USA experienced a horrible economic meltdown that impacted on various aspects of economy such as farming and industrial sector; this was from from1929 to 1942[1]. The recession was triggered by various fiscal features such as the vast margin between the poor and the wealthy, government debts and surplus production of commodities only to mention a few.
Business failure, depreciated stock prices, high unemployment rates are some of the negative impacts created by the depression[2]. The depression exposed various societal and economic problems faced by USA that they hardly knew.
Since the depression was partially caused by the imbalanced allotment of resources, it revealed that the US economy suffered a colossal wealth imbalance. It indicated the huge margin that existed between the wealthy and the poor.
Additionally, it meant that a significant proportion of national wealth was controlled by few tycoons who never even felt the impact during the depression. The depression also revealed how the US administration, commerce and financial entities were incapable of coping with the economic meltdown. This was evident when businesses were unable to sustain the depression leading to closure.
Consequently, people lost their jobs leading to reduced purchasing power within the constraints of the economy[3]. In addition, many financial institutions such as banks reduced their operations due to a decrease in customer savings. This was indication that businesses had no mechanisms that would mitigate such a situation.
The depression also revealed an incapacitated government that was unable to handle an economic crisis before it worsens[4]. It never had effective immediate strategies such as stimulus packages that would curb the situation but instead it relied on market forces, an approach that was unrealistic.
The depression revealed a society with ineffective mechanisms that were incapable of handling an economic crunch. Instead of coming up with creative approaches of curbing the situation, the society (the poor) languished in poverty without any concrete efforts.
The depression also revealed how prosperous person never cared much about the poor since to them it was an opportunity to gain more wealth at the expense of the poor. Due to doubts of their investment security, Americans lacked confidence on their economy. It was so long before they regained assurance of their financial system, a setback that accelerated the crisis[5].
This clearly pointed out how people in US had lost faith with their economy. Racism was at its peak to an extent that it was applicable even for the fewer jobs available. This exposed how immoral the US society was at the expense of certain innocent races, especially at this crucial moment.
Sometimes one may not understand problems that a country faces until an event that reveals them comes to pass. Americans suffered because they didnt have effective instruments capable of preventing or minimizing the dreadful period. If only recognized their societal and economic weaknesses in time they could have come up with different approaches to limit the situation.
Even though the economy of US was worst hit by the depression, some few individual emerged courageous and successfully regained back their economy, thank to President Franklin Roosevelts new ideas. This should act as an example to many states that have no mechanism to combat with recession. The lessons drawn from the recession are numerous and should serve as examples to different nations.
Bibliography
Constantinides, George. Harris, Milton. & Stulz, Rene. Handbook of the economics of Finance (Amsterdam: Elsevier, 2003) 106-134
Cravens, Hamilton. Great Depression: people and perspectives. (California: ABC-CLIO, 2009) 143
Footnotes
Cravens, Hamilton. Great Depression: people and perspectives. (California: ABC-CLIO, 2009) 143
Cravens, Hamilton. Great Depression: people and perspectives. (California: ABC-CLIO, 2009) 143
Cravens, Hamilton. Great Depression: people and perspectives. (California: ABC-CLIO, 2009) 143
Cravens, Hamilton. Great Depression: people and perspectives. (California: ABC-CLIO, 2009) 143
Constantinides, George. Harris, Milton. & Stulz, Rene. Handbook of the economics of Finance (Amsterdam: Elsevier, 2003) 106-134
One of the causes of the Great Depression was the international economic woes of the United States of America. During World War, the U.S.A. had lent money to its allied countries that they could not pay after the war. However, the US government demanded repayment, causing the American banks to lend to these foreign governments to pay back the war-era loan. These governments defaulted on the new loans leading to a crisis in the American banking industry and consequently the citizens who had saved money with them.
One of the actions taken by the Hoover administration to combat the depression was urging the employers to retain their workforce and at the same time urging Americans to work harder. This move, however, maintained Hoovers lack of acknowledgment of the economic downturn and his optimism that hard work would restore normalcy. This refusal to admit the crisis increased the economic setback as it did not provide a real solution of giving aid to Americans.
One of the changes in popular culture due to depression was the shift from individualism to emphasis on community. This adjustment in popular culture happened because of the arising need for having a community around individuals dealing with a tough time. It was an advocacy method to encourage in helping those severely affected economically. President Hoovers foreign policy was less intervening compared to Theodore Roosevelts and Woodrow Wilsons. The former was harsh to its war allies on debt repayment, while for the last two, it was softer and collaborative. One impact of the Dust Bowl phenomenon was the loss of income and homes for most farmers due to the then prevailing drought.
Between 1930-1933, both the rural and urban white-majority face one common predicament, the loss of livelihood. In the rural context, the causes were loss of land or diminished productivity due to the drought that ensued. In both cases, this led to the loss of their homes as they could no longer pay their mortgages and rent. However, the significant difference between the two sides was how they dealt with their situations. In the rural settings, once a family could not sustain itself anymore, they moved in with their relatives. (Corbett et al., 2014). Furthermore, this movement continued once the host family was also sent packing. On the other hand, the urban white became homeless and relied on bread and soup relief once they were ejected from their houses.
The two most important reasons for the great depression were poor income distribution and the low-interest loans that forced people into taking unrealistic risks. The insufficient revenue supply aided in the crash of the stock market as it affected the buying and selling of stock. Whereas the wealthy bought the shares, the poor majority could not afford them, and thus, there was no buyer. On the other hand, the low-interest loans promised quick returns in land and stock as hyped, which resulted in loss of lifelong savings due to poor investment advice. The U.S. is unlikely to experience a similar depression for the same reasons as those that lead to the Great Depression.
Nevertheless, for other reasons such as health crisis and other uncontrollable factors, the U.S. could sink economically. The social services during the depression decreased in participation apart from the film industry, which reformed quickly by adopting community campaigns (Corbett et al., 2014). Both the poor and the middle class felt the effects of the depression as the poor became poorer and starved while the latter faced hunger and lost homes.
