Short Essay On Great Depression

Outline

1. Background of the Great Depression
2. Economic Impact of the Great Depression
i. Failure of the stock market
ii. “Small scale farmers disadvantaged”
iii. Business and industry failure
iv. Farmers
v. Unemployment
vi. Human suffering
vii. Increase of government’s economy regulation
viii. Growth of macroeconomic strategies
ix. Homelessness, discrimination and racism
x. Hoovervilles
xi. Creation of dust bowls
xii. Illness and starvation
3. Overview of Stock Market Crash
4. How people bought products on margin
5. How trouble came up
6. Causes of the Great Depression
i. World-wide and domestic factors
6. Summary of the effects of Great Depression
7. Conclusion
8. Works Cited

The Great Depression

Background

The great depression is an immense tragedy that took millions of people in the United States from work. It marked the beginning of involvement from the government to the country’s economy and also the society as a whole. After almost a decade of prosperity and optimism, the US was now exposed to a period of despair. The day when this happened is referred to as Black Tuesday, and it is the day when the stock market crashed. That was the official date when the Great Depression started. The stock market prices crashed to an extent that there was no hope for them to rise again. A long period of panic struck, and there was darkness in terms of stock market prices. Many people tried as they could to sell their stock, but, unfortunately, no one was ready to buy. The stock market that had for long been viewed as a path to wealth and richness was now a sure path to bankruptcy (Martin 106).

Economic Impact of the Great Depression

Failure of the stock market. The stock market was not the only one that was affected; actually, that was just but the beginning of the Great Depression. In effect, it was unfavorable for the clients whose money was already in the markets for investment: many banks had done that and that meant a huge loss to the clients. It was also a double loss in that though the clients lost their money, the banks were forced to close down. This is because they directly depended on the stock market. When this happened, it caused much panic even to other people, and this is what made them go to the other banks that were open to withdraw their money. This kind of massive withdrawal had a major effect in that it caused the banks to close too. What is more, it was a disadvantage to those who did not withdraw their money because of not reaching the bank on time. After the banks closed, people went bankrupt and could not claim anything whosoever.

Business and industry failure. Industries and businesses were highly affected too. This is because they were also working hand in hand with the stock market. Since the stock market had closed down, this meant that their savings and capital were lost. This affected the labor in the businesses since they had to cut on the number of workers who worked in the corresponding companies. Employees’ wages were also affected because any business could not pay them again as required. The stock market issue also affected the customers in that they stopped buying and spending on luxurious goods. This influenced greatly the companies that produced these commodities in terms of sales and also getting profit. The companies too had to close down (Martin 98).

Farmers. The Great Depression affected the farmers in a very adverse way. Though they always survived other depressions that they encountered, this one was a big challenge to them. Most of the farmers were situated at the Great Plains before the Great Depression took place. The territory was affected so badly by drought and dust storms which were horrendous in nature. They created a situation that was referred to as the Dust Bowl. The farmers were used to overgrazing, and now this had to combine with the effects of drought leading to a blow to the farmers. The latter were even left without food and crops for their animals. This is because the grass that the animals could feed on had already dried up and disappeared in the long run. The loose dirt was picked by the whirled wind, and topsoil got exposed. The farmers were left without crops as the wind picked up everything on its way (Martin 200).

Small scale farmers disadvantaged. Small scale farmers were more disadvantaged than the large scale farmers. They turned out to have a small piece of land on which they had to get their daily bread. Some of these farmers asked for tractors from their respective governments, and thus, they were made to pay some amount to cater for those. The hit that the farmers went through could not enable them to pay their debts. They could also not make it to feed their families, not mentioning themselves. Some of the farmers had also capitalized on the stock market and bank. Since the stock market was affected, and as a result, the banks too, the farmers suffered as well. Losing their investments and crops influenced greatly the way they related with each other and had an impact on their contribution to the economy of the land. The country lost a lot of laborers and this led to the deterioration of the country’s economy.

