Causes and Effects of the Great Depression

The Great Depression was the most catastrophic event in U.S. History. It not only crippled the economy, but stunted political and social aspects of American life as well. Before the Depression, the twenties roared. The previous decade flourished after the slight recession following World War I, but overall made for a hopeful future. People celebrated the end of the war by spending money and enjoying all that life had to offer. This came to a screeching halt when the Depression hit in 1929 and would change the lives of Americans forever. There were many causes of the Great Depression with just as many effects that would change the lives of millions. The crash of the economy and the people’s reaction to it caused the extreme recession, and as a result, the individual family suffered greatly as did the economy.

There's a specialist from your university waiting to help you with that essay.
Tell us what you need to have done now!


order now

The 1930’s and early 1940’s was a dark period for the United States and left many people suffering. There were many three major economic causes that triggered the Great Depression: the stock market crash of 1929, the nationwide bank failures and a strangled European foreign policy. The biggest cause was the Stock Market Crash of 1929. October 29th, 1929, also known as Black Tuesday, has been known as the worst day in the history of the New York Stock Exchange. On Black Tuesday, 16.4 million shares worth nearly $14 billion, worth roughly $185 billion today, were lost. The stock market dropped 25% and lost another $30 billion, worth roughly $1.3 trillion today, over the next four days. The stock market reached its lowest point on November 13th, 1929. In addition to the Wall Street Crash, banks all over the country began to fail. Deposits were uninsured, so that once the bank failed, all the money in it would be lost.

Families who lost everything were faced with problems that included homelessness and poverty. Surviving banks became extremely cautious and were unwilling to hand out new loans due to the uncertainty of the bank’s future. Between 1930 and 1940, nearly 9,000 banks were shut down. Because of the bank failures, people became fearful of the current economic situation and started to change their financial habits. The spending rate dropped dramatically, therefore mass production rates dropped and eventually the workforce ceased as well.

Unemployment followed, rising to 25% at the peak of the Depression, and when people couldn’t pay off their loans and debts, their belongings were repossessed. In attempt to help protect American companies, President Herbert Hoover put the Smoot-Hawley Tariff Act in effect in June of 1930, which raised taxes on nearly twenty thousand imported products. However, his plan backfired and rather than bring in money, the tax virtually shut down foreign trade between the United States and Europe. Though many factors helped cause the Great Depression, the economic ones contributed the most.

There were also social aspects that contributed to the Great Depression, including a reduction in purchasing and the drought in the Midwest. When banks started failing and prices inflated, people got scared of what their futures held. In preparation, many stopped buying unnecessary luxuries and only spent money on the bare minimum. This decrease in purchases from the entire population slowed and eventually shut down many industries during the Great Depression.

This contributed to the ever-rising unemployment rate and forced many people into poverty. Also, the western plains were faced with the problem of the drought. Starting in the Mississippi Valley and spreading, the drought dried up the farms and all their crops, forcing many farmers to sell their farms for less than they’re worth in order to pay off taxes and debts. By the peak of the Great Depression, the dried plains were nicknamed “The Dust Bowl.” Massive dust storms blew all the nutrient-rich topsoil from the fields, leaving the over-plowed infertile dirt that was beneath it. This posed as a huge problem for farmers and resulted in many losing their farms to the dust and dirt that consumed them. The decrease in the population’s purchasing and the Midwest dust bowl contributed drastically to the Great Depression.

The most outstanding effects of the Great Depression were seen in the social aspect of American life and within the early American family. Immediately after Wall Street crashed in 1929, the unemployment rate skyrocketed, resulting in five million jobless in 1930 and eleven million jobless by the following year. Along with the increased unemployment rate, wages plummeted and workers were laid off. Laid off workers received no benefits and no source of income in order to provide for their hungry families. Due to these cuts, many people lost everything they owned. If they had an account at a bank, it was very likely that they lost all the money in it. Farmers in debt had to sell their farms for less than they were worth in order to pay their bills. Additionally, families with low incomes depended on their children to keep the family alive as well. Kids were taken out of school to work in factories and in mines for poor wages.

Nonetheless, families still lost their homes and had to take refuge elsewhere. So when this happened and they had nowhere left to go, they moved to the cities. This mass migration was one of the biggest in United States history. Cities offered employment and opportunities for those having trouble. People also moved to cities to escape the increasingly problematic Dust Bowl issue on the western plains. In cities, people could work in factories and find odd jobs to make the rent and put food on the table. Also, the repeal of prohibition majorly affected society, in both positive and negative ways. Prohibition became a gateway to illegal alcohol trafficking, which soon became very popular and common. However, after the repeal, alcohol served as a new source of income for bars, stores and restaurants. The repeal of prohibition lifted the economy.

There were both positive and negative social effects stemming from the Great Depression, however the majority were devastating and destructive. The overall status of the Great Depression was majorly influenced by its two presidents of the decade, Herbert Hoover and Franklin Delano Roosevelt. President Hoover, the 31st president of the United States, led the country from 1929 to 1933 and had to deal with the Great Depression from the very start of his presidency. Despite the disaster that consumed the country, he had a very laissez-faire approach to the situation. He believed that if the situation was let alone it would eventually fix itself without need for any intervention.

The only remotely productive task Hoover attempted was the creation of the Smoot-Hawley Act in 1930, which raised taxes on imported products. He meant to give more money to the government in order to help families and put more money into the flow of the economy, however this backfired and international trade became choked and nearly nonexistent. This tariff combined with the 1932 Revenue Act, which skyrocketed taxes and fees off the charts, is often blamed for deepening the Great Depression rather than fixing it. In the end, Hoover’s small efforts to turn the economy around were not enough and he was not elected to serve a second term as president. New president Franklin Roosevelt won the election and became the 32nd president of the United States. Unlike Hoover, Roosevelt came with a plan to pull the country out of its financial ruins. In his first hundred days in office, Roosevelt pushed fifteen major bills through congress. These bills were meant to reform every aspect of American economy including banking, deposit insurances, and welfare programs. The Federal Emergency Relief Act gave nearly $500 million to state-run welfare programs in order to get families back on their feet.

The Homeowners Loan Act allowed people to take loans and mortgages out on houses safely. The Glass-Steagall Act insured bank deposits under $5,000, and was proved instantly effective. Following these Acts, Roosevelt put his New Deal into action. The objective of the New Deal was to give help to the people who lost their jobs, homes and savings. To provide relief, Roosevelt put the Nation Recovery Administration into immediate action. The NRA set equal minimum wages, prices and competitive conditions in all industries. It also encouraged unions that planned to raise wages in order to increase the working class’ purchasing power. Additionally, the NRA cut down on farm production in order to sell their products at a higher price and make it more possible to make a living in farming.

By the end of his second term, Roosevelt had also added social security, a national relief agency, and the Works Progress Administration. The WPA employed 8.5 million people and its employees built bridges, roads, public buildings, public parks and airports for a salary of $41.57 a month. Because of this, unemployment fell by 2/3 in his first term. Undoubtedly, without Roosevelt’s plans for reform, the country would have stayed in ruins for many more years. He ultimately saved the country in his first term. The Great Depression was a time of struggles and hardships, and healing the American economy afterwards was no minor feat. Families’ lives were changed forever. During Herbert Hoover’s presidency, the outlook was bleak on the future, but President Roosevelt brought back hope. Ultimately, World War II was what really pulled the country together again. The war demanded guns, munitions, ammunitions and weapons, which created a whole new industry to keep the economy afloat. The Great Depression was one of the darkest periods in U.S. history, leaving many people and their lives in danger. But when the recession finally ended, the economy prospered for decades to come.