1. Background of the Great Depression
2. Economic Impact of the Great Depression
i. Failure of the stock market
ii. “Small scale farmers disadvantaged”
iii. Business and industry failure
vi. Human suffering
vii. Increase of government’s economy regulation
viii. Growth of macroeconomic strategies
ix. Homelessness, discrimination and racism
xi. Creation of dust bowls
xii. Illness and starvation
3. Overview of Stock Market Crash
4. How people bought products on margin
5. How trouble came up
6. Causes of the Great Depression
i. World-wide and domestic factors
6. Summary of the effects of Great Depression
8. Works Cited
The Great Depression
The great depression is an immense tragedy that took millions of people in the United States from work. It marked the beginning of involvement from the government to the country’s economy and also the society as a whole. After almost a decade of prosperity and optimism, the US was now exposed to a period of despair. The day when this happened is referred to as Black Tuesday, and it is the day when the stock market crashed. That was the official date when the Great Depression started. The stock market prices crashed to an extent that there was no hope for them to rise again. A long period of panic struck, and there was darkness in terms of stock market prices. Many people tried as they could to sell their stock, but, unfortunately, no one was ready to buy. The stock market that had for long been viewed as a path to wealth and richness was now a sure path to bankruptcy (Martin 106).
Economic Impact of the Great Depression
Failure of the stock market. The stock market was not the only one that was affected; actually, that was just but the beginning of the Great Depression. In effect, it was unfavorable for the clients whose money was already in the markets for investment: many banks had done that and that meant a huge loss to the clients. It was also a double loss in that though the clients lost their money, the banks were forced to close down. This is because they directly depended on the stock market. When this happened, it caused much panic even to other people, and this is what made them go to the other banks that were open to withdraw their money. This kind of massive withdrawal had a major effect in that it caused the banks to close too. What is more, it was a disadvantage to those who did not withdraw their money because of not reaching the bank on time. After the banks closed, people went bankrupt and could not claim anything whosoever.
Business and industry failure. Industries and businesses were highly affected too. This is because they were also working hand in hand with the stock market. Since the stock market had closed down, this meant that their savings and capital were lost. This affected the labor in the businesses since they had to cut on the number of workers who worked in the corresponding companies. Employees’ wages were also affected because any business could not pay them again as required. The stock market issue also affected the customers in that they stopped buying and spending on luxurious goods. This influenced greatly the companies that produced these commodities in terms of sales and also getting profit. The companies too had to close down (Martin 98).
Farmers. The Great Depression affected the farmers in a very adverse way. Though they always survived other depressions that they encountered, this one was a big challenge to them. Most of the farmers were situated at the Great Plains before the Great Depression took place. The territory was affected so badly by drought and dust storms which were horrendous in nature. They created a situation that was referred to as the Dust Bowl. The farmers were used to overgrazing, and now this had to combine with the effects of drought leading to a blow to the farmers. The latter were even left without food and crops for their animals. This is because the grass that the animals could feed on had already dried up and disappeared in the long run. The loose dirt was picked by the whirled wind, and topsoil got exposed. The farmers were left without crops as the wind picked up everything on its way (Martin 200).
Small scale farmers disadvantaged. Small scale farmers were more disadvantaged than the large scale farmers. They turned out to have a small piece of land on which they had to get their daily bread. Some of these farmers asked for tractors from their respective governments, and thus, they were made to pay some amount to cater for those. The hit that the farmers went through could not enable them to pay their debts. They could also not make it to feed their families, not mentioning themselves. Some of the farmers had also capitalized on the stock market and bank. Since the stock market was affected, and as a result, the banks too, the farmers suffered as well. Losing their investments and crops influenced greatly the way they related with each other and had an impact on their contribution to the economy of the land. The country lost a lot of laborers and this led to the deterioration of the country’s economy.
Unemployment. Many people lost their jobs during this time of the Great Depression. Having lost their jobs, it was very difficult for people to bring food on the table. Families were even forced to sell their houses and move to apartments. Others were made to move in together since the standard of living was going down day by day. Paying rent was now a very hard thing to achieve. It was even complicated for people to separate or divorce. This was the time when the rate of separation and divorce went down. This is because everyone needed the other to contribute, especially in paying the rent. Due to ego, men who had already lost their jobs felt ashamed even to walk in the cities, and, therefore, they were forced to stay in their homes. If at all the wives and the children were working, they felt that their status was challenged. Even in this situation, the two categories aforementioned were forced to go looking for jobs. This time, women were even accused of taking the man’s place after getting a job.
