The Great Depression has been analyzed from every possible perspective in almost a century since it occurred. The wide-ranging federal policies created forward leaps into extensive government programs after that significant economic event. To state the obvious, economic matters impact every level of society in every country on the globe. The Great Depression in America did not just impact America. In the 1920s, America was growing as an economic, industrial, and military power on the global stage.
Many analysts think a significant reason for The Great Depression occurring was that the Republican party was in charge of the Whitehouse for the decade, working up to the stock market crash in October 1929. That is a reasonable assumption because the previous presidential administration often impacts the start of the next four-year term. The Republicans were considered in the pocket of big business and Wallstreet during and before the end of the 1920s. When Herbert Hoover won the presidency in 1928, he was the third Republican in the Whitehouse since the 1920 election of Warren Harding. The Great Depression occurred at the end of Hoover’s first year in the Whitehouse.
During the 1920s, the Democrat and Republican political parties went through some growing pains in different ways just before The Great Depression. These significant political shifts within the parties caused economic challenges, as one might expect. As the progressives moved from being split between the Republican and Democrat parties to being under the Democrat party, several approaches were in combat and conflict with the Liberal wing of that side. The Republican party was experiencing some similar challenges with Big Business and Conservatives.
The farming market went through a focused pre-depression period in the postbellum era in the late 1800s before the entire economy took the drop in 1929. Though the 1920s were a time the farmers started an economic boom for a short period, the depressive economic situation of all sectors dropped in the early 1930s. The Wallstreet crowd played games with currency and stocks until the official burst in late 1929. When part of the crash also put 650 banks out of commission in 1929, something had to be done.[1]
The FDIC (Federal Deposit Insurance Corporation) was started in 1933 when President Franklin Roosevelt signed the Banking Act of 1933. Before the crash occurred, some began to see the banking industry as stable, but there was no real insurance of the banks where people placed their funds. When the bank went down, the people simply lost their money, often the majority of their livelihood. If a thief stole from a bank or a ‘run’ on the bank occurred out of fear, those episodes could cause a bank to have to close its doors.[2] No runs on a bank occurred after World War I until 1930, but a combination of the crash and fear caused many banking crisis closers across the country.[3]
The cascading effect led to lost jobs and unemployment rising exponentially over a brief period. Many monetary policies had to be implemented from 1933 through 1937 to allow stability and rapid growth in the economy.[4] The Gross National Product numbers are striking during the time from 1929-1938. From the time of the crash in 1929 until 1933, the recovery from initial losses in the GNP was around 35 percent, and from 1933-1937 they rose 33 percent.[5] A GNP dip occurred in 1938 of 5 percent and then took a massive jump of 49 percent in 1938-1942.[6] All of these numbers look impressive in a short decade. Still, it took that level of rapid growth to regain so much fiscal ground. GNP lost in 1929 with the initial crash and snowball activity across all industries as a consequence of such rapid financial challenges all at once.
Securities, stocks, bonds, and bank loans went through every financial institution until it impacted every aspect of the United States. The Great Depression had many lessons to teach us, but in reviewing current standing in many of the institutions that were very similar today to what they were then, we have not learned much. The stock market manipulators continue to do what they do. The banks continue to give unwise credit at various times and in highly creative ways to get as much profit as possible. Our nation right now stands in the middle of high personal debt statistics. Some of these same statistics caused the ‘Great Recession.’ But that is analysis for another day.
Sources:
Bernanke, Ben S. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” The American Economic Review 73, no. 3 (1983): 257–76. http://www.jstor.org/stable/1808111.
Gitlin, Martin. The Great Depression. 1st ed. Ann Arbor: Cherry Lake Publishing, 2021.
Romer, Christina D. “What Ended the Great Depression?” The Journal of Economic History 52, no. 4 (1992): 757–84. http://www.jstor.org/stable/2123226.
[1] Martin Gitlin. The Great Depression. (1st ed. Ann Arbor: Cherry Lake Publishing, 2021). 6.
[2] Ben S. Bernanke, “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” The American Economic Review (73, no. 3, 1983: 257–76). 259.
[3] Ibid., 259.
[4] Christina D Romer. “What Ended the Great Depression?” (The Journal of Economic History 52, no. 4, 1992: 757–84). 759.
[5] Ibid., 760.
[6] Ibid., 760.