Unemployment. Many people lost their jobs during this time of the Great Depression. Having lost their jobs, it was very difficult for people to bring food on the table. Families were even forced to sell their houses and move to apartments. Others were made to move in together since the standard of living was going down day by day. Paying rent was now a very hard thing to achieve. It was even complicated for people to separate or divorce. This was the time when the rate of separation and divorce went down. This is because everyone needed the other to contribute, especially in paying the rent. Due to ego, men who had already lost their jobs felt ashamed even to walk in the cities, and, therefore, they were forced to stay in their homes. If at all the wives and the children were working, they felt that their status was challenged. Even in this situation, the two categories aforementioned were forced to go looking for jobs. This time, women were even accused of taking the man’s place after getting a job.

As a matter of fact, it was hard to get jobs locally because every part of the country had been affected. Many people were seen on the roads looking for jobs. Many people could not afford luxurious goods like cars, and thus, very few cars were seen on the roads. A lot of the cars were on sale since maintenance costs were unaffordable. The majority of teenagers were affected as they were the people who were seen on the roads walking up and down looking to get some job (Martin 187).

Older men, women, and families at large were on the rails too. They would be seen boarding trains just to cross and see whether they could get some occupation. Every time there was a job opening, many people applied for the position and chances for employment at such. Those who could not get the job would end up living in shanty towns which were outside the town. The houses in such places were made of affordable cheap materials like newspapers, wood, mud, cardboard, and iron sheets. Farmers who could no longer afford their previous lives would be found in western California. This is because of the agricultural opportunity rumors that came from that area. It is true that there were periods of agricultural opportunities. The farmers were nicknamed as Okies and Arkies.

The Great Depression took place during the reign of President Herbert Hoover. The citizens always blamed the governing President, though he always talked about optimism. Some of the shanty towns which were far from big cities were named after him – for instance, Hoovervilles. Interestingly, newspapers used to cover people sleeping in the streets were called Hoover Blankets. What is more, even bad looking broken cars were referred to as Hoover Wagons (Martin 134).

Human suffering. The Great Depression had a huge impact in that it caused human suffering. It took a very short time, and the levels of living went down drastically. People started borrowing from each other just to survive. Unemployment increased since industries could not take employees anymore. They could not afford to pay the people what they deserved. Research shows that at least a fourth of the labor force in all the industrialized countries could not work anymore (Martin 145). The industries could not satisfy them in terms of wages. This was noticed in 1930, and the total recovery was only realized by the end of that decade.

End of international gold standard. The Great Depression is seen as a cause of international gold standard. There was no money to invest anymore, and it was evident that the interest rates went down too. There was also the introduction of floating rates, and people stopped using the fixed exchange rates. On the other hand, there was an expansion of the welfare state and labor unions in 1930. Union membership went to an extent of doubling between that year and 1940. This was a result of extreme unemployment and the National Labor Relations Act which was passed in 1935. All this led to collective bargaining. The US took an extra mile of coming up with unemployment compensation. This also included the survivors’ and old age insurance. This was incorporated in the Social Security Act the same year. Its aim was to cater for the hardships that the citizens were going through in 1930.

Increase of government’s economy regulation. The rate at which the government regulated the economy increased substantially. The focus was mostly on the financial markets. Different bodies to carry out this function were established. These included the Securities and Exchange Commission which was established in 1934. The main role of these institutions was to control and regulate stock issues in the stock market, especially with regard to the new products. The Banking Act went ahead to come up with deposit insurance, whose role was to work with the banks by prohibiting them from underwriting. Deposit insurance was not so popular in the world up to the Second World War. This time it was able to work effectively, hence achieving its mission and objectives.

Growth of macroeconomic strategies. The aim of the latter was to fight the economic upturns and downturns. As a matter of fact, different strategies were established to fight the Great Depression. An increased focus on how the government spend, tax cuts, and expansion of the monetary fund were some of the ways to fight the the phenomenon under consideration. The government was also trying to work to its best so as to fight unemployment. The banks were also working against recessions.

Homelessness, discrimination and racism. Many people had lost their jobs and it became even hard to get rent for their houses. They had to move to shanty areas which also were not very affordable. Others could not afford anything to cover their heads. This led to building the Hoovervilles. Since so many people were unemployed, there was a huge competition in the job market. Very few could get jobs, and those who did were not paid according to what they delivered. Under the circumstances, discrimination grew and African Americans could rarely get a job. Racism was an issue at that time. Americans were more aggressive as they noticed that there were shrinking opportunities to get a position. The African Americans, Asian Americans, and Hispanics were the people who suffered the most. This is because of the discrimination and racism that were going on. Again, the whites were claiming the jobs which were paying poorly, hence occupying the opportunities that these minorities had before Hoovervilles.

