American History (1865-2010)-The Great Depression
The severest global economic depression of the 20th century occurred in the decade before the the second world war. The occurrence time of the depression varied across all the affected nations. However, in most nations the depression’s onset occurred in 1929. The depression persisted till late 1930s, and in some nations till the early 40’s. This was recorded as the deepest and most spread depression globally. The depression’s nominal onset originated from the United States of America with the 29th October, 1929 crash of the stock market. This day was later to be known as the Black Tuesday. After its start in America the ripple effect spread all over the globe to other nations.
The main causes of the great depression
The great depression was caused by a combination of factors both domestic and international. Despite the fact that there are no clearly agreed upon causes, there are various identified causes that have been put forth by economists and historians. The crash of the stock market in 1929 was identified as the first evident reason. The crash is erroneously thought to be synonymous with the crash-however, the two are not one and the same. The fact is that it is one of the major identified causes. This is because the crash caused great losses to stock investors barely two months after the crash. The losses were estimated to be over 40 billion dollars.
Later on, after slight recovery America was still unable to roll out of the depression, a clear indication that indeed it was one of the main causes of the depression. The numerous bank failures that characterized the 1930s are also implicated as main causes (Stage, S. et. Al, 2008). This period experienced approximately 9000 bank failures which led to loss of savings that occurred due to uninsured bank deposits. This made the surviving banks wary, and they declined to offer any lending in form of loans. The lack of lending exacerbated the situation by reducing expenditure.
The crash of the stock market coupled with lack of lending and economic fears led to a reduction in total expenditure and purchases. This led to a reduction of production by the producers because there were fewer purchases. In turn, there were plenty of lay offs by producers, and as a result the rate of employment rose beyond 25% percent in America, whereas other nations recorded figures as high as 33% percent. The international policies implemented to safeguard investors within America also dealt a big blow to the prospects from international trade. The U.S government implemented the Smoot-Hawley Tariff in 1930 which imposed high taxes on foreign imports s (Stage, S. et. Al, 2008). This reduced international trade and led to retaliatory measures from other nations. The 1930 drought conditions that hit the Mississippi valley worsened the situation. They crippled farming and made farmers unable to pay off their loans as well as taxes. This combination of problems is cited as the main cause of the great depression.
The effects of the great depression
The great depression led to the great drop of personal income, prices, profits and tax revenue. International trade dropped by half to two thirds of the usual trade level. Lack of employment went to a high of 25% percent in America and over 33% percent in some other nations. Cities that greatly depended on industrial manufacture were greatly affected by numerous lay offs. Construction work was completely stalled and all other interdependent industries lost their revenue. Agriculture was also greatly affected because farm produce fetched prices that had fallen by 60 % percent. These effects led to the initiation of the New Deal in America, whereas in some places it caused significant effects such as the rise of extremism in Germany which led to the onset of world war two (Stage, S. et. Al, 2008).
The New Deal
The depression prompted the government to come up with measures that would stimulate the economy and avoid a repeat of the depression. These responses were called the 3R’s, which denoted relief, recovery and reform. The relief aspect was meant to initiate programs that would provide relief aid to the hard hit Americans (Stage, S. et. Al, 2008). The recovery measure was meant to stimulate the rise of the economy from stagnation. Finally, the reform measures were meant to initiate changes within key economy sectors such as banks to avoid a repeat of the same occurrence. These reforms targeted institutions that bear great significance to economy.
Finally, nations were able to later recover gradually from the depression with various initiations that stimulated the economy and reformed various sectors of the economy.
References
Stage, S. et. Al (2008).The American promise fourth edition. Bedford/st Martins Publishers.
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