The Great Depression consequencesfor society. In the history of America, economic What is The Great Depression?It’s the longesteconomic slump that ever happened in the whole history.
It started in 1929 andlasted until 1941. Great Depression affected almost allindustrialized countries and the US in particular. Throughout the 1930s, until1939, the economy could not fully recover from the slum. Therefore, the entireperiod was called the Great Depression – because of its duration and seriousconsequences for society. In the history of America, economic crises haveoccurred before, but none of them lasted more than four years. The GreatDepression experienced three times longer than the economic shocks of the past.
· The longest and most severe depression that theeconomy of the industrialized countries has ever experienced · Economic recession in the United States, Europe andother industrialized countries· The biggest panic on the New York Stock Exchange,followed by a devastating collapse of stocks and deposits.· A prolonged decline in the world economy, whichoccurred in 1929 and finally ended in 1940. Howit started and what caused it?Asset bubblesTwenties in America canbe characterized as a consumer revolution period with the following speculativeboom. From 1928 to 1929 the stock market was rapidly growing. The average valueof securities raised by 40% in a year, and the turnover of trade increased from2 million stocks a day to 5 million. In1920’s, the US experienced rapid economic growth.
Politicians, businessmen and economists were talking about the New Age followedby further growth of welfare, full employment and prosperity of the nation. The path to prosperity was available to everyone, theonly thing you need to do is to invest savings in shares of industrialcorporations.Citizens were pursuing thisidea of rapid enrichment, so they have been investing all their savings incorporate stocks, in order to subsequently sell them at a higher price.
Therefore,the value of securities grew with geometric progression. Americans even weren’tstopped by inflated prices for shares, and they continued to buy them in thehope of a good beneficiation in the future. To buy securities, investors haveactively been taking loans. Suchlike immense demand of shares created aneconomic bubble, which according to the economic rules, would sooner or laterhave to burst. OverproductionHowever, the onlycollapse of the stock market was clearly not enough to initiate such anenormous economic slump which will later enter history as the greatest crisis whichhave ever occurred.A few months before thestock market declining, the US economy was already plunging into a recession:industrial production was declining, while wholesale prices and householdincomes were falling.The economic crisis ofthe thirties was the deepest crisis of overproduction in the history ofcapitalism.
Almost four years the economy of the capitalist countries was in astate of complete disorganization. But especially the crisis hit the maincountry of the capitalist world – the United States of America.The shortage of moneysupply played an important role. At that time, money was determined by a goldreserve, this limited the money supply. Meanwhile growing production, such brandnew types of commodities as cars, airplanes refrigerators, washing machines,radio etc.
appeared. The number of goods grew both by type and by quantity inthe market. As a result of the limited money supply and the growth of thecommodity mass, strong deflation arose – a fall in prices that caused financialinstability, bankruptcy of many enterprises, and non-repayment of loans. Apowerful multiplicative effect hit even the growing industries.
Other reasons The population growth,caused by improvements of living conditions and the development of publicmedicine, led to significant property and social stratification. Economicliberalism, prevailing in America since the end of the XIX century, caused suchsituation that by 1929 year 1% of the population owned 60% of national wealthand 15% % of the national income. Thus, a growing number of people were at risk- in case of economic instability, their situation threatened to becomecatastrophic.Among other reasonsthat caused the crisis, economists call the inefficient monetary policy of theUS Federal Reserve System and increase of duties on imported goods. TheSmoot-Hawley Tariff Act, designed to protect domestic production, led to adecrease in purchasing power. And since the 40 percent duty on almost 20.000imports complicated the sale of European suppliers’ products to the US, thecrisis spread to the countries of the Old World. The BlackThursday On Thursday, October 29,1929, when the Dow Jones Industrial Average index was at around 381.
17, thebubble burst and panic broke out on the New York Stock Exchange. Trying to getrid of their shares before they completely depreciate, investors sold that day12.9 million securities.”Black Thursday” was the first link in the chain ofcrisis of 1929. The stock market crash led to “black Friday”,”black Monday” and “black Tuesday”.
During this period shareholderssold more than 30 million securities. Because of the exchange collapse,thousands of investors according to estimates lost in total at least $ 30billions. 37758703277041 US dollars – the amount in today’s equivalent – theexpression of 30 billion of that time today. Following the bankruptciesof shareholders, banks began to close one by one. Many of them, having lost allthe invested assets, had to answer for debts to depositors and shareholders.
Meanwhile, extremely frightened investors rushed to withdraw their money fromthe surviving banks. The amount of money in circulation increased from $ 454million in 1929 to $ 5,699 million at the end of 1932. President Hoover triedto stop this process. In 1931, he appealed banks to organize themselves in theNational Credit Corporation, a kind of mutual aid fund that would help banksthat are facing troubles.
