Almost everyone knows about the global economic crisis that began in the late 1920s. And this is not surprising. The Great Depression, which lasted about ten years, shocked the whole world, especially sharply affecting the financial affairs of such great powers as the United States of America, Germany, Canada, France, and Great Britain. The economic crisis that gripped these countries has had a significant impact on politics and the economy of the whole world.
So what are the causes of the Great Depression in the US? What happened in those terrible distant years? And how did the United States get out of this situation? In this article we will try to find answers to these questions.
But before you find out what happened during the period of the Great Depression in the USA, we briefly look at the historical events of those days.
What happened before the crisis
The years of the Great Depression in the United States span a fairly long period of time. The beginning of the economic crisis in this state is considered to be October 1929. Only ten years later, the American power managed to get out of the quagmire of financial insolvency. The first four years after the start of the Great Depression in the United States are called the most disastrous economically and politically. Moreover, not only the States, but the whole world felt the severity of the financial crisis.
What happened during the Great Depression in the USA? Just seven months before the crisis began, a new president was elected in the state. They became the Republican Herbert Hoover.
The new head of state was full of strength and energy. He got Congress to endorse his idea of creating a federal farm administration. Hoover intended to carry out important reforms in the business and economy of the state entrusted to him. For example, the president wanted the changes to affect electricity distribution, the stock exchange, rail transport, and banking.
Everything seemed to be conducive to new reforms. The 1920s became a golden time for the United States. After the end of the First World War, enough time has passed to forget all the troubles and difficulties associated with participating in a military conflict. International trade revived, technological progress made itself felt. The USA confidently embarked on the path of restructuring its economy and production.
New technologies were invented, thanks to which the organization of labor was modernized, the quality improved and the number of manufactured products increased. New branches of production appeared, and ordinary people had the opportunity to get rich by participating in operations with securities on the stock exchange. All this contributed to the fact that the average American became more wealthy.
However, it was not so simple. There were many pitfalls in the process of such a sharp economic recovery. Why did the Great Depression in the USA come after a period of prosperity and confidence in the future? We will talk about the reasons for this event below.
Provocative factors
It is worth saying that it is impossible to determine the only cause of the global crisis that shook the whole world in the 1930s. This is simply not feasible, because any event is influenced by the combination of several factors at once, which differ from each other in degree of importance and significance.
What caused the global crisis? Researchers identify at least seven provoking factors that caused the Great Depression of the 30s in the United States and several other countries. We will talk more about each of them.
Overproduction
Due to the fact that the conveyor method of manufacturing products has become widely used in the United States, there are more goods than there is demand for them. Due to the lack of planning at the state level, both the production itself and the sales market for ordinary inhabitants, the demand for products decreases, which leads to a reduction in industry. And this in turn provokes the closure of many enterprises, lower wages, increased unemployment and so on.
Cash shortage in circulation
During the Great Depression in the United States, money as such was tied to a gold reserve (or gold and foreign exchange reserve) administered by the National Bank. This situation significantly limited the money supply available for cash circulation. And as production grew, new and expensive goods appeared (such as airplanes, cars, radios, and trains) that entrepreneurs and private individuals wanted to purchase.
Due to the lack of cash dollars, many switched to payment by bills, debentures or ordinary receipts, which were poorly controlled by the state at the legislative level. As a result, credit defaults became more frequent, which in turn contributed to the deterioration of the economic condition of large and small enterprises or even their complete bankruptcy. Due to the ruin of the production giants, ordinary people lost their jobs, as a result of which the demand for goods fell again.
Population growth
The years of the Great Depression in the USA were marked by incredible population growth. As life before the crisis got better, fertility increased and mortality decreased. The progress in medicine and pharmacology, as well as the relative improvement in working conditions, contributed to this.
Due to the oversupply of the population, especially young children and the elderly, a global economic crisis has occurred.
Stock bubble
According to numerous studies, it was the uncontrolled system of securities circulation that caused the global crisis. Just a couple of years before the Great Depression, stock prices soared by forty percent compared to previous years, which in turn increased the turnover of exchange trading. Instead of the usual two million shares a day, four million or more were sold.
Obsessed with the idea of easy and quick enrichment, the Americans began to invest all their savings in mighty, seemingly corporations. To sell securities more expensive, they largely infringed themselves in the hope of profit in the future. Thus, the demand for goods and products of these same corporations was rapidly falling. Moreover, in order to sell more ordinary securities to ordinary people, they energetically took loans, that is, they themselves became debtors. It is clear that such an absurd situation could not last long. And indeed, after some period of time, the exchange bubble burst loudly.
