Causes of the Great Depression


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In the early 1920s, U.S citizens were living the American dream. The economy was booming and the people were prospering. The stock market was roaring. Even though it was a gamble to invest in it, people were eager to change their way of living and some took that chance. No sooner than later, their life drastically changed for the worst. The stock market collapsed and investors lost everything leading to a Great Depression. The Great Depression suffered detrimental effects on human and social capital. Now, the nation was left to figure it out where or what they would find their next meal or where they were going to sleep. During the 1929 Crisis, which became popularly known as The Great Depression, was a major economic crisis that persisted until World War II and was considered the worst and longest period of economic recession in the twentieth century. Among all the consequences that the crisis has brought, the high unemployment rates, the decrease in industrial production in several countries, as well as the sharp falls in GDP, stock prices, among others. Practically all the world had been involved in this difficult time, which had hampered the economic activities of many countries. Beginning in July 1929, American industrial production began to fall, giving rise to what would be known as The Great Depression, this economic recession dragged on until October 24, when the stock market saw the values of its shares dropped completely, causing thousands of shareholders to lose everything pretty much overnight. From then hundreds of commercial and industrial business foreclosed, which drastically raised unemployment rates and further worsened the effects of the recession. Throughout the crisis of 1929, President Herbert Hoover committed a serious of mistake that worsen the conditions of the depression, making it last even longer. The downfall of the stock market was not the only cause for the Great Depression. There were many factors that led to this economic disaster. The government took a great part in this catastrophic event. According to the Foundation for Economic Education article, these are the reasons that caused the Great Depression: From 1929 to 1933, production at the nation’s factories, mines, and utilities fell by more than half. People’s real disposable incomes dropped 28%. Stock prices collapsed to one-tenth of their pre-crash height. The number of unemployed Americans rose from 1.6 million in 1929 to 12.8 million in 1933. At the height of the Depression, one of every four workers was out of a job. When War World One came to an end, some European countries had their economies weakened, while the United States grew more and more, profiting from the export of food and industrialized products. As a result, North American production became accustomed to this growth, which increased day by day, especially between the years 1918 and 1928. It was a scenario with many jobs, low prices, high production in agriculture and the expansion of credit that unbridled consumerism. The problem for the United States was that Europe began to reestablish itself, which led to less and less imports from the United States. 

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Now, the American industry had no more to sell the exaggerated quantity of goods, there being more products than it seeks. This has led to a fall in prices, a fall in production, and consequently an increase in unemployment. These factors led to a fall in profits and a halt in trade, leading to a stock market crash, which subsequently broke it. In short, the crisis of 1929 was due to overproduction, which was not prepared for the lack of demand, and wiped out all the stranded goods. Many countries have suffered from the great American recession, resulting in great effects similar to the United States of America – the closing of banking, commercial, financial and industrial establishments, which resulted in the dismissal of thousands of workers. In Brazil, the crisis affected the coffee sector. The US was the largest purchaser of Brazilian coffee, which in the midst of this turbulence caused Brazil to see itself in a situation of declining exports. So that the product was not devalued, the Brazilian government bought and burned tons of coffee, reducing supply and maintaining the price of the main product of the country. This induced the coffee growers to invest in the industrial sector, which in a way was positive for the Brazilian industry. Both working-class and middle-class families were dramatically affected by the Great Depression. They lost their jobs and their homes. Businesses went bankrupt and the farming industry suffered a great deal. Hoover’s administration did little to nothing to help business and the people get the support needed to get it back on track. Women and children were the ones mostly affected. With the male head of the household unemployed or underemployed, an enormous amount of stress was bestowed upon family members. The feeling and shame of not being able to provide for their families had a toll in the male figure, causing many to commit suicide. They emotionally distanced themselves from family and friends. In order to provide economic support for their families, women and children were forced to leave home to seek employment. In the 1930s, the number of married working women increased as they left home to get jobs. These were usually low-paying jobs, as they frequently would be working in manufacturing sectors. They also contributed to their household by planting a vegetable garden, conserving and canning the produce, mending or remaking old clothes. Children contributed by delivering a newspaper, working in groceries stores, doing custodial work. Girls would stay home and take care of younger siblings while their mothers worked outside the homes. With poverty well spread all over the country, people were scraping trash for food and sleeping in card boxes, tents, subway station or wherever they would find shelter. Others were committing crime deliberately and were happy when they got caught because that meant they would have a free place to sleep and food for one night in jail. shows the depression’s impact on the family and home. In 1933, the average family income had dropped to $1,500, 40 percent less than the 1929 average family income of $2,300. Millions of families lost their savings as numerous banks collapsed in the early 1930s. Unable to make mortgage or rent payments, many were deprived of their homes or were evicted from their apartments. Both working-class and middle-class families were drastically affected by the Depression. 

