The great Depression was a global phenomenon characterized by an economic slump that hit most industrialized nations across Europe and North America. Specifically, this global phenomenon lasted between 1929 and 1939 making it the longest and most catastrophic economic slump experienced in developed countries across Europe (Modern American Poetry1). Although some countries like Germany were experiencing the economic depression by 1928, the economic slump that hit U.S economy in October 1929 marked the beginning of the great depression (Smiley 1). The catastrophic collapse of stock-market prices on the New York Stock Exchange (“Black Thursday”) in October 1929 remains the most severe economic depression experienced in America (Modern American Poetry1).
Various factors caused the great depression. Apparently, the boom psychology and speculative euphoria resulted in underlying weaknesses and imbalances within the U.S. economy that caused the great depression (Modern American Poetry1). The federal government and financial institutions lacked capacity to address the underlying weaknesses and economic imbalances. Indeed, the American government could not sustain the rising personal debt, increased production of goods, and imbalance between the rich and the poor leading to the stock market crash of 1929. Economists assumed this was simply a correction of the market and hence did nothing to contain the situation. President Herbert Hoover underestimated the severity of the crisis and assured U.S citizens that the economic slump would not last for more than 60 days (WGBH Educational Foundation 1). Herbert did not consider government’s intervention on the matter. Consequently, stock prices continued to fall in America. By the end of 1932, stock prices had dropped to 20 % of their 1929 value.
Apparently, the great depression started in America and spread to other industrialized nations across the globe between late 1929 and early 1940s. The U.S had forged fundamental relationships with other European economies after the First World War that allowed the great depression to turn into a global economic crash (Modern American Poetry1). The First World War, war debts, and the need to pay reparations (Modern American Poetry1) weakened European economies forcing them to rely on America, which was the chief creditor after the war (Quah and Crowley 8). As such, the economic slump in America and the depreciation of the American investment credits to Europe fostered economic challenges in Europe. Ideally, countries that were deeply indebted to America like U.K and Germany experienced the most severe effects of the great depression (Quah and Crowley 8-9). For instance, unemployment levels rose sharply in Germany between 1929 and 1932 where about 6 million people became jobless (Modern American Poetry1).
The recovery that followed the economic slump defined the great depression in America. Notably, a recovery process from the great depression that started in 1933 was ineffective and slow in America. Indeed, the recovery process was active in 1933 but stalled in 1934 and 1935 (Smiley 1). However, the recovery process resumed in 1935 but stopped in 1937 when another economic slump occurred in America (Smiley 1). As such, the U.S economy was yet to recover from the great depression when America entered the First World War in 1942.
The great depression had serious consequences. Many banks tumbled as businesses closed. The continued decline in stock prices strained major financial institutions holding stocks forcing them into insolvency. Indeed, about 11,000 banks in America had failed by the end of 1933 (Modern American Poetry1). Consequently, the failure of major banks and the loss of confidence in the American economy discouraged Americans from spending, which led to reduced production and demand for American products (WGBH Educational Foundation 1). Manufacturing output in America fell to 54 percent of its 1929 level, and about 15 million Americans lost their jobs (Modern American Poetry1).
Politically, the great depression affected America politics. Many Americans blamed President Herbert Hoover for underestimating the severity of the crisis and doing nothing to address the issue. Americans ridiculed him by referring to the shantytowns springing up around U.S as “Hoovervilles” (Gunderson 44). However, Franklin Delano Roosevelt who a governor by then offered Americans a New Deal that would contain the effects of the great depression (Gunderson 30-31). In America, economic distress influenced the 1932 Presidential elections. Democrat Franklin D. Roosevelt won the elections in a landslide victory (WGBH Educational Foundation 1). The election of President Franklin D. Roosevelt marked a new political and economic era in America.
Indeed, President Franklin D. Roosevelt introduced significant changes in the U.S economy. Roosevelt enhanced federal regulations and infrastructure to promote recovery from the great depression (Modern American Poetry1). Specifically, he addressed the depression with urgency by announcing a four-day bank holiday where the Congress passed the Emergency Banking Relief Act to stabilize the banking system (Gunderson 38). President Hoover held the view that local governments and non-governmental organizations should offer food reliefs to the unemployed and homeless. Moreover, Roosevelt’s administration created Social Security to cater for the elderly population and compensated the involuntarily unemployed Americans (Gunderson 38). Eleanor Roosevelt advocated for black rights to address the needs of many African Americans who lost their jobs to the whites during the great depression (WGBH Educational Foundation 1). She also promoted New Deal programs that called for fair treatment among all Americans (Gunderson 30). Roosevelt used his first 100 days in office to lay a sufficient foundation for his New Deal that would rescue the United States from economic challenges.
The New Deal restored good relations between Americans and the federal government since Roosevelt manifested his commitment to caring for the needy and regulating the economy. The New Deal established liberal political alliance of labor unions and minority groups that enabled them to negotiate better-working conditions (WGBH Educational Foundation 1). Indeed, the enactment of the Wagner Act enhanced labor negotiations between employers and employees through labor unions that acted as an arbiter to ensure better contractual negotiations (Gunderson 34). Moreover, the New Deal mandated the administration to offer relief to poor farmers. However, despite numerous interventions by President Franklin D. Roosevelt, unemployment, and economic stagnation persisted in America but at a reduced rate. Indeed, by the start of the First World War, 15 % of American labor force had no jobs. However, the flooding of American companies with diverse foreign orders during and after the First World War led to a rapid decrease in unemployment levels (Modern American Poetry1).
Gunderson, Cory Gideon. The Great Depression. Edina, Minnesota: ABDO, 2010. Print.
Modern American Poetry. About the Great Depression. Web. 3 March 2015.
Quah, Chee-Heong, and Patrick M. Crowley. “A Reconsideration of the Great Depression.” South Asian Journal of Management16.3 (2009): 7-23.
Smiley, Gene. “Great Depression.” Library Economics Liberty, 2008. Web. 3 March 2015.
WGBH Educational Foundation. “The Great Depression.” Pbs.org, 2013. Web. 3 March 2015.