Lower demand for military orders
The period of the Great Depression in the United States began twelve years after the end of the First World War. Many researchers see a pattern in these dates. It is no secret that the United States was enriched by the active sale of military products on government orders. Since the relative period of the world has come, the number of orders has decreased, which led to a drop in gross domestic product.
Features of the political situation
Let's not forget that in the early 1920s the communist movement began to gain strength. Russia survived the revolution and became a communist country. Revolutionary ideas influenced the situation in some other states.
The American government was afraid of the spread of socialist ideas among its citizens like fire. Therefore, any strike or demonstration (not to mention the active position of the trade unions) aroused great suspicion among politicians and was considered by them as a communist threat and treason to their homeland.
Any dissatisfaction of the workers was suppressed, which led to the dissatisfaction of the middle class and the secret protest against the government. To keep the workers in check, large industrialists began to occupy state and political posts, which negatively affected not only the economic, but also the political life of the state itself and its citizens.
Customs duties
This is not to say that it was this reason, highlighted by many researchers, that provoked the onset of the Great Depression in the United States. However, we can safely say that the increase in customs duties significantly aggravated the economic situation in the country. How?
In the summer of 1930, President Hoover issued a decree that, it would seem, was supposed to protect the economy of the state. The essence of the law was that the customs tax increased by more than twenty thousand imported goods. According to Mr. Hoover, such a situation was supposed to contribute to the protection of the domestic market from imported products and increase national trade.
However, things did not go as planned. Other countries, such as Canada, Germany, and France, were deeply offended by higher prices for their exports and increased tariffs on the import of American products into their territory. It is understood that United States products are no longer in demand by foreign buyers. This, in turn, negatively affected the economy of the American power, as exports fell sharply (almost sixty percent compared to previous years). The situation was aggravated by the fact that overproduction was already observed in the country.
So, we have found out in detail the causes of the economic crisis of the 1930s. What marked the beginning of world depression? Let's find out.
Black Thursday
It was under that name that the fatal October 24th remained in the minds and hearts of millions of Americans. What happened on this seemingly unremarkable day? Before finding out, let's find out what preceded the events of Black Thursday.
As mentioned above, the so-called exchange bubble formed in the state’s economy, which did not alert the public. Due to the fact that all participants of the exchange were in debt, large metropolitan banks began to issue loans to brokers for a day, that is, demanding repayment of the debt within 24 hours. This implied that by the end of the working day the shares had to be sold at any, even the most unfavorable price, in order to return the money to the bank.
As a result, there was a panic sale of all the securities that were in the hands of investors. Nearly thirteen million shares were sold in one day. In the following days, called “Black Friday” and “Black Tuesday,” another thirty million securities were sold. It was then that small investors overtook the problem of repayment of loans. That is, huge amounts of money (according to some estimates, tens of billions) simply disappeared both from the exchange's ownership field and from state turnover.
Subsequent financial developments
It is clear that in such circumstances ordinary investors lost their hard-earned money. However, the situation was aggravated by the fact that banks that financed the purchase of shares with their loans could not repay huge debts, and therefore began to declare bankruptcy. Because of this, various enterprises stopped receiving loans and closed. And the average Americans, having lost all their means, found themselves without work.
Of course, this situation affected not only the middle and lower class. Large production concerns, as well as smaller enterprises and businessmen, became bankrupt. A wave of suicides swept through the country.
What did the government do to avoid the Great Depression? US President Hoover issued a decree to close banks. This was done in order to prevent the widespread withdrawal of cash deposits, as well as to prevent the various types of protests that the townsfolk committed under the doors of financial institutions. However, according to many economists, such a decision only exacerbated the situation. Banks closed, and the financial system of a great power simply ceased to exist.
Since the United States was a lender to many European countries, they also suffered economic decline.
Famine in the USA
The Great Depression turned into a huge misfortune for the ordinary American people. Almost half of all working enterprises closed in the country, which negatively affected the standard of living of ordinary citizens. More than half of able-bodied people lost their jobs. Those who stayed to work worked part-time or part-time, which also negatively affected their salaries.
The famine in the United States during the Great Depression became appalling. Children suffered from rickets, adults suffered from exhaustion.
People saved on everything. For example, since there was nothing to pay for travel, Americans traveled on the roofs of trains, which often led to injuries and disabilities.