In 1932, the National Credit Corporation wastransformed into a “Reconstruction FinanceCorporation. The corporation, which had a capital of $ 3.5 billion, lentpublic money to banks that are experiencing difficulties.
This helped to slowdown the speed of the collapse of the banking system, during 1932, 40 bankswere ruined daily. Every day turned into dust $ 2 million, placed on bankdeposits. By the end of the year, the banking system had collapsed. On February14, 1933, all banks in Detroit closed, and three weeks later, bank holidayswere announced all over the country. After bankruptcies offinancial institutions, enterprises began to bankrupt – without possibility toreceive credits factories and any other organizations could not exist further.The consequence of large-scale bankruptcy of enterprises was a catastrophicincrease in unemployment. ConsequencesUS:After a few monthsafter the stock market collapse, unemployment has taken threatening dimensions.
By March 1930, more than 4 million people were left without work. After a year,this number doubled. The peak occurred in early 1933, when there were 16million unemployed in America. Approximately 23% of the working-age populationof the United States was left without means of existence.The Great Depressionchanged the social appearance of America. If the workers who subsisted”from paycheck to paycheck” lost their earnings, then the middleclass suffered the loss of all their savings and work besides it. MiddleAmericans were rapidly getting poor.
By the end of the third year of the GreatDepression, the middle class was on the verge of extinction. Yesterday’s”white-collar” traded with trays of apples and worked as a bootblacks.The homeless were pleased for the benefit of being at least a day in prison toget shelter and some food.Even the wealthiestAmericans had to tighten their belts. Everywhere the electricity was turnedoff, Conrad Hilton closed whole floors in his hotels and switched off thephones in rooms to save on them at 15 cents a month. The company BethleemSteel, fired 6,000 workers after evicted them from the houses that they built,and then demolished these houses in order not to pay taxes on real estate.In the early years ofthe Great Depression, America’s economic growth declined by 31%. The USindustrial production fell by almost 50%, while the prices for agriculturalproducts fell by 53%.
The threat of famine in the United States was real. Thisthreat spread in large industrial centers, and in most of the agriculturalareas, because about 10 states, in addition to the decline in agriculturalproduction, were struck by a powerful drought. As a result, it becameimpossible in these states not just to produce agricultural products but alsoto live. The population moved to more wealthy areas.Citizens had no choicebut to go to demonstrations and protests. The most resonant demonstrationwas the so-called “The Ford Hunger March” it is alsosometimes called «Ford Massacre» in Detroit in 1932, when dissatisfiedemployees of the Ford plant, who were left without work were expressingdissatisfaction. Police and private security of Henry Ford opened fire on theprotesters, whose victims were four people, and more than sixty workers wereinjured. Reconstruction Finance Corporation had to lend $ 300million to the states to fight unemployment.
However, the”non-targeted” use of money led to the fact that the corporationallocated only $ 30 million to the states for the payment of unemploymentbenefits. Gold Standard Every major currencyleft the gold standard during the Great Depression.Great Britain, Japan,and the Scandinavian countries left the gold standard in 1931. Other countries,such as Italy and the U.S., remained on the gold standard into 1932 or 1933,while a few countries in the so-called “gold bloc”, led by France andincluding Poland, Belgium and Switzerland, stayed on the standard until1935–36. According to analysis, the earliness with which a country left the goldstandard reliably predicted its economic recovery. For example, Great Britainand Scandinavia, which left the gold standard in 1931, recovered much earlierthan France and Belgium, which remained on gold much longer.
Countries such asChina, which had a silver standard, almost avoided thedepression entirely. The connection between leaving the gold standard as astrong predictor of that country’s severity of its depression and the length oftime of its recovery has been shown to be consistent for dozens of countries,including developing ones. This partlyexplains why the experience and length of the depression differed betweennational economies. Great Depression in EuropeThe crisis quicklyspread to other countries, primarily Britain and Germany, France, bound bymutual financial obligations with the United States. The collapse of the NewYork Stock Exchange marked the beginning of a decade-long economic recessionthat affected all industrialized countries in Western Europe. United KingdomThe industrial regionsof Britain suffered immediately very strongly, as the demand for Britishproducts vanished. By the end of 1930, unemployment had risen from 1 million to2.
5 million, while exports had declined by 50%. In 1933, 30% of Glasgowresidents were unemployed. Due to the significant decline in heavy industry,unemployment in some cities reached 70%. The National Hungry March of 1932 wasthe largest of many hungry marches that took place in Great Britain during the1920s and 1930s.
