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Analyze the causes of the Great Depression and describe the methods used to remedy it. The Great Depression, which plagued the U. S. from 1929 to 1939, was truly a product of World War I. All throughout the war the American economy had been booming and expanding.
We had been supplying all the countries involved with the war with anything and everything they needed, be it food, clothing or arms. We didn? t care who they were or whom they were fighting for or against as long as we were taking in money. Everyone had been making money and pouring it into farms, factories, and equipment. The demand was at a level it had never come close to before and we were more than willing to meet this demand with supply.
Americans quickly got used to being employed, having money, and a high standard of living. When the war ended, society continued on this path. Unfortunately, the demand for our supplies was gone. We didn? t know what to do. Between 1929 and 1933 world output of goods fell by an estimated 38 % because the demand was gone.
As the demand died down, farms were overproducing, factories were overproducing, and this was leading to prices dropping. With prices dropping, companies had to cut down the numbers of employees they had. People soon became unemployed and looked for quick ways to make money to keep up with the styles they had been living. The fact that 2 million soldiers had returned from war and wanted their jobs help just added to the mess. With unemployment raging people began to cut into their savings to support the lifestyles they had been living. These lifestyles and the using up of their savings gave us what we refer to today as the roaring 20?
s. This could only last so long before savings were depleted. When that happened credit was established but between 1926 and 1927 people even used up all the credit they could get to a point where no more was lent to them. People stopped buying products even pushing companies even farther towards poverty. Demand continued to fall within our own nation and again prices dropped, supply dropped, and unemployment rose. One place that people looked to make money in the midst of this was the stock market.
Many people already had money in the stock market already on the farms, equipment and factories that had been in such great demand during the war. The value of these investments dropped along with the demand and because of the faulty systems within the stock market. People poured money into the stocks even while they dropped without understanding what was going on. According to the book, investments in the factories, farms, and equipment dropped in value from $ 3. 5 billion in 1925 to $ 3. 2 billion in 1929. At the same time, value of the shares traded grew from $ 27 billion to $ 87 billion. There was serious imbalance between real investment and stock market speculation.
It crashed in 1929. Some effects of this depression were mass unemployment, social problems such as a drop in birthrates, many suicides, and poverty across the nation. The Great Depression wasn? t something that could in any way be immediately fixed.
Franklin Delano Roosevelt who took over the presidency after Herbert Hoover realized this. He realized that much had to be done. He organized the? New Deal?
to help America escape from its terrible economic state. He realized tht he had to reform capitalism in order to preserve it. The measures of the New Deal included the government taking a part in the economy like it never had before. The government began to put controls on production to raise prices again. The government organized many new agencies to provide employment for Americans. The government left the gold standard and reduced the value of the dollar.
The government organized the National Recovery Administration, which reduced competition and fixed prices and wages while sponsoring public works projects. Regulations were placed on every industry through this. There was the Works Progress Administration, the National Labor Relations Act, the the Agricultural Adjustment Act, and others. Throughout all of Roosevelt?
s efforts, the New Deal never did really pull the United States out of the depression. He did wonderful things but escaping depression was not possible with the state the economy was in. Fortunately, with World War II demand for what we had rose again. Only then did America really escape the depression. The New Deal had helped out and best of all, the New Deal prepared the United States for the future. Now we were able to balance things properly and if not for the New Deal, there is a good chance we may have slipped into another depression after the second war.
With Roosevelt? s efforts though we had a whole new set of circumstances and a much stronger government to protect us then and even still now.
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