The Great Depression began in August 1929, when the United States economy first entered an economic recession. Although the country spent two months with a declining GDP, it was not until Wall Street Crash in October 1929 that the effects of a declining economy were felt, and major economic declines around the world took place. Market accidents mark the beginning of a decade of high unemployment, poverty, low profits, deflation, falling agricultural income, and lost opportunities for economic growth and personal progress. Although the cause is uncertain and controversial, the net effect is a sudden and general loss of confidence in the economic future.
The usual explanations include many factors, especially high consumer debt, unfairly regulated markets that allow overly optimistic lending by banks and investors, and the lack of a new, high-growth industry, all interacting to create an economic downward spiral of reduced spending , decreased confidence and lowered production.
The industries that suffer most from construction, agriculture as a condition of dust bowls survive in the heart of agriculture, shipping, mining, and logging and durable goods such as cars and equipment that can be delayed. The economy reached its lowest point in the winter of 1932-33; then came four years of very rapid growth until 1937, when the Recession of 1937 brought back 1934 the unemployment rate.
Depression led to major political changes in America. Three years into the depression, President Herbert Hoover, widely blamed for not doing enough to fight the crisis, lost the 1932 election to Franklin Delano Roosevelt in a landslide. Roosevelt's economic recovery plan, New Deal, instituted unprecedented programs for recovery, recovery and reform, and brought about major changes in American politics.
Depression also resulted in increased emigration of people for the first time in American history. For example, some immigrants returned to their home country, and some native Americans went to Canada, Australia, and South Africa. It also resulted in mass migration of people from the worst-affected areas of Great Plains and the South to places like California and the North, respectively (Okies and Great Migration). Racial tension also increased during this time. By 1940 immigration had returned to normal, and emigration declined. A famous example of an emigrant is Frank McCourt, who goes to Ireland, as told in his book Angela's Ashes.
Memory Depression also forms modern economic theory and generates many changes in how governments deal with economic downturns, such as the use of stimulus packages, Keynesian economics, and Social Security. It also forms a modern American literature, producing famous novels such as John Steinbeck The Grapes of Wrath and Of Mice and Men .
There are several issues that come from: what factors triggered the first decline in 1929, structural weaknesses and special events turned it into a great depression, how the decline spread from one country to another, and why the economic recovery took so long.
The bank began to fail in October 1930 (one year after the accident) when farmers failed to repay the loan. There was no federal deposit insurance during that time because bank failures were considered quite common. Depositors worry this that they may have a chance of losing all their savings, therefore, people are starting to withdraw money and convert it into currency. Since deposits taken from banks increase, the money supply decreases as money multipliers work upside down, forcing banks to liquidate assets (such as calling for loans rather than creating new loans.) This causes the money supply to shrink and the contract economy and a significant decrease in aggregate investment. The decrease in money supply further exacerbates price deflation, putting further pressure on businesses that are already struggling.
The US Federal Government's commitment to the gold standard prevents it from engaging in expansive monetary policy. High interest rates need to be maintained, to attract international investors who buy foreign assets with gold. However, high interest also hampers domestic business lending. US interest rates were also influenced by the French decision to raise their interest rates to pull gold into their vaults. In theory, the US will have two potential responses to it: Allow the exchange rate to adjust, or raise their own interest rate to maintain the gold standard. At that time, the US was pegged to the gold standard. Therefore, Americans turn their dollars into francs to buy more French assets, demand for the US dollar falls, and exchange rates rise. The only thing the US can do to get back to equilibrium is to raise interest rates.
Video Great Depression in the United States
Exchange market damage
The Wall Street Crash of 1929 is often referred to as the beginning of the Great Depression. It started on October 24, 1929, and was the most devastating stock market crash in US history. Many stock market crashes can be tied to false excitement and hope. In the years leading up to 1929, rising stock market prices have created an enormous amount of wealth for those invested, in turn encouraging loans to buy more shares. However, on October 24 (Black Thursday), stock prices began to fall and panic selling caused prices to fall sharply. On October 29 (Black Tuesday), share prices fell $ 14 billion in one day, more than $ 30 billion a week. The evaporating value of a week is 10x more than the entire federal budget and more than all that the US spent on World War I. In 1930, the value of stocks had fallen by 90%.
Since many banks also invest their clients' savings in the stock market, these banks are forced to close when the stock market falls. After the fall of the stock market and bank closure, people are too afraid to lose more money. Due to concerns about further economic challenges, people from all classes stop buying and consuming. Thousands of individual investors believe they can become rich by investing in margin losing everything they have. Stock market crashes have an impact on the American economy.