Reference
Corbett, P. S., Janssen, V., Lund, J. M., Pfannestiel, T. J., Vickery, P. S., & Roberts, O. (2014). US history. OpenStax, Rice University.
The catastrophic convulsion of stock-market prices on the New York Stock Exchange in October 1929 and the Great Depression which followed are among the most noteworthy events of the twentieth century.
As noted by Steindl (2007), these two events changed the global economic landscape of the time as developed economies, led by the United States, gravitated towards a grotesque economic slump which resulted in massive job losses, meltdown in global trade, severe contraction in spending, and failure of financial institutions.
Granted the importance of these events, then, it was inevitable for policy analysts to learn important lessons from the Great Depression to avoid a repeat of economic blunders that precipitated the worlds worst depression to date.
Indeed, the widely held perspective, according to Bramble (2009), is that the experience of a generation that was faced with an overwhelmingly greater degree of uncertainty can teach us some important lessons about how to negotiate our own economic uncertainty.
This paper will attempt to critically analyze if the lessons learnt from the Great Depression were decisive in shaping the post-1945 global economy. This objective will be achieved by analyzing three broad domains, namely: consequences of the depression to the global economy; the fall of the gold standard, and; the Bretton Woods system.
The Great Depression Era & its Consequences to the Global Economy
The economic slump that hit industrialized economies of the world, starting in the U.S. and later spreading to Europe, began in earnest in 1929 and lasted until about 1941, making it the longest and most ruthless depression ever experienced by the developed world (Ahamed, 2011).
Policy analysts are in agreement that the economic losses occasioned by this depression, in their full volume and magnitude, are immeasurable.
Although it is outside the scope of this paper to dwell on the real or perceived causes of this depression, it is worth noting that the catastrophic collapse of stock-market prices coupled with unparalleled bank failures and American economic policy with Europe generated an enabling environment that not only destroyed but also dislocated the economic structure of the United States and Europe (Gay, 1992).
The Great Depression brought with it a myriad of consequences that shook the global economy to the core. Indeed, many of the lessons learnt from the depression, according to Bramble (2009), accentuated the need for countries to develop mechanisms that would shield their economies from such consequences should they ever arise again.
This notwithstanding, research into the depression demonstrates that massive unemployment across global economies was one of the overriding consequences of the depression (Hannikainen, 2008).
Romer (2009) notes that, at its most terrible state, unemployment in the U.S. in the decade of the 1930s hit the 25 percent mark, and a quarter of American workers had partial access to the social welfare needed to maintain the fundamentals of life during unemployment.
Another consequence, which is related to the first, is that the GDP of many economies in the developed world declined catastrophically, mainly due to a fall in commodity prices, low production capacity, and a massive volume of economic losses that threatened the already struggling financial institutions (Prescott, 1999).
Romer (2009) observes that &between the peak in 1929 and the trough of the Great Depression in 1933, real GDP [in the U.S.] fell over 25% (p. 1). The decline in GDP of major world economies triggered further consequences, particularly the rise in the standard of living, rapid shifts in habits of consumption, easy credit, over-borrowing, and the spread of price agreements and market controls.
As will be discussed elsewhere in this paper, the above consequences brought with them valuable insights that were used to devise a roadmap of postwar economic recovery in what came to be popularly referred to as the Bretton Woods System.
According to Ahamed (2011), the post-1945 global economic arrangements, implemented by institutions such as the International Monetary Fund (IMF) and the World Bank, made it possible for economies to employ collective fiscal controls and monetary policies that checked and controlled easy credit, over-borrowing, and excessive leverage.
The IMF, in particular, was used as a vehicle to streamline unrestrained flexibility of exchange rates, a feature that was predominant during the Great Depression.
As surmised by Temin (1991), policies hatched during the consultative meeting held in 1944 in Bretton Woods, U.S., and which were largely meant to assist in postwar reconstruction of Europe, viewed economic recovery through the lens of events that happened during the interwar years, particularly the events underlying the Great Depression.
Consequently, it can be deduced that the lessons learnt from the depression were critical in shaping the post-1945 world economy.
The fall of the Gold Standard & the Hegemony of the Dollar
One of the major consequences of the Great Depression, and which will receive considerable attention, is the abandonment of the gold standard and the subsequent demonstrable alterations in the money markets of major world economies.
Most economists, according to Ahamed (2011), believe what came to be known as the Great Depression could have been an ordinary, forgettable recession if only the Federal Reserve had not been so preoccupied with defending the gold standard instead of the real economy.
This policy, coupled with easy credit and unstable currencies, messed up the international financial system, leaving exchange-rate arrangements in absolute disarray (Ahamed, 2011; Gay, 1992). These events, which modern economists argue could have been prevented, led to the abandonment of gold standard by England in September 1931, followed by the U.S. shortly afterwards (Gay, 1992).
According to Subachi (2008), it was President Roosevelt who first set the stage for the dollar to become a hegemonic currency when he torpedoed the agreement of currency stabilization, hatched by his European counterparts in the London agreement of 1933, and instead devalued the dollar by permitting the U.S. to ease credit conditions at home.
Indeed, it is widely believed that Roosevelts decision not only made the dollar achieve its hegemonic status, but brought to an end the depression era in America (Ahamed, 2011).
Other commentators are of the opinion that the dollar attained its hegemonic status after the currency was proposed by the Bretton Woods convenors as the vehicle currency for world trade in an attempt to correct the misaligned exchange rates and intractable current account imbalances factors that either prolonged or intensified the depression (Vasudevan, 2008).
Consequently, it is important to note that the hegemonic status of the dollar was critical in shaping post-war global economy.
The Bretton Woods System
The Bretton Woods system, instituted in 1944, was the foremost exemplar of an entirely negotiated international monetary system projected to administer financial discipline and govern monetary relations among global economies (Bramble, 2009).
