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A Short Overview Of Great Depression

The Great Depression of 1929 was a worldwide economic depression that lasted approximately 10 years.

Tina S
Tina S
Dec 28, 2009
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The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s.
 
Though the U.S. economy had gone into depression six months earlier, the Great Depression may be said to have begun with a catastrophic collapse of stock-market prices on the New York Stock Exchange in 29 October, 1929 known as Black Tuesday but quickly spread to almost every country in the world.
 
During the next three years stock prices in the United States continued to fall, until by late 1932 they had dropped to only about 20 percent of their value in 1929. Besides ruining many thousands of individual investors, this precipitous decline in the value of assets greatly strained banks and other financial institutions, particularly those holding stocks in their portfolios.
 
The ensuing period ranked as the longest and worst period of high unemployment and low business activity in modern times. Banks, stores, and factories were closed and left millions of Americans jobless, homeless, and penniless. Many people came to depend on the government or charity to provide them with food.

Causes:


There were multiple causes for the first downturn in 1929, including the structural weaknesses and specific events that turned it into a major depression and the way in which the downturn spread from country to country.
 
Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade. The mal distribution of wealth in the 1920's existed on many levels. Money was distributed disparately between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy.

The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the mal distribution of wealth, caused the American economy to capsize. Mal distribution of wealth within nation was not limited to only socioeconomic classes, but to entire industries.

A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits.
 
The automotive industry was the driving force behind many other booming industries in the 1920's.
 
The federal government also contributed to the growing gap between the rich and middle-class.
 
A last major instability of the American economy had to do with large-scale international wealth distribution problems.
 
At least in part, the Great Depression was caused by underlying weaknesses and imbalances within the U.S. economy that had been obscured by the boom psychology and speculative euphoria of the 1920s.

Effects:

The Great Depression of 1929-33 was the most severe economic crisis of modern times. Millions of people lost their jobs, and many farmers and businesses were bankrupted. Wage income for workers who were lucky enough to have kept their jobs fell almost 43% between 1929 and 1933. It was the worst economic disaster in American history. Farm prices fell so drastically that many farmers lost their homes and land. Many went hungry. Faced with this disaster; families split up or migrated from their homes in search of work.

Industrialized nations and those supplying primary products (food and raw materials) were all affected in one way or another. In Germany the United States industrial output fell by about 50 per cent, and between 25 and 33 per cent of the industrial labor force was unemployed.

Almost all nations sought to protect their domestic production by imposing tariffs, raising existing ones, and setting quotas on foreign imports. The effect of these restrictive measures was to greatly reduce the volume of international trade: by 1932 the total value of world trade had fallen by more than half as country after country took measures against the importation of foreign goods.

The Great Depression had important consequences in the political sphere. In the United States, economic distress led to the election of the Democrat Franklin D. Roosevelt to the presidency in late 1932. Roosevelt introduced a number of major changes in the structure of the American economy, using increased government regulation and massive public-works projects to promote a recovery.

Roosevelt's program was called the "New Deal." The words "New Deal" signified a new relationship between the American people and their government. This new relationship included the creation of several new federal agencies, called "alphabet agencies" because of their use of acronyms.

Under President Roosevelt the federal government took on many new responsibilities for the welfare of the people. The new relationship forged in the New Deal was one of closeness between the government and the people: a closeness which had never existed to such a degree before.
 
Although Roosevelt and the New Deal were criticized by many both in and out of government, and seriously challenged by the U.S. Supreme Court, they received the overwhelming support of the people. Franklin D. Roosevelt was the only president in U.S. history to be elected for four terms of office.
 
The Great Depression ended as nations increased their production of war materials at the start of World War II. This increased production provided jobs and put large amounts of money back into circulation.

Recovery:

Various countries around the world started to recover from the Great Depression at different times. In most countries of the world recovery from the Great Depression began in 1933.In the United States recovery began in the spring of 1933.
 
However, the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933.
 
There is no consensus among economists regarding the motive force for the U.S. economic expansion that continued through most of the Roosevelt years (and the sharp contraction of the 1937 recession that interrupted it).



 
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