Maps Great Depression in the United States
Banking failure
The big contribution to the recession is the closure and suspension of thousands of banks across the country. Financial institutions fail for several reasons, including unregulated lending procedures, confidence in the Gold standard, consumer confidence in the future economy, and agricultural defaults on outstanding loans. With this merger problem, the banking system is struggling to keep up with increased public demand for cash withdrawals. It as a whole lowers the money supply and forces banks to generate short real estate sales and liquidation of existing loans. In a race to liquidate assets, the banking system began to fail on a wide scale. In November 1930, the first major banking crisis began with more than 800 banks closing their doors in January 1931. In October 1931 more than 2100 banks were frozen with the highest suspension levels recorded in Federal Reserve District St. Louis, with 2 out of every 5 banks hanging. The overall economy underwent a massive reduction in banking footing across the country by more than nine thousand closed banks in 1933.
The closure resulted in massive withdrawal of deposits by millions of Americans estimated to be close to $ 6.8 billion (equivalent to about $ 60 billion in dollars today). During this time Federal Deposit Insurance Corporation (FDIC) was in place resulting in a loss of approximately $ 1.36 billion (or 20%) of the total $ 6.8 billion recorded in failed banks. This loss comes directly from savings, investments and bank accounts every day. As a result, GDP fell from a seven-hundred high in 1929 to a mid-six-hundreds in 1933 before seeing a recovery for the first time in nearly 4 years. The federal leadership intervention is heavily debated about its overall effectiveness and participation. Federal Reserve legislation can not effectively overcome the banking crisis because state banks and trust companies are not forced to become members, eligible banks discounted bank members are severely restricted access to the Federal Reserve, a power between twelve decentralized Federal Reserve banks and federal leadership levels ineffective, inexperienced, and weak.
Unregulated growth
Throughout the beginning of banking regulations the 1900s were very loose if not nonexistent. The 1900 Currency Act lowers the required capital of investors from 50,000 to 25,000 to create a national bank. As a result of this change nearly two-thirds of the banks formed over the next ten years are small enough, averaging just over 25,000 in the required capital. The number of banks will be almost doubled (the number of banks divided by Real GDP) from 1890 to 1920 due to lack of supervision and qualification when bank charter was issued in the first two decades of the 1900s.
Unregulated growth of small rural banking institutions can be partially attributed to rising agricultural costs especially in the Corn Belt and Cotton Belt. Throughout the belt of corn and cotton increased real estate drove demand for more local funding to continue supplying an improved agricultural economy. The structure of rural banks will supply the capital needed to meet the agricultural commodity market, however, this comes with reliable pricing and low-risk loans. Promising economic growth from 1887 to 1920 with an average growth of 6 percent in [GDP]. Particularly participation in World War I fostered a booming agricultural market that encouraged optimism in consumer and loan levels which, in turn, resulted in a more relaxed approach to lending. Overbanked conditions there are pressing banks that are difficult to improve their services (especially for agricultural customers) without supervision or additional regulatory qualifications. This dilemma introduces some high-risk and marginal business returns to the banking market. Banking growth will continue for the first two decades well beyond the previous trend regardless of current economic and population standards. The profitability of banks and loan standards began to deteriorate as early as 1900 as a result.
The failure of the harvest that began in 1921 began to impact on this poorly regulated system, the corn and cotton expansion area suffered the greatest damage due to the era of dust bowl resulting in a decline in the value of real estate. In addition, the year 1921 was the peak for banking expansion with about 31,000 banks in activity, however, with failure at the farm level 505 banks would close between 1921-1930 marking the biggest banking system failure in record. Regulatory questions began hitting the debate table surrounding banking qualifications as a result; discussions will continue into the [Great Depression] as it is not only the failing bank but some will disappear altogether without rhyme or reason. The panic of the financial crisis will increase in the Great Depression due to the lack of confidence in the regulations and the restoration shown during the 1920s, this in turn prompted a dubious, uncomfortable, and lack of consumer confidence in the banking system.
Transmission
With the lack of consumer confidence in the economic direction provided by the panic of the federal government that began to spread across the country shortly after Wall Street Crash in 1929. President Hoover defended the Gold Standard as a measure of the country's currency over the following years. As a result, American shareholders with the majority of gold reserves begin to be wary of the value of gold in the near future. The European decision to move away from the Gold Standard caused individuals to start attracting gold stocks and move investments out of the country or start dredging gold for future investments. The market continues to suffer from these reactions, and the result causes some individuals to speculate daily about the economy in the coming months. Rumors about market stability and banking conditions began to spread, consumer confidence continued to decline and panic began to surface. Transmission is spreading like wild fire that drives Americans across the country to withdraw their deposits en masse . This idea will continue from 1929-1933 causing the greatest financial crisis ever seen at the banking level to push the economic recovery effort beyond the resolution. An increase in the ratio of currency deposits and determinants of money stock forces the stock of money to fall and revenues decline. The panic-induced banking fiasco brings a mild recession into a major recession.
