- The Great Depression was a worldwide economic downturn that lasted for many years.
- It started in the United States and affected almost every country.
- One of the most important things it did was make people want to get new jobs.
The Great Depression was the worst economic event in history. The Great Depression started with the stock market crash of 1929. It lasted until World War II ended, which was 1946. Economists and historians often say that this is the worst event in modern history.
The stock market crash in October 1929 was the beginning of the Great Depression. By 1933, there were 25% unemployment rates. More than 5,000 banks had closed.
President Herbert Hoover tried to fix this by using the Reconstruction Finance Corporation, but these measures did not work well enough. Franklin Roosevelt became president in 1932. His New Deal offered a different approach to solving the Great Depression.
The U.S. economy was excellent, and people made a lot of money from stocks in the 1920s. People had stock exchanges where they could buy and sell stocks, but some people were doing things like putting their savings into the stock market for no good reason, which led to a big crash later on.
The stock market started to go down in the 1920s. Unemployment went up. Jobs became hard to find. Banks had large loans that they could not sell on the market.
The stock prices were higher than they should have been because people didn’t have enough money for goods. Then there was an economic downturn in the agriculture sector, meaning that there were not enough crops being grown or low food prices.
The Wall Street Crash
On October 24, 1929, people started to sell the shares they were buying for more than what they were worth. This happened because there were too many. The day this was happening was called “Black Thursday.” People traded a record 12.9 million shares that day, and it is still considered one of the worst days in history.
Five days later, on October 29th, or “Black Tuesday,” sixteen million shares were traded. It was panic that made it happen. Millions of people lost money, and those who had borrowed money got wiped out completely.
After the stock market crashed, people were scared. They didn’t want to spend money. Other businesses then had less business because people don’t buy things when they are afraid of them. People with jobs worked more, but they made less money, and people could only afford fewer things with their lower wages.
Many Americans who had to borrow money to buy their homes ended up in debt. The number of foreclosures and repossessions was high. But the global adherence to the gold standard helped spread economic problems from America worldwide, especially Europe.
Despite promises from Herbert Hoover and other leaders, the Great Depression worsened. By 1930, 4 million Americans were looking for work, and they could not find it. That number increased to 6 million in 1931.
Meanwhile, America’s industrial production dropped by 50%. People were buying fewer things because they had less money. There were more lines at soup kitchens and more homeless people in America’s towns and cities.
In the fall of 1930, people didn’t have confidence in their banks and took their money, so they had enough cash. This made it hard for banks to give out loans.
A lot of banks closed in the United States. By 1933, thousands of them had closed.
In this dire situation, Hoover’s administration tried to help banks with government loans. The idea was that the banks would then give loans to businesses, hiring their employees back. Banks also needed to get rid of loans they couldn’t pay back by selling them.
Hoover believed that the government should not do work for people but instead let them find jobs. He also thought that it was not the government’s responsibility to create jobs or provide economic relief.
The Dust Bowl
The Dust Bowl was a dry time in the Southern Plains. There were terrible dust storms.
A terrible drought went through the Southern Plains in 1930. Massive dust storms began in 1931. A series of drought years made the water shortage worse.
There are 35 million acres of land that could not be farmed anymore, and another 125 million acres of land was losing its topsoil. Farmers couldn’t buy their crops. So they left them there to rot. People who were starving lost their food and animals.
Dust storms happened during the Dust Bowl. These storms would carry dirt from the Great Plains and make it go all the way to Washington and New York City. Ships in the Atlantic Ocean were covered in dirt.
In some areas, dust made it hard to see the sky. It was like a big cloud that covered the sky and then became a blanket on the ground. The dust got into houses and made them dirty.
Some people had trouble breathing because of the dust. There are estimates about how many people died from this condition, but how many died from this problem is not clear.
On April 14, 1935, the worst dust storm happened. News reports called it Black Sunday. A wall of blowing sand and dirt started in Oklahoma and spread east. Millions of tons of dirt blew off the Great Plains on this day.
The Dust Bowl was a terrible time because of the high winds that blew dust from Texas to Nebraska. This made people move into cities for work instead of where they used to be on farms.
The Dust Bowl also called the Dirty Thirties, lasted for ten years. But its economic impacts on the region continue to affect it today.
In 1932, the country was in a depression. More than 20% of people were unemployed. Democrat Franklin D. Roosevelt won the election because people voted for him to fix their problems and make things better.
On the day that FDR became president, all of the U.S. states had already ordered banks to close, and there was not enough money to pay for workers from the government. But FDR felt confident and optimistic by declaring, “the only thing we have to fear is fear itself.”
Roosevelt took action to fix the country’s economic problems first by making a four-day bank holiday. This meant that banks would close, and we could pass legislation for them to reopen. He also spoke to the public over the radio, and these were called “fireside chats”.
During Roosevelt’s first 100 days in office, he passed laws that helped stabilize and grow the economy. He also created two organizations to help the economy. One organization protects people’s money in banks, and another helps to keep stock markets safe so they can’t go wrong as they did before.
The New Deal
The New Deal was a series of programs started by President Franklin D. Roosevelt to fix the Great Depression. Roosevelt tried quickly to better the economy by providing jobs and different relief programs for those having a bad time.
The government created many different experimental New Deal projects over the next eight years. These projects fundamentally changed how US federal governments work by making them more prominent than before so they could serve more people better.
The government can use the money to help the economy. When they do this, it is called Keynesian economics.
The New Deal did many things that gave people jobs and made sure that prices were low. For example, if a product is too expensive, the government might change the price or even stop making it buy more.
Roosevelt tried to support prices and wages. He also took away the US from the international gold standard. He banned some business practices that some people think are competitive, and he created new public works programs to help people get jobs.
The Roosevelt administration paid farmers to stop or cut back on their production. One of the challenges was destroying excess crops, despite the need for people who wanted food they could afford.
Federal taxes increased three times from 1933 to 1940. Taxes went up for things like income, inheritance, and corporate taxes. These are all types of taxes.
The United States built many projects that employed people. These projects were like dams, bridges, tunnels, and roads that are still in use today.
The New Deal helped the country. Because of it, people felt better when they saw that there were measurable results, like when FDR closed the banks for a week in 1933 to stop people from taking their money out.
In World War II, the United States got better. The war made trade happen. It also fixed a problem with prices and wages. Suddenly, there was a lot of demand for things that were not expensive, and this led to a significant economic stimulus.
Although the economy got better, it wasn’t enough to convince people that the New Deal helped get America out of the Great Depression. The Great Depression was the result of three things. A changing Federal Reserve, tariffs, and inconsistent government intervention. It might be made better or even avoided by changing any one of these factors.