Mass performances
As a result of the circumstances described above, worker strikes became more frequent. However, they could not lead to anything good, as the United States confidently slipped into the economic abyss.
Here it is worth giving an example of one of the speeches of workers who went down in history as the Detroit hunger march. Hundreds of people came to the gates of Ford's factory, from where they were inhumanly fired. Then, on the destitute and exhausted people, fire was opened by the guards of the enterprise and the police. Workers who resisted were beaten, armed policemen were also seriously injured. Five strikers were killed, dozens were subjected to severe repression.
Against the background of the events described, crime flourished. Armed gangs robbed ordinary people and the rich. Bonnie and Clyde, who went down in history, became famous for robbing financial institutions and jewelry stores. They caused the deaths of many civilians and police, but people hated the banks so much that they idealized the robbers, considering them national heroes.
What did the president do
It cannot be said that Mr. Hoover did nothing to pull the state out of the Great Depression. He took some steps in this direction, but the economic crisis was in full swing, so it was impossible to muffle it in a matter of minutes.
What good did Herbert Hoover save temporarily shut down banks and raise customs tax? First of all, he directed the money supply from the state treasury to improve the banking system and agricultural business. Railways were laid, new houses were erected, the construction of which the unemployed were actively involved. The poor and those who lost their jobs were provided with humanitarian aid in the form of free canteens (to visit which it was necessary to take places in advance), and other social programs were carried out.
Later, banks were allocated state loans to resume operations, and the production of enterprises began to be strictly regulated: restrictions were placed on output, a sales market was established, the level of wages for workers was controlled by the government itself.
Nevertheless, the anti-crisis measures proved to be ineffective, and the population hated the president for allegedly exercising his functions too late and in insufficient volume. True or not, who knows? Maybe at that time it was impossible to defeat the Great Depression so quickly. And maybe Mr. Hoover really turned out to be not too conscientious (or not too wise) the head of state.
Be that as it may, the people did not support Hoover in the 1932 presidential election. Franklin Roosevelt took his place, who managed to pull the United States out of the quagmire of the Great Depression.
The policy of the new head of state
What marked the beginning of the US exit from the Great Depression? President Roosevelt’s so-called new course has been announced.
However, experts say this program was an exact continuation of the Hoover plan, with only minor additions.
As before, the construction of municipal and administrative facilities involved the unemployed. Banks were still periodically closed. All the help was also provided to farmers. Nevertheless, significant financial reforms were carried out, implying a restriction on the right of banks to various operations with securities, and bank deposit insurance was established without fail. This law was adopted in 1933.
The following year, the confiscation of gold (bullion and coins) from the American population was carried out at the legislative level. Due to this, the state price for this precious metal has increased, which led to the violent devaluation of the dollar.
These were the measures taken by the president to get the US out of the Great Depression. Roosevelt made some improvements, although the state could only fully boost the economy in the 1940s. And then, according to experts, this was due to the appearance of military orders due to the outbreak of World War II.
What the economic crisis has led to
The consequences of the Great Depression in the USA for American citizens:
- Millions of people died of hunger, disease, and other causes. According to experts, this figure ranges from seven to twelve million.
- The number of radical political parties sharply increased.
- Nearly three million people have become homeless.
- There was a merger of enterprises in a monopoly.
- Exchange regulation was carried out.
The consequences of the Great Depression in the USA for the whole world:
- The collapse of the economy of some European powers.
- Since it became unprofitable to have trade relations with America, the sales market in other countries was expanded.
- A new currency was found to replace the dollar. She was the British pound.
- There was a financial unification of some countries of Europe and Asia.
Films about the Great Depression in the USA
The economic crisis of the 1930s was imprinted in the minds and hearts of people for a long time. The image of the Great American Depression was immortalized in dozens of films. Among them are the following:
- “Damned way.” The 2002 action movie tells of inter-clan mafia wars that took place during that terrible period.
- The Untouchables. The crime drama of 1987, which tells about the struggle of the FBI and the mafia during the years of the great crisis.
- “Bonnie and Clyde.” 1967 action movie about famous robbers.
- "Favorite". The 2003 film about how, during a period of financial instability, people were looking for an outlet, for many it turned out to be a hippodrome.
According to historians, during the period of the Great Depression, Americans actively visited movie theaters, since it was there that they were distracted from the oppressive and soul-exhausting reality. Some films of that time are still popular among moviegoers (King Kong, Gone With the Wind, and so on).