Whether this causes the Great Depression is still highly debated because of many other linking factors. However, it is evident that the banking system is experiencing a massive decline across the country due to lack of consumer confidence. Because withdrawal requests will exceed the availability of cash, the bank starts to make discount sales such as fire sales and short sales. Due to the inability to immediately determine the current value of this fire sale value and short sales will result in huge losses while recovering the possibility of revenue for unpaid and underpaid loans. This will enable healthy banks to take advantage of the struggling units that force additional losses that result in the bank being unable to meet the demand of depositors and create a widespread failure cycle. Investments will remain low by half a decade ahead as the private sector will raise savings due to future uncertainty. The federal government will carry out additional policy changes such as Check tax, monetary restrictions (including money supply reduction by burning), High Wage Policy, and New Agreements through Hoover and Roosevelt administrations.
Depression in cities
One of the most visible effects of depression is the emergence of the Hoovervilles, which are dwarfed clusters in many cardboard boxes, tents, and small rickety wooden huts built by homeless people. Residents live in huts and beg for food or go to the soup kitchen. The term was coined by Charles Michelson, head of publicity of the Democratic National Committee, to refer sardonically to President Herbert Hoover whose policy Michelson blamed for his depression.
Unemployment reached 25 percent on the worst days of 1932-33, but it was uneven. Lack of work is less severe among women, workers in non-durable industries (such as food and clothing), service and sales workers, and those employed by the government. Inner city men who lack skills have a much higher unemployment rate. Age also plays a factor. Young people have trouble getting their first job. Men over the age of 45, if they lose their jobs, rarely find others because the employer has a younger male option. Millions of people are employed in the Great Depression, but men with weak credentials do not, and they fall into the long-term unemployment trap. Migration in the 1920s that brought millions of peasants and townspeople to the big cities suddenly reversed. Unemployment makes those cities unattractive, and the network of relatives and more food supplies makes people wiser to return. The city authorities in 1930-31 attempted to overcome depression by expanding public works projects, as President Herbert Hoover strongly advocated. However, tax revenues declined, and cities and private aid agencies were completely overwhelmed by 1931; no one can provide significant additional help. People come back with help as cheaply as possible, including a public kitchen that provides free food for anyone who comes. After 1933, new sales taxes and federal money infusions helped ease the fiscal tensions of cities, but the budget did not fully recover until 1941.
The federal program launched by Hoover and greatly expanded by New Deal President Roosevelt used major construction projects to try to jump start the economy and solve the unemployment crisis. The ERA, CCC, FERA, WPA and PWA alphabet bodies build and improve public infrastructure dramatically, but do little to help the private sector recovery. FERA, CCC, and especially WPA focus on providing unskilled jobs for long-term unemployed men.
The Democrats won easy landslide victories in 1932 and 1934, and a larger one in 1936; Poor Republicans look cursed. The Democrats capitalize on Roosevelt's magnetic appeal to urban America. The key groups are low-skilled ethnicity, especially Catholics, Jews, and blacks. Democrats promised and delivered in terms of political recognition, union membership, and relief work. The political machines of the cities are stronger than ever, as they mobilize their police officers to help families in need of assistance who most navigate the bureaucracy and get help. FDR won virtually every demographic vote in 1936, including taxpayers, small businesses and the middle class. However, Protestant middle-class voters turned sharply against him after the 1937-38 recession undermined repeated promises that the recovery was imminent. Historically, local political machinery was primarily interested in controlling their environment and city elections; the smaller the number of voters on election day, the easier it is to control the system. However, for Roosevelt to win the presidency in 1936 and 1940, he needed to bring in electoral colleges and that meant he needed the greatest possible majority in cities to flood rural voters. The machines came for her. 3.5 million voters on the payroll list during the 1936 election gave 82% of their vote to Roosevelt. The rapidly growing and energetic labor unions, especially those based in the cities, turn out to be 80% for the FDR, as do the Irish, Italian and Jewish communities. Overall, 106 cities of over 100,000 residents voted 70% for FDR in 1936, compared with 59% elsewhere. Roosevelt works very well with big city machines, with one exception to his arch-enemy, Tammany Hall in Manhattan. There he supported an elaborate coalition built around the nominal Republican Fiorello La Guardia, and based on Jewish and Italian voters mobilized by trade unions.
