The Great Depression 1930

Great Depression:

At the end of the 1920s, the United States boasted the largest economy in the world. With the
destruction wrought by World War I, Europeans struggled while Americans flourished. Upon
succeeding to the Presidency, Herbert Hoover predicted that the United States would soon see
the day when poverty was eliminated. Then, in a moment of apparent triumph, everything fell
apart. The stock market crash of 1929 touched off a chain of events that plunged the United
States into its longest, deepest economic crisis of its history.

The Great Depression was the worst economic downturn in the history of the industrialized
world, lasting from 1929 to 1939. It began after the stock market crash of October 1929, which
sent Wall Street into a panic and wiped out millions of investors. Over the next several years,
consumer spending and investment dropped, causing steep declines in industrial output and
employment as failing companies laid off workers. By 1933, when the Great Depression reached
its lowest point, some 15 million Americans were unemployed and nearly half the country’s
banks had failed.

As the effects of the Depression cascaded across the US economy, millions of people lost their
jobs. By 1930 there were 4.3 million unemployed; by 1931, 8 million; and in 1932 the number
had risen to 12 million. By early 1933, almost 13 million were out of work and the
unemployment rate stood at an astonishing 25 percent. Those who managed to retain their jobs
often took pay cuts of a third or more.

Out of work Americans filled long breadlines, begged for food, or sold apples on street corners.
A Chicago social worker wrote that “We saw Want and Despair walking the streets, and our
friends, sensible, thrifty families, reduced to poverty.”

More than a third of the nation’s banks failed in the three years following 1929. Long lines of
desperate and despairing people outside banks hoping to retrieve their savings were common.
Many ordinary citizens lost their life savings when banks failed. Farmers were hit particularly
hard by the crisis. On top of falling prices for crops, a devastating drought in Oklahoma, Texas,
and Kansas brought on a series of dust storms known as the Dust Bowl. In the South,
sharecroppers—both white and black—endured crushing poverty and almost unimaginable
degradation. African Americans suffered significantly higher levels of unemployment than
whites due to pervasive racism.

The financial crisis was not limited to the United States. Countries in Europe and around the
world experienced the depression. Hitler’s rise to power in Germany was fuelled in part by the
economic slowdown, and throughout the 1930s international tensions increased as the global
economy declined.

Causes Of Great Depression 1930:

The effects of the Great Depression were huge across the world. Not only did it lead to the New
Deal in America but more significantly, it was a direct cause of the rise of extremism in
Germany leading to World War II.
Causes:

1) Stock Market Crash for 1929: Many believe erroneously that the stock market crash that occurred
on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was
one of the major causes that led to the Great Depression. Two months after the original crash in
October, stockholders had lost more than $40 billion dollars. Even though the stock market began to
regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is
called the Great Depression.

2) Bank Failures: Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and
thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic
situation and concerned for their own survival, stopped being as willing to create new loans. This
exacerbated the situation leading to less and less expenditures

3) Reduction in Purchasing Across the Board: With the stock market crash and the fears of further
economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in
the number of items produced and thus a reduction in the workforce. As people lost their jobs, they
were unable to keep up with paying for items they had bought through installment plans and their
items were repossessed. More and more inventory began to accumulate. The unemployment rate rose
above 25% which meant, of course, even less spending to help alleviate the economic situation.

4) American Economic Policy with Europe: As businesses began failing, the government created the
Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for
imports thereby leading to less trade between America and foreign countries along with some
economic retaliation.

5) Drought Conditions: While not a direct cause of the Great Depression, the drought that occurred in the
Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts
and had to sell their farms for no profit to themselves. The area was nicknamed "The Dust Bowl."