The World’s Longest and Worst Economic Collapse, The Great Depression in The United States, Lasted From 1929 To 1940

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The Great Depression

William R. Beaman

University of Phoenix



The Great Depression

The world's longest and worst economic collapse, The Great Depression in the United States, lasted from 1929 to 1940. A brief discussion of causes is included. Some of the Federal government's responses and policies are examined. This paper will discuss the impact of the Great Depression upon American society.


Historians and economists have offered many opinions about the cause of the Great Depression. There is likely not any specific reason, but a combination of several factors:

Advances in technology and the modernization of industry had created the capacity to produce vast quantities of goods, greatly exceeding demand.

The American economy was not diversified; wealth was concentrated in the construction and automobile industries. Newer industries, such as petroleum and chemicals, were insufficiently developed to compensate when the basic industries declined.

Distribution of wealth: During the 1920s workers provided increases in productivity yet received a small portion of the wealth, the rich grew wealthier.

"Maldistribution of purchasing power ... As industrial and agricultural production increased, the proportion of the profits going to farmers, workers and other potential consumers was too small to create an adequate market for the goods" (Brinkley, 2007, p. 688).

The country's credit structure: Farmers were deeply in deep, yet food prices were too low to allow repayment on loans. Many large banks invested irresponsibly in the stock market, inducing losses greater than could be absorbed.

Foreign debt: European countries could not repay loans incurred during World War I. The weakening American economy during the late 1920s served to make repayment more difficult. American tariffs prevented sales of foreign goods, cutting off a means for foreign debtors to repay loans.

Government actions

The stock market crash of 1929 decreased the value of common stock by roughly 40%. Banks failed, factories shut down, and businesses closed. Unemployment increased to 25% or more by 1932. President Herbert Hoover and his administration took actions that in all likelihood worked to deepen, or at least had no significant effect in reversing the Great Depression. After initially moving to increase public works spending, Hoover, wanting to maintain a balanced Federal budget, decreased spending and increased taxes. This action removed money from the economy. Hoover's unpopularity across the country led to an easy victory for Franklin Roosevelt in the Presidential election of 1932.

Roosevelt quickly moved to create programs to stimulate the economy and create jobs. Some of the programs passed as part of Roosevelt's "New Deal":

On March 9, 1933, Congress passed the Emergency Banking Act, allowing inspection of banks. This act intended to reestablish American's faith in the banking industry.

The Glass-Steagall Act set more rigorous regulations for banks and created the Federal Deposit Insurance Corporation (FDIC). A federally-backed corporation that would provide stability and reassurance to the public.

Securities Exchange Act of 1934: "Empowered the Securities and Exchange Commission with broad authority over all aspects of the securities industry. This includes the power to register, regulate, and oversee brokerage firms, transfer agents, and clearing agencies as well as the nation's securities self regulatory organizations" (United States Security and Exchange Commission, 2009).

Federal Housing Administration (FHA): Provides mortgage insurance on loans made by FHA-approved lenders.

Federal Emergency Relief Administration (FERA): Funds were provided to states that directed money to local relief agencies.

The Civilian Conservation Corps (CCC) "The CCC's mission was two-fold: to reduce unemployment, especially among young men; and to preserve the nation's natural resources" (Oregon State Archives, 2010).

Tennessee Valley Authority (TVA): Was established in 1933 to assist in the development of the Tennessee River and nearby areas.

The "Second New Deal", another round of legislation, began in 1935.

The National Labor Relations Act: Also known as the Wagner Act, which set the framework for union representation for most private sector employees.

Fair Labor Standards Act of 1938 (FLSA): "The federal legislation that established overtime wage requirements and defined specific exempt occupations" (University of Texas, 2010).

Probably the most enduring effort to come from Roosevelt's New Deal is the Social Security Act, providing old-age pensions, survivor benefits for victims of industrial accidents, aid for the blind, physically disabled, and dependent mothers and children.

Effects of the Great Depression

The philosophy of the United States included the idea that America was the land of opportunity. The system rewarded men for hard work and entrepreneurship. Individuals without jobs were seen as at fault for their condition. As society expected men to provide for family, the psychological trauma of the Great Depression was often more severe for men than women. "… [T]he helplessness of unemployment was a challenge to traditional motions of masculinity" (Brinkley, 2007, p. 672).

A change in African American voting: Previously most African American voted for Republicans. "By 1936, more than 90% … were voting Democratic, the beginning of a political alliance that would endure for decades" (Brinkley, 2007, p. 710).

Roosevelt appointed American's first female cabinet member: Secretary of Labor Frances Perkins. A female network of lower level federal bureaucrats was created because of Roosevelt's appointment of more than 100 women to federal positions.

New groups, agricultural and union emerged to challenge corporations for power in the United States.

New Federal regulations stabilized the banking system and stock market.

By the start of World War II, the Federal government had overshadowed the importance of State or local governments.

Roosevelt established a higher level of Presidential power and decreased the power of Congress.


The New Deal created the beginnings of a Federal welfare state. Although, conservative and small by today's standards, the groundwork was laid for relief programs and Social Security. Following the Great Depression American workers came to believe that protections were needed "from the unpredictability and instability of the modern economy ..." (Brinkley, 2007, p. 715). The Great Depression left a permanent mark on the United States; a greater role for the federal government and a conviction that the free market should be regulated to avoid another economic disaster.



Brinkley, A. (2007). American History: A Survey (12th ed.). New York: McGraw-Hill.

Oregon State Archives (2010). The Civilian Conservation Corps: Protecting Oregon's Resources. Retrieved January 25, 2010, from (2010). The Federal Deposit Insurance Corporation. Retrieved January 25, 2010, from

United States Security and Exchange Commission (2009, November 4). The Laws That Govern the Securities Industry. Retrieved January 25, 2010, from

University of Texas (2010). Glossary of Terms. Retrieved January 25, 2010, from