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How did the 1929 stock market crash and depression change the US economy and affect American citizens?

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It would not be an exaggeration to say that the stock market crash of October 29, 1929 and the Great Depression that followed changed almost everything about American life.

The crash wiped out huge amounts of wealth and led to a global economic crisis. In the US, half the banks closed for good, wiping out peoples' savings. Not only did people lose their nest eggs but unemployment skyrocketed, and at the Depression's peak nearly 30% of the workforce was unemployed.

At this time, the prevailing idea was that the federal government's primary role was to provide for the national defense; the nation's government had almost no role in social welfare. This meant that, when the economy collapsed, people had no safety net. There was no deposit insurance, which guaranteed that money that was put in a bank would be replaced in case of a failure; there was no unemployment insurance; there was no minimum wage, which became a problem when desperate people were competing for very few jobs; and there were no food stamps. Many peoples' homes were foreclosed when they couldn't make their mortgage payments after losing their jobs and their savings. In 1932, as many as one thousand homes were being foreclosed daily.

People settled in tent villages, which were called "Hoovervilles"—after President Hoover, who was perceived as not doing enough to address the crisis. Hoover did take steps to provide assistance, but this approach was limited. He did not wish to interfere in the economic process of the free markets—or the "invisible hand"—believing they would eventually right themselves. However, when this strategy proved to yield few results, he was voted out of office.

Franklin Roosevelt's promise of a New Deal for the American people appealed strongly to a population who had experienced firsthand the "old deal," which relied solely on free markets and private charity to solve economic problems. With the New Deal, the federal government assumed a role of responsibility beyond national defense for the first time. It reinterpreted the role of government to include the provision of physical and economic welfare for its citizens. It was reasoned that, in a democracy, the people are the foundation of the government, and the government should therefore work in the people's interest. It was believed that bringing prosperity back to the people would not only revitalize business but the entire economy.

While many of the programs the New Deal enacted do not seem revolutionary by modern standards, at the time they were considered a radical change as a result of the Great Depression. The New Deal changed life for all US citizens and subsequent generations.

For example, with the New Deal, Roosevelt created government work programs to provide employment and to pump money back into the economy, as private industry had failed to do so. In the 1930s, creating government jobs to prop up the economy was a radical idea. Furthermore, under FDR's administration, Congress passed the National Housing Act of 1934; the federal government made home mortgages more affordable, helping to revitalize the housing and construction markets. Congress also passed the Social Security Act of 1935, which not only provided a system for accumulating a retirement income, but also established programs for unemployment insurance, financial help for the handicapped, and aid to widowed mothers with dependent children. Additionally, the Fair Labor Standards Act of 1938 established a minimum wage and curtailed child labor. On the banking front, since self regulation had failed, Congress passed the Glass-Steagall Act, which separated investment and commercial banking and curtailed investors from taking careless risks with peoples' money.

While the Great Depression would last until the huge government investment in World War II revitalized the economy, the groundwork that the New Deal laid in federal welfare programs had a lasting impact on American citizens. By concerning itself with the social welfare of its citizens and actively setting up an economic safety net, a large majority of US citizens were able to prosper after World War II.

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