Great Depression Research Paper

Underwood 1

The Great Depression: The Extensive Effects The 1920s was a time of roaring prosperity. Even mid-October of 1929, the average middle-class American saw an “illimitable vista of prosperity” (). The thought of poverty was close to an end; in 1928, President Herbert Hoover stated, “We have not yet reached the goal, but given a chance to go forward with the policies of the last eight years, and we shall soon with the help of God be within sight of the day when poverty will be banished from the nation” (). The prescience of the end of poverty became known as the American Dream; however, this foresight was shortly lived. On Tuesday, March 26, 1929, the Hoover Administration saw the largest stock market crash of their administration to that date. Several months later brought Black Monday, the largest stock market crash in American history and the cardinal cause of the Great Depression. The Great Depression is one of the single most important events in the financial history of the United States and the world; the effects of and leading to the Great Depression lasted for several years. The Great Depression was an economic deficit with worldwide effects that began with the stock market crash of October 1929; the most profound effect of the Great Depression was the highest rate of unemployment in American history: banks, factories, and stores closed, leaving millions of Americans jobless with no money. Without money, many Americans had to rely on either the government or donations from charities to be obtain food; as the depression continued, however, the Roosevelt administration created

Underwood 2

government agencies to aid in supplying Americans with food, relieving the effects of the Great Depression, preventing a catastrophic event like it from occurring again (). The group of people most affected by the Great Depression and the events it instigated were the American stockholders; thousands of stockholders lost large sums of money due to the rapid decrease of stock values caused by the crash of Black Monday. Although this was a huge loss, predicting it was impossible; from 1925 to 1929, the average stock price of a common stock on the New York Stock Exchange more than doubled, causing many people to make large investments in the stock market in hope of making large profits. Even people who had no prior knowledge of the stock market or how it worked attempted to invest in anticipation of profits. Economists, such as Irving Fisher, assured stockholders that they were “dwelling on a permanently high plateau of prosperity ()”. This, along with the assurance of many other reporters and professionals, cause the popularity of being a stockholder to skyrocket: in 1920, there were only 29,609 stockholders; a mere ten years later, there were 70,950. Stockholders’ ignorance of how the stock market worked soon turned against the thousands of investors in America and spread throughout the rest of the United States, halting economic flow (). The Depression had a remarkable effect on the United States; however, the United States was not the only place to feel the consequences of the Great Depression: Canada was also profoundly affected (The Global Effects of

Underwood 3

the Great Depression 1). Previously, Canada’s economy relied on the export of grain and other raw materials. The people who exported these goods suffered huge losses after other countries increased tariffs on imported products. Following the closing of many Canadian companies, the unemployment rate in Canada rose from three percent in 1929 to twentythree percent in 1933 (). Other governments were affected by the Depression as well. As the Depression was at its zenith in 1933, the only country hit as hard as the United States was Germany (). Approximately six million individuals in Germany were left unemployed. Many aspects of German life led to these despondent times. Most prominent were the reparations Germany was still paying from World War I. Chaos arose in Germany after the war, causing hyperinflation in 1923; Germany was just recovering when the stock market crash hit (Effects on Germany 1). Another factor in the economic downturn was the German government. Germany suffered a series of poor leaders; the chancellors of 1932, as Herbert Hoover said, were unable to deal with the effects of the deepening Depression. On January 30, 1933, Adolf Hitler became the chancellor of Germany (). The leadership of Hitler, one of the key figures in the relief of the Great Depression both in Germany and worldwide, marked the foundation of the collapse of the Great Depression. The actions beginning in 1933 aimed at relieving the Great Depression in the United States and Germany had a major influence on other nations, particularly Great Britain (). Great Britain, unlike the United States, had a