In 1938, Republicans made an unexpected comeback, and Roosevelt's attempt to clear the Democrats from his political opponents backfired. The conservative coalition of the North and the Southern Democrats took control of Congress, lost the urban liberal vote, and stopped the expansion of New Deal ideas. Roosevelt survived in 1940 thanks to his margin in the Solid South and in the cities. In the North more than 100,000 cities gave Roosevelt 60% of their votes, while the rest of the North liked Willkie 52% -48%.
With the start of full-scale war mobilization in the summer of 1940, the economy in the cities experienced a rebound. Even before Pearl Harbor, Washington pumped a massive investment into new factories and financed the production of ammunition all the time, guaranteeing jobs for anyone who appeared at the factory gate. The war brought about a recovery of prosperity and hope of hope for the future across the nation. It has the biggest impact on cities on the West Coast, especially Los Angeles, San Diego, San Francisco, Portland and Seattle.
The economic historian led by Price Fishback has examined the impact of New Deal spending on improving health conditions in 114 largest cities, 1929-1937. They estimate that each additional $ 153,000 in relief expenditure (in 1935 dollars, or $ 1.95 million in 2000 dollars) is associated with a reduction of one infant mortality, one suicide, and 2.4 deaths from infectious diseases.
Comparison of global severity
The Great Depression began in the United States and quickly spread throughout the world. It has a severe effect in rich and poor countries. Personal income, consumption, industrial output, tax revenues, profits and prices fell, while international trade fell more than 50%. Unemployment in the US rose to 25%, and in some countries rose as high as 33%.
Cities worldwide are hit hard, especially those that rely on heavy industry. Practical construction is discontinued in many countries. Agriculture and rural areas suffer as the price of crops drops by about 60%. Faced with declining demand with alternative sources of employment, areas that depend on primary sector industries such as grain, mining and logging, and construction, suffer the most.
Much of the economy began to recover in 1933-34. However, in the US and some other negative economic impacts often lasted until the start of World War II, when the war industry encouraged recovery.
There was little agreement about what caused the Great Depression, and the topic became highly politicized. At that time most economists around the world recommended an "orthodox" solution to cut government spending and raise taxes. However, British economist John Maynard Keynes advocated spending large-scale government deficits to make up for the failure of private investment. No major country adopted its policies in the 1930s.
Europe
- Europe as a whole was hit hard, both in rural and industrial areas. Democracy is discredited and the left often tries to regulate coalitions between Communists and Socialists, who were previously arch-enemies. The right wing movement appears, often following the Italian fascist mode.
- When the Great Depression worsened, the Labor Party lost power in Britain and the conservative-dominated coalition government came to power in 1931, and remained in power until 1945. There were no programs in the United Kingdom comparable to the New Deal.
- In France, the Socialist government of the "Popular Front" with some Communist support, came to power in 1936-1938. It launched large programs that favored workers and the working class, but gave rise to rigid opposition.
- Germany during the Weimar Republic had fully recovered and prospered in the late 1920s. The Great Depression struck in 1929 and was severe. The political system turned violent and the Nazis under Hitler came to power through elections in early 1933. Economic recovery was done through autarky, pressure on economic partners, wage controls, price controls, and spending programs such as public works and, in particular, the military spent.
- Spain saw an increasing political crisis that led from 1936-39 to civil war.
- In Italy Benito Mussolini, economic control of his corporate state is tightened. The economy is never prosperous.
- The Soviet Union was largely isolated from the world trading system during the 1930s. To force farmers into industrial jobs in the cities, food is stripped of the countryside, and millions die from starvation.
Canada and the Caribbean
- In Canada, Between 1929 and 1939, gross national product fell 40%, compared to 37% in the US. Unemployment reached 28% at depths of the Depression in 1929 and 1930, while wages reached their lowest point in 1933. Many businesses were closed, because the company's profit of C $ 396 million in 1929 turned to a loss of $ 98 million in 1933. Exports shrank by 50% from 1929 to 1933. The worst fires are areas that depend on primary industries such as agriculture, mining and logging, as prices go down and there are some alternative jobs. Families see most or all of their assets lost and their debt becomes heavier as prices go down. Local and provincial governments set up aid programs, but no new programs like the New Testament exist. The Conservative Government of Prime Minister R. B. Bennett replied to the Smoot-Hawley Tariff Act by raising tariffs on the US but lowering it on British goods. Nevertheless, the economy suffered. In 1935, Bennett proposed a series of programs that resembled the New Deal; but lost the election that year and no program was passed.
