The Great Depression, 1929-33

The Great Depression, 1929-33

Overview

  • The Great Depression was the most severe economic downturn in the industrialised world, affecting not just the US, but also other nations.
  • It began in 1929 with the Wall Street Crash and lasted until the late 1930s, though it hit its worst point in the winter of 1932-33.

Causes

  • It was primarily sparked by the collapse of the stock market during the Wall Street Crash, which wiped away billions of dollars of investment.
  • Other causes included high levels of national debt, severe drought conditions in the agricultural sector, and laxity in enforcing regulations in the banking industry.
  • The decline of the construction and automobile industries also contributed, as did the over-expansion of credit.

Impacts

  • The Great Depression led to massive unemployment, rising from a low percentage in the 1920s to a high of nearly 25% in 1933.
  • A steep drop in consumer spending and overall economic demand contributed to the slump.
  • Numerous banks and businesses collapsed, unable to weather the storm, which resulted in several social and health effects including an increase in suicide rates, a decrease in marriage rates, and significant health decline.
  • The best summary measure of the economic impact comes from the decline in the Gross National Product, which fell by nearly 50% from 1929 to 1933.

Responses

  • Initially, the government adopted a policy of laissez-faire, hoping that market forces would correct the situation. Over time, it became clear that government intervention was necessary.
  • President Franklin D. Roosevelt launched his New Deal in 1933, aiming to stabilise the economy by providing jobs, supporting agriculture, and offering relief to the unemployed.
  • The New Deal saw a massive increase in government spending and regulation, marking a major shift in the US economic policy.

End of The Depression

  • It is widely agreed that the Great Depression ended with the onset of World War II, as the increased government spending in defense stimulated the economy.

In summary, the Great Depression was a landmark event in the history of the US, shaping its economic policies and leaving a permanent mark. It’s important to understand the causes, impacts and responses to this event to comprehend both the era and the future economic changes in the country.