Great Depression Essay, Research Paper

“The Great Depression of the 1930’s was

a worldwide phenomenon composed an infinite number of separate but related

events.” The Great Depression was a time of poverty and despair caused

by many different events. Its hard to say what caused this worldwide

depression because it’s all based on opinion as opposed to factual data.

There are many contributing factors but not one specific event can be pin

pointed for starting the depression. It is believed that some events

contribute more than others-such as the Stock Market Crash of 1929.

The Stock Market Crash of 1929 was in the

majorities opinion, a long and overdue crash that was bound to happen.

Prices sky-rocketed so high that when they reached what was believed to

be it’s all time high, most people sold their gaining stocks for a profit.

So many people sold their stocks at a rapid rate that the corporations

were unable to pay the shareholders. Speculation arouse months before

the crash when Roger Babson made his speech at the annual National Business

Conference which he said “….. Sooner or later a crash is coming which

will take the leading stocks and cause a decline from 60 to 90 points in

the Dow Jones Barometer.” This and many others speeches like

this scared people into selling there stocks before the inevitable would

happen. This was a leading causes that assisted the Great Depression

become one of the bleakest and most studied events in the history of our

country: yet not the only cause.

Another large contributing factor was Mother

Nature, I say this because in Oklahoma the weather was so dry that the

farmers were unable to harvest their crops: these farmers became known

as Okies. The land was a barren wasteland of dust and dirt in which

it got it’s name the Dust Bowl. In other areas, the extreme opposite

took place: farmers overproduced and prices rapidly dropped because the

demand decreased. The drastic result of this oversupply made it hard

for farmers to make money due to the fact that they had so much that they

were forced to sell it at substantial low priced just to remain competitive

enough to make even the small profit they were making. The imbalances were

however, self correcting in which if manufacturers made too much of something,

it’s price would fall, profits would disappear, and the producers would

cut back on output. In 1932 the American writer, Stuart Chase described

cycles as “the spree and hangover of an undisciplined economy.”

Economists recognized the depression as

a cycle in which there were four cycles; expansion; crisis(or panic); recession

(or contraction); and recovery. The definitive description was made

by Wesley Clair Mitchell of the University of California. A cycle

Mitchell explained in Business Cycles(1913) was “the process of cumulative

change by renewal of [Economic] activity develops into intense prosperity

by which the prosperity engenders a crisis, by which crisis turns into

depression and by which depression finally leads to…. a revival of activity.”

Banks played a significant role in the

depression because they were in charge of all the money and interest

rates. For example when banks had large reserves, they lowered interest

rates. Cheaper loans encouraged manufactures to invest in new equipment

and hire additional workers. The resulting expansion of production

caused an upswing of the cycle. The increased borrowing eventually

reduced the bank’s reserves, thus resulting in a drastic increase of interest

rates. That discouraged investors and slowed the economy down.

Another good explanation was the bad distribution of wealth for the cycles.

During these challenging and difficult times the rich opted not to spend

there money: they saved in banks, vaults, etc. This resulted in increased

investments, more production, and eventually more goods piled up on shelves

and warehouses. Prices fell, production was cut back and workers

were discharged. As a result, the economy entered the depression phase

of the cycle.

The crisis stage of the cycle was brought

about by bank failures and by irrational selling of stocks ;thus causing

business failures, a slowing in production, a rise in unemployment, and

an overall optimistic view about the future.

Another helpful aide in the depression

was the chief International creditor who was described as “unexperienced

and less careful about it’s lendings because it was less dependent on this

business than the chief pre-war tender, Great Britain.” He granted

huge short term loans to politically unstable nations.

Lionel Robbins was a professor at the London

School of Economics. He offered what was probably “the most influential

contemporary explanation of the length of the downturn in the Great Depression(1934).

The World War (World War I) had destroyed much property and stimulated

nationalistic sentiments that resulted in restrictions on international

trade; Robbins wrote” Robbins believed that the depression was dragging

on because of structural weaknesses. An example of Robbins philosophy

was that the monetary confusion and rampant inflation after the war had

hampered.

Many policies that the government put out

hurt and slowed the recovering economy. One act known as the American

Hawley-Smooth of 1930 crushed the European industry which was already unstable

from the depression. It stopped European trade and prevented European

from earning the almighty dollar. This Act also destroyed any possibilities

of regaining the money loaned to them during World War I.

The collapse of the German Banking system

in 1931 had monumental affects on the entire world. It aided to turn,

what would have been, a small economic problem into the Great Depression.

President Hoover was outraged and blamed the Great Depression on the Europeans

by saying, “the hurricane that swept our shores were of European origin.”

