Assess the Significance of the
Depression for the USA
Natasha
Word Count: 1998
Jazz, the Charleston, nightclubs, getting drunk on illegal alcohol— the Roaring Twenties. Who would have
known that the prospering America went out with the Wall Street Crash of October 1929? Less than two
months after the Wall Street Crash, the United States entered the worst economic downturn in history. During
hard times of ten years, Americans were engulfed by severe poverty— the Depression. Despite the turmoil it
brought upon the world, it is extremely significant for the USA because of its short-term, widespread, and
profound impact on the American people and government, and its long-term implications on American
economic security. In the following, the criteria for assessing significance is first presented. Next, historical
evidence is supplied to argue how the Depression fits the criteria. Finally, an overall assessment of the
Depression’s significance for the USA is reached.
To assess the significance of the Depression, the criteria against which significance is assessed must be set.
Criteria have been separated into two parts: short-term impacts and long-term impacts. The first criterion is
assessed by examining whether the Depression’s impacts on the American people and government were
widespread and extensive. The second criterion is appraised through inspecting whether the Depression’s
impact affected the USA’s economic security in the long run.
The Depression is known to most people for its widespread poverty and unemployment. According to the
National Bureau of Labour Statistics, the unemployment rate reached 25% during 1933, the highest
unemployment rate ever recorded. Romer, a former economic advisor of the Obama Administration,
confirms the widespread unemployment by stating that a 61% decrease in industrial production between
1931 and 1932 indicates that a large portion of America’s working force was unemployed. Furthermore,
according to the National Bureau of Economic Research, the laborers who were fortunate enough to keep
their job experienced a 33% reduction in weekly wages between 1929 and 1932, forcing many of them to
join breadlines and soup kitchens. This pervasive dependence on welfare is confirmed by Williams, head of
the National Youth Administration in 1933, who said that “one in every six persons in the cities, and one in
every eight persons in countrysides,” was dependent on welfare. In addition to the unemployment and
welfare, over 25% of the American families in 1934-36 did not spend enough to secure the Bureau of Home
Economics’ adequate diet at minimum cost. Never before had the number of families unable to feed their
children adequate diets exceeded 15%. A skyrocketing unemployment rate, an unprecedented number of
people dependent on welfare, and an enormous number of children with inadequate diets all agree that the
Depression had a widespread impact on the USA, deeming the Depression as extremely significant.
Aside from being widespread, the impacts of the Depression were also profound because it reshaped
American’s consumer mindset. During the 1920s, Americans increased their spending in “every sector of
living”: from home to leisure to education. Homemakers used toasters, washing machines, and refrigerators;
Women wore silk hoses, makeup, and new hairdos; families went to movies, banquets, and dances in their
automobiles (Lynd, 1929). However, this all changed when the Depression took away the life savings of
countless American families.
In 1931, the washable, cheap synthetic nylon was invented, providing an alternative to the expensive,
delicate silk. At the end of the Depression, nylon stockings were released for sale. Four million pairs were
sold out in 4 days, indicating that Americans embraced a new level of frugality in their daily lives. Another
form of thriftiness is reflected through the success of the board game Monopoly, which became a frenzy
during the Depression, saving the Parker Brothers from the brink of bankruptcy. According to Edward
Parker, the grand-nephew of the founder, Monopoly was successful because it offered “cheap, affordable
entertainment”, which indicated that Americans had returned to thriftiness (Pilon,2019). According to Pells, a
history professor at the University of Texas, Austin, the Depression made Americans replace mass
consumption— buying for the sake of buying —with thriftiness—only buying what one needs. Therefore,
the Depression is exceptionally significant because it left an extensive impact on the American lifestyle.
In addition to changing the consumer mindset, the Depression also transformed American’s outlook on life.
During the lead up the Roaring Twenties, America was plagued by mindless optimism, a belief that the
American economy will continue to boom. Such foolish optimism is exhibited through the most renowned
novel of the Roaring Twenties: The Great Gatsby. Published in 1925, The Great Gatsby portrays the lavish
life of upper-class Americans in Jazz Age New York, the dream life of young Americans in the 1920s.