As a matter of fact, it was hard to get jobs locally because every part of the country had been affected. Many people were seen on the roads looking for jobs. Many people could not afford luxurious goods like cars, and thus, very few cars were seen on the roads. A lot of the cars were on sale since maintenance costs were unaffordable. The majority of teenagers were affected as they were the people who were seen on the roads walking up and down looking to get some job (Martin 187).
Older men, women, and families at large were on the rails too. They would be seen boarding trains just to cross and see whether they could get some occupation. Every time there was a job opening, many people applied for the position and chances for employment at such. Those who could not get the job would end up living in shanty towns which were outside the town. The houses in such places were made of affordable cheap materials like newspapers, wood, mud, cardboard, and iron sheets. Farmers who could no longer afford their previous lives would be found in western California. This is because of the agricultural opportunity rumors that came from that area. It is true that there were periods of agricultural opportunities. The farmers were nicknamed as Okies and Arkies.
The Great Depression took place during the reign of President Herbert Hoover. The citizens always blamed the governing President, though he always talked about optimism. Some of the shanty towns which were far from big cities were named after him – for instance, Hoovervilles. Interestingly, newspapers used to cover people sleeping in the streets were called Hoover Blankets. What is more, even bad looking broken cars were referred to as Hoover Wagons (Martin 134).
Human suffering. The Great Depression had a huge impact in that it caused human suffering. It took a very short time, and the levels of living went down drastically. People started borrowing from each other just to survive. Unemployment increased since industries could not take employees anymore. They could not afford to pay the people what they deserved. Research shows that at least a fourth of the labor force in all the industrialized countries could not work anymore (Martin 145). The industries could not satisfy them in terms of wages. This was noticed in 1930, and the total recovery was only realized by the end of that decade.
End of international gold standard. The Great Depression is seen as a cause of international gold standard. There was no money to invest anymore, and it was evident that the interest rates went down too. There was also the introduction of floating rates, and people stopped using the fixed exchange rates. On the other hand, there was an expansion of the welfare state and labor unions in 1930. Union membership went to an extent of doubling between that year and 1940. This was a result of extreme unemployment and the National Labor Relations Act which was passed in 1935. All this led to collective bargaining. The US took an extra mile of coming up with unemployment compensation. This also included the survivors’ and old age insurance. This was incorporated in the Social Security Act the same year. Its aim was to cater for the hardships that the citizens were going through in 1930.
Increase of government’s economy regulation. The rate at which the government regulated the economy increased substantially. The focus was mostly on the financial markets. Different bodies to carry out this function were established. These included the Securities and Exchange Commission which was established in 1934. The main role of these institutions was to control and regulate stock issues in the stock market, especially with regard to the new products. The Banking Act went ahead to come up with deposit insurance, whose role was to work with the banks by prohibiting them from underwriting. Deposit insurance was not so popular in the world up to the Second World War. This time it was able to work effectively, hence achieving its mission and objectives.
Growth of macroeconomic strategies. The aim of the latter was to fight the economic upturns and downturns. As a matter of fact, different strategies were established to fight the Great Depression. An increased focus on how the government spend, tax cuts, and expansion of the monetary fund were some of the ways to fight the the phenomenon under consideration. The government was also trying to work to its best so as to fight unemployment. The banks were also working against recessions.
Homelessness, discrimination and racism. Many people had lost their jobs and it became even hard to get rent for their houses. They had to move to shanty areas which also were not very affordable. Others could not afford anything to cover their heads. This led to building the Hoovervilles. Since so many people were unemployed, there was a huge competition in the job market. Very few could get jobs, and those who did were not paid according to what they delivered. Under the circumstances, discrimination grew and African Americans could rarely get a job. Racism was an issue at that time. Americans were more aggressive as they noticed that there were shrinking opportunities to get a position. The African Americans, Asian Americans, and Hispanics were the people who suffered the most. This is because of the discrimination and racism that were going on. Again, the whites were claiming the jobs which were paying poorly, hence occupying the opportunities that these minorities had before Hoovervilles.