He also said, “European statesmen did not even have the courage to meet

the real issues and heavy spending on arms and frantic public works programs

to meet unemployment led to unbalanced budget and inflation that tore their

system assunder.”

The Germans also blamed the depression

on the harsh terms imposed by the Versailles Treaty, especially the reparation

they were forced to pay. They claimed the reparations brought down

the economic vitality of their country to an all time low.

Not one single book I have read has blamed

any one specific country for the start of this catastrophe. As a

matter of fact, each book has said if the countries would have worked in

unison rather than focusing solely on themselves we might not have ever

heard of the Great Depression. Nobody knows what the result would

have been if the countries worked together and resolved the problem before

it festered as it did. No one ever envisioned the extensive duration

of the depression. My only prayer is that we never see another time

like this again.

The United States was and still is a great

power in the world’s manufactured goods – twice as much as Great Britain

and Germany combined. When American producers cut back on their purchases

of raw materials and other supplies, the effect on other countries was

devastating. The policies of the Federal Reserve Board in the early

1930’s put added pressure on European currencies. After Great Britain

was again forced to leave the gold standard in 1931, many foreign banks

withdrew deposits from America in the form of gold: they were afraid that

the United States might go off the gold standard too. “When the Reserve

Board raised the discount rate to discourage these withdrawals it inadvertently

exacerbated the deflationary trend, thus deepening and prolonging the world

depression.” The America delfation was probably the cause of much

of the deflation that took place elsewhere and thus an important reason

why the depression lasted so long.

High unemployment was the most alarming

aspect of the Great Depression. “In every industrial nation, more

people were out of work than in any period in the past. It has been

estimated that in 1933 about thirty million workers were jobless, about

two-thirds of these in three countries – the United States, Germany, and

Great Britain. If anything, this estimate is low.” In New

York City a survey was conducted by the Welfare Council and in New York

alone 100,000 families were being treated for physical and mental effects

of unemployment. The homeless rate increased dramatically.

So much so that many people did not even have a roof over their heads.

The majority of homeless people had nothing at all and the minority made

shacks on vacant land: these shacks soon became known as “Hoovervilles”.

Women played a new role during this time.

When a man lost his job and was having difficulty locating a new one, it

was up to the women to work. This made a man “feel less than a man”

because the women were supporting the family and at that point in time

such an event was frowned upon. Worldwide, in 1929 about one-third

of all workers were women. Everyone agreed that ending the depression

would solve the unemployment problem or at least bring unemployment down

to “manageable” levels. There was also, however, the more immediate

problem of what to do about the people who were unemployed and needed assistance

merely to survive. Whether efforts to aid the unemployed would help

to end the depression or make it worse was a matter of risk-taking.

Another way to solve the unemployment problem was to export people to other

countries that had available jobs so that people could survive.

I do not think the Great Depression could

have been avoided: we simply do not live in a perfect world. There

is no way of telling when or if the next depression will occur. I

feel if the governments worked together then the depression would not have

been such a catastrophe as it ended up being. Did the nations not

know that they influenced the course of the depression and in turn, the

course of history. Another reason why the depression lasted so long

was because politicians were so busy in pointing fingers at each other

instead of resolving it.

Who knows how long the depression would

have lasted if World War II never came to be. Because of World War

II industries began making weapons and these industries hired the workers

to meet the high demands. The United States would sell their weapons

world wide and make a profit.

This turn in events concludes the era of

the Great Depression with the last cycle: recovery.

It is an amazing and complex phenomena,

that at seventeen years old I am able to pin-point (in what is my opinion),

the leading cause of the duration of the Great Depression: uncooperative

leaders unwilling to aid and assist so that harmonious coexistence would

have prevailed.

Hopefully, at this point in our history

we have learned from our past mistakes and will never see such a dreadful

and dire time again!

BIBLIOGRAPHY

1). Bernstein, Irving. A Caring

Society, The New Deal, The Workers, And

The Great Depression. Haugghton Mifflin Company. 1985

2). Garraty, John A. The Great Depression.

Harrcourt Brace Jovanovich Publishers. 1986

3). Hoover, Herbert. The Memoirs

Of Herbert Hoover 1920-1933. The Macmillan Company. 1953

4). Meltzer, Milton. Brother Can

You Spare A Dime. Random House Inc. 1969

5). Patterson, Robert T. The Great

Boom And Panic. Henry Regenery Company. 1965

6). Rothbard, Murray W. America’s

Great Depression. D. Van Nostrand Company Inc. 1963

7). Smith, Gene The Shattered Dream.

William Morrow and Company. 1970

8). Watleins, T.H. The Great Depression,

America in the 30’s. Little Brown Company. 1993