What was the Great Depression, and what effects did it have?

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ophelious's profile pic

ophelious | High School Teacher | (Level 1) Educator

Posted on

This is a big question, and like a lot of big questions it is fairly complex in terms of giving an answer.  I am going to guess that you are interested in a general overview, and because you posted it originally in the "literature" category that the question is related to a book you are reading and therefore you don't need to know all the gory details but just the greatest hits.

The "Great Depression" (as it is now known) generally started in 1929.  It is known as "great" not because it was awesome but because it was so big.  Indeed, it affected many parts of the world in negative ways and lasted up until World War II.

To make a long story manageable, the "Great Depression" was a period of economic history where productivity went down, markets collapsed, and unemployment skyrocketed.  It is similar to what America has been experiencing for the last few years, but on a much more horrible scale (that's why ours is simply the "Great Recession.")

There are different explanations as to why the economy tanked at the end of the 1920's.  At the heart of it was a big drop in the money supply caused by both people and governmental policy.  There was a stock market "crash" in 1929 (known as Black Friday) that wiped out the fortunes of many people, a good number of whom had borrowed the money that they'd used to invest in the first place.  Within a year the market had begun to reverse itself, but people were still wary of spending money and chose to keep it or pay off debt.

The problem with this (as you hear people talking about even in our situation now) was that people spent less money and so there was a drop in demand for products. When demand goes down, you don't need as many workers to make things so you lay them off.  Those laid off people don't spend money, so demand goes down more.  It becomes a terrible cycle. Prices drop, a phenomenon known as deflation, and though it sounds like a good thing it really depresses everybody.  Wages go down, property values go down, and profits go down.

The government made things worse at the time, at least initially.  This is another one that ties in with today.  Conventional wisdom is that when the economy starts to slow and "deflate" the government should step in and spend money like a shot of adrenaline to a misfiring heart.  During the Great Depression, though, the government didn't do this.

Added to this was an awful drought known as "The Dust Bowl" (people back then liked to think of clever names, didn't they?)  This destroyed a great deal of farmland and left many farmers broke and homeless.  Unfortunately, there were no jobs in the city available and they mostly slipped into grueling poverty.

As for consequences, imagine this: You buy a house for $10,000.  You make $1 an hour.  Because of deflation, your house is now worth $7,000 and you make .60 an hour.  Sill, you are paying on the original $10,000 you borrowed.  You are worse off, even though things have gotten cheaper.

So there you have it.  Depression caused by a collapse of the monetary system coupled with supply and demand problems.  The result was poverty, unemployment, and misery.  There's more to it, but that's the gist in a nutshell.

 

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

The Great Depression had tremendous impacts on the United States (I am limiting my answer to domestic affairs in the US).  Some of those impacts were felt in the short term and some have become more apparent in the long term.  Let us look at some of the most important impacts.

In the short term, the Great Depression was tremendously harmful to the US economy and society.  Economically, the Depression put an estimated 25% to 33% of Americans out of work.  Many of those who kept their jobs saw their wages and/or their hours drop.  America’s GDP dropped dramatically and would not recover to pre-Depression levels until WWII began.  This economic misery harmed society as well.  For example, fewer people got married and fewer of those who were married had children.  This was because people were too uncertain about their futures to make such commitments.  This is just one example of the ways in which the Depression put stress on people and disrupted their lives.

In the long term, the Great Depression fundamentally changed the relationship between the US government and the people.  Before the Depression, the government was relatively hands-off.  With the Depression, however, came President Franklin Roosevelt’s “New Deal,” which involved the government in many aspects of American life.  All of a sudden, Americans came to expect that the government would help keep the economy growing and would try to make sure that people had a certain standard of living.  For example, it was only after the Depression that the government started to do things like providing Social Security to retired Americans and insuring bank deposits so that Americans would not lose their savings if their banks went broke.  Ever since the Great Depression, the US government has gotten more and more involved in American life.  This is, perhaps, the greatest impact or effect of the Depression.

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element-water's profile pic

element-water | Student, Grade 6 | (Level 1) Salutatorian

Posted on

The first post was very detailed in explaining about the Great Depression and its causes.

The Great Depression was a worldwide economic depression which occured during the decade preceding World War II. It was a time of extreme hardship for people in Australia. It lasted from about 1929 to 1932. For numerous amounts of people, this period began before the market crash in prices and laster until the Second Word War.

The Great Depression may have been caused by:
- A fall in export prices and sales
- A fall in overseas loans leading to a reduction in government capital spending.
- A fall in residential construction

The impact and consequences of the Great Depression on the citizens was devastating. Without work or a job, the income of many people were dropping resulting in homeless people. These people were forced to live in makeshift homes and poor conditions and sanitation.

 

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