The Great Depression was the worst economic downturn in US history. It began in 1929 and did not abate until the end of the 1930s.
The stock market crash of October 1929 signaled the beginning of the Great Depression. By 1933, unemployment was at 25 percent and more than 5,000 banks had gone out of business.
Although President Herbert Hoover attempted to spark growth in the economy through measures like the Reconstruction Finance Corporation, these measures did little to solve the crisis.
Franklin Roosevelt was elected president in November 1932. Inaugurated as president in March 1933, Roosevelt’s New Deal offered a new approach to the Great Depression.
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Causes behind the Great Depression
An entire decade of economic uncertainty put a lot of people under tremendous pressure to survive which also resulted in mental and emotional turmoil for many. It was a shock for all the economies around the world, especially for the American economy which was revelling through a successful period driven by a bullish stock market.
Experts and frontrunners in the market were also not able to predict any formula to get out of the ditch. The weakening stock market of America, decrease in aggregate demand, agrarian crisis across the globe, overproduction, and inefficient policy decisions together caused the worst economic distress of the 20th century. It transformed the socio-political and economic order around the world forever.
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State of agriculture before the great depression
WWI proved a boon for the American farm sector. European countries were unable to produce farm products due to their preoccupation with the war, they imported farm supplies from America. Increased demand for farm products enhanced prices. The American government encouraged farmers to produce more and passed the Federal Farm Loan Act to establish federal land banks for aiding farmers. The opportunity to expand their ability to farm more land with less labour-intensive pieces of equipment was lucrative to farmers. They took loans and bought more land and machinery to enhance their capabilities.
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Post-WWI, demand for farm products remained stable for a few years but as the European powers began getting back on their feet there was a reduction in demand for American farm products. With the enhanced capacity to produce and more farmland to be cultivated, it was difficult for American farmers to reduce production. They kept on overproducing without realizing that increased production will result in a decline in prices.
Lessons learned by the economic tragedy
Although the great depression was a period full of despair and helplessness, it taught meaningful lessons to humanity like not being careless during favourable times, differentiating between wants and needs, and being adaptable to the situation at hand. Taking risks for growth, expansion and prosperity is necessary but only informed and strategic decisions can get one through the uncertainty of the future.
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The Great Depression became a point of reference for economists and finance experts to tweak their policies and plan effectively to sail through tough times. Today when the global economy is trying to recover from the loss caused by the pandemic and is also under the threat of emerging variants and wars, the lessons learnt during the great depression again have become relevant to sustain the situation.
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The Great Depression (1929-39), The Great Depression (1929-39), The Great Depression (1929-39)