The Great Depression and New Deal
The effects associated with the Great Depression were enormous across United States and the whole world. One of the greatest achievements that were facilitated by Great Depression was the New Deal and the Germany’s extremism that facilitated World War II. There are five main causes of Great Depression. Firstly, the crash of Stock market of 1929 was considered by stakeholders as the cause of Great Depression. As it occurred on a Black Tuesday—that is on 29th October—most of the stakeholders lost their investments of a total of $40 billion and above. Though the economy and the stock market later recovered from the loss, the disaster had already happened. Secondly, is the bank failures where more than 9,000 banks had uninsured bank deposits, and investors lost their hard-earned savings (Roark et al., 2011). The banks that survived were unwilling to create or issue new loans, thereby, leading to reduced expenditures.
Thirdly, purchasing power was reduced across the globe. With the crash in the stock market, most of the people across the globe were not willing to purchase shares. As such, it reduced the economic plausibility of the economy. The production capacity lessened making most of the companies to lay-off workers in a bid to reinstate its economic activities. The rate of unemployment rose to about 25%, therefore, necessitating less spending in the economy. Fourthly, the economic policy employed by European on America began to fail, as the government enhanced the creation of Smoot-Hawley tariff in an attempt to necessitate protection of American companies. The Tariff’s structure was designed to realize high amount of tax revenues from trade involving America and the foreign nations. Finally, drought conditions that were evident in Mississippi denoted that the residents of the region were not able to meet their obligations, for instance taxation and debts, thus, the government was forced to forego one of the tax revenue region.
In reacting to this crisis, President Hoover summoned business executives and declared that wage cutting was not a solution but to be optimistic on the economic trends that were in place. When the strategy proved to be unrealizable, the president became inactive and believed that the situation would correct itself. The organization of international cessation on reparations and war debts ensured that the depression was mitigated. This was followed by Reconstruction of the various Finance corporations with an aim of bringing assistance to businesses and banks; the recovery process was not realized (Roark et al., 2011). President Hoover attempted economic ideas that were conventional, and the system collapsed in the long run.
The effect of depression was sustained after period of three decades when the federal government incorporated key policies that had a positive impact on Wall Street and financial institutions. In the case of Agricultural Adjustment Act (AAA), farm production was reduced in order to raise prices of commodities. The National Industrial Recovery Act (NIRA) was implemented in order to enhance fair distribution of business practices and functions across the society. It recognized labor rights for instance wages, working hours, and preferred conditions. On the other hand, enactment of public works administration (PWA) act ensured that private industries were allowed acquire loans which they used in construction and development of public amenities such as ports sewage plants, dams, among others. Civilian Conservation Corps (CCC) enhanced relocation and provision of jobs to young men. Finally, Works progress administration (WPA) established strategies that ensured that men were offered jobs that were useful to the public. All these policies and strategies were aimed at facilitated recovery of New Deal.
Reference
Roark, J., Johnson, M., & Cohen, P. (2011). Understanding the American Promise, Volume 2: from 1865: A brief history of the United States, MA: Bedford.
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