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 affecting the financial affairs of such great powers as the United States of America, Germany, Canada, France, Great Britain. The economic crisis that has engulfed these countries has significantly affected the politics and 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 of America manage to get out of this situation? In this article we will try to find answers to these questions.
But before we find out what happened during the Great Depression in the United States, let's take a quick look at the historical events of those days.
What happened before the crisis
The years of the Great Depression in the US cover quite a long period of time. October 1929 is considered to be the beginning of the economic crisis in this state. Only ten years later did the American power manage to emerge from the quagmire of financial insolvency. first fouryears after the start of the Great Depression in the United States are called the most disastrous economically and politically. Moreover, the severity of the financial crisis was felt not only by the States, but by the whole world.
What happened during the Great Depression in the US? Just seven months before the start of the crisis, 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 approve his idea for a federal farm board. Hoover intended to carry out important reforms in the sphere of business and the economy of the state entrusted to him. For example, the President wanted changes to be made to electricity distribution, the stock exchange, rail transport, and banking.
Everything seemed to favor new reforms. The 1920s were a golden age 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 declared itself. The United States has 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 was improved and the quantity of manufactured products was increased. New branches of production appeared, and ordinary people had the opportunity to get rich by participating in securities transactions on the stock exchange. All this contributed to thethe average American became we althier.
However, things were not so easy. There were many pitfalls in the process of such a sharp rise in the economy. Why, after a period of prosperity and confidence in the future, came the Great Depression in the United States? We will talk about the reasons for this event below.
Provoking 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 affected by a combination of several factors at once, differing from each other in degree of importance and significance.
What caused the development of the global crisis? Researchers identify at least seven provoking factors that caused the Great Depression of the 1930s in the United States and several other countries. Let's talk about each of them in more detail.
Overproduction
Due to the fact that the conveyor method of manufacturing products has become widely used in the States, there are more goods than demand for them. Due to the lack of planning at the state level, both for the production itself and for the sales market, the demand for products decreases among ordinary people, which leads to a reduction in industry. And this, in turn, provokes the closure of many enterprises, lower wages, an increase in unemployment, and so on.
Lack of cash in circulation
During the Great Depression in the US, money as such was pegged to the gold reserve (or gold reserves) held by the National Bank. Suchthe situation significantly limited the money supply available for cash circulation. And as production grew, new and high-value goods (such as airplanes, cars, radios, and trains) emerged that entrepreneurs and individuals wanted to purchase.
Due to the lack of cash dollars, many switched to payment by bills of exchange, promissory notes or ordinary receipts, which were poorly controlled by the state at the legislative level. As a result, loan 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 manufacturing giants, ordinary people lost their jobs, as a result of which the demand for goods again decreased.
Population growth
The years of the Great Depression in the United States were marked by incredible population growth. As life became better before the crisis, the birth rate increased and the death rate decreased. The progress in medicine and pharmacology, as well as the relative improvement in working conditions, also contributed to this.
Due to the overpopulation, especially young children and the elderly, there was a worldwide economic crisis.
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 forty percent over previous years, which in turnincreased the turnover of stock trading. Instead of the usual two million shares a day, four million or more were sold.
Obsessed with the idea of getting rich quick and easy, Americans began to invest all their savings in seemingly mighty corporations. In order to sell securities at a higher price, they infringed on themselves in many ways in the hope of future profits. Thus, the demand for goods and products of these same corporations was rapidly falling. Moreover, investors, in order to sell more securities to ordinary people, vigorously took out loans, that is, they themselves became debtors. It is clear that such an absurd situation could not continue for long. Indeed, after some period of time, the stock market bubble burst loudly.
Decrease in demand for military orders
The Great Depression began in the United States twelve years after the end of the First World War. Many researchers see a pattern in these dates. It's no secret that the United States has enriched itself thanks to the active sale of military products for government orders. Since a relative period of peace has come, the number of orders has decreased, which led to a fall in the gross domestic product.
Peculiarities 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 have also influenced the situation in some other states.
The American government was afraid of the spread of socialist ideas among its citizens. Therefore, any strike or demonstration (not to mention the active position of trade unions) aroused great suspicion among politicians and was viewed by them as a communist threat and treason.
Any worker grievances were suppressed, leading to middle-class dissatisfaction and undercurrents of protest against the government. To keep the workers in line, big industrialists began to occupy government and political positions, which had a negative impact not only on the economic but also on the political life of the state itself and its citizens.
Customs duties
It cannot be said that it was this reason, identified by many researchers, that provoked the start of the Great Depression in the United States. However, we can safely say that the increase in the size of the customs duty has 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 state's economy. The essence of the law was that the customs tax was increased on more than twenty thousand imported goods. According to Mr. Hoover, this situation should have helped protect 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, have been deeply offended by the increase in the price of their exports and have raised tariffs on US products imported into their territories. It is clear that the goods of the United States have ceased to be in demand among foreign buyers. It's inin turn, had a negative impact on the economy of the American power, as exports fell sharply (by almost sixty percent compared to previous years). The situation was further aggravated by the fact that overproduction was already observed in the country.
So, we found out in detail the causes of the economic crisis of the 1930s. What marked the beginning of the global depression? Let's find out.
“Black Thursday”
It was under this name that the fateful October 24 remained in the minds and hearts of millions of Americans. What happened in these seemingly unremarkable days? Before we find out, let's find out what preceded the events of Black Thursday.
As mentioned above, the so-called stock market bubble was forming 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, with a requirement to repay the debt within 24 hours. This meant that by the end of the working day, the shares had to be sold at any, even the most disadvantageous price, in order to return the money to the bank.
