor Standards Act introduced a minimum wage, and overtime payment and limited the number of working hours.
Another important step was the Public Works. The program of Public Works implied the building and reconstruction of numerous objects of infrastructure (bridges, highways, parks, schools, hospitals, kindergartens). The major goal of this program was to provide jobs for numerous unemployed people. As a result, a significant part of today’s public spaces and infrastructure objects were created during the New Deal. The most famous are Golden Gate Bridge, Hoover Dam, Lincoln Tunnel, and Great Smoky Mountain National Park. The program of Public Work also involved culture workers. The artists were collecting the traditional art of the ingenious people, musicians were playing the free concerts. Music schools also were free.
To help the farmer, the government adopted the Agricultural Adjustment Act. Under this act, the farmers received the subsidies and worked less. This act had both positive and negative consequences. The negative effect was the necessity to remove the production overhang, and many cattle were slaughtered. But in the end, this act allowed the farmers to buy lands and increase the price of their products.
Consequences of Great Depression
The Great Depression significantly influenced the USA. This recession caused the mass devastation of households and firms. As a result, the level of production catastrophically declined. Many people had lost their jobs and fell below the poverty line. More than half of the banks had bankrupted.
The country could overcome the Great Depression only at the beginning of the Second World War. Numerous men were called to the front, the housewives had to get a job and the level of unemployment decreased. The companies received a huge number of orders for the defense industry.
Other countries were also touched by the Great Depression. Great Britain had to abandon the Gold Standard to increase the supply of money and stimulate the economy. In other countries, far-left (Soviet Union) and far-right parties (Germany, Italy) came to power because these parties offered a radical exit from the crisis. But in most developed countries, the state was strengthened, and the bureaucracy took over the levers of managing the economy and began to take care of social problems and create a welfare state.