It is evident that in any country there are different levels of people as far as their income is concerned. Where people live is different depending on what one eats. The lifestyle generally depends on what the person earns…
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The Great Depression
Though most Americans are aware of the Great Depression of 1929, which may well
be "the most serious problem facing our free enterprise economic system,"(
) few know of the many Americans who lost their homes, life savings and
jobs. This paper briefly states the causes of the depression and summarizes the
vast problems Americans faced during the eleven years of its span. This paper
primarily focuses on what life was like for farmers during the time of the
Depression, as portrayed in John Steinbeck's The Grapes of Wrath, and tells what
the government did to end the Depression.
In the 1920's, after World War 1, danger signals were apparent that a great
Depression was coming. A major cause of the Depression was that the pay of
workers did not increase at all. Because of this, they couldn't afford
manufactured goods. While the factories were still manufacturing goods,
Americans weren't able to afford them and the factories made no money (Drewry
and O'connor 559).
Another major cause related to farmers. Farmers weren't doing to well because
they were producing more crops and farm products than could be sold at high
prices. Therefore, they made a very small profit. This insufficient profit
wouldn't allow the farmers to purchase new machinery and because of this they
couldn't produce goods quick enough (Drewry and O'connor 559).
A new plan was created called the installment plan. This plan was established
because many Americans didn't have enough money to buy goods and services that
were needed or wanted. The installment plan stated that people could buy
products on credit and make monthly payments. The one major problem with this
idea was that people soon found out that they couldn't afford to make the
monthly payment(Drewry and O'connor 559).
In 1929 the stock market crashed. Many Americans purchased stocks because they
were certain of the economy. People started selling their stocks at a fast
pace; over sixteen million stocks were sold! Numerous stock prices dropped to
fraction of their value. Banks lost money from the stock market and from
Americans who couldn't pay back loans. Many factories lost money and went out
of business because of this great tragedy (Drewry and O'connor
By the 1930's, thirteen million workers lost their jobs which is 25 percent of
all workers. The blacks and unskilled workers were always the first to be fired.
Farmers had no money and weren't capable of paying their mortgages. Americans
traveled throughout the country looking for a place to work to support
themselves and their family (Drewry and O'connor 560-561). John Steinbeck, born
in 1902, grew up during the Depression near the fertile Salinas Valley and wrote
many books of fiction based on his background and experiences during that time
and area of the country. One of his great works would be the Grapes of Wrath In
this book, Steinbeck describes the farmers plight during the Great Depression
and drought. When the rains failed to come, the grass began to disappear. As the
farmers watched their plants turn brown and the dirt slowly turn to dust they
began to fear what was to come. In the water-cut gullies the earth dusted down
in dry little streams. As the sharp sun struck day after day, the leaves of the
young corn became less stiff and erect; then it was June and the sun shone more
fiercely. The brown lines on the corn leaves widened and moved in on the
central ribs. The weeds frayed and edged back toward their roots. The air was
thin and the sky more pale; and every day the earth paled. (qtd. Steinbeck 2-3).
The farmers worst fears were realized when their corn and other crops began to
die. The dust became so bad they had to cover their mouths with handkerchiefs
so they could breath (Steinbeck 3- When the drought hit the Great Plains and
the soil turned to dust, many farmers moved to California because they could no
longer farm their land(Drewry and O'Connor 561). The drought began to affect
other parts of the country. In 1930, Virginia's belt of fertile land dried up.
Ponds, streams, and springs all dried up and the great Mississippi River water
level sank lower than ever recorded. Small farmers every-where began to feel
the drought. Their small gardens were ruined and their corn crop was cut almost
down to nothing. The hay and grass needed to feed their livestock was no longer
available. They now faced a major problem -how to feed their livestock. The
silos were rapidly emptying and the barns in many cases were empty. The farmers
were terrified that the government feed loans wouldn't be available to keep the
livestock from dying. In many cases, the Red Cross was making allowances for
feed to keep alive livestock (Meltzer 121). The small farmers of fruit trees
and vegetable plants depended on others who ran canneries to bottle and can
their produce. The people they depended upon were the same people that hired
scientists to experiment on the fruits and vegetables to come up with better
tasting and yielding produce. Thus the small farmers were dependent on these
same rich landowners for almost everything. They couldn't harvest their produce
on their own so they sold it to the rich landowners and thus made very little
money on their produce (Steinbeck 444-447). The farmers found themselves in debt
caused by the purchase of land, tools, animals and other items bought on credit.
