Great Depression - The Greatest Economic Recession in Modern World History.

August 05, 2018
What is the 'Great Depression'?

Economists and historians define the Great Depression as the most catastrophic economic event of the 20th century. It was certainly the greatest and longest period of economic decline in modern world history. It started with the U.S. stock market crash of 1929 lasting till the 1946 World War II.

What Caused the Great Depression?

The 1929 stock market crash created havoc in the nominal wealth; both corporate and private that sent the US economy in to the world of chaos. The unemployment got severely affected where the rate rose to 24.9% by 1933 from 3.2% in early 1929. The unemployment rate remained stagnant despite the various actions taken by the both the Herbert Hoover and Franklin Delano Roosevelt administrations. It still remained above 18.9% in 1938.  By the time the Japanese bombed Pearl Harbor in late 1941, real per capita gross domestic product (GDP) was still low and hadn’t improved.

The stock market crash doesn’t seem to be the sole reason for the decade-long economic recession. The Great Depression also do not portray about the prolonged severe depth and longetivity of this economic meltdown. There are a variety of specific events and policies contributed to the Great Depression which were responsible for its elongation during the 1930’s.

Effects of Great Depression

Unemployment continued to hunt down as millions of Americans lost their jobs.  There were 4.3 million unemployed in 1930, 8 million in 1931 and the number rose to 12 million in 1932.

These jobless Americans had no other option but filled lines waiting for bread, begged for food or sold apples on street corners. In the words of a Chicago social worker “We saw Want and Despair walking the streets, and our friends, sensible, thrifty families, reduced to poverty.”

The ordinary citizens lost their life savings as banks crashed. More than a third of the nation’s banks failed in the three years following 1929. The sight of long lines waiting in despair to reclaim their savings was not uncommon anymore.

The plight of the farmers was worsened with the fall of prices of crops. A series of dust storms known as the Dust Bowl and a deadly drought in Oklahoma, Texas and Kansas only added to their miseries. Sharecroppers, in the South, both white and black had to undergo this devastating poverty and the horrendous degradation of crops. Since racism was also a thing at that time, African Americans seemed to suffer higher levels of unemployment than the whites. This financial crisis spread like a virus from the US to parts of Europe and the world.  Hitler’s rise to the power only added fuel to the fire in the 1930s along with so many international conflicts and tensions. And of course, the continuous decline in the global economy made the period in history the worst ever.

Measures like the Reconstruction Finance Corporation which was an initiative taken by President Herbert Hoover to uplift the stagnant economy seemed to be of little value.  In November 1932, Hebert was toppled down by Franklin D. Roosevelt, winning in huge margin (57% of the vote to Hover’s 39.7%). Inaugurated as a President in March 1933, Roosevelt’s New Deal offered a new approach to the Great Depression.

Will Great Depression happen again?

There is unlikely no chance for such a disaster like this to occur again. Central banks around the world, including the Federal Reserve, have learned from their mistakes.  They have adopted good measures to manage the economy. .

Even though are no possibilities of monetary policy counteracting fiscal policy, the sizes of the U.S. national debt and the current account deficit could trigger an economic crisis anytime. It is tough to say what will happen in the future since the current U.S. debt level is unparalleled. 

Post Written by -  Adap Immanuel Teron

No comments:

Powered by Blogger.