Free «The Great Depression» Essay
The Great Depression occupies a unique place in US history. This process is known as the global economic crisis that began in 1929 and lasted until 1939. In fact, the main impact of the crisis was manifested in the fast-growing US economy. During this crisis, people plunged into a state of depressive stupor, and such condition gave the name to this historical process. The Great Depression was synchronous, comprehensive process that affected all sectors of the economy. The goal of this essay is to analyze and explore the causes, consequences, and measures of The Great Depression.
From the standpoint of economic theory, the Great Depression of 1929 in the US started due to overproduction and lack of money to buy products (Rothermund 46). Since the currency was tied to gold, and the amount of the metal is limited, there was a shortage of money, and then the deficiency of effective demand for goods and services. Further, the chain began processes, which marked a sharp drop in the prices of goods, bankruptcy, unemployment, protective duties on imported goods, the decline in consumer demand and a sharp decline in living standards (Rothermund 50). According to another point of view, the Great Depression was preceded by the rapid growth of the US economy. Thus, from 1917 to 1927 the US national income increased by almost three times (Rothermund 52). The country has mastered the assembly-line production, developed a stock market, and the increased number of speculative transactions (Burg 105). Besides, the growth of production of goods demanded increasing a money supply (Burg 110). Before the start of the Great Depression, the US gold reserves increased not so fast, as the economy developed. This process led to the emergence of hidden inflation as the government prints new money under the rapid growth of the economy (Burg 125). Thus, the government undermined the security of gold dollar and expanded the budget deficit that caused the decline in labor productivity and an increase in the number of fake money (Robbins 62). After stock exchange problems, government noticed the collapse of the banking system (Robbins 65). In fact, banks tried to stop the issuance of deposits, but many of them went bankrupt. (Robbins 62). Moreover, many companies went bankrupt, and their shares had fallen in price. In first four years of the crisis, industrial production in the US fell by 46% (Robbins 70). Unemployment became a mass process, and a third of the working population of America was left without a livelihood. Besides, economists noticed the decrease in the size of the average wage that caused the protests on the streets (Gunderson 32). Only in February 1932, America has seen the first government response to the crisis (Gunderson 32). The government has lowered the discount rate from six to four percent (Gunderson 35). Hoover and his entourage tried to expand the money supply, leaving the market with large purchases of Treasury liquidity. The first measures of influence on the process of the Hoover administration were limited only to those actions. The next two years of the crisis was characterized by inaction and waiting for the return of the economic cycle to the lifting phase. The Federal Reserve knew how to cut production, but they have not issued new money (Gunderson 36). Treasury Secretary Andrew Mellon believed that the Treasury should provide the conditions for the market to restore the necessary adjustment of prices and the internal proportions independently. The government also took measures of freezing the banking system and regulatory legislation. Besides, they adopted a special law on the restoration of industry and agriculture. However, this policy was weak and did not contribute to the substantial improvement (Gunderson 36). Besides, these reforms became the basis for the successful functioning of the American society in the future.
Consequently, The Great Depression was a prolonged economic crisis in the world that began in the US in 1929. It was a crisis of over-production of many goods, which followed a period of prosperity and the rise of the US economy. In fact, the purchasing power of the population did not correspond to the number of goods. Besides, financial speculation with fictitious money undermined the economy. These processes have led to a crisis of production, mass unemployment, a decline in the stock exchange and the banking system. However, the anti-crisis policy was weak and did not produce a noticeable effect on the economy. Besides, the first social transformations during the crisis became a successful basis of the US economy in the future.