- Cuba and the Caribbean witnessed their biggest unemployment during the 1930s due to falling exports to the US, and falling export prices.
Asia
- China fought with Japan during the 1930s, in addition to the internal struggle between Chiang Kai-shek nationalist and communist Mao Zedong.
- The Japanese economy is growing at a rate of 5% of GDP per year after years of modernization. Manufacturing and mining account for more than 30% of GDP, more than double the value for the agricultural sector. However, much of the industry's growth is directed towards expanding the country's military power. Beginning in 1937, much of Japan's energy focused on war and massive occupation in China.
Australia and New Zealand
- In Australia, the conservative, Labor-led 1930s government concentrates on cutting spending and reducing national debt.
- In New Zealand, a series of economic and social policies similar to the New Deal were adopted following the election of the first Labor Party in 1935.
Strict monetary policy
The stock market crash of 1929 not only affected the business community and the economic confidence of the people, but also caused the banking system soon after the turmoil. The explosion of the US economy in 1920 was based on high debt, and the outbreak of debt chains caused by the collapse of banks had produced far-reaching adverse effects. Precisely because of the shaky banking system, the United States used monetary policy to save the already hampered economy. Kindleberger's American economist from a long-term study of the Great Depression shows that in 1929, before and after the fall of the stock market, the Fed lowered interest rates, tried to expand the money supply and eased financial market tensions for several times, but they did not succeed, the fundamental reason is that the relationship between various credit institutions and communities is in the process of drastic adjustment, the normal supply channel for money supply is blocked. Later, some economists argued that the Fed had to do a large-scale market opening business at the time, but the essence of that statement was that the US government should be quick to implement measures to expand fiscal spending and fiscal deficits, whereas, the essence of this argument is that the government The US should be immediately implemented to expand fiscal spending and fiscal deficit measures.
Hoover Administration gold standard
Between the 1920s and 1930s, the United States began to try a tight money policy to encourage economic growth. In terms of fiscal policy, the US government has failed to reach a consensus on fiscal issues. President Hoover began expanding federal spending, he set up a government financial revitalization company to provide emergency aid to banks and financial institutions that are on the verge of bankruptcy. Hoover's fiscal policy has accelerated the recession. In December 1929, as a means of demonstrating government confidence in the economy, Hoover reduced all income tax rates by 1% in 1929 due to a sustainable budget surplus. In 1930, the surplus turned into a rapidly growing economy contraction deficit. In 1931, US federal fiscal revenues and expenditures changed from a financial surplus to a deficit for the first time (deficit of less than 2.8% of GDP). By the end of 1931 Hoover had decided to recommend a large tax increase to balance the budget; In addition, Congress approved the tax increase in 1932, a substantial reduction in personal immunity to increase the number of taxpayers, and interest rates have risen sharply, the lowest marginal rate rising from 25% on taxable income of more than $ 100,000 to 63% on taxable income taxes of more than $ 1 million because the tariffs are made much more progressive. Hoover changed his approach against the Depression. He justified his call for federal assistance by noting that "We use the emergency power to win the war, we can use it against the Depression, suffering, and suffering that are equally great." This new approach includes a number of initiatives. Unfortunately for the President, nothing has proved so effective. Equally important, with the presidential election drawing closer, the political heat generated by the Great Depression and Hoover's policy failures grew ever softer.
In terms of financial reform, since the recession, Hoover has been trying to improve the economy. He established government agencies to encourage employment harmony and support local public works assistance promoting government and business cooperation, stabilizing prices, and trying to balance the budget. His work focuses on indirect assistance from individual countries and the private sector, which is reflected in a letter emphasizing "more effective support for every national committee" and voluntary services - "attractive for funding" from outside the government. The commitment to defend the gold standard system prevented the Federal Reserve from extending money supply operations in 1930 and 1931, and promoted a countervailing action that damaged Hoover to avoid the dollar's abundant gold standard system. When the Great Depression became worse, the call came because of increased federal intervention and spending. But Hoover refuses to allow the federal government to force fixed prices, control the value of business or manipulate the currency, instead, it begins to control the dollar price. For the official dollar price, it expanded its credit base through free market operations within the federal reserve system to ensure the dollar's domestic value. He also tends to provide indirect assistance to local banks or public works projects, refusing to use federal funds to provide immediate assistance to citizens, which would undermine the public spirits. Instead, he focuses on volunteering to raise money. Although Hoover was a philanthropist before becoming president, his opponents considered him irresponsible of citizens. During the Hoover administration, US economic policy has turned into activism and intervention. In his re-election campaign, Hoover tries to persuade Americans to claim that the steps they are asking seem to help in the short term, but that will be devastating in the long run. Finally, he was defeated by Franklin Roosevelt in 1932.
