The Great Depression had multiple causes, and one can make the argument that the economy was not booming in all sectors before the crash in 1929. Farmers, who made up a significant portion of the economy, were going under at an alarming rate throughout the decade as farm prices abruptly...
The Great Depression had multiple causes, and one can make the argument that the economy was not booming in all sectors before the crash in 1929. Farmers, who made up a significant portion of the economy, were going under at an alarming rate throughout the decade as farm prices abruptly fell at the end of WWI. Farmers produced more in order to make their loans; however, they flooded the market and further depressed prices. Many stocks were overvalued in 1929, and businesses produced more than consumers wanted. High tariffs made American goods less attractive to war-torn Europe as well.
The Great Depression was a slow-motion crash that took four years to fully bottom out with unemployment being around twenty-five percent in 1933. This figure does not count underemployment, which would make the final loss of consumer purchasing power even worse. The stores could still get food; however, many people could not afford it without some kind of assistance. Credit dried up as well, making it harder to buy a house.
The COVID-19 pandemic downturn happened rather suddenly—most businesses affected were doing quite well in February 2020, only to be told to shut down due to national or state orders in order to prevent the spread of the virus in March. Laying off millions of workers hurt the purchasing power of groups of people who were living paycheck to paycheck. This led to the downturn of several stocks. Some investment gurus claimed that this was a market correction, since stocks had been doing very well for most of the previous decade. Businesses that employ essential workers, such as grocery stores, are recording record profits—this is in contrast with the Great Depression, when most businesses did poorly. Any supply shortages during the COVID-19 pandemic can be blamed on a supply chain that was not meant to handle extreme spikes in demand, such as the demand for toilet paper that happened in late March. Most stores are doing better in maintaining stocks, though there are some shortages in toiletries.
The federal government has more power to prevent a nationwide depression than it did in 1929. Unlike the Great Depression, the US government has lowered interest rates in order to stimulate spending and lending. The government has also sent out stimulus checks to help laid-off workers, and it has increased the amount given for unemployment. The government has also looked for ways to provide small businesses with money in order to keep them afloat while they undergo this shutdown.
The main difference between the two economic slowdowns are that the Great Depression was caused mainly by market panic and problems throughout the economic sector, while the COVID-19 slowdown is caused by federal- and state-mandated business closures that are meant to limit the spread of a disease. At this point, it is difficult to forecast the final ending of the COVID-19 downturn, but at least the government has more options for limiting the disaster than it did in 1929.