The Great Depression in The Us: Causes and Solutions Applied

In October 1929, there was a worst breakdown in the US economy which remained for 10 years and bring the whole economy to its knees. This cause unemployment, hunger, homelessness in the whole economy. Before Great Depression the economy of US has an exciting period with new inventions, technical innovations and changing lifestyles. The economy was on boom and there was prosperity in the economy.

But suddenly the crash of Wall Street wiped out millions of investors into air. Over the next several years consumer spending and investments dropped, causing steep declines in industrial output and employment as failing companies laid off workers. By 1933 the depression reached its highest point. Over 15 million Americans were unemployed and nearly half of the country’s banks had failed.

Main Causes of Great Depression

1. Stock Market Crash: In October 1929, the Wall Street of New York crashed down so badly that the shares of the investors blew up into air. On this day, nearly 16 million shares were traded on the New York Stock Exchange in a single day. Billions of dollars were lost wiping thousands of investors. The amount of money out on loan was more than the entire amount of the currency circulating in the economy. When the stock prices declined below the amount of borrowed money the owner had to sell his shares to pay the debt. This cause prices to decline more due to this the share prices went deep down and cause crash in stock market.
2. Bank failure: Throughout 1930 the over 9000 banks failed. Bank deposits were uninsured and thus as banks failed and people lost their savings. Surviving banks being unsure of the economic situation and for their own survival, stopped being as willing to create new loans. This situation led to less and less expenditures.
3. Decline in purchasing across the economy: When the stock market crashed individuals from all classes stopped purchasing items. This thus led to reduction in production and thus and reduction in workforce. As people lost their jobs. They were unable to keep up with paying for the items they purchased. More and more inventory began to remain unsold and accumulated. The unemployment rate rose above 25 percent.
4. American Economic Policy: Due to business failure, the Government created Smoot-Hawley Tariff in 1930 to help the domestic producers. Due to this high tax were imposed on imports leading less trade between America and foreign countries. Due to which the gain from foreign exchange went down to lowest level.
5. Drought Condition: Although not the direct cause of Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such great proportion that the farmers failed to pay their taxes and debts and had to sell their farms for no profit to themselves. This area was nicknamed by “The Dust Bowl”.

Steps Taken to Overcome the Great Depression

In 1933 Franklin Roosevelt was elected the President of America. He delivered his first inaugural address in March 4,1993 on Washington’s Capitol Plaza. “First of all,” he said, “let me assert my firm belief that the only thing we have to fear is fear itself.” He promised that he would act swiftly to face the “dark realities of the moment” and assured Americans that he would “wage a war against the emergency” just as though “we were in fact invaded by a foreign foe.” His speech gave many people confidence that they’d elected a man who was not afraid to take bold steps to solve the nation’s problems. The next day, the new president declared a four-day bank holiday to stop people from withdrawing their money from shaky banks. On March 9, Congress passed Roosevelt’s Emergency Banking Act, which reorganized the banks and closed the ones that were insolvent. In his first “fireside chat” three days later, the president urged Americans to put their savings back in the banks, and by the end of the month almost three quarters of them had reopened.

The increasing pressures of the Great Depression caused President Roosevelt to back a new set of economic and social measures Prominent among these were measures to fight poverty, to counter unemployment with work and to provide a social safety net. The Works Progress Administration (WPA), the principal relief agency of the second New Deal, was an attempt to provide work rather than welfare. Under the WPA, buildings, roads, airports and schools were constructed. Actors, painters, musicians and writers were employed through the Federal Theater Project, the Federal Art Project and the Federal Writers Project. In addition, the National Youth Administration gave part-time employment to students, established training programs and provided aid to unemployed youth. Although the WPA only included about three million jobless at a time, it had helped a total of 9 million people when it was abandoned in 1943.