The Great Depression Essay Example
The Great Depression is a global phenomenon that mainly originated from the US. It is arguably the most important economic event in US history. This great catastrophe was responsible for the loss of millions of jobs in the US. It is difficult for those who did not live through this period to fully comprehend the full force of this worldwide economic meltdown. As a result of this, the government got involved with the country’s economy and also the society in general. This was a period of anguish in the US after years of optimism and prosperity. Black Tuesday was the name given to the day when the great depression first occurred. It was also the day when the stock market collapsed. The stock market prices crashed to the point where people lost hope in it ever rising again. A prolonged period of panic followed and there was uncertainty with regards to stock market prices. Many individuals tried as much as they could to get rid of their stock, but, unfortunately, no one was willing to purchase. The stock market that had for an extended period seen as the gateway to wealth and prosperity was now a guaranteed path to bankruptcy.
No one knew how best to deal with the crisis. President Hoover believed that local governments and charities should offer relief to those who had lost their jobs and the homeless. Franklin Roosevelt, then governor of New York, partnered with Frances Perkins and Harry Hopkins to start a work relief program back in 1931. However, this did not yield much. By 1932, about a fifth of government funds was spent on relief.
Those severely affected sank into despair. Suicide rates rose from 14 to around 17 per 100, 000.
Causes of the Great Depression
What led to this economic meltdown? According to the former chairman of the Federal Reserve, Ben Bernanke, the actions of the central bank fueled it. He stated that it should not have utilized tight monetary policies. He noted the following main mistakes:
- When the market collapsed, most investors resorted to the currency markets. During that period, the value of the dollars held by the government was supported by the gold standard. Around 1931, many speculators started to trade in their dollars for gold, eventually leading to a run on the dollar.
- The Fed did not increase money supply to tackle deflation.
- The Fed started to raise the fed fund rate in the spring of 1928. The rate was increased throughout a recession that began in August 1929.
- Interest rates were again raised by the Fed to preserve the value of the US dollar. This action limited the availability of money for people to invest in their businesses.
- Another great mistake was that investors withdrew all their money from banks. The banks’ failure led to more panic. The Fed did not pay attention to the plight of the banks. Eventually, people lost confidence in the banking sector. People took their money and hid them under their mattresses, refusing to use or spend it. The result? Money supply was inhibited.
The Aftermath of the Great Depression: Economic Effects
The Collapse of the Stock Market
The crashing of the stock market was just the beginning of the Great Depression. It was not the only thing that was severely affected. The environment at that time did not favor those who had already invested their money. Many financial institutions had done that, and that led to a huge loss to the clients. It was also a double loss since not only had the clients lost their money, but the banks were also forced to close down. This is due to them (the banks) directly relying on the stock market. As a result of this, there was widespread panic all over, even to other people. This made them go to the other banks that were still open to completely withdraw their money. This kind of large withdrawal of money severely affected the banks’ operations, leading to their closure. Besides, those who did not reach their banks on time could not withdraw their money. As a result of the banks being closed, many people went bankrupt and could not claim anything.
Large-Scale Farmers Disadvantaged
Farmers were also significantly affected by The Great Depression. Even though they managed to survive other depressions, this one was the mother of them all. Before the onset of The Great Depression, most farmers were located at the Great Plains. This area was impacted so severely by drought and dust storms which were always terrible. This led to a phenomenon called the Dust Bowl. In addition to overgrazing, the farmers had to also deal with the effects of drought, thus substantially affecting the farmers. The farmers were even left without food and crops for their animals. The grass that their animals fed on had already dried up and disappeared over time. On the other hand, the loose dirt was blown away by wind, thus exposing the topsoil. Eventually, the farmers were left with no crops as the wind blew away everything in its path.
Small-Scale Farmers Disadvantaged
Unlike large-scale farmers, small-scale farmers were more disadvantaged. They had small pieces of land on which they had to work on to get something to eat. Most of these small-scale farmers requested for tractors from their respective governments and were then made to part with some amount of money to cater for them. The Great Depression greatly affected the farmers to the extent that they were unable to pay their debts. Also, they could also not fend for their families. Most of these farmers had also invested in the stock market and had savings in the banks. Since the stock market had collapsed, the banks and the farmers suffered also. Losing their investments and crops greatly affected how they related with one other and their contribution to the economy of the land. The state at large lost many laborers and this led to the deterioration of the economy of the nation.
The Great Depression led to many losing their jobs. These job losses significantly affected people's ability to put food on the table. While most families were forced to sell their homes and move into apartments, others were forced to move in together since the living standards were deteriorating as days went by. It was even complicated for people to divorce or separate (this was the period when the rate of separation and divorce reduced). Each person needed the other’s contribution, particularly when it came to paying the rent. As a result of ego, men who had already lost their jobs felt ashamed even to walk around town, and thus they were forced to stay at home. If it happened that all the wives and the children were working, the men felt that their status was being challenged. Even in this situation, the two categories mentioned above were forced to look for jobs. At some point, the women were even accused of taking the man’s place after getting a job. In the absence of steady income flow, it became much difficult for women to deal with matters concerning clothing, food and medical care (since at that time their main role was being housewives). Birthrates reduced as couples postponed conception until they could secure financial stability.
It was not easy to get jobs locally because the whole country had been adversely affected. Many people were all over looking for jobs. Many people could not afford luxurious commodities like cars, and therefore, very few vehicles were seen on the roads. Due to high maintenance costs, many vehicles were put on sale. The majority of teenagers were also highly impacted by the economic meltdown as they were the people who were seen on the roads up and down looking to get any kind of job.