Some critics regard it as an American strategy to control the world; however, the great depression (1929-1939) was the longest and deepest economic downturn in the western world. The roaring industrialization of the twenties marked a turning point for many Americans welcomed by the Jazz age. Women became full of life and started drinking, wearing short skirts and worse of all, smoking same to men (Freedman 61). Many average American bought automobiles accosted by household appliances on credit. In as much as many businesses grew by 65% from manufacturing to mechanization, workers wage only rose by 8%. At the same time, inequality grew by 0.1 percent pushing the poor to worse levels while the rich gained more wealth (Mcquaid 636). Evidently, with the rising personal debts and a consistent production of more goods, a balance was unattainable hence triggering a great depression on the lack Tuesday of October 1929. The stock market crashed leading to the worse economic collapse felt all over the world including various industrialised nations such as Europe.
Apart from worsening wages, the great depression led to the closure of 11,000 banks out of 25,000 by 1933 in the United States. Notably, the failure attracted a nationwide loss of confidence in the economy. As a result, many people were not willing to invest or meet the high production at the time. Certainly, this aggravated the spiral downfall hence putting into question the relationship build by America from World War I. historically, America emerged from world war I as a major financier of various countries including Europe. Countries like Germany had been weakened by the war and had to pay for war reparations (Freedman 62). It, therefore, asked for a lot of financial assistance from America, which appeared to be enjoying financial stability. Therefore, many countries that suffered from the great depression mainly had debt or credit related issues with the United States. Germany, for instance, had cases of rising unemployment represented by 6 million people, which is 25% of the entire German workforce.
Causes of the great depression
The great depression was felt in different countries around the globe. It’s huge effects not only forced a new deal in America but directly led to extremism in Germany and most importantly World War II. As a result various key issues contributed to the fall of world economy.
Before the industrialization period, limited Americans had a limited access to the banking sector. However, as industrialization gained momentum more banks came into light. Americans gained interest in savings and use of banking institutions for various purposes. The interest triggered opening of more banks hence growing the American economy tremendously. Interestingly, not only the Americans benefited from the financial institutions but also external partied who were in need of financial assistance. In the 1930s over 9000 banks failed raising more questions into the future of America (Berton 46). Insurance was not a common thing to come hence many bank deposits remained uninsured. As operations became worse, many banks lost their savings while surviving banks were not sure of the future. In response, many banks stopped financial lending, leading to less expenditures hence the depression.
Stock market crash of 1929
Arguably, during the industrialization, stock market was a sure place to register quick riches. Investment made in the stock market appreciated in value within shorted periods attracting more investment than anticipated. Statistically, the stock market crashed in the black Tuesday of October 1929. Two months down the line after the original crash, stakeholders lost over $40 million (Wicker 44). The loss led to massive instability in stock prices and marginal value. As a result, many industries were not sure of the future in gaining the market value against other currencies. Despite starting to gain value in the late 1930s, the change was not enough to bring America into its feet. The crisis hence led to the financial burden and hole hence the depression.
American-Europe economic policy
In the wake of supremacy show casts, American gained a great milestone through industrialization. The country made ties with different countries not only to improve their welfare but also to harness control. One particular relationship that contributed to massive problems include the America-Europe policy in response to falling businesses and financial problems, the government introduced a smoot-Hawley Tariff to protect companies (Wicker 49). Certainly, this initiated high taxes for import while other products flooded the market. Notably, this led to less trade between America and other countries hence attracting other countries into the great depression. Economic retaliation, therefore, forced different countries including Europe to suffer the same consequences of the financial turn.
John Steinbeck notes in his book The Grapes of Wrath that different natural conditions led to the great depression apart from financial conditions. In as much as it is not a direct effect, the 1930 drought in Mississippi valley can also be linked to the general outlay of the great depression (Mcquaid 635). As a result of the natural calamity, many people could not pay taxes or debts. The financial institutions lacked the capacity to work while shops did not have the ability continue operations. Conceivably, this weakened the entire financial sector raising more questions than answers. Many farmers had to sell their farms, shops had to close and profits channelled to basic requirements. From this perspective, the great depression was not only a factor of finances but also other shock absorbers within America.
