The Great Depression in America :: essays research papers

  Ã‚  Ã‚  Ã‚  Ã‚  The Great Depression of 1929-33 was the most severe economic crisis of modern times. Millions of people lost their jobs, and many farmers and businesses were bankrupted. Industrialized nations and those supplying primary products which were all affected in one way or another. In Germany the United States industrial output fell by about 50 per cent, and between 25 and 33 per cent of the industrial labor force was unemployed. The Depression was eventually to cause a complete turn-around in economic theory and government policy. In the 1920s governments and business people largely believed, as they had since the 19th century, that prosperity resulted from the least possible government intervention in the domestic economy, from open international relations with little trade discrimination, and from currencies that were fixed in value and readily convertible. Few people would continue to believe this in the 1930s.The Great Depression was an economic slump in North America, It was the longest and most severe depression ever experienced by the industrialized Western world. Though the U.S. economy had gone into depression six months earlier, the Great Depression may be said to have begun with a catastrophic collapse of stock-market prices on the New York Stock Exchange in October 1929. During the next three years of the U.S. government stock continue to fall, until by late 1932 they had dropped to only about 20 percent of their value in 1929. Besides ruining many thousands of individual investors, this precipitous decline in the value of assets greatly strained banks and other financial institutions, particularly those holding stocks in their portfolios. Many banks were consequently forced into insolvency; by 1933, 11,000 of the United States' 25,000 banks had failed. Many people thought that it was the governments fault for bringing this together. It also became clear that there had been serious over-production in agriculture, leading to falling prices and a rising debt among farmers. The Depression spread rapidly around the world because the responses made by governments were flawed. When faced with falling export earnings they overreacted and severely increased tariffs on imports, thus further reducing trade. Moreover, since deflation was the only policy supported by economic theory at the time, the initial response of every government was to cut their spending. As a result consumer demand fell even further.