Nobody knew when it started, and no one could predict when it would stop. They didn’t even label it a depression at first. At worst, it was a recession, a brief slump, a market “correction,” or a blip on the rising wealth curve.
Only after the full scope of those heartbreaking years became clear did it become known as the Great Depression – Great because there had never been anything slightly comparable.
In retrospect, we see it as a neat decade between the Roaring Twenties and World War II, perhaps the most important ten years in American history, a watershed era that perhaps scarred and transformed the country.
However, it has been difficult for subsequent generations to grasp its devastation. The Great Depression is just over the horizon of recollection; it’s been so long.
The Great Depression started in August 1929, when the Roaring Twenties’ economic expansion ended. A succession of financial crises punctuated the contraction. A stock market crash in 1929, a series of regional banking panics in 1930 and 1931, and national and foreign financial crises from 1931 to 1933 were among these crises.
The commercial banking system collapsed in March 1933, prompting President Roosevelt to proclaim a national holiday. The global gross domestic product (GDP) dropped by an estimated 15% between 1929 and 1932. Global GDP dropped by less than 1% during the Great Recession from 2008 to 2009.
Although the Great Depression was mild in some countries, it was severe in others, most notably the United States, where at its worst in 1933, 25% of all workers and 37% of all nonfarm workers were out of employment.
Some individuals went hungry, and many others lost their farms and homes. Homeless vagrants snuck onboard freight trains that crossed the country.
The “Okies,” or dispossessed cotton farmers, packed their belongings into dilapidated Model Ts and migrated to California in the false hope that the posters about plentiful jobs were real. By 1933, industrial production declined by 50 percent, foreign trade plunged by 30 percent, and investment fell by 98 percent.
Cities worldwide were severely hit, particularly those reliant on heavy industry. Construction was practically halted in many countries. Crop prices fell by 60%, wreaking havoc on farming communities and rural regions. Faced with falling demand and few alternatives, areas reliant on primary sector sectors such as mining and logging suffered the most.
Drought continued in the agricultural heartland, companies and families defaulted on a record number of debts, and over 5,000 banks failed. Hundreds of thousands of Americans became homeless and started congregating in shanty towns known as “Hoovervilles” that sprouted up across the nation.
Recovery from the Great Depression began in most countries around the globe in 1933. In the United States, recovery started in early 1933, but the country did not return to 1929 GNP for over a decade, and the unemployment rate remained around 15% in 1940, albeit lower than the high of 25% in 1933.
Economists disagree on the driving factor behind the United States’ economic expansion that lasted for most of Roosevelt’s presidency (and the 1937 recession that interrupted it).
Most economists agree that Roosevelt’s New Deal policies either caused or accelerated the recovery, though his policies were never aggressive enough to completely pull the economy out of recession.
Some economists have also emphasized the beneficial effects that Roosevelt’s words and actions foreshadowed regarding reflation and rising nominal interest rates. The rollback of those same reflationary measures was responsible for interrupting a recession that began in late 1937.
One contributing policy that reversed reflation was the Banking Act of 1935, which effectively increased reserve requirements, causing a monetary contraction that helped to thwart the recovery. In 1938, GDP resumed its upward trajectory.
Economic historians generally agree that the Great Depression ended with World War II’s outbreak. Many economists believe that government spending on the war caused or hastened recovery from the Great Depression. Others think it played a minor role in the recovery, though it did help to reduce unemployment.
The Great Depression altered the political and fiscal landscape of the United States. It resulted in a major political realignment, forming a coalition of big-city ethnics, African Americans, organized labor, and Southern Democrats committed to the interventionist government to different degrees.
It increased the federal government’s role in American life by establishing national old-age pensions, unemployment compensation, assistance to dependent children, public housing, federally funded school lunches, insured bank depositions, the minimum wage, and stock market regulation.
It fundamentally changed labor relations, resulting in a revitalized labor movement and a national labor strategy that supported collective bargaining. It transformed the agricultural sector by instituting federal price support. Above all, it influenced Americans’ perceptions of the federal government as an agent of action and change and the ultimate guardian of public well-being.
The Depression’s memory also influenced modern economic theories. It resulted in many changes in how the government dealt with economic downturns, such as using stimulus packages, Keynesian economics, and Social Security. It also shaped contemporary American literature, resulting in renowned novels such as John Steinbeck’s The Grapes of Wrath and Of Mice and Men.
The Central Park of New York City became Hooverville, a shanty town for the newly impoverished (named for President Herbert Hoover, in office during the market crash and widely blamed for it). 1933.
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