According to Subachi (2008), the planners at Bretton Woods, U.S., not only came up with a legal system of rules, institutions, and processes to regulate the international monetary system, but also established the IMF and the World Bank to facilitate multilateral decision-making with regard to currency relations among national economies.
The two institutions became operational in 1945. Vasudevan (2008) notes that &the International Monetary Fund (IMF) was initially conceived as an instrument to facilitate expansionary national economic policies that would enable member countries to overcome temporary liquidity problems, such as a shortage of funds (p. 38).
The negotiators, while forming the Bretton Woods institutions, came up with four critical policies aimed at strengthening global economies to avoid repeating what was perceived to be the errors of the past.
First, the negotiators developed a pegged rate currency regime to check unrestrained flexibility of exchange rates, which not only discouraged trade and investment, but also fuelled destabilizing speculation and competitive depreciations factors that were primarily responsible for the escalation of the depression in the 1930s (Vasudevan, 2008).
Consequently, it can be argued that by pegging major world currencies to the American dollar, the negotiators had conclusively relied on the lessons from the depression, particularly the realization that misaligned exchange rates and the emergent threat of protectionism were to blame for the force and magnitude with which the depression hit global economies (Ravenhill, 2008).
It therefore follows that lessons from the depression were decisive in shaping the post-1945 world economy.
As noted by Vasudevan (2008), the second policy aimed at addressing liquidity problems by ensuring adequate supply of monetary reserves and gold were embedded in the IMF in subscriptions and quotas contributed by individual countries according to their relative economic importance.
The rationale behind establishing such a fund, according to Subachi (2008), was to bail out States that, by any eventuality, experienced shortage of monetary reserves by permitting them to borrow the required foreign currency in amounts determined by the size of their subscriptions and quotas.
It should be recalled that international liquidity problems and unequal balance of payments provided the impetus for the depression to spread fast from its epicentre in the U.S. to other parts of Europe (Prescott, 1999).
Equally, this policy has been particularly popular with nations in need of extra reserves at least until the collapse of the Bretton Woods system in 1971. In light of these revelations, it is safe to argue that lessons from the Great Depression were decisive in shaping modern world economy.
The third policy revolved around eliminating existing exchange controls that, according to economists, constrained currency convertibility and, in their place, encourage independent member states to return to a monetary and financial system of free multilateral payments (Bramble, 2009).
According to Subachi (2008), the negotiators at Breton Woods felt that discriminatory currency practices and exchange regulation had to be prohibited in principle if governments were to circumvent a recurrence of the kind of economic meltdown that had characterized the decade of the 1930s.
This particular policy, in its element, demonstrates that the lessons learnt from the depression were critical in determining futuristic monetary principles and policies, particularly in ensuring that world economies did not fall prey to the same challenges that befell preceding economies.
A critical analysis of the post-1945 world economy demonstrates that discriminatory currency practices and limited currency convertibility are not only incongruous to a free market economy, but may further misalign exchange rates of global economies, leading to the kind of confusion reminiscent of what was experienced in the 1930s (Steindl, 2007).
Consequently, it can be argued that the lesson learnt from the depression of the 1930s that protectionism, limited currency convertibility, and exchange regulation leads to chaos in the currency market was decisive in shaping post-war world economy.
The fourth policy, according to Subachi (2008), established some form of international monetary cooperation among nation-states, which was to be institutionalized on a permanent basis. This institutional forum, it was felt, could be used to check currency troubles which became prevalent during interwar years (Steindl, 2007).
Again, it can be argued that this policy was a direct offshoot of the depression as it is during this era that global currencies started collapsing, making the world economy pose more dangers than it had been previously imagined.
Conclusion
Mainstream commentators are in agreement that the Great Depression, witnessed from 1929 to 1941, was indeed a watershed in the history of contemporary global economics (Ravenhill, 2008).
After critically discussing the causes and consequences of the Great Depression, the gold and dollar issue, and the Bretton Woods system, it is clear that the events and lessons from the Great Depression of the 1930s were decisive in shaping the post-1945 world economy.
It is of interest to note that many of the consequences of the depression, particularly currency troubles, exchange regulation, liquidity problems, discriminatory currency practices, and competitive depreciations, were addressed at length during the consultative meeting held at Bretton Woods in 1944.
According to Ravenhill (2008), the outcome of this particular meeting provided the foundation for the postwar world economy, at least until the 1970s. This interplay, therefore, demonstrates the importance of the lessons learnt from the depression in shaping postwar global economy.
List of References
Ahamed, L (2011). Currency Wars, Then and Now. Foreign Affairs, Vol. 90, Issue 2, pp 92-103.
Bramble, T (2009). Crisis and Contradiction in the World Economy. Journal of Australian Political Economy, Issue 64, pp 37-64.
Gay, E.F (1992). The Great Depression. Foreign Affairs, Vol. 10, Issue 4, pp 529-540.
Hannikainen, M (2008). Unemployment and Labour Market Flexibility in the Great Depression. Scandinavian Journal of History, Vol. 33, Issue 2, pp 139-160.
Prescott, E.C (1999). Some Observations on the Great Depression. Quarterly Review, Vol. 23, Issue 1, 25-34.
Ravenhill, J (2008). Global Political Economy, 2nd Ed. Oxford: Oxford University Press.
Romer, C.D (2009). Lessons from the Great Depression for Economic Recovery in 2009. Paper Presented at the Brookings Institution, Washington, D.C. March 9, 2009. Viewed <https://www.brookings.edu/>
Steindl, F.G (2007). What Ended the Great Depression? Independent Review, Vol. 12, Issue 2, pp 179-197.
Subachi, P (2008). From Bretton Woods Onwards: The Birth and Rebirth of the Worlds Hegemon. Cambridge Review of International Affairs, Vol. 21, Issue 3, pp 347-365.
