The Great Depression Period Analysis

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
Causes of the Great Depression
Failures of Individual Banks
Solving the Depression
Conclusion
Work Cited

Introduction

The Great Depression is almost certainly one of the most misinterpreted events in American history. It is usually cited, as evidence that unregulated capitalism is not the finest in the world and that only a huge welfare state, enormous amounts of economic regulation, and further Interventions can save capitalism from itself. Amongst the many myths nearby the Great Depression are that Herbert Hoover was a laissez faire president and that FDR brought us out of the depression? What caused the Great Depression? To get a grip on that, it’s essential to look at preceding depressions and contrast. The Great Depression was by no way the primary depression this country ever had, but it was obviously the worst. But as America sees, there is good cause to believe that the Federal actions explain many of the troubles that lead up to the stock market crash and the succeeding depression (Andvig, Jens C., 1991, 431-55).

Causes of the Great Depression

Unequally Distributed Wealth

The main causes for the Great Depression were a combination of unequally distributed wealth, the stock market crash, and eventually the bank failures. The unequal distribution of wealth existed on numerous levels. Money was distributed inequitably among the rich and the middle class, among industry and agriculture inside the US, and among the US and Europe. This inequity of wealth created an unbalanced economy. The extreme speculations kept the stock market unnaturally high, but ultimately lead to large market crashes. These market crashes, shared with the uneven distribution of wealth, and bank failures, caused the American economy to crumple (Buehler, E. C., 2002).

The distribution of national income became gradually more skewed in the 1920’s. The nations total recognizes income rose from $74.3 billion in 1923 to $89 billion in 1929. Though, the prosperity was not divided consistently between all Americans.

“According to a study done by the Brookings Institute in 1929, the top.1% of Americans had a combined income equal to the bottom 42%. That same top.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a staggering 75% increase in per capita disposable income.” (Gusmorino)

Gap between the Rich and the Working-Class People

A main reason for this gap among the rich and the working-class people was the augmented manufacturing output throughout this period. Thus, wages increased 25% as fast as productivity increased. As production costs fell rapidly, wages rose gradually, and prices remained constant. “In fact, from 1923-1929 corporate profits rose 62% and dividends rose 65%.”(Gusmorino)

The federal government favored the original industries (radio and automotive) as opposed to agriculture. Throughout World War 1, the government subsidized farms and paid senior prices for what and further grains. Since the government was feeding the US and Europe, they confident farmers to buy other land, invest in modern methods, and to produce extra food. However, when the war was over, the US stopped helping farmers.

Large Concentrations of Wealth and Dependence upon Two Industries Is the Economy

The problem with having huge concentrations of wealth and dependence upon two industries is the economy relies on those industries to get bigger, grow, and invest in order to prosper. At the time, the major problem with the automotive and radio industries was that they could not expand since people could only buy so lots of cars and radios. When those industries went down, they took the American economy with them (Danielian, N. R., 1929, 411-20).

In 1929, 1,124,800,410 shares were traded on the New York Stock Exchange. From 1928 to 1929, the Dow Jones Industrial Average rose from 191 to 381. This profit was attractive to investors. Company earnings were not important as long as stock process continued to rise, and huge profits could be made. Through the convenience of buying stocks on margin, one could buy stocks without money to purchase them. By mid 1929, the total of outstanding broker’s loans was over $7 billion, in the subsequently three months that number would enlarge to $8.5 billion. Interest rates for broker’s loans were as high as 20%!

Failures of Individual Banks

Failures of individual banks generated runs on further banks as depositors became anxious about the security of their accounts. A high rate of insolvencies hit the banking industry and the nations stock of money in circulation plummeted. These developments prompted a rapid tumble of the GNP that was the defining characteristic of the Great Depression.

This speculation and the resultant stock market crashes, acted as a trigger to the unbalanced US economy. More jobs were lost, further banks went under, and more factories closed. Unemployment would produce to roughly 13 million by 1932. The Great Depression had begun (Ferderer, J., 2004, 825-49).

