Report on the Great Depression
Introduction
The Great Depression was the most severe and widespread economic downturn of the 20th
century. It lasted from 1929 to the late 1930s, affecting not just the United States but economies
around the world. The depression was marked by massive unemployment, a sharp decline in
industrial production, widespread poverty, and a financial collapse that led to lasting social and
economic upheaval. Understanding its causes, effects, and eventual recovery is essential to
comprehending the challenges faced by modern economies and the importance of economic
regulation and social safety nets.
Causes of the Great Depression
1. Stock Market Crash of 1929
o On October 29, 1929, known as Black Tuesday, the U.S. stock market experienced
a catastrophic crash. Stock prices had been inflated by speculation and easy credit,
leading to a bubble that eventually burst.
o The collapse triggered widespread panic, and investors rushed to liquidate their
holdings, which caused even deeper financial instability.
2. Bank Failures
o Thousands of banks failed in the early 1930s, wiping out people's savings. Bank
failures were caused by poor lending practices and the widespread loss of
confidence in the financial system.
o This created a ripple effect as businesses could no longer secure credit, leading to
closures and further job losses.
3. Overproduction and Declining Demand
o Throughout the 1920s, industries produced goods at record levels, but wages for
workers did not keep pace with production. This led to overproduction in
agriculture and manufacturing.
o As people had less money to spend, demand for products plummeted, resulting in
unsold inventory and layoffs.
4. Reduction in International Trade
o The United States, along with other nations, imposed tariffs in an attempt to
protect domestic industries. The Smoot-Hawley Tariff Act of 1930 was
particularly damaging, as it led to retaliatory tariffs from other countries, thereby
further reducing international trade.
5. Drought and Agricultural Collapse
o The Dust Bowl, a series of severe dust storms in the Great Plains, exacerbated the
agricultural crisis. Droughts led to crop failures, which further reduced the
incomes of farmers and increased the severity of the economic downturn.
Effects of the Great Depression
1. Mass Unemployment
o By 1933, the unemployment rate in the United States had risen to around 25%.
Many people lost their jobs in manufacturing, agriculture, and the service
industries. Homelessness and poverty became widespread.
o Families faced eviction from their homes, and “Hoovervilles” (makeshift
shantytowns) sprung up as displaced families sought shelter.
2. Decline in Industrial Production
o Industrial output dropped by nearly 50%, as factories closed and workers were laid
off. The automobile, steel, and other industries faced significant downturns due to
the shrinking demand for goods.
3. Widespread Poverty
o Poverty was widespread as millions of Americans were unable to find work or
earn wages. Rural areas, particularly in the Midwest and South, suffered as
farmers struggled with low crop prices and severe drought conditions.
4. Political and Social Unrest
o The economic hardship fueled political extremism, and people became
disillusioned with the government’s ability to address the crisis. Protests, strikes,
and demonstrations were common as people demanded change.
o The rise of political movements, such as socialism and communism, gained some
traction during this period, though they were never able to fully replace
democratic governance.
5. International Impact
o The Great Depression was not confined to the United States. Worldwide trade
contracted, and countries in Europe and Latin America also experienced economic
downturns.
o In Germany, the Great Depression helped bring Adolf Hitler and the Nazi Party to
power, ultimately contributing to the outbreak of World War II.
The New Deal and Recovery
1. Franklin D. Roosevelt’s Presidency
o Franklin D. Roosevelt (FDR) was elected president in 1932, and he took bold
action to combat the Great Depression. He introduced a series of programs and
policies collectively known as the New Deal.
o The New Deal focused on relief (providing immediate aid to the needy), recovery
(stimulating economic growth), and reform (preventing future depressions).
2. Key New Deal Programs
o Civilian Conservation Corps (CCC): Employed young men in public works
projects like building roads, parks, and flood control projects.
o Public Works Administration (PWA): Funded large-scale infrastructure projects
to create jobs and stimulate economic recovery.
o Social Security Act: Established unemployment insurance, old-age pensions, and
assistance for the disabled.
o
Federal Deposit Insurance Corporation (FDIC): Insured bank deposits to
restore confidence in the banking system.
o Securities and Exchange Commission (SEC): Regulated the stock market to
prevent speculative practices that contributed to the 1929 crash.
3. Economic Reforms and Regulations
o Roosevelt’s policies aimed to stabilize the financial system, provide relief to the
unemployed, and prevent the conditions that led to the Depression from recurring.
o Labor unions gained more rights, and wages and working conditions began to
improve. New regulatory frameworks helped create a more stable economy in the
long term.
Conclusion
The Great Depression was a pivotal moment in history, not just for the United States but for the
global economy. Its causes were complex, stemming from factors like overproduction, stock
market speculation, international trade disruptions, and environmental disasters. The effects were
devastating, with widespread unemployment, poverty, and political instability. However, through
the leadership of Franklin D. Roosevelt and the implementation of the New Deal, the U.S. began
to recover and set a foundation for a more regulated and resilient economy.
The legacy of the Great Depression is still felt today, influencing economic policies, social
welfare programs, and our understanding of the importance of financial regulation to prevent
such a catastrophe from happening again.