Temin, P (1991). Lessons from the Great Depression. Cambridge, MA: MIT Press.
Vasudevan, R (2008). Finance, Imperialism, and the Hegemony of the Dollar. Monthly Review: An Independent Socialist Magazine, Vol. 59, Issue 11, pp 35-50.
In the period between the end of First World War and the onset of the great depression, United States enjoyed relatively stable economic conditions under the leadership of a string of republican presidents.
The market was flooding with new and improved products, business men engaged in extensive marketing and financial institutions provided potential consumers with easy credit to boost their purchasing power. In fact, in August 1928, Hebert Hoover, a republican presidential candidate at the time confidently proclaimed that America was nearer to the final triumph over poverty than ever before (Wiegand, 2009).
Economists, historians, and financial analysts have over the years tried to reach a consensus over the actual events that led to the great depression. In the 1920s persons employed in the service industry such as office secretaries comprised 30% of all the people who were gainfully employed and this percentage had risen to 38% by 1929 (Wiegand, 2009).
However, the economy of America lacked diversification and employment opportunities was heavily dependent on a few industrial sectors which were operating in the economy. Upon the declination of these industries in the late 1920s, expenditure in the construction industry reduced by approximately18 % in the period between 1926 and 1929 while automobile sales continued to decline (Wiegand, 2009).
Consequently, the need to lay off workers who were not directly involved in production process such as service industry workers emerged which led to widespread unemployment and poor standards of living among these workers.
In addition to lack of diversification in American economy, there was unequal distribution of wealth in the countrys economy which resulted in reduced purchasing power among consumers (Brinkley, 2007). In the period before the great depression, industrial and agricultural production had increased significantly.
However, low income levels among most American consumers reduced overall demand and resulted in disequilibrium between demand and supply which negatively impacted on industrial performance. The credit structure in pre depression period contributed to occurrence of the great depression. Financial institutions incurred great losses emanating from customers defaulting on loans and reckless investment in the stock market.
In the late 1920s, Europe, a major importer of American goods reduced its demand for American products. This was attributed to increased productivity among some European countries and the fact that some countries within the region were experiencing financial difficulties (Brinkley, 2007).
In addition, the international debt structure in American economy was highly unstable due to the post World War effects. Some European countries with shattered economies such as Germany and Austria owed huge amounts of money to American banks and were unable to repay. In response to this, American banks made huge loans from European countries governments to service their own loans which led to piling up of debt.
Economic and Psychological Impact Summary
The great depression brought with it a great deal of hardship and suffering which extended in every aspect of American life. Its consequences were devastating to the countrys economy and to peoples lives. For an office secretary, the major threats posed by the great depression were loss of employment and reduction in disposable income.
Unemployment caused adverse psychological effects to American workforce whom had developed in a culture where unemployment and poverty were viewed as signs of failure rather than transition in life. A jobless office secretary would develop a sense of idleness, helplessness and reduce his/her self esteem which resulted in frustrations and loss of self worth among the unemployed Americans.
The great depression adversely affected the financial ability of American workers such as office secretaries. Due to loss of employment and reduction in per capita income, consumption ability of office assistants considerably reduced leading to reduced purchasing power hence poor standards of living.
Due to persistent unemployment and decline in income, poverty incidences among these workers increased rapidly. Increased strain for such families to meet their basic needs and the prevalent uncertainties in the economy resulted in the market retreat from consumerism which reduced overall demand.
The great depression presented new challenges for workers who were already facing the risk of unemployment. Bank loan officers incurred enormous losses due to payment default by low income borrowers while manufacturing executives had to deal with reduction in financial resources available for spending. In addition, automotive dealers experienced reduced sales while farmers lacked adequate market for their products due to reduction in overall demand.
President Roosevelts new Deal Summary
Franklin Roosevelts new deal played a major role in reconstruction and recovery of American economy from the great depression. The republican president established the federal emergency relief administration which provided financial grants to relief agencies which provided assistance to desperate and unemployed Americans (Brinkley, 2007).
The unemployed office assistants consequently benefited from such relief programs which provided them with basic needs and financial assistance. In addition, Roosevelts government established temporary projects through the civil work administration where workers would gain temporary employment to further sustain themselves. Office assistants secured employment in these industries which provided them with an opportunity to earn income.
In a bid to establish a long term solution to the problem of unemployment in the United States economy, President Roosevelt sought to promote industrial recovery in the region through a series of reforms. His administration allowed the creation of labor unions which advocated for protection of workers rights, reasonable salaries, and creation of jobs in America.
In addition, the congress passed the national industrial recovery act in 1933 which further promoted efforts towards stabilizing the labor market through improved industrial performance (Brinkley, 2007). An office secretary would therefore benefit from working in a relatively stable economic environment where jobs were secure and the income levels were reasonable.
President Roosevelts new deal aimed at responding to the economic depression which had sent a series of panics to the banking sector and threatened the entire financial system and the living standards of Americans. Coupled with the presidents pleasant personality, the new deal served to promote confidence among the Americans amidst economic and social turmoil that persisted in the society at the time.
The new deal spearheaded recovery efforts in United States through its imaginative and far reaching projects instigated by the federal government and the Alphabet Laws. These projects promoted industrial growth, financial stability, stock market recovery, social and political reconstruction, and overall economic development.
However, the new deal faced a lot of criticisms from President Roosevelts opponents such as the American liberty league which raised a lot of concerns over the new deals dictatorial policies and its supposed attacks on capitalism consequently raising substantial public opposition (Brinkley, 2007). In addition, the new deal appeared to focus more on the role of federal government in American life rather than providing immediate solution to the great depression.
Reference List
Brinkley, A. (2007). American history: a survey. New York: McGraw Publishing.
Wiegand, S. (2009). Lessons from the Great Depression for Dummies. Indiana: Wiley Publishing Inc.
