Historical Encyclopedia
The Great Depression, which began in 1929 and lasted for nearly a decade, was the most severe economic crisis in the history of the United States. This period was characterized by mass unemployment, declining incomes, bank and industrial failures, inflicting tremendous damage on the American economy and society. The reasons for the crisis were complex and included both internal economic problems and global instability.
The Great Depression was triggered by a number of factors, among which the stock market crash in October 1929 was the main catalyst. In the preceding years, economic growth in the U.S. was accompanied by speculative investments in the stock market. The rise in stock prices created an illusion of prosperity, and many Americans invested their savings in stocks. When the market collapsed, it led to the bankruptcy of millions of investors and the destruction of trust in the economy.
The crisis was also caused by income inequality, a reduction in industrial production, and weak banking systems. Agriculture suffered from an oversupply of products and falling prices, depriving farmers of income. International economic instability, stemming from the aftermath of World War I, and trade barriers like the Smoot-Hawley Act, which led to reduced foreign trade, also had significant impacts.
The main blow to the economy came on October 24, 1929, known as "Black Thursday." On this day, stocks on the stock market plummeted sharply, triggering mass panic among investors. People began to sell stocks frantically, leading to further price collapse. Within a few days, the market lost about 30% of its value, and millions of Americans lost their savings.
The crash in the stock market devastated the banking sector, as banks had invested client funds in stocks. Many banks failed, and millions of depositors lost their savings, leading to mass unemployment and an intensification of the economic crisis.
The Great Depression led to mass unemployment: by 1933, around 25% of the workforce was unemployed, which amounted to about 13 million people. People lost their jobs and homes, and were forced to live in shanties and tent cities, known as "Hoovervilles," named after President Herbert Hoover, who failed to address the crisis. Many Americans lived in extreme poverty, suffering from hunger and a lack of medical care.
The decline in living standards affected almost all strata of society. Businesses closed, farmers lost their land, and urban residents found themselves on the brink of survival. The Great Depression also took a toll on people's mental health: many experienced depression and hopelessness.
Herbert Hoover, the President of the United States at the beginning of the Great Depression, adhered to principles of non-intervention by the state in the economy and did not take active measures to improve the situation. He believed that the market would recover on its own and placed the responsibility for exiting the crisis on the private sector and charity. Nonetheless, Hoover's efforts proved ineffective, and the economy continued to worsen.
Eventually, Hoover began to take certain steps to stabilize the situation, such as creating the Reconstruction Finance Corporation, which provided loans to banks and businesses. However, these measures were too delayed and failed to make a substantial impact, leading many Americans to blame him for his inability to cope with the crisis.
In 1933, Franklin Delano Roosevelt was elected President of the United States and proposed a program of economic reforms known as the "New Deal." The main goal of the New Deal was to restore the economy, combat unemployment, and prevent future crises. Roosevelt actively supported government intervention in the economy, which marked a significant departure from previous principles.
Under the New Deal, new agencies were created, such as the National Industrial Recovery Administration, which controlled production and prices, and the Public Works Administration, which focused on building infrastructure like roads and bridges. Assistance programs for the poor and unemployed also became a critical part of the New Deal, and the Social Security Act of 1935 provided pensions for the elderly.
Roosevelt understood that strengthening the banking system was essential for economic recovery. One of the first steps taken by the president was the declaration of a "bank holiday" – a temporary closure of all banks to assess their financial status. This helped restore trust in banks and prevent further bankruptcies.
In 1933, the Banking Reform Act was passed, establishing the Federal Deposit Insurance Corporation (FDIC) to protect citizens' deposits. This law helped to restore confidence in banks and prevent mass withdrawals of deposits in the future.
The New Deal helped stabilize the economy and reduce unemployment; however, its success was limited. The U.S. economy began to recover, but the unemployment rate remained high, and many New Deal measures did not lead to long-term improvements. Some critics argue that Roosevelt’s programs hampered economic recovery instead of facilitating it due to government intervention.
At the same time, the New Deal laid the foundation for the modern welfare state, and many of its programs became permanent fixtures of the American social system. In particular, the Social Security Act and labor rights protections became significant achievements that provided support to citizens in times of crisis.
The Great Depression ended with the onset of World War II when the U.S. began actively preparing for military actions. The production of military equipment and armaments created new jobs, leading to the complete disappearance of unemployment. U.S. industry experienced an unprecedented boom, and economic growth became possible due to involvement in the war.
Thus, the Great Depression concluded not so much because of the New Deal but as a result of global economic changes brought on by the war. Nevertheless, the lessons of this period left a deep mark on American society and influenced the economic policy of the U.S.
The Great Depression was one of the most difficult periods in U.S. history, affecting virtually all aspects of American life. This crisis changed the approach to the economy and led to the emergence of government social support programs, which influenced the country's further development. The experience of the Great Depression served as a reminder of the importance of a stable and balanced economy, as well as the need for government support in difficult times.