The Great Depression
In 1928, while leading the campaign for his presidency, Herbert Hoover promised a new day and new life for all Americans. For nearly a decade, the United States of America had experienced economic growth, and citizens voted for Hoover expecting that the tendency would continue. The majority of Americans assumed that their country would continue to enjoy prosperity after Hoover took office. Unfortunately, optimistic thoughts and voices were proven to be wrong. The result was much different since the social and economic trauma caused by the Great Depression would soon test the nation. The severe economic depression affected all people: poor, rich, as well as the middle class. The world and American economies had collapsed by the end of the twenties; the global market slump of the 1930s had started. The Great Depression of the twentieth century is truly ranked as the longest and worst event in the contemporary era accompanied by the low business activity and high rate of unemployment.
In the late twenties, most of the American citizens believed that the country finally entered a new and successful period of rapid and continuing progress that would make their living standards much higher. Americans took the significant and spectacular increase in the stock market as proof since the knowledgeable investors widely shared this vision. When the stock market crashed, the optimistic point of view also crashed. Pessimism and uncertainty about the future life gripped the society. An expected and complete collapse of the U.S. stock market prices occurred in October 1929. Some researchers point out that the stock market crash was not the main cause of the Depression. However, it was one of the primary symptoms. The Depression itself was a result of overproduction, uneven economic growth, excessive buying of credits, and poor income distribution. The serious shortcomings and imperfection of the U.S. banking system led to the credit crunch. Another essential weakness of the economy was the unequal distribution of wealth. The country had over five hundred millionaires; however, the wealth and the substantial amount of money were concentrated in the hands of few people to maintain the consumer spending. Seventy percent of the American families earned less than $ 2,500 of annual salary that supposed to provide each family with a comfortable standard living.
In time when Herbert Hoover became the 31st President of the USA, the majority of the citizens had already exhausted almost all their monthly income on various consumer goods, housing and food, and supplemented their wages with purchasing the credits. Increasingly, the American nation was running into debt. Nevertheless, only few worried as the unemployment remained low, economy seemed stable, and the citizens had confidence in the national economy. Unfortunately, all that confidence was gone after the stock market crash. Most of the national banks were vulnerable to the slowing economy; they made questionable investments and provided many consumer loans. Thousands of the stockholders were losing large sums of money, and some of them eventually collapsed. Stores, banks, and factories were closed leaving millions of citizens without jobs and money. Since most of the consumers were hesitant to spend money, they were forced to depend on charity and governmental efforts to provide them with commodities and food. The psychological trauma of Americans produced by the stock market crash was more visible and significant in comparison with the direct effects of the wealth loss. Across the country, citizens faced a deepening severe depression as the result of loss of economic confidence, the stock market crash, numerous credits, and weaknesses within the economic system.
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In the decade preceding the war, a severe and terrible economic tragedy, the Great Depression significantly affected the lives of millions of Americans since they lost their jobs and means of subsistence. In order to ease the negative results of the stock market collapse, the government decided to involve in the social and economic affairs of the country. The President Roosevelt gave power to the state and helped alleviate the Depression. Through his New Deal, the head of the state sought to provide Americans with workplaces and stimulate the demand. According to the anti-governmental, libertarian vision, tight credit pushed the country into the Great Depression. The libertarians argue that, although the Presidents programs might have helped ease the symptoms of the Great Depression including the high unemployment rate, these initiatives had never healed the primary and genuine cause a drop in GDP caused by the tight credit. Gross Domestic Product decreased forty-six percent from over one hundred billion dollars to nearly fifty-six billion dollars. The libertarians assert that the massive banking sphere collapsed at the beginning of the Depression and compounding of its effects was deemed unnecessary.
After the failure on the Black Tuesday, the situation became even worse; the entire manufacture fell, and companies could not get credits. Many banks went out of activity. Most of the farmers had no possibility to buy seeds for the planting period because of no available credits. Libertarians noted that, in fact, the President Roosevelt n had ever solved the initial problem of the tight credit. In reality, most of his initiatives and policies were adverse to the country. Following the libertarian point of view, when businesses barely survived, formation of the minimum wages could help people with work places. However, it could also cause a problem for millions unemployed people when searching for a job.
The pro-government, advanced position pointed out to the significant wealth gap, abuses, corruption, and considerable social inequality as the primary causes of the severe economic Depression during the roaring twenties. A series of the national economic programs enacted by the President Roosevelt was his response to the Depression. With the New Deal, the administration developed legislation with a focus on the reforms, relief, and economic recovery. Critics warned of an expanding government power and the way towards socialism. However, the majority of the citizens accepted and supported an activist government role.
The New Deal initiatives provided millions of citizens with jobs and funded public projects in each state. The national policy aimed at protecting the bank deposits finally ceased a dangerous and hazardous trend of the bank runs. Abuses on the stock market misuse were determined and controlled in order to avoid possible collapse in the future. The expansion and modification of the Social Security system remained the most important governmental deal of that time. Finally, the federal authorities took responsibility for the economic affairs.
The President believed that the excessive competition accompanied by the reduction of wages and prices, demand for services and goods, and extension of unemployment was responsible for the severe Depression. Roosevelts recovery package would be inconceivable and unimaginable nowadays. It allowed companies in various industries to collude with a twenty-five percent premium. The national economy was poised for high and fast recovery; however, because of the misguided policies, recovery stalled.
Despite the fact that the Presidents New Deal programs seemed helpful and comprehensive, they failed to achieve the main purposes to rescue the national economy and end the Great Depression. In 1939, the rate of unemployment was nineteen percent, and it had not reached its pre-Depression level until 1943. The massive expenditure caused by the U.S. entry to the World War II ultimately cured the country with its economic troubles and misfortune. There were over a million of American workers in comparison with approximately 600,000 workers ten years ago. However, the conservatives often blamed the President for more than doubled countrys debt. In quite short terms, the country lost a good deal of funds. The liberals considered that it would be hard to overcome the gap between the rich and the poor people by the end of the decade.
Despite its imperfection, Roosevelts initiatives and New Deal helped the country overcome chaos in difficult times. The United States felt strong enough to struggle with further experiences and difficult tasks. What brought the country out of the economic Depression were not the Roosevelts New Deal programs, but the World War II. The President, as well as his administration, started to face new challenges. Roosevelt together with over four hundred thousand people did not survive. However, when the war ended, the broken America emerged as an influential and powerful nation.
Historians admitted that the offered initiatives and policy conducted did not have a high effect because of their fragility. Keynesian economics viewed fiscal policy of the New Deal programs provided by Roosevelt as not strong and insufficient to guarantee the full employment in the country. According to monetarists, the Federal Reserve failed to use the monetary tool strictly and accurately, and it caused the long duration of the Depression. If the central banking sphere had chosen the fast and steady increase of the money, instead of plunging it during the huge crash, the Depression would have never achieved those rates The fact that the Great Depression had lasted for years convinced most of the policymakers and economists that the countries should not trust and rely on capitalism when recovering from Depression. Moreover, the countries should not rely heavily on intervention of the government to resolve the problems and get positive results. The researches show that the recovery after the Great Depression could occur rapidly and be successful if the authorities did not intervene.