Fitzgerald, the author of The Great Gatsby, later wrote in an essay that the Roaring Twenties was “a whole
race going hedonistic, deciding on pleasure.” (Martinz, 2019). During the Depression, however, such
optimism vanished. The Grapes of Wrath, a bestseller in 1939, vividly portrays the “dispossession of
farmers” and the “widespread suffering” of the American people (Bauer, Campbell, & Mander, 2019). When
the novel was released to the public, it was “hailed” by the American working class, indicating that
“Americans had entered an era of limits, where they should make the best of what they already had rather
than embarking on a quest for the unobtainable.” (Romer & Pells, 2019). It is evident that the Depression
made Americans abandon mindless optimism and embrace realism, reforming their attitude towards life.
Apart from leaving profound impacts on the American people, the Depression also left extensive impacts on
the American government. Prior to the Depression, the federal government regarded welfare and
unemployment issues as a state responsibility. This is evident as Hoover once said “prosperity can not be
restored by raid upon the public treasury.” However, when 25% of the American population was
unemployed, the federal government had to take action.
The Federal Emergency Relief Act (FERA) was a short-term solution for the escalating welfare crises in
states. By providing $500 million in grants to state governments, the FERA allowed state governments to
replace their failing relief programs with functional ones (Snell,2009). The federal government had never
lent money, let alone such a significant amount to state governments. Therefore, the FERA displays how the
federal government attempted to resolve welfare issues, something that had never been done before.
The National Industrial Recovery Act of 1933(NIRA), a long-term solution for the welfare crisis, empowered
president Roosevelt “to implement industrial codes to regulate weekly wages, employment hours, and
minimum ages of employees” (Gitterman,2012). Though the Supreme Court declared the NIRA
unconstitutional, it led to the creation of the Fair Labour Standards Board(FLSB), which achieved the aims
of the NIRA. The success of the FLSB indicates that the federal government is preparing to take
responsibility for social welfare in the future.
As for unemployment, the Roosevelt administration billions of dollars on public work programs such as
Tennessee Vally Authority (TVA) and the Civilian Conservation Corporation (CCC). Before the Depression,
the federal government had never spent such an enormous amount of money on unemployment; instead, they
turned a blind eye and blamed everything on the unemployed. The CCC continued to operate with support
from the federal government for a decade, and The TVA is still operating today, indicating that the
Depression is extraordinarily significant because it pressured the federal government to take an active role in
combating unemployment.
In response to federal prodding and public pressure in the 1930s, states governments adopted general sales
tax and alcoholic beverages and tobacco taxes, which were either insignificant or non- existent in most
states. These tax reforms increased the state government’s revenue from 1827 million dollars in 1927 to 3657
million dollars in 1940 (Snell, 2009). The increase in revenue allowed state governments to create
unemployment compensation and increase welfare spending from 2.2% in 1927 to 19% in 1940 (Snell,2009).
The significant shift in welfare spending and the creation of the unemployment compensation agree that the
Depression is indeed significant because it coerced state governments into reforming revenue expenditures.
Not only was the Depression significant because it impacted the American people and government in great
width and depth during the 1930s, but it is also significant because of its implications to American economic
security today.
The Social Security Act of 1933 (SSA) collected a portion of workers’ income in 1935, placed into a trust
fund, and in 1940 gave the money back to 112,331 retirees and 54,648 dependent children (children who are
under sixteen, lost one parent, and are living with relatives) (SSA, 1940). Extending beyond the Depression,
the SSA now benefits over 8 million people, nearly 40 times the amount in 1940(SSA,2020). The sheer
number of Americans receiving support from the SSA today indicates that the SSA is critical for American’s
economic security. Without the Depression, the SSA may never have been created, let alone benefit so many
people. Therefore the Depression is extremely significant.
Aside from welfare policies, the New Deal also proposed industrial policies that are applicable today.
Although the Supreme Court struck down on the NIRA, it led to the creation of the Fair Labor Standards
Board (FLSB), which established the minimum wage at 0.25$ per hour in 1937 (Gitterman,2012). Gitterman,
professor of public policy at UNC-Chapel Hill, states that “minimum wage might prove to be one of the most
important remaining New Deal programs in support of worker economic security” (2012, 54). Without the
Depression, the then Republican-dominated Supreme Court may never have passed the FLSB. Therefore the
Depression indirectly secured worker economic security today, making it extremely significant.
Mentioned in the short-term effects of the Depression, changes in state revenue and expenditure are vital to
American economic security and even political stability today. Snell, the Economic and Fiscal Division
Director of the National Conference of State Legislatures, states that “the shifts in revenue policy laid the
foundations for the state and local government of the 21st century” (Snell,2009). In the absence of the
Depression, state governments may never have created unemployment compensation or increased welfare
spending. Therefore, the Depression is significant because it is crucial to American economic security today.