Consequences of Hoover policy
In 1929, the Great Depression began, the asset bubble burst, and the unemployment rate increased. The following year, although most people think that there is nothing to worry about, Hoover takes firm action on issues such as work, construction, public construction, and agriculture, which help restore public confidence. Unemployed populations rose, although remained less than 9%.
In 1931, "a tragic year", politicians and economists were convinced that the economy would recover in 1931, but a serious economic crisis and depression took place this year. In a somewhat critical atmosphere, at a congressional meeting in 1932, Hoover prepared to take more vigorous action in the government work report which he submitted to Congress. Especially, Hoover underscored his own achievements over the past two years. Since Hoover's policy has led to an increase in financial spending and financial difficulties, he decided to raise taxes.
Roosevelt Administration gold standard
In early 1933, the last few weeks of Hoover's time, the American financial system was paralyzed. The Great Depression was extended by interventionist policies for four years. The bank crisis caused serious deflationary pressure. For this phenomenon, Hoover still wants to stop it. In fact, the worst period of 1932 - The Great Depression has passed, but the recovery is slow and weak. During the 1933 financial crisis that culminated in a banking holiday in March 1933, much gold flowed out of the Fed, some of which flowed into individuals and companies in the United States. This domestic loss occurs because individuals and businesses want to keep metal gold into bank deposits or paper money, some gold flows overseas, and this external loss occurs because foreign investors are worried about the depreciation of the dollar. Roosevelt understood that traditional political and financial policies could not save the United States from "disaster years", he pursued the "New Deal" to try to redeem the United States in administrative ways. In the spring and summer of 1933, the Roosevelt government suspended the gold standard. Emergency Banking Law gives the President the power to control international and domestic gold sport. It also gives the finance minister the power to hand over gold coins and certificates. On April 20, President Roosevelt issued an official announcement about a gold standard moratorium. The announcement bans gold exports, and prohibits financial institutions from converting money and deposits into gold coins and ingots. The action prevents the outflow of gold. Soon, the Roosevelt government weakened the connection with gold once more. Thomas's amendment to the Agricultural Assistance Act to give the President the power to reduce the dollar gold content by 50%. President Roosevelt also uses the silver standard rather than gold to exchange dollars, it is determined by the price of the bank. In April 1933, Roosevelt decided to abolish the gold standard through the New Deal. He abandoned this traditional monetary policy primarily because of a major crisis against the failure of the original monetary policy. And the purpose of his actions is to ban all gold exports except for foreign countries, so that the United States can maintain the same monetary base with most countries. The Hoover government has stubbornly insisted on using "healthy money" policies that oppose deficit spending and state aid that only makes the economic crisis worse. Because of this situation, Roosevelt imposed the application of inflation, and used federal deficit spending to promote work to enforce recovery. The neglect of the gold standard made Wall Street stocks rise rapidly, the Wall Street stock trading very active, with a total of 5 million shares sent in one day, which is the most active day in the last six months.
The political outcome of depression
Hoover's response
The Hoover Administration sought to improve the economic situation quickly, but to no avail. During Hoover's presidency, businesses were encouraged to maintain high wage rates. President Hoover and many academics believe that high wage rates will maintain a stable level of purchasing power, keeping the economy changing. In December 1929, after the initial phase of the depression began, President Hoover continued to promote high wages. It was not until 1931 that business owners began to reduce wages in order to survive. Later that year, The Hoover Administration created a Check Tax to generate additional government funding. Taxes add a two cent tax for the purchase of all bank checks, directly affecting ordinary people. This additional cost pushes people away from using checks, so instead the majority of the population increases their cash usage. The bank has been closed for lack of cash, but the reaction to Tax Check is rapidly increasing the pace.
Roosevelt's New Deal
In the "First New Deal" of 1933-34, various programs are targeted for depression and agriculture in rural areas, in the banking industry, and for the economy as a whole. Aid programs are formed for long-term unemployed people who are routinely skipped every time new jobs are open. The most popular program is the Civil Conservation Corps which puts youth to work in construction work, especially in rural areas. Prohibitions are lifted, fulfilling campaign promises and generating new tax revenues for local and state governments. A series of assistance programs are designed to provide jobs, in collaboration with local governments.
