The Great Depression affected almost every country in the world. It enabled Adolf Hitler to rise to power in Germany and do many of the horrible things he did while running Nazi Germany. Some people say that the depression was one of the sparks of the World War.
The economy began to break down and did so for quite a long time. From 1930 to 1933 the prices of industrial stocks fell 80 percent. Large sums of money were lost by banks and individuals who invested in stock. Between those four years, 9000 banks failed thus wiping out the savings of millions of people. The widespread failure of the banks made it harder for industrialists to get loans. This lack in money caused a dramatic decrease in production quality and quantity. This drop in production led to a drop in employment. The total value of Unites States goods dropped from $104 billion to $56 billion in only 3 years.
Foreign trade also took a violent blow. Which is obvious because the United States couldn’t even provide for itself much less the rest of the world. Many tariffs were placed on imports and exports. Most significant was the Smoot-Hawley Tariff Act of 1930 which increased the number of tariffs greatly. Thinking the law would reduce the price on goods, President Hoover signed it. In reality the act made tariffs rise so high, foreign countries raised tariffs on U.S. goods as well.
Back in Washington, Hoover had ideas of his own. He believed that if business was left alone then it would work itself out if not interfered with. Hoover stated that local governments should give to the needy in hopes of helping them get back on their feet. This idea looked good on paper but when it came down to it the local government didn’t have the money to pay the needy. This caused problems in the government. However in 1932, congress passed the Reconstruction Finance Corporation which was Hoover’s most successful anti-depression strategy. The RFC was able to provide some relief to by lending money to the necessary things that were needed to break the nation of the depression. The RFC lent money to banks, railroads, and other large industrial powers. However, the American public didn’t feel that Hoover did enough to help the depression.
Rising unemployment, falling incomes, increasingly underutilized capacity, the drop in primary-product prices and the collapse of international trade combined to depress the international economy.
Some citizens were lucky enough to find themselves working in Depression proof jobs such as the cigarette and shoe manufacturing industries (Kennedy, p....
But critics of that view contend that increase inequality of income and wealth is an unlikely candidate to cause an economic decline on the order of the Great Depression.
But even with all that bungling, it is not clear that we can lay responsibility for the Great Depression at the feet of the Fed.
"Malinvestment" is a term coined by the Austrian school of economics to sum up their explanation of the causes of business cycles.
However, since the real effect of the increased tariffs was to increase prices and increase price rigidity, it is easy to see how the Act could have exacerbated the Depression.
Hall and Ferguson write:
The existence of the gold standard linked economic conditions across countries to a much greater extent than is currently the case, and it is because of this linkage that the Depression was a worldwide event.
The Great Depression was caused by a combination of factors- a natural slowdown of the business cycle, weaknesses of the 1290’s economy magnified the slowdown, the republican response failed to help, a great environmental disaster, and the collapse of the world eco...
In The Great Depression: An International Disaster of Perverse Economic Policies, Hall & Ferguson write that:
Wages grew more slowly than output per worker, which suggests that corporate profits were rising.
Roosevelt’s “New Deal” helped give the country the confidence it needed to get their feet back on the ground. But in 1940 about 15 percent of America’s working force did not have jobs. It wasn’t until 1942 when World War 2 erupted that the depression could be called over. The demand for war products opened up many jobs for the unemployed. In 1944 the unemployment rate was at only 1 percent. Some say the war was a horrible event in time, but for America it ended a depression that could have lasted for much longer.
There were some Americans who were able to keep their jobs during the depression. People with money found the cost of living during the depression to be much less than in the 20s. For example the cost of a pound of steak was 29 cents and gas was only 18 cents a gallon.
President Herbert Hoover was the unlucky man in office when the depression hit. In 1932, Franklin Roosevelt was elected to replace Hoover and made reforms that gave the government more power and helped to lessen the severity of the depression. Roosevelt handled the harsh times very well and was able to ease the pain felt not only throughout the nation but throughout the world.