Solving the Depression

“During the early years of the depression in the United States of America, President Herbert Hoover and his administration believed, as did many bankers, economists, and financial leaders, that left alone, the economy would eventually right itself. Business leaders operating through the spirit of competition would restore America’s prosperity and economic vitality. When the economy, during the depression, did not improve during Hoover’s administration, Americans began looking for a new leader, a leader who would take decisive action against the economy. The people found a new leader in Franklin D. Roosevelt in 1932, when they elected him president in a landside election.” (Harrison, 2002)

President Roosevelt had many accomplishments during his term of president during the time of the depression. Some of his accomplishments were:

“Social Security Act” provided for state-administered, federally funded unemployment insurance, welfare benefits, administered old age, and survivor’s pensions. Prior to this passage few states provided old age pensions and un-employment insurance.
“Relations Act (Wagner Act)” gave new life to the National Industrial Recovery Act. That act gave workers the right to collectively bargain and established the National Labor Relations Board to supervise union elections and investigate unfair labor practices by companies.
’Revenue Tax Act’ increased income taxes on the wealthy and on corporations.
’Rural Rehabilitation Division of FERA’ later called Resettlement Administration funded work-study jobs, teacher’s salaries, free lunch program and construction of new schools.

Roosevelt throughout his term during the depression years encouraged cooperation and optimism with his speeches, fireside chats, and press conferences, which made a powerful impression on many Americans.

Conclusion

The experience of the Great Depression brought about change in how we conduct business. For many people the depression brought on distrust in banks and our government; a trust that our government set out to regain in many years to come. Our government implemented federal laws and banking regulations that would stabilize the economy for many years. Reorganizing industries, the stock market, and agriculture provided stability that lead to trust.

Each era has had its own battles that has shaped and reshaped America into what it is today. Learning from battles such as racism, terrorism, and recessions will continue to form America into a better place (Trescott, Paul., 1982, 211-20).

Work Cited

Andvig, Jens C. “Verbalism and Definitions in Interwar Theoretical Macroeconomics.” History of Political Economy 23 (1991): 431-55.

Buehler, E. C., ed. Debate Handbook: Instalment Buying of Personal Property. Manhattan: University of Kansas Press, 2002.

Danielian, N. R. “The Theory of Consumers’ Credit.” American Economic Review 19 (1929): 411-20.

Ferderer, J. Peter and David A. Zalewski. “Uncertainty as a Propagating Force in the Great Depression.” Journal of Economic History 54 (2004): 825-49.

Fisher, Irving. “The Debt-Deflation Theory of Great Depressions.” Econometrica 1 (1933): 337-57.

Gusmorino, Paul A., III. “Main Causes of the Great Depression.” Gusmorino World (1996). Online. Internet: Web.

Harrison, George L. Collected Papers. Federal Reserve Bank of New York. New York.

Hoover, Herbert. The Memoirs of Herbert Hoover: The Great Depression, 1929-41. New York: Macmillan Company, 2002.

James, George R. Papers. Files of the Federal Reserve System. File 00.411, box 9 #4, 1926. National Archives. Washington, D.C.

James, Harold. The End of Globalization: Lessons from the Great Depression. Cambridge; London: Harvard University Press, 2001.

Jeffries, John W., Nash, Gary B., Segrue, Katherine L., “The Great Depression and WWII, 1929-1945.” Encyclopedia of American History.

Kutler, Stanley I. Dictionary of American History. Third Edition. Charles Scribner’s Sons, Inc. 2003.

Kutler, Stanley K., Dallek, Robert, Hollinger, David A., McCraw, Thomas K., Kirkwood, Judith. “The Great Depression, 1929-1939.” Encyclopedia of the United States in the Twentieth Century. Volume III.

Lincoln, E. E. “Are the Costs of Distribution Really Too High?” System, the Magazine of Business 50 (1926): 158-216.

Trescott, Paul. “Federal Reserve Policy in the Great Contraction: A Counterfactual Assessment.” Explorations in Economic History 19 (July 1982): 211-20.Bender, David L. The Great Depression Opposing Viewpoints, 1994 Greenhaven Press, Inc. San Diego, CA

Watkins, T.H. The Great Depression America in the 1930s. New York: Little, Brown and Company, 2003.

Click Here To Order Now!