This credit was due to the bank and when the farmers found them- selves unable
to repay the debts the bank took away everything they had - their land, homes,
animals and equipment. When the banks took over, they went in with tractors
and destroyed everything on the farms which included their homes and barns.
This is best por- trayed in Steinbeck's description of how the tractors
destroyed everything in its way. "The iron guard bit into the house corner,
crumbled the wall, and wrenched the little house from its foundation, crushed
like a bug (50).
"In the little houses the tenant people sifted their belongings and the
belongings of their father and of their grandfathers" (Steinbeck 111). This
describes how after many generations of farming on their land these people had
to gather their property and memories and then try to sell whatever they could.
The farmers were so desperate for money that they had to sell for literally
pennies.Steinbeck describes the desperate conversation of a farmer to a
persepective buyer "Well, take it-all junk-and give me five dollars. You're not
buying only junk, you're buying junked lives" (Steinbeck 112).
The desperation for work and money became so bad that they were willing to work
for as little as was offered just so they could have some sort of job and make
any amount of money. Soon it was a fight for life or death (Steinbeck). In a
desperate search for a job farmers moved themselves and their families all over
the country. As people wandered the country looking for work they were unable
to live in one place. Large numbers of homeless people led to Hoovervilles.
The farmers and their families had to build homes out of anything that they
could acquire as Steinbeck describes "The south wall was made of three sheets of
rusy corrugated iron, the east a square of moldy carpet tacked between two board,
the north wall a strip of roofing paper and a strip of tattered canvas, and the
west wall six pieces of gunny sacking"(Steinbeck 310-311). The homes were
usually near water source so they could have water to drink from, cook and wash
their clothing (Steinbeck 311).
To cut down the number of people seeking jobs or needing help, the government
decided to try to come up with some sort of relief. Among other things, they
limited immigration, returned hundreds of Mexicans living here,and sought other
methods to help the farmers. Hoover's Federal Farm Board urged farmers to plant
less so that prices would go up but there was no encouragement to do so.From
1920 to 1932 farm production did drop 6 percent but prices fell ten times as
much-by 63 percent. Farmers watched prices hit new lows-15 cents for corn, 5
cents for cotton and wool, hogs and sugar 3 cents, and beef 2.5 cents(Meltzer
123). With farm prices so low, most farmers, living under the fear of their
mortgages, knew that sooner or later they will lose everything. In 1932 the
farmers declared a holiday on selling. They picketed roads asking people to
join the. They gave away free milk to the poor and unemployed rather then let
it spoil because they refused to sell it. A thirty-day holiday on farm selling
was begun August 8 and extended indefinitely(Meltzer 125). In December 1932, 250
farmers from twenty-six states gathered together for a Farmers National Relief
Conference. They announced that they demand relief from creditors who threaten
to sweep them from their homes and land(Meltzer 126).
In May 1933, the Agricultural Ajustment Act was passed. The aim of this act was
to raise the farm prices by growing less. The farmers were paid not to use all
the land to plant crops. The money came from tax on millers, meat packers, and
other food industries. In June of that same year the Farm Credit Act was passed.
This act helped farmers get low interest loans. With this act, farmers
wouldn't lose their farms to the banks that held the mortgages. The farmers
who lost their farms already would also receive low interest loans(Drewry and
The Great Depression was the end result of World War I. It affected the rich
and poor alike, factory workers and farmers, bankers and stockbrokers. In short,
it affected everyone; no one was left untouched. But of all the people hurt,
farmers were the worst off. John Steinbeck chose to write about farmers hoping
that Americans would recognize their plight and correct the situation. The
Great Depression is known to be the worst economic disaster in U. S. history.
For this reason, the Depression caused many people to change their ideas about
the government and economy.
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