Underwood 4

moribund economy prior to the stock market crash of October 1929 (); however, the British economy did not suffer a morbid crash, as did the economies of the United States and Germany (Effects on the United Kingdom 1). Britain did, however, suffer declines in both imports and exports during the Depression. In comparison to other thriving nations during the time of the Great Depression, the United Kingdom remained in a fairly stable economic condition (Effects on the United Kingdom 2). Unlike Great Britain, the Great Depression hit many other countries in Europe immeasurably. One of these unlucky countries was France, the last major nation of at that point in time to feel the effects of the Great Depression; the reason for the delayed impact on France was the undervaluation of the French Franc (Effects on France 1). France, as Great Britain, was impacted by the efforts of the United States to relieve the Depression (). Finally, in 1932, the Depression brutally found its way to France: the number of tourists dropped and exports of perfume fell, as did those of wine, food, and other items (). Even though the Depression hit France late, it came violently. Unemployment rose fifteen percent and industrial production dropped twenty-five percent from their levels in 1929. In hope of a change, André Tardieu was elected to run a new French government in 1932; he gained his popularity by aiming his campaign towards the threat of communism (). Like many other countries, France eventually overcame the Depression through involvement in World War II, which created jobs and caused money to begin circulating once again.

Underwood 5

The Great Depression also hit Italy, with its highly regarded corporatefascist government led by Mussolini. The public saw the erratic policy changes Mussolini made as genius; however, these changes did not benefit the economy. Even though Italy’s contribution to world manufacturing was down almost three percent, it rose from the depression in 1934 (). The United States, like all countries, eventually emerged from the deficits of the Great Depression. At the forefront of this recovery was World War II: it increased manufacturing and created millions of jobs. In addition, aiding in the recovery were government agencies, such as the Tennessee Valley Authority (TVA); the TVA was created in May 1933 to supervise the development of a 640,000 square mile area in the Tennessee Valley (). The Tennessee Valley was a region in which sharecroppers and farmers were malnourished and soils were useless for growing agricultural products. The TVA planned to help this region and restore a large amount of agricultural production to the United States (). Although there were many other agencies, such as the Civilian Conservation Corps (CCC), the Federal Emergency Relief Administration (FERA), and the Public Works Administration (WPA), most of them followed in the footsteps of the TVA: they were aimed at creating jobs while simultaneously either beautifying the United States or boosting the economy(). The Great Depression heavily affected the United States and the world as a whole for several years. The Depression has taught governments around

Underwood 6

the world how to deal with economic problems in hope that it will not happen again. As Wecter Dixon stated, the stock market could be very profitable: If a man saves $15 a week, and invests in good common stocks, and allows the dividends and rights to accumulate, at the end of twenty years he will have at least $80,000 and an income from investments of around $400 a month. He will be rich. And because income can do that, I am firm in my belief that anyone can not only be rich, but ought to be rich (4). However, the stock market crash of October 1929 and the ensuing depression alerted stockholders to how volatile being involved in the stock market without knowledge could be. Even in the current recession, many world leaders are influenced by measures taken to end the Great Depression to revive economic conditions. Due to its tremendous effects in the United States and throughout the world, the Great Depression is known in history as a narrow escape from the downfall of the world economy. Hopefully, one day the world economy will be as rich and prosperous as the roaring 1920s, and America and the rest of the world will be chasing the “American Dream” once again, barring another unforeseen event such as the Great Depression.

Underwood 7

Works Cited Dixon, Wecter. The Age of the Great Depression, 1929-1941. New York: Macmillian, 1952. Effects on France. 12 April 2009 . Effects on Germany. 12 April 2009 . Effects on the United Kingdom. 12 April 2009 . Garraty, John A. The Great Depression: An Inquiry into the Cause, Course, and Consequences of the Ninteen-Thirties as Seen by Contemporaries and in the Light of History. 1st Edition. Orlando: Harcourt Brace Jovanovich Publishers, 1986. "Great Depression." World Book Encyclopedia 2001: 338-43. Smitha, Frank E. The Great Depression, to 1935. 1998-2005. 11 April 2009 . The Global Effects of the Great Depression. 20 March 2008. 11 April 2009 .