The Great Depression of 1929-1941 is considered as the worst economic depression in the history of the United States. The Great Depression was not only caused by various domestic factors, but also worldwide economic conditions. According to many researchers, some of the key factors that led to the great depression include the stock market crash in 1929, bank failures, reduced purchases across the board, United States economic policies and the 1930 drought. Also, according to a research by Nardo, the Great depression in U.S. was caused by imbalances and the underlying weaknesses that were experienced within the economy (Nardo, 2000). The occurrence of the Depression exposed these weaknesses and also exhibited the inability of financial institutions to cope up with the severe downward economic cycle during the period. Before the occurrence of the Depression, the government depended on market forces to correct the economic imbalances during business downturn. The Great depression proved that the market forces alone were unable to achieve the recovery and this brought various fundamental changes in the U.S. economic structure.
All U.S. citizens, both poor and rich, were affected by the Great Depression in one way or another. The lives of many families were changed in a dramatic way and many of them faced real hardship during the period. This paper examines the various ways in which the lives of Americans were influenced by the Great Depression.
The impact of the Great depression ranges from economic, social and psychological impacts. The economic impacts of the Great Depression are evident from human suffering during the time. In that short span of time the industrial output and the standards of living of American citizens dropped precipitously.
The Great Depression led to a great loss of employment in the United States. Many peoples in the agricultural and manufacturing sectors were rendered jobless during the Depression. According to the United States Bureau of Labor, employment level in manufacturing sector dropped by 24.3% between 1929 and1933. According to the report, there were 45.6% fewer construction jobs and 315 fewer manufacturing jobs in 1933 in comparison to 1929 (Nardo, 2000). Those who were fortunate to be employed experienced cutbacks in the number of working hours, where many of them were offered part-time employment. This was done in order to spread the scarcer work hours to all employees. The demand for goods and services had reduced considerably and thus many factories were not operating to their optimum.
According to a research by Rothermund, men were adversely affected by the unemployment than women. During the time of Great Depression the blacks were discriminated and thus the occupational shift in demand of labour was operating against them (Rothermund, 1996). Employment, basically, depended on the age, color and skill of an individual. Older men were discriminated and also, the high skilled workers were considered suitable in comparison to the low skilled workers. In many farms and factories, many workers were displaced in large numbers and thus rendered unemployed. The unemployment level was high because the United States’ economy depended on Agriculture and manufacturing during the period of Depression.
Banking sector is one the sectors that were adversely affected by the Great Depression. The Depression led to a collapse of corporate profits, where the profits dropped from $10 billion in 1929 to making a collective loss of $1.5 billion in 1932 (Rothermund, 1996). The Depression led to closure of many banks. There was an increased erosion of confidence in the banking sector by many citizens. The bank closure had many effects to citizens. One of the effects is the reduction in the supply of money. Due to reduced money in circulation in the economy, the purchasing power of many consumers was greatly reduced. In order to curb the reduction in purchases, retailers and manufacturers attempted to reduce prices their goods and services in order to entice the consumers. However, their attempt was largely in vain. Many manufacturing factories resorted to reducing the number of work force and scaling back production in order to avoid losses since they were unable to move their merchandise.
By around 1932, about 14 million workers were unemployed. Many citizens withdrew their deposits from the banks and hoarded them in cash or in form of gold. By early 1933, about 9,000 banks had already failed. By this time the public confidence on banks had deteriorated to a great extent. In addition, the number of financial intermediaries and markets had reduced to a great extent. On the other hand, there was an increase in the rates of bankruptcy which affected all classes of borrowers except the federal government.
The banks and other financial institutions were in a big crisis due to buy-now-pay-later policy. By 1929, the banks had not recovered the money they had given out on this policy and opted to increase the interest rates in order to recover. This led to an increase in the prices of various goods and services (Rothermund, 1996).
Social and Cultural Effects
During the Great Depression there were various profound cultural and social changes among the Americans. During the Great Depression there was a rapid rise in criminal activities. Due to the high unemployment levels many unemployed workers turned to criminal activities in order to earn a living. Cases of malnutrition also increased and at the same time the suicide rates increased. This was due to increased hopelessness among citizens. The unemployed women could engage in prostitution in order to put food on the table and also pay bills.
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The Great Depression also affected the demographic trend of American citizens. According to Romer and the National Bureau of Economic Research, during the Great Depression period many couples delayed their marriages. This is because it could be a burden to start and raise a family during the time. It was also observed that the rate of divorce dropped considerably low since it was too expensive to raise two families during the time. Also, for the first time in United States history, birth rates dropped to an extent of surpassing the replacement level (Romer & National Bureau of Economic Research, 1998).
The Great Depression also affected education sector where in many American universities, the number of students who were enrolled during the Depression shrunk considerably. Many schools were forced to close due to insufficient number of staffs and also due to decreased government spending on education. Due to decreased employment levels many students were forced to overstay in schools.
In addition, mass migration increased steadily during the Great Depression. Many people migrated from rural areas to urban centers in search of employment. For instance, thousands of farmers in states like Arkansas and Oklahoma left their homes and headed to the West where they thought was better. However, the condition there was worse and they could live in squalid camps and survive on unbearable wages (Rothermund, 1996).
Despite the devastating loss of wealth, crisis in financial institutions and erosion of citizens’ confidence to financial institutions, the United States did eventually recover from the Great Depression. Many efforts were put in place in order to recovery from the Depression. At the moment the U.S. financial system is operating normally with the real GDP advancing at a pace of 3%. Furthermore, employment growth rate has resumed to normal, though not up to sufficient pace. These initiatives to recovery were undertaken y the Federal Reserve. Various policies were put in place in order to prevent the economy from shrinking further. This was done by stabilization of the sickly financial system and mitigation of the burgeoning recession.