What Was the Great Depression?

Great Depression - Florence Thompson with children during the Great Depression
Great Depression Photo - Florence Thompson with two of her children during the Great Depression in a photograph that came to be called "Migrant Mother.". Library of Congress, Prints & Photographs Division, FSA-OWI Collection, LC-USF34-9058-C

The Great Depression was a period of worldwide economic depression that lasted from 1929 until approximately 1939. The starting point of the Great Depression is usually listed as October 29, 1929, commonly called Black Tuesday. This was the date when the stock market fell dramatically 12.8%. This was after two previous stock market crashes on Black Tuesday (October 24), and Black Monday (October 28). The Dow Jones Industrial Average would eventually bottom out by July, 1932 with a loss of approximately 89% of its value. However, the actual causes of the Great Depression are much more complicated than just the stock market crash. In fact, historians and economists do not always agree about the exact causes of the depression.

Throughout 1930, consumer spending continued to decline which meant businesses cut jobs thereby increasing unemployment. Further, a severe drought across America meant that agricultural jobs were reduced. Countries across the globe were affected and many protectionist polices were created thereby increasing the problems on a global scale.

Franklin Roosevelt and His New Deal

Herbert Hoover was president at the beginning of the Great Depression. He tried to institute reforms to help stimulate the economy but they had little to no effect. Hoover did not believe that the federal government should be directly involved in economic affairs and would not fix prices or change the value of the currency. Instead, he focused on helping states and private businesses to provide relief. 

By 1933, unemployment in the United States was at a staggering 25%. Franklin Roosevelt easily defeated Hoover who was seen as out of touch and uncaring. Roosevelt became president on March 4, 1933 and immediately instituted the first New Deal. This was a comprehensive group of short-term recovery programs, many of which were modeled on those that Hoover had attempted to create. Roosevelt's New Deal not only included economic aid, work assistance programs, and greater control over businesses but also the end of the gold standard and of prohibition. This was then followed by the Second New Deal programs which included more long-term assistance such as the Federal Deposit Insurance Corporation (FDIC), the Social Security System, the Federal Housing Administration (FHA), Fannie Mae, the Tennessee Valley Authority (TVA), and the Security and Exchange Commission (SEC). However, there is still question today about the effectiveness of many of these programs as a recession occurred in 1937-38. During these years, unemployment rose again. Some blame the New Deal programs as being hostile towards businesses. Others state that the New Deal, while not ending the Great Depression, at least helped the economy by increasing regulation and preventing further decay. No one can argue that the New Deal fundamentally changed the way that the federal government interacted with the economy and the role it would take in the future.

In 1940, unemployment was still at 14%. However, with America's entry into World War II and subsequent mobilization, unemployment rates dropped to 2% by 1943. While some argue that the war itself did not end the Great Depression, others point to the increase in government spending and increased job opportunities as reasons why it was a large part of the national economic recovery.

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