The National Recovery Administration (NRA) seeks to stimulate demand and provide jobs and help through increased government spending. To end deflation, the gold standard is suspended and a series of panels consisting of business leaders in each industry establish a rule that ends the so-called "cut-throat competition," is believed to be responsible for forcing down national prices and profits. Some Hoover agents continued, especially the Financial Corporations Reconstruction, which provided large-scale financial assistance to banks, trains and other institutions. Reforms that were never enacted in the 1920s are now the center of attention, such as the Tennessee Valley Authority (TVA) designed to upset and modernize the impoverished mountainous terrain of Appalachia.
In 1934-1936 came the much more controversial "New Deal". It displays social security; Job Progress Administration (WPA), a huge aid agency for unemployed people run by the federal government; The National Labor Relations Board, which operated as a strong stimulus for union growth. Unemployment fell 2/3 in Roosevelt's first term (from 25% to 9%, 1933-1937). The second set of reforms was launched by the Roosevelt Administration during the same period, which was the responsibility for social welfare by the main law ---- The Social Security Act in 1935. Insurance and poor aid ("public assistance" or "welfare ") is a constituent part of the law that provides pensions for the elderly, payment of allowances for dependent mothers, handicapped children and the blind, and unemployment insurance. The Social Security Act still plays a vital role of the American health and human services system so far. Most economies had recovered in 1936, but long-term unemployment that persisted until the war began for World War II in 1940.
The New Deal, and still, is heavily debated. The business community, with considerable support from conservative Democrats such as Al Smith, launched a crusade against the New Deal, warning that dangerous people had mastered the economy and threatened the American conservative tradition. Scholars remain divided. When asked whether "overall, the government policy of the New Deal serves to extend and deepen the Great Depression," 74% of American university professors specializing in economic history disagree, 21% agree with provisos, and 6% fully agree. Among the respondents who taught or studied economic theory, 51% disagreed, 22% agreed with provisos, and 22% agreed completely.
Recession 1937-1938
By 1936, all major economic indicators had returned to the level of the late 1920s, except for unemployment, which remained high. In 1937, the American economy unexpectedly declined, which lasted for most of 1938. Production declined sharply, as did profits and jobs. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. The factor that contributed to the Recession of 1937 was the tightening of monetary policy by the Federal Reserve. The Federal Reserve doubled reserve requirements between August 1936 and May 1937 leading to a contraction in the money supply.
The Roosevelt government reacted by launching a rhetorical campaign against monopoly power, considered a cause of depression, and appointing Thurman Arnold to break the great confidence; Arnold is ineffective, and the campaign ends after World War II begins and the company's energy must be directed to win the war. By 1939, the effects of the 1937 recession had been lost. Jobs in the private sector recovered to the level of 1936 and continued to rise until the coming war and manufacturing jobs jumped from 11 million in 1940 to 18 million in 1943.
Another response to the deepening of the Great Depression of 1937 had a more tangible result. Ignoring the Treasury's request, Roosevelt began his denial of depression, reluctantly abandoned his efforts to balance the budget and launched a $ 5 billion spending program in the spring of 1938 in an effort to increase mass purchasing power.
Business-oriented observers explain recession and recovery in very different terms from Keynesian economists. They argue that the New Deal has been very hostile to business expansion in 1935-1937. They say it has encouraged a massive strike that has a negative impact on large industries and has threatened anti-trust attacks against big companies. But all those threats were sharply reduced after 1938. For example, antitrust attempts failed without major cases. CIO and AFL unions are beginning to fight each other more than companies, and tax policies are becoming more profitable for long-term growth.
On the other hand, according to economist Robert Higgs, when only looking at the supply of consumer goods, significant GDP growth only returned in 1946. (Higgs does not estimate value for collective goods consumers such as victory in war) For the Keynesians, the war economy shows how big the fiscal stimulus needed to end the decline of the Depression, and at the time, caused concern that once America was demobilized, it would return to a depressed state and industrial output would fall into its pre-eminence. level-crust. A false prediction by Alvin Hansen and other Keynesians that the new depression will begin after the war fails to take into account the pent-up demand of consumers as a result of the Depression and World War.
After that
The government began heavy military spending in 1940, and began compiling millions of youths that year. By 1945, 17 million had entered service into their country, but that was not enough to absorb all unemployment. During the war, the government subsidized wages through cost-plus contracts. Government contractors are fully paid for their costs, plus a certain percentage of profit margins. That means the more salaries a person pays, the higher the company's profits because the government will bear it plus the percentage.
Using this cost-plus contract in 1941-1943, the factories employed hundreds of thousands of unskilled workers and trained them, at government expense. The military training program itself concentrates on teaching technical skills involving machinery, machinery, electronics and radio, preparing soldiers and sailors for the postwar economy.
