What Caused the Great Depression?
The world seems to be crashing on you and there is no place to run. This could be a description of what people felt during the Wall Street Crash of 1929 (October 1929) which was also called as the Great Crash, and the Stock Market Crash of 1929. This disaster was the start of the Great Depression, which lasted for 12 years and ended at the onset of World War II in 1941.
Stock Market Crash of 1929October of 1929 saw the collapse of the stock market, which obliterated 40 percent of the value of common paper stock, decimating the investment portfolio of many. This represented only a single happening as the tragedy continued and more and more people became penniless, which rendered them helpless in providing for the needs of their families. Folks were pleading for money and food for their children as they aimlessly roamed the streets. Multitude of businesses was closed and banks were declining. By 1932, an average of one out of four Americans were unemployed. Despair and hopelessness were mirrored on the faces of the people for they saw no hope in sight as all kinds of bad news filled the air.
- The Great Depression: Sites to visit
- Causes of the Great Depression
- 1st Timeline of the Stock Market Crash
The Great Depression and the New Deal
In response to the devastating effect of the Great Depression, a series of economic programs was adapted by the US in1933-36. Called the New Deal, the program was enacted by Congress during the 1st term of President Franklin Delano Roosevelt (1933-37). It concentrated on the 3 Rs: relief, recovery and reform. It means relief for the poor and the jobless, recovery of the economy back to normal and reform of the financial system to avoid depression and encourage people to invest in the stock market again.
Aside from the 3 R’s, the New Deal started a political realignment which made the Democratic Party the majority. This party based its platform on liberal ideas, big city machines and empowering the labor unions, ethnic minorities and the white South. Some of the opposition Republicans supported the program while others were non-supportive claiming that such program is destructive to business and development.
- The New Deal Program
- 3 R’s of the New Deal
- Mythology of the New Deal
- Great Depression and the New Deal
- Was the New Deal Successful?
Unemployment During the Great Depression
By the time that Franklin Delano Roosevelt was inaugurated as President in 1933, one fourth of the entire American population was unemployed. Consumers’ confidence was low due to the stock market crash; they stopped purchasing goods from factories and low production led to workers’ mass lay-off. The jobless had almost no money left to spend leading businesses to gradually decline. At the peak of the Great Depression, there were more than 13 million people unemployed. More and more people rely on the government and charity to feed their families.
Measures to remedy unemployment:
1. The Civilian Conservation Corps (CCC) offered young men between 18 and 25 years to work in camps administered by the army.
2. A Public Works Administration (PWA) gave employment for skilled construction workers on a wide variety of projects.
3. The Federal Emergency Relief Administration (FERA) distributed direct relief to hundreds of thousands of people, usually in the form of direct payments.
- Unemployment during the Great Depression
- Unemployment during the Great Depression
- Why Unemployment in the Great Depression?
Agriculture was greatly affected during the Great Depression. After the massive crash of the stock market, prices were declining very fast. In the spring of 1933, the agricultural sector was on the verge of disaster. In the United States, 25 percent of farmers and 37 percent of all nonfarm workers were completely jobless. Some people had nothing to eat; many others lost their farms and homes. Homeless individuals climbed aboard freight trains that were crisscrossing the nation. Cotton farmers dispossessed of their farms; packed their bags and drove their dilapidated Model Ts all the way to California hoping that the posters about plentiful jobs were true.
Some measures introduced:
1. Agricultural Adjustment Act (AAA) gave economic aid to farmers.
2. Commodity Credit Corporation purchased goods to be stored until prices will rise.
3. Soil Conservation Service was another government agency providing relief to farmers.
The Great Depression transformed the lives of people who lived and farmed on the Great Plains altering America’s way of life. Government funding was available to help displaced people endure the Great Depression; however, what took place altered the future of agriculture for years to come. Some government programs helped them to live through the 1930s but this changed affected the future of agriculture forever. Farmers have to contend with the dust, insects, heat of summer and cold of winter. Families are deprived of heat, light, indoor bathrooms and other facilities; and the necessity of raising their own food.
In the ‘40’s, 2.5 million people left the Plains states, which was marked as the biggest migration in American history. They consisted of farmers, professionals, retailers, and others. Eventually, they were competing for seasonal job with very low pay. Many ended up performing seasonal jobs like picking crops at extremely low wages. By 1940, nearly six million farmers were receiving federal subsidies.
Industry and Labor
Industry suffered with the economic crash of 1929 to 1932. In the United States, the indicator of industrial production dropped from one hundred in 1929 to fifty-five in 1932, the largest plunge compared with all previous industrial economies. During 1930, President Herbert Hoover motivated industrialists to maintain wages, to schedule working hours, and to provide an investment plan to tide workers during the expected short duration of the recession
Some measures created were:
1. In 1933, The National Recovery Administration (NRA) was established and with the help of the National Industrial Recovery Act (NIRA), tried to control heated competition by establishing codes of fair competitive practice to produce more employment and encourage more buying.
2. The NIRA secured the right to bargain as a collective group through the use of labor unions to represent the individual workers.
3. National Labor Relations Act disallowed employers from unfairly interfering with union activities; with the National Labor Relations Board which supervises bargaining and negotiation of the organization, the election of organization administrators, and makes sure that workers have the right to choose the organization that represents them in dealings with employers.
The Second New Deal
In the economic planning aspect, the First New Deal was inadequate so the government and the private sector deemed it necessary to move to the Second New Deal. This program was a compilation of legislation in 1935 focusing on the goal of economic security for all.
Some relevant points of the Second New Deal are:
1.Emergency Relief Appropriation Program Act which required government to be more aggressive in giving employment, to be labor intensive, pay a security wage and not compete with the private sector. It also created these acts: Rural Electrification Administration, National Youth Administration, Resettlement Administration and Work Progress Administration.
2. Social Security had better and more workable plans added.
3. Wagner National Labor Relations Act extended long term security to labor. It was described as the balance of power between American capital and labor.
Despite the serves of legislative initiatives, the Depression continued. To relieve the pressure, President Roosevelt proposed a new set of economic and social measures intended to fight poverty, create more work for the unemployed, and provide a social safety net.
- Summary of the Second New Deal
- New Deal Cultural Program
- Second New Deal Program
- Roosevelt and the New Second Deal
A New Coalition
Roosevelt won a second victory in 1936 over his Republican opponent. Taking 60% of the votes, he was able to form broad new coalition with the Democratic Party, labor group, farmers community, urban, ethnic, Afro-American and the traditional Democratic in the south. The republican was supported by the business and middle class citizens from small towns and suburbs. His formidable political alliance withstood several decades.
The years from 1932 to 1938 was marked with widespread public debate on the relevance of New Deal policies to the nation’s political and economic life. The citizens wanted the government to assume the responsibility for the welfare of ordinary people. The New Deal laid down the foundations of the modern welfare state in the United States and President Roosevelt, had established a new standard of mass leadership. At the onset of World War II, the Great Depression came to its final end.
- New Deal Coalition of Franklin Delano Roosevelt
- How Roosevelt Realigned Politics in 1936
- FDR’s New Deal Coalition
- What Ended the Great Depression?
Miscellaneous Resources: Refer to these links for more insights about The Great Depression:
- Interesting Facts about Great Depression
- Timeline of the Great Depression
- A Photo Essay
- Social Effects during the Great Depression
Image: Wikimedia Commons