The Great Depression
The Great Depression
The economic depression that be-fell the United States and other countries in the 1930s was unique in its strength and its consequences. At the depth of the depression, in 1933, one American worker in every four was out of a job. In other countries unemployment ranged between 15 percent and 25 percent of the labor force. The great industrial slump continued throughout the 1930s, shaking the foundations of Western capitalism and the society based upon it. Aspects of the economy President Calvin Coolidge had mentioned during the long prosperity of the 1920s. He said "The business of America is business." Despite the seeming business prosperity of the 1920s, however, there were serious economic weak spots, a major one being a depression in the agricultural sector. Others facing depression and problems were such industries as coal mining, railroads, and textiles.
Throughout the 1920s, U. S. banks had failed--an average of 600 per year--as had thousands of other business firms. By 1928 the construction boom was over. The spectacular rise in prices on the Stock Market from 1924 to 1929 shared little relation to actual economic conditions. In fact, the boom in the stock market and in real estate, along with the expansion in credit (created, in part, by low-paid workers buying on credit) and high profits for a few industries, concealed basic problems. Thus the U. S. stock market crash that occurred in October 1929, with huge losses, was not the actual cause of the Great Depression, although the crash began the most traumatic economic period of modern times. By 1930, the depression was most apparent, but few people expected it to continue. Previous financial panics and depressions had reversed in a year or two and thus most people thought that this was just part of the ups and downs of the business cycle. The usual forces of economic expansion had vanished, however.
Technology had eliminated more industrial jobs than it had created; the supply of goods continued to exceed demand; the world market system was basically unsound. The high tariffs of the Smoot-Hawley Act (1930) exacerbated the downturn. As business failures increased and unemployment soared--and as people with dwindling incomes nonetheless had to pay their creditors--it was apparent that the United States was in the grip of economic breakdown. Most European countries were hit even harder, because they had not yet fully recovered from the ravages...