TheGreat Depression of 1928Introduction: The greatdepression was the severe economic downturn in the history of industrializedworld that began from 1929 and lasted until about 1939.
It was the longest,deepest and widespread depression experienced ever by the westernindustrialized world. This depression may said to have began with thecatastrophic collapse of stock market prices on New York stock exchange onOctober 24, 1929 which cause the Wall Street into a panic and traders sold $12.9million of shares in one day which also known as Black Tuesday . Over the next three years stock market pricescontinued to fall. The following table shows the considerable decrease of stockprices throughout the period. High Price Sep 1929 Low Price Nov 1929 American Can 181 86 American Telephone & telegraph 304 197 Anaconda Copper 131 70 General Electric 396 168 General Motors 72 36 Montgomery Ward 137 49 New York Central 256 160 Radio 101 28 Union Carbide & Carbon 137 59 United States Steel 261 150 Westinghouse E & M 289 102 Woolworth 100 52 Electric Bond & Shares 186 50 Source:Frederick lewis, Allen, Only yesterday, pg241, In 1932 the dropped investment and consumerspending caused steep decline in industrial output around 54percent of its 1929level which forced companies to laid off their worker. In 1933 around $15million Americans were unemployed and half of the United States financialinstitutions were failed when this depression reached its lowest level. Thisgreat depression was began in United States of America but quickly turned intothe world wide western economic countries.
Impact& Causes by the great Depression This depression caused many farmers tolose their farms at that time, years of over cultivation, and the droughtcreated the “Dust Bowl” in theMidwest. It ended the agriculture in a previously fertile region. Thousands offarmers and other unemployed persons look to work in California. Many ended upliving as homeless persons others moved to shantytowns called “Hoovervilles”During the great depression thepresidency of United States (HerbertHoover) is also crippled which led to the election of new president Franklin D Roosevelt in 1932. Whopromises the nation of new deal and he becomes the nation’s longest servingpresident. The economic dip wasn’t just confined to US but it also effectedmuch of the developed world. In Europe the Nazis get the power to came inGermany which began the WWII.
Following are the causes of the great depressionin details.1. The StockMarket Crash of 1929 On ThursdayOctober 24th 1929, market plunged at the opening bell, a recordshares were traded around $12.9 million which is also known as “Black Thursday” then after five dayson 29th October around $16 million shares were traded after theanother panic wave swept the Wall Street making the worthy shares ends like aworthless and those investors who bought shares by borrowing money after twomonths they were wiped out by losing $40 billion of investments. As consumersconfidence lost by this market crash, the dip of spending and investment leadto industries and businessman to slow down their production and began firingtheir personnel and who remained hired their wages change into cut down. Thisincreased the unemployment ratio in United Stated by half of the workforce. Eventhough a number of losses regained by the market by the end of 1930, but theeconomic system was devastated and United States of America simply enteredwhich is called the Great Depression. 2.
Failures ofBanksWhenthe stocked rippled the whole economy in 1930 the first wave of banking panicbegan and large number of investor lost the confidence on their bank anddemanded their deposits in cash. Second wave came in 1931 when more then 3000banks were collapsed and people lost their money after this wave more peoplespanicked and they withdrew their money and put it under their mattressesforcing more banks to shutdown and by the end of these waves more than 9000banks had failed that further decrease the money supply. The fed didn’t putenough money circulation to get the economy growing again instead they allowthe US dollar total supply to fall 30 percent.
3. EconomicFactor Duringthe Depression the economy of the country shrank 50% in the first five years.In 1929 the output of the economy was $105 billion, as measured by GDP. In 1930the US raised the tariffs up to 50% on imported goods to increase the demandfor domestic products.
However increasing the demand of domestic items itcreates unemployment in abroad as the factories shut down and economy againshrank another 8.5% of GDP, then in 1931 it again fell 6.5% and then 12% in1932 the country had faced 5 years contractions.Thenew deal boosted the GDP growth to 10.8% in 1934 and its going up for next threeyears until in 1938 the government cut the new deal and the depression returncausing economy shrank 3.3%. But the WWII preparations boost the economy up to8% in 1929 and 8.8% in 1940.
Next year Japan bombed Pearl Harbor, and the USentered the WWII. Here are the details of GDP of the economic depression. Year Nominal GDP (trillions) Real GDP (trillions) GDP Growth Rate 1929 $0.105 $1.057 NA 1930 $0.092 $0.
967 -8.5% 1931 $0.077 $0.905 -6.4% 1932 $0.060 $0.788 -12.
9% 1933 $0.057 $0.778 -1.3% 1934 $0.067 $0.862 10.8% 1935 $0.
074 $0.939 8.9% 1936 $0.085 $1.061 12.
9% 1937 $0.093 $1.115 5.1% 1938 $0.087 $1.078 -3.3% 1939 $0.
094 $1.164 8.0% 1940 $0.103 $1.266 8.8% Source: www.
jraces.com/s_nominal+us+gdp+growth/4. Political and the New Deal Thisdepression also shaken the politics of the United States in unfetteredcapitalism.
Herbert Hoover, a Republican who additionally served as USsecretary of commerce, believed that the government should not directlyintervened this economic depression and has no responsibility to create jobsand provide financial remedy for the residents. As a result people voted forFranklin Roosevelt. He won an overwhelming victory in the presidential electionMarch 1933. After electing he take on spot action to address the USA’s economicwoes and promised that government spending might end this depression.
Atinauguration day he ordered every state of US to close all remaining bank andannounce the four day bank holiday. During the closer of banks so the congresscould pass the legislation bill to reopen those banks to gained the peopletoward restoring the public confidence. 5. DroughtCondition This economic devastation of the depressionwas worse by environmental destruction. After long years drought coupled withpoor farming practices created a vast region from southeast Colorado to theTexas that came to be called the Dust Bowl. Massive dust storms blocked townskilling the crops and animals, making people sick and causing millions ofdamage which was unknown.
Recoveryfrom the Great DepressionAfter the new president elected inthe US, he promises to create the programs to end the great depression withinhis 100 days of his presidency he signed the new deal which created 42 newagencies which are designed to create jobs, allow unionization and provideunemployment insurance. Some are Tennessee Valley Authority (TVA), which builtdams to control the flooding and hydroelectric projects provide electricity,and the Work Progress Administration (WPA) program who give permanent jobs to8.5 million people from 1935 to 1943. Many of these programs still workingwhich include social security, Security and Exchange Commission and the FederalDeposit Insurance Corporation, these programs guard the economy and helpprevent another depression. This great depression of era had fueled the rise ofthe extremist political movements in various European countries, financialstress made Germans to elect the Adolf Hitler’s Nazi party in 1933. If FranklinD. Roosevelt had spend enough on the deal to end depression before Nazi’s cameinto power the WWII would never be happened.