The structural walls were dramatically lowered during the war, especially unofficial policies toward employing women, minorities, and workers over 45 or under 18 years. (See FEPC) Strikes (except in coal mining) are sharply reduced when unions encourage their members to work harder. Tens of thousands of new factories and docks are built, with new bus services and nursery care for children making them more accessible. Wages soared for workers, making it quite expensive to sit at home. Employers are retooling so that new unskilled workers can handle jobs that previously require skills that are now in short supply. The combination of all these factors pushed unemployment below 2% in 1943.
Roosevelt's declining popularity in 1938 is evident throughout the United States in the business community, the press, and the Senate and House. Many have labeled the recession "Roosevelt Recession". In late December 1938, Roosevelt sought to gain popularity with the American people, and tried to regain the nation's confidence in the economy. His decision that December to name Harry Hopkins as Minister of Commerce was an attempt to achieve the trust he desperately needed. The appointment was surprising largely due to the lack of Hopkins business experience, but proved very important in shaping the years after the recession.
Hopkins made its mission to strengthen the relationship between Roosevelt's administration and the business community. While Roosevelt believed in the complete reform (The New Deal), Hopkins took a more administrative position; he feels that recovery is imperative and that the New Deal will continue to hinder recovery. With the support of Agriculture Secretary Henry Wallace and Finance Minister Henry Morgenthau, Jr., popular support for recovery, not reform, hit the country. By the end of the 1938 reform it had been beaten, as no new reform legislation was passed.
The economy in America is now beginning to show signs of recovery and the unemployment rate has declined after a cruel 1938 year. The greatest shift towards recovery, however, came with the German decision to invade France at the beginning of World War II. After France's defeat, the US economy will skyrocket in the months that follow. The defeat of France meant that Britain and other allies would look to the US for a huge supply of material for war.
This need for war material creates a major boost in production, leading to a promising number of jobs in America. In addition, the UK chose to pay for their material with gold. This stimulated the flow of gold and increased the monetary base, which in turn, propelled the American economy to its highest point since the summer of 1929 when depression began.
By the end of 1941, prior to America's entry into war, defense spending and military mobilization had begun one of the biggest explosions in American history, ending the last imprint of unemployment.
Facts and numbers
Depression effect in US:
- 13 million people become unemployed. In 1932, 34 million people became family members without full-time wage earners.
- Industrial production fell by almost 45% between 1929 and 1932.
- House construction fell by 80% between 1929 and 1932.
- In the 1920s, the banking system in the US was about $ 50 billion, about 50% of GDP.
- From 1929 to 1932, about 5,000 banks went bankrupt.
- By 1933, 11,000 of the 25,000 US banks had failed.
- Between 1929 and 1933, US GDP fell by about 30%, the stock market lost almost 90% of its value.
- In 1929, the unemployment rate averaged 3%.
- In Cleveland, the unemployment rate is 50%; in Toledo, Ohio, 80%.
- One Soviet trading company in New York averaged 350 apps a day from Americans looking for work in the Soviet Union.
- More than a million families lost their farmland between 1930 and 1934.
- The company's profits fell from $ 10 billion in 1929 to $ 1 billion in 1932.
- Between 1929 and 1932, the average income of American families was reduced by 40%.
- Nine million savings accounts were removed between 1930 and 1933.
- 273,000 families were driven from their homes in 1932.
- There are two million homeless people who migrate across the country.
- More than 60% of Americans are categorized as poor by the federal government in 1933.
- In the last affluent year (1929), there were 279,678 immigrants, but in 1933 only 23,068 people came to the United States.
- In the early 1930s, more people emigrated from the United States than immigrated there.
- With little economic activity, there is little demand for new currencies. No penny or penny was printed in 1932-33, no quarter of a dollar in 1931 or 1933, no half dollar from 1930 to 1932, and no silver dollar in 1929-33.
- The US government sponsors a Mexican Repatriation program intended to encourage people to voluntarily move to Mexico, but thousands, including some Americans, are deported at their disposal. In total, about 400,000 Mexicans were discharged.
- New York social worker reports that 25% of all school children are malnourished. In mining areas in West Virginia, Illinois, Kentucky, and Pennsylvania, the proportion of malnourished children may reach 90%.
- Many people fall ill with diseases such as tuberculosis (TB).
- The US census of 1930 determined the US population to be 122,775,046. About 40% of the population is under 20 years of age.
See also
- Entertainment during the Great Depression
- Penny auction (foreclosure)
- New Deal and art in New Mexico
- The Great Depression Timeline
- Ham and Egg Movement, California pension program, 1938-40
- The Great Depression in the Washington State Project
- Sales tax tokens
Source of the article : Wikipedia
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