Steven there. Shortages of everything from food to

Steven Barclay

Prof. Lippitt

HUM 2250H

02/01/2018

 

The Great Depression

The Great Depression was the largest economic recession
in US History. A recession is a period of time when the economy is in decline
following an economic peak. These can be caused by reduced trade, production,
productivity, sudden decreases in government spending, etc. The Great
Depression began in October of 1929 and lasted for 10 years. The stock market
crash of 1929 signaled the start of the depression. The Hawley-Smoot Tariff Act
caused a severe reduction in international trading by raising tariff rates
drastically. A tariff is a tax or fee that must be paid on certain imports and
exports. The increased tariffs discouraged outside nations to continue trading
with the US due to the cost of trading going up. This resulted in a steeper
downturn in the global economy. Banks failed when confidence in the banking
system was lost, and millions of people lost their life savings. Due to the loss
of confidence in the banking system, people began to poor into banks
withdrawing all their money. These bank runs caused widespread bank failures.
Since the banks had run out of money, people lost their life savings simply
because the money was not there. Shortages of everything from food to clothes swept
over the nation due to the lack of production in the US stacked on top of declining
imports and exports. After the end of World War II, there was a large movement
of people who started to sway into favor of a more socialist or communist
government due to fear of another depression or economic downturn. Overall,
there are many factors that caused the Great depression, and the effects are
still felt today.

The Stock Market Crash of 1929 is widely regarded as
the largest cause of the great depression, but there were many other key
factors that also played vital roles towards the start of The Great Depression.
A couple years after the stock market crashed, its value finally stopped
plummeting but by then it had lost over 80 percent of its original value in comparison
to the stock market prices of 1929. During the 1920s, the stock market was
rapidly expanding due to a booming economy. After reaching its peak,
unemployment was rising, and production had slowed down. This left stock prices
at an inflated level and it was only a matter of time before the stock bubble
popped. On October 18, 1929, the bubble finally popped, and prices began to
fall. On October 24, 1929, known as “Black Thursday,” almost 13,000,000 shares
were traded. On October 29, 1929, known as “Black Tuesday,” roughly 16,400,000
shares were traded, and thousands of investors lost their life’s fortune. After
the stock market crashed, people lost their confidence in the banking system. A
mass wave of people rushed into their banks to liquify their savings.
Unfortunately, the banks didn’t have enough liquid assets to give people their money
and were forced to closed. By the end of the Great Depression, over half of all
US banks had disappeared, and millions lost their life’s savings. The
Smoot-Hawley Tariff Act was passed in the name of protecting American jobs in
the agricultural industry from competitors in other countries. The act increased
import tariffs to reduce agricultural imports to protect US farmers from going
out of business. The act didn’t protect US farms, but it did add more economic
strain onto an already poor global economy. Farmers also suffered during this
time due to falling crop prices and droughts that caused dust storms in Kansas,
Texas, and Oklahoma, known as “The Dust Bowl.” The Dust Bowl lasted from
1930-1936 and caused seriously stunted the agricultural industry during its
time.

In the short run, the Great Depression was devastating
economically, socially, and politically. During the depression, thousands of
businesses were forced to close due to the harsh economic climate, lack of
production, and lack of resources. Due to the amount of businesses closing,
unemployment skyrocketed, and millions were left unemployed. By 1933, the
unemployment rate rose to an all time high of 25 percent. Those who were lucky
enough to keep their job endured major pay cuts. During the depression
everybody held onto what little money they had, and spending was not
encouraged. For the economy to recover after a depression spending needs to
increase. This wasn’t the case until the start of WWII when war efforts created
jobs to fuel the war, which allowed for more incomes, which provoked more
spending. During the depression, the US was plagued with food shortages,
homelessness rates increased dramatically, and education was unprioritized due
to children leaving school to go to work. It was an incredibly challenging time
for not only the US, but the entire world.

Underneath the thick layer of negative aspects of The
Great Depression there lie some good aspects the whole situation. Inflation
levels plummeted during the depression. Inflation is the rate in which prices
rise in an economy. Depressions help to regulate the levels of inflation, and
if it weren’t for depressions prices would continuously climb until nobody
could afford anything. During the depression prices for goods fell roughly 30
percent. After the depression, a lot of social programs were put into place
that would make it harder for another depression like The Great Depression to
occur again. The creation of a lot of social welfare programs occurred during
the depression. A lot of the social welfare programs that were put into place
made it so that life in the US was much more stable, and the chances of someone
losing everything due harsh economic climates were slimmed. At the time, this
seemed great because more people were swaying towards socialism and communism
after losing faith in capitalism and democracy.

            The Great Depression
set the stage for the Cold War as people moved from capitalism to socialism and
communism all over the world. Communism and socialism were becoming more
popular due to fear of another depression. Capitalism is founded on the belief
that production and property should be privately owned.  Communism is founded on the belief that all property
should be shared equally, and everybody should be provided based on their needs
and nothing more. In a communist society the government maintains control of
natural resources, production, and the distribution of all resources between
the people based on individual needs. Socialism is founded on the belief that
all property should be owned by the community itself rather than privately. Like
communism, socialism aims towards equality among everyone. The difference
between socialism and communism is that in a communist society the government
controls property completely, but in a socialist society property is controlled
by the people to a certain extent. People believed that capitalism was the root
cause of the depression due to the lack of stability, and security. People
believed that socialist and communist policies would make for a more stable
form of government that would provide everyone with equal opportunities to
pursue their dreams. Keynesian and Marxist economic theories became popular
while the economic theories of Milton Freidman (1912-2006) were almost shunned completely.
Karl Marx (1818-1883) was an economist that believed that communism was the
solution for social inequality. John Maynard Keynes’ (1883-1946) economic theories
also became quite popular. He believed that during times of economic hardship
the government should increase spending, lower taxes, and increase the money
supply to speed up the process of economic recovery. As more people shifted
towards believing communism was superior, especially in Europe, the United
States government feared that communism would spread all over the world. To
stop the spread of communism from reaching the US, the government used
propaganda to scare the people into fearing communism. This is commonly known
as the Red Scare. The government did this because the country was founded on
the beliefs that everyone has the right to life, liberty, property, and the
pursuit of happiness. The cold war officially ended after Mikhail Gorbachev
(1931-present) took power in Soviet Russia.

The Great Depression was the largest economic recession
in US History. The Great Depression lasted for 10 years beginning in the year
1929 and ending in 1939. Signaling the start of the Great Depression was the
Stock Market Crash of 1929. By raising tariff rates by as much as 50%, the
Hawley-Smoot Tariff Act severely reduced global trading, worsening the effects
of the Great Depression. Due to the cost of trading going up, the newly enacted
tariffs tremendously reduced global trade. This resulted in a steeper downturn
in the global economy. Millions of people lost their life’s savings when banks
failed when confidence in the banking system was lost. The loss of confidence
in banks urged people begin pouring into banks in an attempt to withdraw all of
their money. These bank runs caused widespread bank failures. Millions lost all
of their money due to banks closing after filing for bankruptcy. Due to the
lack of production, declining trades, and agricultural problems, the US was
plagued with shortages of food and other products all over the country. After
the end of World War II, there was a large movement of people who started to
sway into favor of a more socialist and communist government due to fear of
another depression or economic downturn. This was because majority of people
blamed capitalism due to its unpredictable nature. People started to believe
that leaving control of production and distribution of goods and services to
the government was a safer and more efficient strategy in comparison to leaving
those roles to the private sector. This marked the start of the Cold War. Overall,
there are many factors that caused the Great depression, and the effects are
still felt and discussed over 50 years later.