Great Depression and New Deal Programs

Mar 23, 2020
folder_opencategory: History

The Great Depression was the hardest economic period around the world in the 1930s. The period began after the United States experienced a thriving economy in the early 1920s. The Great Depression lasted until the late 1930s when the World War II outbroke. There were major causes that led to the Great Depression such as the crash in the stock market, mass unemployment, overproduction, underconsumption, and failure in the banking system (Burg, 2009). President Herbert Hoover’s strategies had been worsening the situation until President Franklin Roosevelt introduced the New Deal programs with the aim of promoting social reforms and economic recovery from the stagnation. Although the new Deal program failed to end the Great Depression, it succeeded in providing relief from economic difficulties. The paper explains the major causes of the Great Depression and five significant and long-term plans in the President Roosevelt’s New Deal programs. Finally, the paper exemplifies on the success or the failure of the New Deal in light of the Great Depression.

One of the major causes of the Great Depression was the crash in the stock market. The United States of America had witnesses the growing and the firm economy in the early 1920s. The United States economy was thriving, and there was a great sense of prosperity despite the weakening economic conditions (Robbins, 2011). However, this is arguably not the case considering the worsening economic condition such as raising unemployment and low consumer spending. As a result, the sense of prosperity was short-lived when there was a crash in the stock market which greatly contributed to the Great Depression. During the early 1920s when the economy was thriving, many people invested in buying stocks due to their increasing value. This practice was observed until September 1929 when the stock started sharply losing its value in the market. More than 13million shares changed their owners from September to October of the same year due to panic which led to the fall of the stock value by 89% (Badger, 1989). Many people decided to sell their shares but there were no buyers. This resulted in the collapse of the stock market due to the downfall of stock value and the lack of people to buy the shares.

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Moreover, many people and firms including banks lost their money on the set of the Great Depression as the stock market continued to experience the downturn. The United States banks became bankrupt due to the collapse of the stock market and inefficient system. The failure of banks system also contributed to the Great Depression. The banks had freedom to make their decisions even against the economy though there were independent organizations including government who had power to regulate the banks. The banks panicked with the set of the economic decline and decided to call their clients to return their loans before the end of the payment period. People and authority lost confidence and trust in the banking system. People were disappointed, and clients with savings made long queues for mass withdrawals rendering the banks bankrupt (Robbins, 2011). As a result, the banks` failure in making decisions and managing their customers had a negative impact on the economy which caused the Great Depression.

Another cause of the Great Depression was mass unemployment which was a result of low consumer spending (Robbins, 2011). The crash in the stock market greatly affected the living conditions and standards of Americans. It triggered a significant drop in people’s purchasing ability of goods and services. The fear of the Depression made people avoid spending their income which led to reduced consumer spending and overproduction. The reduced demand for goods and services, in turn, led to decreased demand for labor. As a result, many people lost their jobs accounting for about 25% increase in unemployment rate and 33% decline in Gross Domestic Product (GDP). This greatly affected the economy since people could not afford to purchase goods and services, which contributed to the Great Depression. Moreover, there was overproduction which was a negative effect of reduced spending. This led to production industries making loses instead of profit.

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President Roosevelt’s notable programs were the Federal Security Agency (FRA), Civil Works Administration (CWA), Civilian Conservation Corps (CCC), Public Works Administration (PWA) and the Social Security Act (SSA) (Badger, 1989). The main aim of the programs and policies were to promote social reforms and economic relief as well as recovery from the Great Depression. The CCC was established in 1933 to relieve the high rate of unemployment due to the Great Depression. It focused on creating job opportunities for American citizens. The CWA was also created in the same year to help expand job market. The FSA was devised in 1939 with the main aim of providing social security and funding education as well as administering food and drug safety. The NRA was designed to create a good relationship with the working class and business people in the United States. It aimed at providing government intervention to strengthen the hope of those involved the economy. However, these programs were canceled after being accused of violating the supreme power and being unconstitutional. Finally, the SSA was created to empower and provide income to the retiree (Badger, 1989). This was to empower the wage earning retiree so that they can afford to purchase goods and services as well as improve their living standard.

The New Deal failed to end the Great Depression although it managed to succeed in providing relief instead of recovery. The New Deal programs were successful in creating jobs and reducing the rate of unemployment. However, it did not provide enough jobs that were able to terminate the Great Depression. Moreover, there were weaknesses in some of the programs such as NRA and CWA that were closed earlier due to issues. For example, the NRA ended after being declared unconstitutional for violating supreme power. The Great Depression finished by the end of the Second World War (Romer, 1992). The gradual reduction on interest taxes, consumer spending, regulations, huge inflow of gold, and encouraging investment spending at the end of the Second World War enabled overcoming the Great Depression.

–°onclusion

In conclusion, the Great Depression between 1929 and 1939 significantly affected the economies of the western industrialized countries. An important trigger of the Great Depression in America was after the October 1929 stock market crash. This was similar in many other western nations where the crash in the stock market, mass unemployment, overproduction, under consumption, and failure in the banking system are cited as the main causes of the economic downturn. President Franklin Roosevelt introduced New Deal programs with the aim to promote social reforms and economic recovery from the Great Depression. The Federal Security Agency (FRA), Civil Works Administration (CWA), Civilian Conservation Corps (CCC), Public Works Administration (PWA) and the Social Security Act (SSA) were important programs in improving the condition. Nevertheless, the New Deal programs did not end the Great Depression but provided relief. The New Deal did not create enough jobs that were able to terminate the Great Depression. The end of the Second World War brought the end to the Great Depression through the gradual reduction on interest taxes, consumer spending, regulations, and encouraging investment spending.

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