Political and Social Ideologies between FDR and Herbert Hoover
Political and social ideologies have helped transform the mindset among community members. The Great Depression presents an event in which the U.S. developed progressive leadership policies to improve living standards (Lewis, 2017). This period evidenced economic hardships and challenges resulting in abject poverty levels. For example, many families from minority communities ended up homeless for failing to repay their mortgage loans. However, prominent ideologies from national leaders in the U.S. ensured prompt recovery from financial problems that affected the American economy.
The Reasoning behind Former Presidents Ideologies
The U.S. encountered social and political transformation after World War I. American isolationism depicted a period of loneliness which allowed former president Franklin Delano Roosevelt (FDR) guide the country through the Great Depression (Lewis, 2017). The nation focused on industrializing its economy by ensuring job creation to the middle-class working citizens. However, the situation changed towards World War II when American advocated for the establishment of The United Nations (Lewis, 2017). The change was attributed to the increasing need of an international agency committed to national prosperity and economic growth. For instance, economists were convinced of successful globalization of industrialized products. Similarly, Americans favored formation of the UN for protecting human rights and values (Lewis, 2017). Most importantly, the American mindset changed following the implications and economic destruction caused by the Great Depression and World War II.
Cold War and Conformity
I believe that that civil rights in same-sex relationships were suppressed during the Cold War conformity. Political leaders implemented social policies that negatively affected individuals with unique sexual identities (Lewis, 2017). This approach was necessary for ensuring unity and support in case of military confrontation. For instance, liberal American presidents integrate gender equality rights by avoiding suppression techniques to cause public fear among individuals in Cold War conformity. This practice was common during the second half of the 20th century and affected future policymaking.
The Affluent Society
In the Affluent society, several social and political issues existed during postwar America as the country became more powerful. For instance, the government encouraged large-scale commercial practices, which allowed organizations to invest in foreign markets (Lewis, 2017). Similarly, the sense and pride of national identity enhanced local consumerism as businesspeople acquired more wealth from profitable ventures. The postwar America exacerbated the social and political issues as the country experienced financial and economic power across North America, Europe, and Asia. For instance, the postwar period facilitated accurate and comprehensive information awareness among minority populations concerning their human rights. This period also resulted in economic discrimination against minority populations due to lack of education. Collectively, the U.S. had its community divided along racial or cultural lines.
The Sixties
History will judge America harshly for its humanity atrocities against minority communities across the U.S. until the 1960s. Cesar Chavezs perspective on governments and institutions in the U.S. was based on financial wealth and military power. For instance, postwar America was attributed to consumer products retailed in local and international economies (Lewis, 2017). This illustrated that the U.S. had managed to improve living conditions among the middle-class Americans who had endured systemic segregation in accessing public resources. Most fundamentally, Cesar Chavez was specific on authorities fundamental role, which determines success in responding to general needs timely and effectively.
The Unravelling
The U.S. lost the nostalgic image of a thriving economy attributed with social attributed away from racial discrimination. Unraveling presented a period when Americans became conservative, as evidenced in recent political times. In essence, America lost the nostalgia due to inequalities that favored specific communities at the expense of minorities. African-Americans, for example, established their own television stations to dissociate from discrimination in the media stations (Lewis, 2017). History has depicted similar attitudes as the 1970s, by the immediate former U.S. president. The sense of nationalism and conservative leadership policies were imminent in national directives and employment practices.
The Triumph of the Right
Different presidents interpreted the political slogan of making American great. Former U.S. President Ronald Reagan succeeded in implementing social harmonization of political policies against minorities discrimination. Internationally, he contributed to the end of the Cold War, which threatened another military encounter with the Soviet Union. However, the former administration depicts a contradicting interpretation of making America great again (Lewis, 2017). In essence, the officials intend to generate more national wealth by reducing international involvement in the financial practices of under-developed nations. The immediate former U.S. president failed in administering nationalistic principles, which risked inter-racial conflicts.
The Recent Past
Information from historical events is useful in determining how to improve actions and relationships in the future. Theodore Roosevelt was specific in ensuring advanced preparations for successful interaction among American people (Lewis, 2017). The U.S. has undergone remarkable historical events that present useful learning lessons for improving its interaction with racially diverse citizens (Lewis, 2017). Civil Rights movements in the sixties were critical in enhancing equal recognition of all Americans irrespective of socio-cultural backgrounds.
Modern politics in the U.S. has caused social divisions similar to the period of Unravelling. Individuals with different cultural backgrounds criticize each other based on religious, racial, and sexual practices (Lewis, 2017). America has experienced similar instances in the past with individuals losing the lives unnecessarily. The current administration has a challenging role in enabling a socially cohesive community with less social hate. Embracing progressive values will be objective in reducing conflicts evidenced across public institutions.
Reference
Lewis, V. (2017). The president and the parties ideologies: Party ideas about foreign policy since 1900. Presidential Studies Quarterly, 47(1), 27-61. Web.
Historically speaking, America has always been a country of affluence and excess. That is why when the country finds its economic stability threatened, it enters a tailspin that results in economic losses for the country and its population that also causes a ripple effect in the international community. These kinds of effects, which we are seeing now, were first seen and experienced by the nation way back in 1929, the era of the Great American Depression.
The Great Depression was more than a state of mind for the people back then. It had long-reaching psychological and physical effects on most people due to their sudden lack of ability to provide for the most basic necessities such as food, shelter, and clothes. Oftentimes, they blamed themselves for their sorry state of life without realizing those bad economic decisions and political motivations of the government they elected to protect them actually caused their social situation. Nobody was spared from the depression. Together with the stock market crash, the upper crust of society found themselves without the financial ability to continue their lavish lifestyles dictated by the affluence of the era. Those who were unemployed believed that it was their fault they did not have a job. These were the people whose psyches were affected. Their self-blame and doubt spread across the lower tier of society until it became so widespread that it took the New Deal Era of governance to reverse the mindset. This was the program that opened the eyes of the people to the fact that the depression era did not affect just the low bracket of society and that if they were to overcome it, all sectors of society had to work together.