It is evident that in any country there are different levels of people as far as their income is concerned. Where people live is different depending on what one eats. The lifestyle generally depends on what the person earns…

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The depression was caused by a number of serious weaknesses in the economy. Although the 1920s appeared on the surface to be a prosperous time, income was unevenly distributed. The wealthy made large profits, but more and more Americans spent more than they earned, and farmers faced low prices and heavy debt. The lingering effects of World War I (1914-1918) caused economic problems in many countries, as Europe struggled to pay war debts and reparations. These problems contributed to the crisis that began the Great Depression.

America's "Great Depression" began with the dramatic crash of the stock market on "Black Thursday", October 24, 1929 when 16 million shares of stock were quickly sold by panicking investors who had lost faith in the American economy. At the height of the Depression in 1933, nearly 25% of the Nation's total work force, 12,830,000 people, were unemployed.

Wage income for workers who were lucky enough to have kept their jobs fell almost 43% between 1929 and 1933. It was the worst economic disaster in American history. Farm prices fell so drastically that many farmers lost their homes and land. Many went hungry.

Faced with this disaster, families split up or migrated from their homes in search of work. 'Hoovervilles' (named after President Hoover, as an insult), shanty towns constructed of packing crates, abandoned cars and other cast off scraps sprung up across the Nation. Gangs of youths, whose families could no longer support them, rode the rails in box cars like so many hoboes, hoping to find a job. 'Okies', victims of the drought and dust storms in the Great Plains, left their farms and headed for California, the new land of "milk and honey" where they believed all one had to do was reach out and pluck food from the trees. America's unemployed were on the move, but there was really nowhere to go. Industry was badly shaken by the Depression. Factories closed; mills and mines were abandoned; fortunes were lost. American business and labor were both in serious trouble.

Unable to help themselves the American public looked to the Federal Government. Dissatisfied with President Herbert Hoover's economic programs, the people elected Franklin D. Roosevelt as their president in 1932. Roosevelt was a bold experimenter and a man of action. Early on in his administration he assembled the best minds in the country to advise him. This group of men were known as the 'Brain Trust.' Within one hundred days the President, his advisors and the U.S. Congress passed into law a package of legislation designed to help lift the troubled Nation out of the Depression.

Roosevelt's program was called the 'New Deal.' The words 'New Deal' signified a new relationship between the American people and their government. This new relationship included the creation of several new federal agencies, called 'alphabet agencies' because of their use of acronyms. A few of the more significant of these New Deal programs was the CCC (Civilian Conservation Corps) which gave jobs to unemployed youths and to improve the environment, the WPA (Works Progress Administration) gave jobs to thousands of unemployed in everything from construction to the arts, and the NRA (National Recovery Administration) drew up regulations and codes to help revitalize industry. Later on came the creation of the Social Security System, unemployment insurance and more agencies and programs designed to help Americans during times of economic hardship. Under President Roosevelt the federal government took on many new responsibilities for the welfare of the people. The new relationship forged in the New Deal was one of closeness between the government and the people: a closeness which had never existed to such a degree before.

Although Roosevelt and the New Deal were criticized by many both in and out of government, and seriously challenged by the U.S. Supreme Court, they received the overwhelming support of the people. Franklin D. Roosevelt was the only president in U.S. history to be elected for four terms of office.

Despite all the President's efforts and the courage of the American people, the Depression hung on until 1941, when America's involvement in the Second World War resulted in the drafting of young men into military service, and the creation of millions of jobs in defense and war industries.

Causes of the Great depression of USA:

  • Unequal distribution of wealth

  • High Tariffs and war debts

  • Over production in industry and agriculture

  • Stock market crash and financial panic

Effects of the Great depression

  • Widespread hunger, poverty, and unemployment

  • Worldwide economic crisis

  • Democratic victory in 1932 election

  • FDR's New Deal

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