90 Years Since the Great Depression: How Are We Doing Now?
The Great Depression was the worst economic downturn in the history of industrialisation, lasting from 1929 to 1939. What began after the stock market crash of October 1929 sent Wall Street into panic and wiped out several millions of investors.
Fast forward 90 years: let’s understand how this low point in American economic history still affects the world at large.
What Was the Great Depression?
The Great Depression was the longest and the greatest economic recession in modern history. During the short depression that began in 1920 and lasted until 1921, popularly known as the Forgotten Depression, the US stock market fell by almost 50 per cent as corporate benefits slumped over 90 percent. Despite that, the US economy enjoyed unhindered growth during the decade.
During the Roaring Twenties the American people discovered the stock market and dove in head-first. The 1929 market crash wiped out a great bulk of nominal wealth for businesses and individuals alike. Half of the banks failed, unemployment rates rose to 25 per cent and homelessness flourished throughout the country.
The American economy entered a mild depression during the summer of 1929, as spending slowed and unsold stocks began piling up, in turn slowing down factory production. On 24 October, 1929, nervous investors began selling overpriced shares and the inevitable stock market crash happened.
A record 12.9 million shares were traded that day, which came to be known as ‘Black Thursday’. The next Tuesday witnessed the trading of 16 million shares. Consequently, workers were fired from factories and those who managed to stay had to do so for reduced wages. Due to the global adherence to the gold standard, the economic woes from the US spread like wildfire throughout the world, especially affecting Europe.
Effects of the Great Depression
During the first five years of the Great Depression, the economy slumped by 50 per cent. By the end of 1929, 650 banks had failed. In 1930, the economy slumped another 8.5 per cent. The gross domestic product fell 6.4 per cent in 1931 and 12.9 per cent in 1932.
By 1933, the US had suffered at least four years of economic shrinkage: it only produced half of what it did in 1929, equalling $57 billion. Preparations for World War II sent growth up by 8 per cent in 1939 and 8.8 per cent in 1940.
On the political front, people grew sceptical of unfettered capitalism, as clearly the method had failed. As a result, Americans voted for Franklin D. Roosevelt instead of Herbert Hoover. Roosevelt’s economic programme, the New Deal, worked and in 1934 the economy grew 10.8 per cent as unemployment reduced.
Other effects of the Great Depression include:
- Unemployment, which peaked at 24.9 per cent by 1933, rendering 15 million people jobless
- Bank failures, which amounted to $4,000 by 1933, forcing depositors to lose $140 billion
- Trade barriers that countries set up to protect their industries, plummeting world trade by 65 per cent by dollars measurement and 25 per cent by the units measurement
Does the Great Depression Affect Us Today?
One of the multiple theories as to what ended the Great Depression is Roosevelt’s presidency. When he entered office, he implemented policies now known to be a part of the New Deal. The first New Deal started in 1933 and concerned with the economy, the farmers and the banks.
The Emergency Bank Act wanted to stabilise the banking system, while the Emergency Farm Mortgage Act and the Agricultural Adjustment Act attempted to save farmers, their crops and their farms. The second New Deal that came about in 1935. It sought to help the poor, unemployed and struggling Americans.
One long-term effect of the Great Depression is evident today. Many experts argue that it caused the increased reliance on the government for stabilising and maintaining the economy. Besides that, other long-term effects that we are living with today include uncertainties in considering a house as an investment, debts and loans.
The New Deal public works programmes also helped build many of today’s landmarks such as the Rockefeller Center, Triborough Bridge and Chrysler Building in New York, the Dealey Plaza in Dallas and the Overseas Highway in Florida.
The Great Depression was a testing time for people all over the world. While some countries were quick to recover from its repercussions, others had to toil hard. The world economy never faced such a turmoil again, but we now know that the effects of such an intense economic slowdown live even 90 years later.