The Depression Era actually affected the international community as a whole. The world was changing and developing at a fast pace but the salary brackets of workers across the world did not compensate nor keep up with the growing world population. In Germany for instance, the nation struggled to afford the cost if World War I reparation and peace settlements. People were looking for somebody to blame for their hardships in life. Refusing to accept the truth that they caused the predicament they now found themselves in.
Countries like Britain and Europe took longer to feel the effects of the economic turmoil because of their political power setup. Britain was already suffering from a huge unemployment rate but because they had unemployment insurance and welfare, the jobless were somehow shielded from the effects of the depression. France on the other hand barely felt the effects because of their less industrialized status as a country.
The stock market crash of 1929 was caused by the greediness of people who borrowed heavily from others in order to play the stock market. Stock prices were at their peak and the market seemed to be the best bet in terms of investments. By 1929, the market bubble had burst and the stocks lost at least 80% of their value. People were left feeling destitute and the stock market could not entice new investors to spend in the market. The banking system was left in utter chaos as stock market loans remained uncollectible and, because banks themselves had invested in stocks, they found themselves unable to answer to their own depositor obligations, causing numerous bank runs across the nation. Upon Roosevelts ascension to power, he initiated a 3 day bank holiday in order to help banks copes with the bank runs. Later on, the Federal Deposit Insurance Corporation was established in order to ensure that a repeat of the bank runs would never happen again. Under the FDIC, banks could no longer invest in the stock market. This is perhaps the biggest change that occurred within the stock market as a result of the stock market crash of 1929.
The Great Depression (GD) of 1929-40s refers to the collapse of the world economy. It was normally caused by the collapse of the stock market. During this epoch high levels of unemployment dominated the world thus the closure of a myriad of businesses (Rauchway 105) .
Although it had no significant impact in some countries around the globe, cases of countries such as the US was severe (Hillstrom 11). This left a large proportion of individuals jobless. In addition, the majority of them lost high valued properties and became homeless. It was therefore, necessary that, the government to compensate the affected individuals.
The government accomplished this by devising a strategy aimed at averting the situation. A number of prominent members in the government devised numerous new deals. This was the turning point as the Americans became awake and sought for the strategies of ending the depression (Edsforth 262).
A number of interested individuals brought their opinions. For instance, a democrat entitled as Glass believed in the dominance of the white, budget devoid of deficits, the statutory rights, as well as the controlled power accorded to the president. Therefore, this document will discuss the cause, effects, as well as the reactions to the great depression.
The Cause of the great depression
Before the economy collapsed, Americans experienced some problems, which later became the cause of the great the GD (Murphy 17). For instance, there was poor distribution of wealth resulting to the increased gap between the affluent and the poor. The poor banking system among the banks was an additional challenge. This is because banks were in favor of some sectors.
Unfavorable balance of payments deficits dominated the entire economy, resulting to more imports than exports hence the US turned into a creditor nation. There was also the general increase of the price of commodities in the stock exchange market. This culminated into a vast wealth accumulation among the capital class (Murphy 112). There also existed some ignorance of the less speculative economic indicators leading to high investments among the capitalists (Hillstromn 109).
The gambling of commodities created a high inflation and this weakened the economy expansively. Financial institutions such as banks started numerous loan facilities in favor of stock- buyers. This was because stocks were selling at a good price than the other commodities in the market. In addition, the banks allowed capitalists to use stock as security for loans. In case the value of stock goes down, the financial institutions have less value security of loans taken by capitalists.
This would therefore, mean that financial institutions remain with less monetary items. This is indicative that productive businesses would not thrive, and mortgages would foreclose. As a result, bankruptcy among the business people heightened due to the collapse of the stock exchange used by a large proportion of individuals as short cut to becoming wealthy.
There was an immense panic among people since they had lost confidence in their savings. The panic resulted from the investment of clients savings on the stocks. The closure of the stock exchange market meant that banks experienced a high level of withdrawals thus their closure. A great market crash was therefore, experienced in late October 1920.
Effects of the great depression
The collapse of the stock market had a profound impact on the industries. For instance, numerous industries lost their capital in the market crash. Moreover, some industries lost their capital due to banks closures. Consequently, capitalists had to reduce the working duration sometimes, as well as the workers wage bill. This resulted to low purchasing among the customers, as well as a reduced spending on luxurious commodities.
Conversely, the reduced spending among the customers meant low demand of workforce. This further led to a reduction of the number of workers, and their wage bill. Drastically after the cost reduction measures, a myriad of businesses could not thrive leading their eventual closure. Lastly, the workers lost their jobs. Consequently, the unemployment rate escalated the ratio of dependency.
Reactions to the great depression
After the collapse of the economy, Americans sought a solution for the economic crash. Some Americans blamed President Hoover while others targeted the financial institutions and businesspersons. The collapse of the economy was not only attributed to one side, but to all structures of the Americans economy (Marsh 25).
The government responded in several ways. First, President Herbert, the President of the time in the US refused to intervene on the peoples behalf. He regarded the government intervention as a moral decay of the American person. He further argued that, during such a difficult situation in a country, proper strategic measures are crucial in curbing the situation.
Though forced by the congress to show his concern on the crash, he remained reluctant. This was due to his concern of balancing the national budget. More importantly, he was against violating his principles. He conducted spending in order to stabilize the business sector.
He was encouraged by the fact that regained prosperity calm the poor majority, who in turn they behaved unwillingly in waiting. Consequently, due to his uncaring nature, he was later defeated in a preceding elections of 1932 by Franklin D. Roosevelt. During the campaigns, Franklin had promised to respond appropriately in order to mitigate the depression.
