Many have asked the question, “What caused the Great Depression?” and to this day there has been little that is agreed upon, but there are a few causes that where agreed on. The causes that a majority agreed upon are as follows, lack of diversification, maldistribution of purchasing power, Credit structure, international trade. Now with each of these factors play a role in the downfall of the American economy and aid in the Great Depression.
First, There’s the lack of diversification in the economy, this is a huge problem because at this point in history the economy is tied solely to the automobile and construction industries, well we run into a problem in 1926-1929 this was the beginning of the end for the economy so when the market started to crash there was no back up markets like smaller industries for oil or Manufactures, so when there isn’t enough sectors in an economy when one essential sector goes belly up the whole economy does the same there wasn’t enough balance to be able to pull our economy out of the hole it dug, there where smaller sectors starting to pull up and trying to help but they didn’t have enough time to get their roots deep enough to withstand this huge economic slam.
Then when you add that there was a maldistribution of purchasing power in the economy only about half of the American people could participate in the economy and purchase goods produced in these industries, therefore there wasn’t a good chance of pulling through this kind of depression. In short there were many factors in the fall of the American economy which lead to the Great depression.
When an economy suffers significantly there is always a political agenda, and this is when political many American’s begun to take notice and participate. This is generation is known as the Boomers and to this day they are the most politically active generation. In their teens and early adulthood, they had to have a say in what was going on they are the ones that would burn their draft cards and march on Washington to have their views heard and to speak their mind. Thus, shows that there was a lot of problems associated with the great depression, many of these problems have been addressed like the economic down fall, long period of unemployment, labor strife, and cultural complications.
As for the long period of unemployment it was a hard time for everyone, unemployment rates got as far as 25% and this was bad, due to the high amount of unemployed individual’s there was no demand for products and services, which in hand cases more problems and companies are going bankrupt. With everything going down the drain in a matter of a couple years; everyone’s life was turned upside down, all that they had known to be normal just abruptly changed, people were out of jobs and they couldn’t really live everything was in shambles, people where living outside and having to wait in lines at the soup kitchen to get food, there was such a shortage and emotions were running high there was many food riots and violence.
Life was very different for these people and they had to stand up or get mowed over. As follows are some of the events that happened during the great depression, in march Herbert Hoover was elected in as the 31st president, on October 24th the stock markets start to decline, on October 29th also known as “ Black Tuesday” this is the day stock markets plummeted, then on June 17th the Smoot Hawley Tariff act was passed and many economic studies feel that this played a vital role in the cause of the great depression. In all this commotion there is a connection to make.
What is the connection between low employment rates and the low demand for products and services? Well the connection is simple with the unemployment rising every day, people are more worried about eating and trying to provide for their families, it is hard for people to go out and justify buying a car or other services, this is not the time for that well what happens if no one is participating in the market well bad news, the companies go bankrupt and there Is no money in the economy so everything continues to fall and there is no hope for redemption.
There is new government policies that are in the making and the face of this is called , “The New Deal was a series of programs and policies of Relief, Recovery and Reform to combat the effects of the Great Depression during the presidency of Franklin D. Roosevelt. The New Deal fell into two stages relating to the dates the programs were initiated.
The First New Deal encompassed national planning laws and programs for the impoverished from 1933 – 1934. The Second New Deal covered the period from 1935 – 1939 and focused on social reform together with policies and programs to speed up the nation’s recovery. The New Deal programs helped all Americans and provided jobs for millions of people. Many New Deal programs still continue today.” ( ) this about sums up the new deal and what it was intended for. Programs included in this deal were as follows:
- The Agricultural Adjustment Administration (AAA) brought relief to farmers by paying them to curtail production, reducing surpluses, and raising prices for agricultural products.
- The Public Works Administration (PWA) reduced unemployment by hiring the unemployed to build new public buildings, roads, bridges, and subways.
- The Civilian Conservation Corps (CCC) employed hundreds of thousands of young men in reforestation and flood-control work.
- The National Recovery Administration (NRA) established codes to eliminate unfair practices, establish minimum wages and maximum hours, and guarantee the right of collective bargaining.
- The Tennessee Valley Authority (TVA) brought cheap electricity to people in seven states.
- The Homeowners’ Refinancing Act provided mortgage relief to the unemployed.
- The Securities Act of 1933 provided government oversight of stock trading.
- The Federal Deposit Insurance Corporation (FDIC) protected depositors’ bank accounts.
These are just to name a few programs and what they were used for. Many will ask did this “New Deal” it wasn’t good at bringing the end of the Great Depression but it did provide some relief this helped drop the unemployment rate and bring some jobs out for people to work and start spending in the economy again. I want to bring attention to a few of the programs in the new deal that I feel are significant and need to be addressed: First, you have the NRA, and no this is not that National Rifleman’s association, back in this time era is was the acronym for the National Recovery Administration (NRA) established codes to eliminate unfair practices, establish minimum wages and maximum hours, and guarantee the right of collective bargaining.
Then we have the AAA which was The Agricultural Adjustment Administration (AAA) brought relief to farmers by paying them to curtail production, reducing surpluses, and raising prices for agricultural products. In my opinion these two programs stand out because they were trying to limit how many hands were in the pot so to speak. Most of these programs were ruled out because they were considered unconstitutional and the new deal keeps getting revised.
Behind every new proposal or act to help the economy in some way, there is always controversy from both sides and this plan was no different, there was opposition from the far left conservatives who were operating under the interest group called the American Liberty League, they were in opposition to the new deals dictorial policies and its supposed attacks on free enterprise, they also gained support from the communist party and the Socialist party. The new deal in my opinion was a growing pain it always in the rough it needs to be revised till they get it right and that is what happened: I think that the new deal was positive because at least someone was trying to shine light into the darkness and it wasn’t the best deal but with a little fixing one day it would work.
Economists put blame on the new deal for making the depression so much worse and protracted because it put to much power in one hand and it moved way to slowly and cautiously to provide any fiscal stimulus, they needed mass growth and recovery but the new deal was only providing slight relief. In the following years there is many things happening FDR has implemented the new deal, it need revions then he comes out with the second version, Rossevelt is re-elected with an even bigger landside than against hoover, there is substantial economic growth but a ressission soon follows, and in 1941 the USA joins WW1 and this is what brough the end to the great depression because the demand was there and people were working to supply the troops with all they needed and that boosted the economy.
In concultion, there has been a lot of change throughout history it is mostly a trial and error to see what works, there is going to be fighting and losts of opposition it is the ability to come together and make a difference that will either make or break us.