To prevent the mass bank failure which led to the Depression from reoccurring, Congress passed the Banking
Act of 1933, setting up another agency essential to the US economy: the Federal Deposit Insurance
Corporation (FDIC). The FDIC collects money from all American banks and places it in the Deposit
Insurance Fund(DIF), providing up to 250,000 dollars of insurance to depositors should a bank fail. This is
extremely significant as banks failed during the Depression because panicking depositors drew out their
money. With the promise of an insurance, it is highly unlikely that such a scenario would reoccur, preventing
another Depression. (FDIC, 2018).
Some may argue that the Banking Act of 1933 is not of significant use today because no economic downturn
like the Depression had occurred, and there is no risk of another Wall Street Crash because Americans have
returned to their senses. However, unknown to most people, the FDIC successfully prevented the US from
another Depression during the Wall Street Crash of 2008. According to a report from the FDIC, although the
Wall Street Crash of 2008 and the bank failures which followed presented the FDIC with an “unprecedented
challenge,” it still managed to restore banks to a “strong position” by 2013, preventing another Depression
from occurring. Every day, hundreds to thousands of banks experience different degrees of bank failure, and
the FDIC halts them before they can escalate. Therefore, the fact that history has not repeated itself yet
proves how vital the FDIC and the Banking Act of 1933 are to American economic security.
Overall, the Depression is extremely significant because it revolutionized the American consumer mindset,
their attitude towards life, and the role of the American government. Furthermore, it resulted in the creation
of policies, regulations, and organizations that secure American society today. The Depression, despite its
desperation, devastation, and suffering, shaped the America we know today.
References
Amadeo, K. (2019, December 14). Worst Stock Market Crash in U.S. History. Retrieved from https://
www.thebalance.com/stock-market-crash-of-1929-causes-effects-and-facts-3305891
Bauer, P., Campbell, C., & Mander, G. (2019, February 1). The Grapes of Wrath. Retrieved from https://
www.britannica.com/topic/The-Grapes-of-Wrath#ref340968
Chappelow, J. (2020, January 29). Gross National Product (GNP) Definition. Retrieved from https://
www.investopedia.com/terms/g/gnp.asp
Chuck, J. (n.d.). Retrieved February 29, 2020, from http://www.tanocapital.com/news/2008/11/14/tanocapital-reseach-the-crash-of-2008-vs-1929-similarities.html
Dobbin, F. R. (1993). The social construction of the Great Depression: Industrial policy during the 1930s in
the United States, Britain, and France. Theory and Society, 22(1), 1–56. doi: 10.1007/bf00993447
Fetcher, R. (1939, January). MY HOPES FOR THE CCC. The Magazine of The American Forestry
Association.
Gitterman, D. P. (2012). Making the New Deal Stick? The Minimum Wage and American Political
History. Journal of The Historical Society, 12(1), 47–78. doi: 10.1111/j.1540-5923.2011.00355.x
Johnson, B., Stickerkitty, & Girdwood Research. (2018, February 27). National Recovery Administration.
Retrieved from https://socialwelfare.library.vcu.edu/eras/great-depression/u-s-national-recoveryadministration/
Lynd, R. S., & Lynd, H. M. (1929). Middletown: a study in American culture. San Diego: Harcourt, Brace &
Co.
Martinez, J. (2019, August 7). The Great Gatsby. Retrieved from https://www.britannica.com/topic/TheGreat-Gatsby
Pilon, M. (2018, November 14). How the Great Depression Became the Golden Age for Monopoly.
Retrieved from https://www.history.com/news/great-depression-games-monopoly
Romer, C. D. (1993). The Nation in Depression. Journal of Economic Perspectives, 7(2), 19–39. doi:
10.1257/jep.7.2.19
Snell, R. (2009). State Finance In The Great Depression (pp. 1–9). National Conference of State
Legislatures .
Social Security Act. (n.d.). Retrieved from https://www.georgiaencyclopedia.org/articles/history-archaeology/
social-security-act
Williams, A. W. (1935, January). Buffalo Council of Social Agencies. Buffalo Council of Social Agencies.
Buffalo. Retrieved from https://socialwelfare.library.vcu.edu/eras/great-depression/problem-unemploymentjanuary-1935/
Wolman, L. (1993). Wages During the Depression. Retrieved from http://www.nber.org/chapters/c2256