While in office, he carefully followed his advisors instructions and developed programmes aimed at recovering the economy. He later launched the politics of the New Deal, which was a measure of essential conservation. The New Deal was to redeem capitalism and the key economic institutions of US from the dangerous depression.
The New Deal (ND)
In the first deal, the Tennessee valley Authority (TVA) of 1933 reflected on the incoming liberal means of the second ND. The TVA provided the required funds to transform the economies of seven depressed states a together with the Tennessee River. This entailed the construction of dams, power making, as well as the flood and soil erosion control.
The above construction activities were relatively high wage jobs (Edsfoth 264). Sources have shown that this is a socialism ideology. Other sources have regarded them as a proper way of solving social and economic problems. The second ND (1935-40S), aimed at ending the depression by spending in all economic activities. This increased the number of consumers, hence a higher demand for commodities. The resultant effect is a high spending hence economic growth.
Conclusion
Since economic depression, results from preventable factors, there, therefore, need to find appropriate prevention measures. First low spending by both consumers and the government demands improvement. The government, therefore, should use its huge financial power; inform of taxation and spending, as a precautionary measure to stabilize the economy. The increased spending needs emphasis in order to deal with depression adequately. This is crucial in the prevention of cases allied with the economic crash.
Work Cited
Edsforth, Ronald. The New deal: Americas response to the great depression .Malden, MA: Wiley-Blackwell, 2000. Print.
Marsh, Carole. The great depression and the new deal. Peachtree, GA: Gallopade International. Peachtree, 2005. Print.
Murphy, Robert. The politically incorrect guide to the great depression and the new deal. New York, NY: Regnery publishing, 2009. Print.
Rauchway, Eric. The great depression: A very short introduction. New York, NY: Oxford University press, 2008. Print.
The election of Franklin D. Roosevelt as the President of the United States of America in 1932, only three years after the great depression, was in response to the need for peace amidst the populations intense fears (Polenberg 54). During his re-election speech in 1936, Franklin claimed that his first term aimed at delivering this peace to the people.
To begin with, people felt insecure in their homes due to the temporary nature of their jobs, the lack of profits, and the inability to make significant returns in their enterprises (Polenberg 54). Secondly, people sought to have peace in the society at large, which would allow the local government to provide the communities with needs such as sanitation, schools, and playgrounds, among others (Polenberg 54).
Thirdly, Franklin noted that people yearned for global peace and favorable relations between the US and other nations (Polenberg 54). It is evident that, after four years as the president of the US, Franklin Roosevelt was fully aware of the needs of the American people. However, one may wonder whether he was aware of the peoples challenges when he assumed power in 1932.
Based on Roosevelts First Inaugural Address in March 1933, it is evident that he had a plan to change the devastating state of the American economy. According to Roosevelt, a part of the problem was due to the relief provided by the federal government. He argued that the issue of food and cash for the delivery of minor jobs diminished the vitality of the people (Polenberg 51).
Out of the five million unemployed citizens under the relief role, Roosevelt noted that only a third of the group was reliant on the state for their livelihood, before the great depression (Polenberg 51). With this in mind, he presented security legislation to the Congress that would see the needs of the one and a half million citizens, who were incapable of living independently, addressed.
This proposal sought to empower the local communities and make the three and a half million people on relief, self-reliant, once again (Polenberg 51). When he assumed the presidency in 1932, Franklin acknowledged the challenges of the nation, and also the way to get them out of the great depression. He urged the people to eliminate fear and believe in the possibility of better times.
Besides the change in ethics, Franklin also urged people to take action of the situation by being selfless in their dealings (Polenberg 41). The restoration process involved creating jobs for numerous unemployed people. The jobs would be provided by the government and the industries on a national scale, hence, ensuring decentralization of processes, and redistributing the growth process nationwide (Polenberg 41).
This would, in turn, increase the purchasing power of individuals, which would add value to agricultural products and reduce farm losses (Polenberg 42). Franklin also sought to reduce costs incurred in the relief activities by unifying the federal, State and local governments processes. This involved central supervision and control of various utilities including transport and communication (Polenberg 42).
In the endeavor to return people to work, Franklin also sought to avoid the recurrence of activities that led to the depression in the first place. He achieved this by ensuring strict supervision of all banking and credits and investments (Polenberg 42) to reduce speculation, and the provision of an adequate and proper currency (Polenberg 42).
In conclusion, it is evident that President Franklin D. Roosevelt had a plan to end the depression from the moment he stepped into office. This argument is supported by his claim that he had ended the involuntary idleness of thousands of young men three years earlier while addressing a crowd in Virginia in 1936 (Polenberg 65).
Works Cited
Polenberg, Richard D. The Era of Franklin D. Roosevelt, 1933-1945: A Brief History with Documents (Bedford Series in History & Culture). Boston : Bedford/St. Martins, 2000. Print.
The election of Franklin D. Roosevelt as the President of the United States of America in 1932, only three years after the great depression, was in response to the need for peace amidst the populations intense fears (Polenberg 54). During his re-election speech in 1936, Franklin claimed that his first term aimed at delivering this peace to the people.
To begin with, people felt insecure in their homes due to the temporary nature of their jobs, the lack of profits, and the inability to make significant returns in their enterprises (Polenberg 54). Secondly, people sought to have peace in the society at large, which would allow the local government to provide the communities with needs such as sanitation, schools, and playgrounds, among others (Polenberg 54).
Thirdly, Franklin noted that people yearned for global peace and favorable relations between the US and other nations (Polenberg 54). It is evident that, after four years as the president of the US, Franklin Roosevelt was fully aware of the needs of the American people. However, one may wonder whether he was aware of the peoples challenges when he assumed power in 1932.
Based on Roosevelts First Inaugural Address in March 1933, it is evident that he had a plan to change the devastating state of the American economy. According to Roosevelt, a part of the problem was due to the relief provided by the federal government. He argued that the issue of food and cash for the delivery of minor jobs diminished the vitality of the people (Polenberg 51).
