The Great Depression was the economic sag affecting Europe, North America, and other industrially engaged countries of the world. It began in 1929 and extended to the year 1939, making it qualify as the longest and the worst felt depression throughout the history of the industrialized Western world. Despite the fact that the U.S market had gone into depression six months before, the Great Depression is documented as having started after the shattering subside of the New York Stock Exchange market’s prices, which took place in 1929. Following this downturn, the next three years were characterized by a continuous drop in the value of stocks, until the year 1932. They had dropped to 20% of their original value in 1929. The effects of this disastrous financial downturn had included the ruining of the investments of many and reduced the value of the assets. This condition had greatly strained the banks and the other financial institutions – especially those who kept stocks in their portfolios. Following this decline, many American banks were forced into insolvency, a situation that saw 11,000 out of the 25,000 American banks which failed by 1933. The failure of many banks and the general loss of confidence in the economy had contributed to a high reduction of the spending and production levels as well as the consumer demand. This further had aggravated the economic drop. As a result, the overall productivity output had dropped and the unemployment rate had significantly increased. For instance, by 1932 the manufacturing output of America had dropped to 54% of the productivity levels of 1929, and 20-30% of the U.S workforce was unemployed (FDR American Heritage Center, Inc).
The causes of the Great Depression cannot be traced to the one factor; instead, they might be extended to the combination of both domestic and global state of affairs that led to the deep economic drop. The compilation of these global and international conditions had to be done by the cooperative efforts of economists and historians because this is an area of multidisciplinary. The first cause of the Great Depression was the stock market hurtles of 1929. According to many researches, the crash of October 29, 1929 had branded as the black Tuesday incidence and was compared to the Great Depression as one and the same occurrence. Though that may not be wholly true, it was one of the major factors that led to the Great Depression. The crash of October 1929 included stockholders who had lost more than USD 40 Billion. This is the amount that stock value had lost in two months. However, despite the positive recovery of the stock market in 1930, the improvement was not enough. America had entered into the Great Depression phase (FDR AHC, Inc).
The banks’ failure was the other reason for the Great Depression. During the 1930s more than 9000 banks were declared failed and many bank clients had lost their savings – citing that the deposits of these banks were uninsured. On the other hand, the banks that survived the downturn, due to the waves of the stock failure, had resulted to exercising some extra care. Here, they acted very unsure while concerning the economic situation, as they were most concerned for their welfare. This, of course, had created the situation that led to their refusal to give more credits. The further aggravation was observed through the reduction of the spending (FDR AHC, Inc).
A reduced purchasing level across the market was the next factor for the Great Depression. With the stock market price drop and the fear of experiencing further economic anguish, the individuals from all classes and occupations had refrained from making purchases. This, as a result, led to a reduction in the number of items produced, a case that called for retrenchment and sacking, in response to the reducing workforce demand. Because of the lost jobs, the credit buyers were unable to pay for the items they had already bought – a case that resulted into the repossession of such items by the credit sellers. Therefore, the inventory was registered by businesses, a case that further aggravated the unemployment of the employees working for such enterprises. Following this, the unemployment rate had risen to more than 25%, which implied that there would be an extended lack of spending and the economy would be kept in dismay (Foner 136).
The American Economic Policy with Europe was the other contributing factor to the current writing’s issue. This was the case, as with the failure of banks and businesses, the American government instituted the tariff branded ‘Smoot-Hawley Tariff’ in 1930 – as a movement to secure American companies. On the basis of this tariff, America had charged high taxes for importation, a case that led to less trade dealings between American and the other foreign countries. These foreign countries had retaliated through mostly imposing high taxes on the goods going to America (Foner 124).
The drought conditions were the other reasons for the incidence of the Great Depression. Though not a direct cause: the drought that took place at the Mississippi valley in the year 1930 and was a cause for dismay. Many land owners had to sell their lands at no profit; they were not able to pay their taxes among the other debts. Due to the drought, there was also a significant rise in food prices, which directly led to the spending’ increase (FDR A H C, Inc).
The social impacts of the Great Depression had included the followings: the mass migration of the people who could not manage to survive in different parts of the affected areas; the incidence of the increased crime cases, following the shift to crime, the 25% of the workers had lost their jobs; and increasing poverty levels, as a result of the loss of the employment and businesses. There was the occasion of working at homes or alternative income areas, as a result of the wage levels’ reduction. Other social impacts of the depression had included: homelessness, the incidence of children dropping out of schools, and the disruption of families, as the men lost their jobs. There was also an increase in the level of racial prejudice and xenophobia resulting from the changing social relations and trends. Lastly, there was also the occurrence of a rising frequency of the fringe political groups, which were formed to deal with the economic changes (Foner 124).
FDRs had attempted to reverse the Great Depression through the instructions in the following programs: FDIC and REA policy, where the Federal Deposit Insurance Corporation was offered to insure the savings accounts of the clients in the banks approved by the government. The government would repay the depositors who lost their money. The Rural Electrification Administration program had given the loans to install electricity in rural areas. Following this program, one out of every four farms had electricity, which was beyond their expectations of reaching one out of ten farms. The (Civilian Conservation Corps) CCC program was pioneered to provide employment opportunities for single men between the ages of 18 and 25. These had employed men in order to create new parks, build bridges, help in flood control programs, and plant trees. It must be noticed that they earned one dollar a day. The WPA program was designed to offer jobs to individuals working at parks, buildings, and hospitals – as well as the hiring of photographers and artists. This program was very successful. The AAA program on agriculture was set up to help farmers. The program was aimed at paying farmers, so that they would not produce crops – and for the destruction of surplus produce. As a result, the food prices would rise, offering good returns to the working farmers (Foner 136).
Some of the programs had a great success. In this case, from the FDIC program, the investor’s confidence had increased by seeing an increasing rate of the savings. The REA program had four out of every ten farms the electricity. The CCC program was successful, as it greatly reduced the number of the unemployed youths between the ages of 18 and 25. The WPA program on the other hand was one of the most successful efforts, as it gave jobs and income sources to very many citizens. The AAA program had considerably worked, as after its enforcement, the returns from crop farming had increased (Foner 136).
The achievements of the New Deal had included the increased faith in banks among citizens and investors, the revitalization of the many failing relief programs, and the realized physical and psychological boost by CWA on its four million workers. The CCC program had enlightened the Americans on how to live independently, thus increasing their productivity. Cheap electricity was delivered to the Americans, while recreation opportunities and flood control were improved at the Tennessee River valley. Unemployment was greatly reduced, and the SSA program had helped millions of American employee including domestic and farm workers, by creating a sense of security for them (FDR A H C, Inc).
In conclusion, it is clearly indicative that the stock market prices crisis of 1929 was the major cause leading to the Great Depression. The other reasons had included: the failure of banks; the reducing purchasing levels after 1929; and the new American policies, especially the Hawley Tariff’ of 1930. Also, the drought conditions at the Mississippi valley can be cited as an outstanding occasion for the depression. The social consequences of the Great Depression were as follows: the rising crime and increasing unemployment among other impacts. FDR had attempted to overcome the depression by formulating policies while including the CCC program. The reduction of the unemployment was one of the FDR’s successes.