Solutions to the great depression
Officially, the great depression ended at the beginning of World War II in 1941 when America became involved in the war. Retaining stability after the great depression was a major task; however, it was inevitable considering the many problems. Among the many institutions and programs that aided in the recovery, include the Tennessee Valley Authority. It built hydroelectric power sources and dams to control flooding and provide electricity to the communities in the south. Works Project Administration (WPA) provided permanent jobs employing over 8.5 million Americans from 1935-1943 (Folsom, 01). Apart from solving internal problems, several things had to be done to solve the stock market crash, hoarding money, the gold standard, federal reserve board decisions and malinvestment scenarios. The sticky wages had to be solved to calm inequality of income and back up production. Conceivably, World War II was a natural recovery process from the great depression. Over 12 million Americans went into the war reducing the number of people to spend of demand for money. Additionally, many people were also deployed in defence related jobs hence reducing the number of unemployed. Seemingly, the war jobs took care of 17 million people who were unemployed at the time. In as much as this questions the value of world peace, it is imperative to note that the strategy worked well towards stimulating stability.
The global war hiked debt from $49 billion to over $260 billion in 1945 creating panic as to the future of great depression. President Roosevelt assisted by the new dealer’s came up with an ultimate solution, as they feared the great depression might re-appear. Hitler and Hirohito gave up their fight and FDR halted many of its dealings triggering congress to drop WPA, CCC and NYA. Therefore, Rosevelt unveiled various strategies to ensure people and the world at large enjoys stability from the depression. Notably, a package of new entitlements came into light including adequate Medicare. In order to assure Americans against any form of eventualities, the government resorted to medical arrangements that suit good living conditions. They also introduced decent homes for people back at home to ensure that people concentrate on specific issues of building the economy (Cravens 50).
A number of useful and remunerative jobs also came into light as part of the major proposal to control the great depression. These jobs were to ensure imposed obligations of taxes resonate well to the entire economy. Apart from the incisive goods, tax reforms also assisted in reforming the economy. For instance, the government cut the excessive reform tax to 38 percent and top income to 86%. Despite being high, the cuts sent a message to many business people that they could keep much of their profits as well as income. In essence, the free market systems, lower taxes and balanced budgets reduced the rate of unemployment, controlled income and subdued all the pending sourced of depression.
In conclusion, the great depression greatly affected people. It introduced hardships and extremism that led to death and severe problems. In Adolf Hitler regime, German aggression initiated war in Europe killing many people while in America health, education and security led to many problems. Many businesses lost financial stability while investors had to accept their losses in stocks. A number of natural conditions including stock performance, unemployment and inequality triggered the great depression. Notably, several measures were employed to control the bad luck. Some of the viable solutions included reduction of unemployment levels and tax cuts. It also entailed providing proficient living conditions that has adequate security and lighting system. Several institutions such as WPA also came into light to control both the natural and manmade conditions that might have led to the depression.
Folsom, Burton. FEE. What Ended the Great Depression?. February 24, 2010. Web Nov. 21, 2014. http://fee.org/the_freeman/detail/what-ended-the-great-depression
Freedman, Russell. Children of the Great Depression. New York: Clarion Books, 2005. Print.
Berton, Pierre. The Great Depression 1929-1939. Toronto: Anchor Canada, 2001. Internet resource.
Wicker, Elmus R. The Banking Panics of the Great Depression. Cambridge: Cambridge University Press, 2000. Print.
Cravens, Hamilton. Great Depression: People and Perspectives. Santa Barbara, Calif: ABC-CLIO, 2009. Print.
Mcquaid, K. “Corporate Dreams: Big Business in American Democracy from the Great Depression to the Great Recession.”Journal of American History (2012): 635-36. Print.