About the Depression Years

Small businesses bore the brunt of the Great Depression.

Viewed from eight decades of hindsight, the Great Depression remains a vivid example of economic calamity at its darkest level. To this day, historians use the Depression as a model for debating the role of market forces versus government intervention in correcting such calamities.

History

Declining stock values are generally blamed for igniting the Depression during October 1929, when the market imploded completely on what is now called "Black Tuesday." Three years later, stocks fell to 20 percent of their value, which left many of their owners defenseless against market forces.

Time Frame

Banks with major stock portfolios were the next institutions to crumble. By 1932, 11,000 of the nation's 25,000 banks failed, further aggravating the downward spiral of lower spending and production. Twelve million to 15 million people remained jobless, accounting for roughly 25 percent of the work force, according to www.english.illinois.edu. (See Reference 1)

Effects

Alarmed by what they saw as overeager federal intervention, a group of prominent millionaires plotted a military coup against President Franklin D. Roosevelt. The plot failed when the chosen military leader, General Smedley Butler, informed Congress.

Responses

Undaunted by criticisms of his approach, Roosevelt continually prodded Congress to pass reforms like the Securities and Exchange Commission's creation in 1934. The commission became the primary regulator of sellers of stocks and bonds.

Considerations

Recovery took on mixed dimensions during the late 1930s. Gross National Product continually rose, but so did unemployment, which increased from 14.3 percent in 1937 to 19 percent in 1938. This trend is often blamed on Roosevelt's spending cuts and his unwillingness to agree to heavy deficit spending recommended by economists like John Maynard Keynes, www.huppi.com/kangaroo/Timeline.htm indicated. (See Reference 2)

Significance

Pre-wartime spending boosted Great Britain's economic fortunes.

The onset of World War II changed the economic picture substantially. As the world geared up for new hostilities in 1939, Great Britain and Germany were deemed in recovery from the Depression because of heavy deficit spending in preparation for the war. The United States also began to emerge from the Depression as it borrowed and spent $1 billion on pre-wartime expenses, according to www.huppi.com/kangaroo/Timeline.htm. (See Reference 2)

References

• About The Great Depression
• Timelines Of The Great Depression

Resources

• FDR's Policies Prolonged Depression By 7 Years, UCLA Economists Calculate
• Five Myths About The Great Depression
• Learn About The Great Depression