The Great Depression in October of 1929 - Essay Example

During the decade-long economic depression, many people lost their businesses, jobs, homes, savings and, in many cases, hope. The positive and negative effects of government programs and policies put in place during this period to try to solve the economic meltdown and alleviate the suffering of the people are still debated today.
Many dynamics factored into bringing about the Great Depression but there were two central contributing causes. The first of these was that the wealth of the nation was unevenly distributed. A middle class, as we would define it today, did not exist. The country was divided between the ‘haves and the have-nots.’

Some very few people had enormous wealth and power while a much greater number of the population consisted of those struggling to pay the bills each month. This condition established an unstable economy requiring only a small thing to send it off the tracks. This condition then combined with inflated speculations among the majority of stock market investors much like what has occurred recently in the marketplace. “The excessive speculation in the late 1920s kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the mal-distribution of wealth, caused the American economy to capsize” (Hicks, 1960 p. 110).

The effects of the Great Depression were many and widespread. Banks were not federally mandated to insure depositors at this time. Therefore when hundreds of banks suddenly failed, millions of people lost their life savings. Immediately following the bank failures, many factories were forced to close and all types and sizes of businesses dissolved leaving many workers without jobs or money in the bank. Many businesses and financial institutions failed. The businesses that stayed open were barely making enough to remain operational. The tax base fell suddenly which affected local governments, many of which could not continue to conduct some city services at a normal capacity. The price of farm products also fell sharply and the mass foreclosures of family farms soon followed causing bloody clashes between the owners and the bank representatives. Of those who were able to hold on to their farms, widespread droughts during this time forced many more away from their livelihood. By the end of 1930, more than four million were unemployed, and another four million by the next year.

State governments were in no position to do much to aid depression victims, so hard-pressed were they for revenues. The response of the federal government was, at least in the early years, too little and too late. President Herbert Hoover and his aides were convinced that prosperity was soon to come. Roosevelt repeatedly claimed he restored optimism to the American people after they had descended into misery as a result of the depression and that his New Deal policies ‘saved capitalism’ (Yantek, 2007).

The New Deal, while serving to save capitalism primarily by alterations within the government structure was complemented by programs of domestic reform, many of which survive to this day. According to many, the New Deal was successful only in creating a new economic predicament instead of bringing its touted prosperity. Read More