The Great Depression is probably one of the most misunderstood events in American history. It is routinely cited, as proof that unregulated capitalism is not the best in the world, and that only a massive welfare state, huge amounts of economic regulation, and other interventions can save capitalism from itself. The Great Depression had important consequences and was a devastating event in America, however many good policies and programs became available as a result of the great depression, some of which exist even today.
When the stock market crashed in October 1929, the nation plummeted into a major depression. An economic catastrophe of major proportions had been building for years. The worldwide demand for agricultural goods during World War I vanished after the war and rural America experienced a severe depression throughout most of the 1920s. This lead to banks foreclosing farm mortgages and by the early 1930s, thousands upon thousands of American farmers were out of business.
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The U.S. economy was superficial and shallow. Major businesses increased profits through most of the decade while wages remained low and workers were unable to buy the goods they had helped to produce. The financial and banking systems were very unregulated and a number of banks had failed during the 1920s. The construction and automotive industries, whose booming business had been made possible by the prosperity earlier in the decade, slowed. Declining sales resulted in higher rates of unemployment.
America was witnessing a breakdown of the Democratic and free enterprise system as the US fell into the worst depression in history. The economic depression that beset the United States and other countries was unique in its severity and its consequences. At the depth of the depression, in 1933-1935, one American worker in every four was out of a job. It was a time when federal and state officials were still developing work programs for the unemployed. This great industrial slump continued throughout the 1930s, shaking the foundations of Western capitalism.
When the Depression began, there was no federal relief for the unemployed or assistance for families facing starvation. Some states operated relief programs but curtailed them due to declining tax revenues. Religious and charitable organizations provided relief in many urban areas; however, in many of these organizations operating in the North as well as the South, there was a lot of discrimination and racism, which excluded African Americans from their “soup kitchens.” In communities where relief work was offered through state agencies, African Americans were given less in monthly aid than white applicants.
The reason I am referring to African Americans is that I have recently read a book that dealt mostly with the great depression and welfare programs. This book is called “There are no children here” and it is written by Alex Kotlowitz. This is not about a fictional story of hardships and struggles but rather it is a harsh reality that exists in this country, one to which we turn our backs and close our eyes daily. This book is touching only if you understand and acknowledge the facts that perpetuate poverty and welfare dependency in the United States. Although I learned a lot from this book I think that it paints a vivid picture of the United States, too vivid for some, which most people do not want to see.
The Great Depression had devastating effects on African Americans and the rest of US citizens. Tenant farmers and sharecroppers were among those hardest hit by the farm depression of the 1920s. Throughout the South, African American urban labourers had always had little job security, and when the Depression hit, they were the first to be fired. Industrial workers, who had ventured north during the Great Migration, likewise joined the ranks of the unemployed early in the Depression.
By 1934, 38 percent of African Americans were regarded as incapable of self-support in any occupation while 17 percent of whites fell in that category. Relief rolls soared throughout the nation. In 1935, Atlanta reported that 65 percent of African American workers were in need of public assistance. In Northern cities, the numbers in need of relief ranged between 25 and 40 percent of the African American work force.
Prior to the Great Depression, governments traditionally took little or no action in times of business downturn, relying instead on impersonal market forces to achieve the necessary economic correction. But market forces alone proved unable to achieve the desired recovery in the early years of the Great Depression, and this painful discovery eventually inspired some fundamental changes in the United States’ economic structure.
The New Deal describes the program of US president Franklin D. Roosevelt from 1933 to 1939 of relief, recovery, and reform. These new policies aimed to solve the economic problems created by the depression of the 1930s.
In the first two years, the New Deal was concerned mainly with relief, setting up shelters and soup kitchens to feed the millions of unemployed. However, as time progressed, the focus shifted towards recovery. The New Deal included federal action to stimulate industrial recovery, assist victims of the Depression, guarantee minimum living standards, and prevent future economic crises. Many economic, political, and social factors lead up to the New Deal. Staggering statistics, like a 25% unemployment rate, and the fact that 20% of NYC school children were underweight and malnourished, made it clear immediate action was necessary.
In order to accomplish this task, several agencies were created such as the Works Projects Administration and the Social Security Act. The WPA developed relief programs to preserve people’s skills and self-respect by providing useful work during a period of massive unemployment. From 1935 to 1943 the WPA provided approximately 8 million jobs at a cost of more than $11 billion. One of the most well known, The Social Security Act, created a system of old-age pensions and unemployment insurance, which is still around today. Social security consists of public programs to protect workers and their families from income losses associated with old age, illness, unemployment, or death.
New severe recessions however led many people to turn against New Deal policies. In addition, The United States entered World War II in December of 1941, the year generally considered to be the end of the Great Depression, causing an enormous growth in the economy as war goods were once again in great demand. No major New Deal legislation was enacted after 1938.
However, one good thing remained. The welfare programs of the Great Depression changed American values forever. As a result of the great depression, people everywhere were raised learning never to accept anything they didn’t work for. After the Great Depression, government action, whether in the form of taxation, industrial regulation, public works, social insurance, social-welfare services, or deficit spending, came to assume a principal role in ensuring economic stability in most industrial nations with market economies.
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