Approximately 200 thousand unemployed men were sent to labourcamps, whichcontinued to operate until 1939. In conjunction withother anti-crisis measures by the end of 1933. England managed to achieve astabilizing effect. This is mainly due to the use of the UK’s advantages inrelations with other countries and a tough domestic economic course.Already in 1934. therigid budgetary policy of economy starts to soften a little, as evidenced bythe growth of wages, the restoration of unemployment benefits, the reduction ofthe income tax and other measures that helped to reduce social contradictions.GermanyCrisis in Germany, wasparticularly acute. This was primarily since its economy was entirely dependenton foreign investment, which began to decline sharply from 1929, and in 1932 asa result of the elimination of the Young Plan(of the plan of reparationpayments) generally disappeared.
In this year crisis reached its culmination.Industrial productionfell by 40%. Foreign trade fell by 60% (2.5 times). About half of all employedin the national economy turned out to be unemployed. Only 20% of them receivedunemployment benefits.
The ruin of peasant farms began. There was a collapse ofseveral banks.In the years of thecrisis, social contradictions worsened, especially since the anti-crisis actstaken by the government had an anti-work orientation: wages were reduced,unemployment benefits were eliminated, a military regime was established inlabor camps.
FranceThe crisis in industrywas accompanied by an agrarian crisis: agricultural production fell by 40%.Revenues of peasants were reduced almost twice, thousands of households weresold for debts. Foreign economic relations were disrupted, the foreign tradeturnover decreased by 66%. The economy of France was thrown back to the levelof the late 19th century. The reduction in production caused huge unemployment.Wages decreased (by 20%).
A wave of strikes and demonstrations of workers sweptacross France. Soviet UnionIn the USSR the yearsof the Great Depression coincided with the period of dekulakization and famine.However, isolated from the world, the Soviet economy did not feel a significantimpact of the economic recession. At first glance, it looked like confirmationof Marx’s theory of crises and contributed to the spread of communist andsocialist views in the world. When the Soviet trade mission in New Yorkannounced 6 thousand vacancies, it received 100 thousand applications.
New DealThe first 100 days ofRoosevelt’s presidency were marked by intensive law-making activity. Measuresto overcome the Great Depression, undertaken by the Government of the UnitedStates of America, were called the ” TheNew Deal”. Reform began with the rescue of the banking system. Almost 10days the US banks did not work. Thenew president of the United States, Franklin Roosevelt, saw no alternative buta new economic and political course, the main essence of which was to increasegovernment intervention in the economic and social life of the country.
In order to improve thesituation, a number of important laws were adopted. One of the most importantwas the Federal Deposit Insurance Corporation on June 16, 1933. Commercialbanks were forbidden to work with securities, this right was received byspecialized financial organizations – thereby reducing the risks to whichdepositors of the bank were exposed.An earlystep for the unemployed came in the form of the Civilian Conservation Corps(CCC), a program enacted by Congress to bring relief to young men between 18and 25 years of age.
The CCC was run in a semi-military style and enrolledjobless young men in work camps across the country for about $30 per month.About 2 million young men took part in this program during the 193Os.Due to the law of the restoration of industry in various fieldsof it laws of fair competition were adopted which fixed prices for products,production levels, and determined sales markets. May 13, 1933, Congresspassed the Agricultural Adjustment Act (AAA) to provide economic relief tofarmers. The AAA had a core to plan to raise crop prices by paying farmers asubsidy to compensate for voluntary cutbacks in production. This law allowed toincrease prices for agricultural products. Before the newpresidential elections, the Law on Social Insurance was adopted. Insurance wasprovided for old age (pension) and unemployment (benefits).
Thanks to the broadsupport of the liberal democratic forces, FD Roosevelt was elected presidentfor a second term. The amount of public works has increased, the number ofpeople receiving benefits has enlarged. In 1938, the Fair Labor Standards Actwas adopted. The average length of the working week was set at 44 hours, childlabor was finally banned.
On March 6, PresidentRoosevelt declared a state of emergency in the country and closed all thebanks. They were divided into three groups: first “healthy” groupwere opened after holidays, the second – banks, which, with the help of thestate, could work further, the rest were liquidated. The exchange of banknotes for gold was stopped. The first 100 days ofRoosevelt’s presidency were marked by intensive legislative activity. Congressauthorized the creation of the Federal Deposit Insurance Corporation and theFederal Emergency Management Administration, which was established by the Lawon the Restoration of the National Economy of July 16, 1933. An important stage inthe fight against the Great Depression of the United States was theorganization of public works.
At least 3 million unemployed Americans wereemployed at the same time. The main areas of activity here were the developmentof