Great Depression in the United States
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Great Depression in the United States
March 23, 2004
The Great Depression was the worst and longest economic collapse in the history of the modern industrial world, lasting from the end of 1929 until the early 1940s. What was once the land of hope and hopefulness had become the land of depression. The American people were questioning all the sayings on which they had based their lives - democracy, capitalism, and individualism. The Great Depression saw rapid declines in the production and sale of goods and a sudden severe rise in unemployment. According to Robert S. McElvaine author of Great Depression in the United States “…at the worst point in the depression, more than 15 million Americans--one-quarter of the nation’s workforce--were unemployed (1).” Thirteen million people lost their jobs and could not find work. Banks and businesses failed, leaving the entire county in great need. The depression was caused by a number of serious weaknesses in the economy, income was unevenly distributed, Americans spent more money than they earned, farmers faced low prices and heavy debts, and the lingering effects of World War II. The depression ended in the united Sates only when massive spending for World War II began.
Two things happened during the twenties that triggered the Great Depression one of these events was the crash of the Wall Street stock market in October of 1929. The stock market collapsed after steady declines in production, prices and incomes over three previous months which forced the speculators to revise their expectations. Anxiety soon gave place to panic which led to the crash. However, the depression affected the different industrialized countries in various ways and degrees of intensity. The collapse of the stock market produced a chain reaction throughout the American economy. Most of the buying power of the country was concentrated in the hands of a minority of rich people. Consumer spending went into a sudden and pronounced decline, beginning especially with luxury items. Because the fact that industry had not shared its profits with labor in the form of increased wages for increased productivity, there was no great reservoir of mass purchasing power to keep goods moving (Goldston 42) Between 1923 and 1929, manufacturing output per person/hour increased by 32 percent, but workers’ wages grew by only 8 percent (McElvaine 2). The second event was that in the 1920s income was distributed very unevenly, and the portion going to the wealthiest Americans grew larger as the decade proceeded. Corporate profits shot up by 65 percent in the same period, and the government let the wealthy keep more of those profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by more than two-thirds (McElvaine 2). Technology had eliminated more industrial jobs than it had created; the supply of goods continued to exceed demand; the world market system was basically unsound. The high tariffs of the Smoot-Hawley Act exacerbated the downturn. As business failures increased and unemployment soared--and as people with dwindling incomes nonetheless had to pay their creditors--it was apparent that the United States was in the grip of economic breakdown. Most European countries were hit even harder, because they had not yet fully recovered from the ravages of World War I. After World War I the united Sates became the world’s chief creditor as European countries struggled to pay war debts and reparations. Many American bankers were not ready for this new role. They lent heavily and unwisely to borrowers in Europe, especially Germany, who would have difficulty repaying the loans, particularly if there was a serious economic downturn. These huge debts made the international banking structure extremely unstable by the late 1920s.
The deepening depression essentially coincided with the term in office (1929-33) of President Herbert Hoover. According to the Editors of Time-Life Books authors of Hard Time: The 30s, “the stark statistics gave no real picture of the situation—of the pitiful men who sold apples on the city street corners; of the long lines of haggard men and women who waited for dry bread or thin soups, meager sustenance dispensed by private and municipal charities; of the bloated bellies of starving children; of the distraught farmers blocking roads to dump milk cans in a desperate effort to force up the price of
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Systemic risk, Great Depression in the United States, Great Depression, Herbert Hoover, New Deal, Depression, Franklin D. Roosevelt, Unemployment, Deflation, SmootHawley Tariff Act, Economic collapse, Federal Deposit Insurance Corporation
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