In 1934, with families being disorganized and deprived of money, people were putting off their wedding, putting off their divorce, because of the inability to pay the fees that each situation required. Birth rate also decreased. Families were living in a precarious conditions In many cities, only the most destitute families could receive welfare, and the childless or single were not eligible. Some people managed to earn a few cents a day shining shoes or selling apples. President Hoover later said, and possibly believed: “Many persons left their jobs for the more profitable one of selling apples.” Still, this saved a few from the humiliation of accepting charity. Seeking a solution to the serious problem, American voters decided to elect Democrat Franklin Delano Roosevelt to the presidency, hoping he would reinstate the American economy. In the year 1933, he put into practice the New Deal, which caused the government to control the prices and production of industries and farms. It was then possible to control inflation and prevent inventory accumulation. The Plan also included investments in public works, such as the improvement of roads, railways, electricity, among others. Thus, the first results began to appear, with a significant decrease in unemployment. With the development of the program, the American economy was gradually re-entering, and by the early 1940s, it was functioning normally. Franklin Delano Roosevelt promised that he would act swiftly to face the “dark realities of the moment” and assured Americans that he would “wage a war against the emergency” just as though “we were in fact invaded by a foreign foe.” His speech gave many people confidence that they’d elected a man who was not afraid to take bold steps to solve the nation’s problems.“First of all,” he said, “let me assert my firm belief that the only thing we have to fear is fear itself.” The New Deal was a set of economic and social measures to solve the 1929 Crisis. The plan articulated state and private investments, and reforms to adapt various sectors of the economy and stimulate consumption, thus boosting the economy. The New Deal was carried out between 1933 and 1937, aiming to recover the economy from the crisis of overproduction and financial speculation. The measures taken in this period sought, above all, the generation of jobs. With this, the government intended to increase the consumption of workers creating a virtuous cycle of development. Some measures of the New Deal: Enormous investments in public infrastructure works, especially in the construction of roads, railways, hydroelectric power plants, bridges, hospitals, schools, airports, and popular houses; Granting of subsidies and loans to small producers; Control of the issuance of currencies, in parallel with the devaluation of the dollar; Supervision and control of the activities of banks and other financial and economic institutions, in order to make fraud and speculation difficult; Control of agricultural and industrial production and prices; Legalization of trade unions; Reduction of working hours to eight hours a day; Creation of Social Security and minimum wage.

The Depression-era bequeathed a mixed legacy to American families and households. Perhaps the major positive aspect of this legacy was the idea that the economic security and welfare of the family should be a fundamental national goal. To be sure, this idea was imperfectly realized in the New Deal welfare state, which often discriminated against women wage-earners and relegated the families of blacks and other nonwhites to second-class status. Nevertheless, during the 1930s and subsequent decades, the federal government did come to play a major role in providing for the health, welfare, education, and housing of American families. My father-in-law Charles A. Griffith grew up during the Great Depression and he used to tell us accounts of it. I remember how proud he was when telling us how his parents had bought his first home for only $10,000 dollars. He also told us how his family was affected by the depression and he was at a grocery store with his mother and a lady gave him a dime to buy candy. His mother immediately took it from him and saved to buy groceries. He said that his mother maintained a vegetable garden, and they lived mainly from it and the sawing she did for other people to earn money to help in the household. 

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