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  • Subject area(s): Business
  • Price: Free download
  • Published on: 21st September 2019
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  • Number of pages: 2

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Thesis:

History has not dealt kindly with the aftermath of protracted periods of low risk premiums highlighting the irrational exuberance of the US stock market that lead to the tragedy of the Great Depression and eventually sowing the seeds for the triumph of “The New Deal”.

Despite the Stock Market being a driving factor in the tragedy of the Great Depression, which started due to major crashes in 1929, the United States was eventually introduced into a state of Triumph as a result of “ The New Deal.”

Background: Great Depression

October 29th, 1929 marked the beginning of the crash, ultimately resulting in the stock market losing about half of its value.  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.

There were many causes of the Great Depression. A fragile banking system, an industrial abundance, and depressed agricultural commodities market. All of these contributing factors ultimately culminated in a ripple effect across the political and socioeconomic realities of the United States. The unemployment rate reached a record high of 25 percent.  During the Great Depression, over one third of national banks failed (11,000), family incomes dropped 40 percent, and, the stock market value fell over 90 percent. President Hoover's main idea to help kick start the economy was to discourage a capitalist oriented economy, and lead them to develop a dependency on government handouts and intervention. President Hoover encouraged vast arrays of public work projects and he introduced the 1932 Reconstruction Finance Corporation (RFC) authorized the lending of $2 billion to banks, railroads, and other privately held companies, and in July 1932 the federal government appropriated $300 million for the nation’s first relief and public works projects.  However, this ultimately  failed to address the harsh realities of the looming Great Depression. Eventually, the electorate soured on President Hoover’s socialist agenda, and Franklin D. Roosevelt was elected into office. FDR introduced a proposal called, “The New Deal” in 1933. The New Deal was a array of public work projects, financial reforms, and regulations that helped boost the dwindling American economy and culture out of the Great Depression.

Historical Context:

During the 1920s, the U.S. economy broadened and the stock market’s value increased exponentially, a period that has been referred to as the “Roaring Twenties.”  On October 24, 1929, cautious investors began questioning the overpriced stock market, and ultimately led to the financial crash that many were predicting. This day in history is remembered as “Black Thursday”.  The Great Depression set in during the fall of 1930, and the first of many banking panics began. The US consumer lost confidence in banking institutions and demanded their cash up front.  

Another factor of significant historical context during this period was the disastrous 1930 Hawley-Smoot Tariff.  This act raised average tariff rates to 60 percent, forcing America’s trading partners to retaliate by instituting counter tariffs on US-made goods. Ultimately, international trade contracted, resulting in further global economic depression.

Bread lines, soup kitchens, and rising numbers of homeless people became commonplace in America’s towns and cities. Farmers couldn’t afford to harvest their crops. Hoover’s administration tried supporting failing banks and other institutions with government loans.  The goal was that banks would in turn would loan to businesses, which would then stimulate the economy.

In 1932, with the country in the farthest depths of the Great Depression, 15 million people were unemployed. President Hoover’s policies did not seem to be working. Democrat Franklin D. Roosevelt won an overwhelming victory in the Presidential election. FDR ascended to the Presidency and ushered in  “The New Deal” in 1932. Among the programs and institutions of the New Deal included the Tennessee Valley Authority.  The TVA built dams and hydroelectric projects to control flooding and provide electric power to the impoverished Tennessee Valley region.  Another key component of the New Deal was Works Progress Administration.  The WPA was a permanent jobs program that employed 8.5 million people from 1935 to 1943.

Europe and other countries around the world also suffered from the depression. Depression-era hardships had fueled the rise of extremist political movements in various European countries, the most notable being the Nazi regime.  Adolf Hitler’s Nazi regime came to power during this period. Nazi aggression  caused war to break out in Europe in 1939. The United States turned its attention to strengthening the US military infrastructure to join European coalitions in countering the Nazi efforts.

Historical Significance:

The first three years of the ten year Great Depression the United States stock market lost over 90 percent of its everyday value and. It took over 25 years for the stock market to get back on track and gain back most of the value. With such an outrageous event taking place mostly from the stock market, it took time to regain that lost trust and faith in it. President Franklin D. Roosevelt incorporated “The New Deal,” in 1933. “The New Deal” incorporated programs that helped boost the economy out of the depression, but also gave the citizens of the United States hope, and the feeling of prosperity. A major part of what the Great Depression was so impactful and significant was the lessons and ideas we captured to help use in the future. With such strong leadership from Franklin D. Roosevelt, we were lifted out of the Great Depression, but even with FDR gone, we still have his concepts and ideas to help us interlude before any events like this can happen again.

Triumph:   Domestic economic expansion and prevailing world wide peace are commonly regarded as the greatest triumphs resulting from the Great Depression.  The unintended consequences of the rise of Nazi driven extremism forced the United States to join WWII.  Much in the same way WWI ushered in the Roaring '20s, WWII ended the Great Depression. As a result of WWII, many people were hired to work in varying positions in military, from engineering to combat, resulting in higher employment. United States manufacturing rapidly grew to supply the war effort resulting in further job gains. These jobs seemingly took care of the 17 million people that were left unemployed as a result of the Great Depression. Most historians are in agreement that the massive spending that occured in response to Nazi extremism and WWII ultimately ended the Great Depression.

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