Out of the five million unemployed citizens under the relief role, Roosevelt noted that only a third of the group was reliant on the state for their livelihood, before the great depression (Polenberg 51). With this in mind, he presented security legislation to the Congress that would see the needs of the one and a half million citizens, who were incapable of living independently, addressed.
This proposal sought to empower the local communities and make the three and a half million people on relief, self-reliant, once again (Polenberg 51). When he assumed the presidency in 1932, Franklin acknowledged the challenges of the nation, and also the way to get them out of the great depression. He urged the people to eliminate fear and believe in the possibility of better times.
Besides the change in ethics, Franklin also urged people to take action of the situation by being selfless in their dealings (Polenberg 41). The restoration process involved creating jobs for numerous unemployed people. The jobs would be provided by the government and the industries on a national scale, hence, ensuring decentralization of processes, and redistributing the growth process nationwide (Polenberg 41).
This would, in turn, increase the purchasing power of individuals, which would add value to agricultural products and reduce farm losses (Polenberg 42). Franklin also sought to reduce costs incurred in the relief activities by unifying the federal, State and local governments processes. This involved central supervision and control of various utilities including transport and communication (Polenberg 42).
In the endeavor to return people to work, Franklin also sought to avoid the recurrence of activities that led to the depression in the first place. He achieved this by ensuring strict supervision of all banking and credits and investments (Polenberg 42) to reduce speculation, and the provision of an adequate and proper currency (Polenberg 42).
In conclusion, it is evident that President Franklin D. Roosevelt had a plan to end the depression from the moment he stepped into office. This argument is supported by his claim that he had ended the involuntary idleness of thousands of young men three years earlier while addressing a crowd in Virginia in 1936 (Polenberg 65).
Works Cited
Polenberg, Richard D. The Era of Franklin D. Roosevelt, 1933-1945: A Brief History with Documents (Bedford Series in History & Culture). Boston : Bedford/St. Martins, 2000. Print.
Period of Great depression remains a memorable economic period in the US history. During this period millions of people lost their jobs, and the United States experienced the worst economic hardship ever (Conlin, 777). The effects of the depression had a significant impact all over the world, including Germany where it resulted into World War II. It was not only caused by a single factor, but by a combination of factors including both, domestic and worldwide conditions.
One of the reasons which caused this Depression was overproduction of the agricultural sector. Workers had to be laid off until the manufactured surplus was used up (Document M). It hampered considerably with the business cycle when people had enough of what they needed.
As a result, the agricultural farm products prices dropped (Document N). Some could not afford to pay the government taxes and had no choice but to sell their farms in order to pay these taxes. Those who had debts had their land auctioned to repay the loans. As a consequence, farm products reduced in quantity and many farmers lost their land leading to reduction in industrial production.
Another reason which led to depression was the decline in spending or the aggregate demand. This was due to unemployment, loss of jobs and present harsh economic time. Reduction in demand affected the supply and many industries shut down and some laid off their workers in order cut down production. The economy of the United States had worsened to an extent where those who had jobs got enough to keep them alive. They lived on forty cents a day, and had little money to use in making purchases (Document I).
Stock market crash also fuelled the Great Depression of the United States. Many people had invested in the stock market by 1920s as heavily as never before. Trading on stocks was the most lucrative investment during this decade, and many of those who had invested in stocks flourished. The deviation from the long term trend was above twenty percent after 1920 (Document A). There was a heavy investment in stock during this period leading to extremely marginal stock.
However, the down fall of this came in 1929, when a few stock market investors started selling their stocks. This was due to a prediction of the end of rise in the stock market thus; there was a nationwide stampede to unload the stocks (Document D). A sudden decrease in stock prices was then realized since there were no buyers and a large number of desperate sellers. The result was a loss in millions of dollars. It led to the Great Depression in the United States.
The American foreign policy also played a role in the Great Depression. It was an attempt by the Americans to export more than it could import (Document P). The policies favored monopoly and rise in inequality in terms of wealth and income. However, it charged a higher tax for the imports, thus reducing trade with other countries.
This happened after the governments creation of the Smooth Hawley Tariff of 1930 which raised the average duty on European imports from forty percent to sixty percent (Document P). Although this was created in favor of America, it had a significant contribution to the extreme decline of world prices of raw materials. It affected international linkages of the US to other countries, and in revenge other countries came up with their own policies as a correction to trade imbalances.
Banking panics were felt towards the end of 1929, and at the start of 1930s. Most of the banks had inherent weak financial structure. People started losing confidence with the banks, and as a result there was a simultaneous demand by those people who had deposits in the bank (Document L).
Most of the banks ran into insolvency during the period with the weakness of one bank spreading to the rest (Document L). More debts reduced chances of getting more loans. Most of the banks had run into bankruptcy. It affected the stocks, and most of the industries which depended on banks were shut down. Their workers were left jobless, and they had to be laid off. This led to hard economic times in the USA which had never been felt before.
Lastly, the period of 1920s was a period of economic boom. Many people enjoyed the privilege by buying goods on credit and installments, since most of them were employed. Debt was taken as a normal thing which could be repaid after some time. Three out of every four radios were purchased on the installment plan, as well as sixty percent of all automobiles and furniture (Document H). They didnt take the future into consideration.
The unemployment percentage rate had risen from 4.7 percent in the year 1926 to 23.1 percent in the year 1930 (Document F). With most of the people losing their jobs, they were not able to pay the monthly installments. They remained with their large debts, and with most of them, goods were repossessed.
In conclusion, these factors combined led to The Great Depression that had a great and very negative impact on the US economy, as well as on the economy of other countries worldwide. After this period, many countries reacted by developing crucial macroeconomic policies that fuelled economic downturns and upturns. Up to date central banks all over the world try to moderate recessions from time to time.
Works Cited
Conlin, Joseph R. The American Past: A Survey of American History. Boston: Cengage Learning, 2011.