As a result, there was a panic sale of all the securities that investors had in their hands. Almost thirteen million shares were traded in one day. In the days that followed, known as "Black Friday" and "Black Tuesday", another thirty million securities were sold. It was then that small depositors were overtaken by the problem of repayment of loans. That is, huge sums of moneytens of billions by some estimates) simply disappeared both from the field of ownership of the exchange and from the state turnover.
Following financial developments
It is understandable that in such circumstances, ordinary savers lost their hard-earned money. However, the situation was aggravated by the fact that the 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 American, who lost all their money, found himself out of work.
Of course, this situation has not only affected the middle and lower class. Large industrial concerns, as well as smaller enterprises and businessmen, became bankrupt. A wave of suicides swept across the country.
What did the government do to avoid the Great Depression? US President Hoover issued an executive order to close banks. This was done in order to prevent the widespread withdrawal of cash deposits, as well as to prevent various kinds of protests that the inhabitants made under the doors of financial institutions. However, according to many economists, such a decision only exacerbated the situation. The banks closed and the financial system of the great power simply ceased to exist.
Because the United States was the creditor of many European countries, they also suffered an economic decline.
Famine in the US
The Great Depression was a huge misfortune for the common American people. Almost closed in the countryhalf of all operating enterprises, which had a negative impact on the standard of living of ordinary citizens. More than half of the able-bodied people have lost their jobs. Those who remained worked part-time or part-time, which also had a negative impact on their wages.
Hunger in the US during the Great Depression reached horrendous proportions. Children suffered from rickets, adults suffered from malnutrition.
People saved on everything. For example, since there was nothing to pay for the fare, Americans traveled on the roofs of trains, which often led to injuries and disabilities.
Mass demonstrations
Due to the circumstances described above, workers' strikes have become more frequent. However, they could not lead to anything good, as the United States was steadily sliding into an economic abyss.
Here it is worth giving an example of one of the performances of the workers who went down in history as the Detroit hunger march. Hundreds of people came to the gates of the Ford plant, from where they were brutally fired. Then, on the destitute and emaciated people, fire was opened by the security guards of the enterprise and the police. Workers who resisted were beaten and armed police officers were also seriously injured. Five strikers were killed, dozens were brutally repressed.
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 andjewelry stores. They caused the deaths of many civilians and policemen, but people hated banks so much that they idealized the robbers, considering them national heroes.
What the president did
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 could not be dampened in a matter of minutes.
What good did Herbert Hoover do other than temporarily close the banks and raise the customs tax? First of all, he directed the masses of money from the state treasury to improve the banking system and the agrarian business. Railways were laid, new houses were built, the construction of which was actively involved in the unemployed. The poor and those who lost their jobs were provided with humanitarian assistance in the form of free canteens (to visit which it was necessary to take seats in advance), and other social programs were carried out.
Later, state loans were allocated to banks to resume operations, and the production of enterprises became strictly regulated: restrictions were imposed on output, a sales market was established, the level of wages for workers was controlled by the government itself.
And yet, anti-crisis measures proved to be ineffective, and the population began to hate the president for allegedly carrying out his functions too late and insufficiently. Was it true or not - whoknows? Maybe at that time it was impossible to defeat the Great Depression so quickly. Or maybe Mr. Hoover really turned out to be not a very conscientious (or not too wise) head of state.
Be that as it may, the people did not support Hoover in the 1932 presidential election. His place was taken by Franklin Roosevelt, who managed to pull the United States out of the quagmire of the Great Depression.
Policy of the new head of state
What marked the beginning of the US exit from the Great Depression? The so-called New Deal of President Roosevelt was announced.
However, according to experts, this program was an exact continuation of the Hoover plan, with only minor additions.
As before, the unemployed were involved in the construction of municipal and administrative facilities. Banks continued to close periodically. All also provided assistance to farmers. Nevertheless, significant financial reforms were carried out, which implied restrictions on the right of banks to various operations carried out with securities, and bank deposit insurance was also instituted on a mandatory basis. This law was passed in 1933
The following year, gold (in bars and coins) was confiscated at the legislative level from the American population. Due to this, the state price for this precious metal increased, which led to the forced 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 thoughthe state was able to fully raise the economy only in the 1940s. And then, according to experts, this happened due to the appearance of military orders as a result of the outbreak of World War II.
What the economic crisis led to
The impact of the Great Depression in the United States on American citizens:
- Millions of people died from hunger, disease and other causes. According to experts, this figure ranges from seven to twelve million.
- The number of radical political parties has increased dramatically.
- Almost three million people became homeless.
- There was a merger of enterprises into monopolies.
- Exchange relations were regulated.
The consequences of the Great Depression in the United States for the whole world:
- The fall 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 has been found to replace the dollar. It turned out to be the British pound sterling.
- There has been a financial unification of some countries in Europe and Asia.
Movies about the Great Depression in the USA
The economic crisis of the 1930s has long been imprinted in the minds and hearts of people. The image of the Great American Depression has been immortalized in dozens of films. Among them, the following should be highlighted:
- “Cursed way”. The action movie of 2002 tells about the inter-clan mafia wars that took place during that terrible period.
- “The Untouchables”. 1987 crime drama about the fight between the FBI andmafia in the years of the great crisis.
- “Bonnie and Clyde”. 1967 action movie about famous robbers.
- “Favorite”. A 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.
As historians note, during the Great Depression, Americans actively visited cinemas, as it was there that they were distracted from the oppressive and soul-exhausting reality. Some films from that time are still popular among cinephiles (King Kong, Gone with the Wind, etc.).
