Students of Economics may be well aware of the concept of the economic
business cycle. This is a cycle of events that affects all industrial
nations (and even all sorts of industries for that matter), and it
happens as a direct result of the fluctuations in the economy of the
country or the industry. On a nation wide basis, this period of
depression results in large rates of Great Depression unemployment,
low productivity, low national income, and a general lowering of the
standard of living of the people of the country. A boom period, or a
period of expansion, is always followed by a period of recession or
contraction, and a depression is nothing other than a very severe form
of economic recession.
To answer the question When was the Great Depression we need to
understand that this is an effect that surfaced in the year 1929 and
carried on till the 1930's and even the 1940's in some countries. There
were many factors and events before the Great Depression itself that
ultimately led to its surfacing. The Great Depression originated in the
United States with the fall in stock prices around September 4, and on
October 29, 1929 the entire stock market crashed. This day is till today
also known as 'Black Tuesday'.
The result of this stock market
crash reverberated around all major cities in the world, and the
nations dependent on heavy industries were the worst hit. Unemployment
rate in the US alone rose up to 25%, and in some countries it even went
as high as 33%.
When was the Great Depression Started
Many people agree that the stock market crash was the cause of the Great
Depression, but there are many economists who claim that this was
merely a symptom of the Depression, and not a cause in itself. One would
require detailed economic understanding to get to the bottom of this
Depression entirely, but it is widely attributed to two factors - the
ineptitude and weakening of the US Federal Reserve, and Britain's choice
to return to the Gold Standard at the rates that were prevalent before World War I.
The truth is that when you operate in a free market where the forces of
demand and supply are allowed to operate as they will, there are bound
to be certain time when the economy on a whole will fall. The inability
of the central bank to prevent this from occurring only compounds the
problem further. Even today, economists still debate if the Depression
was a result of the free forces of demand and supply in the market, or
if it was because the Reserve Bank failed to take adequate measures to
control the money supply in the economy. There are three main schools of
thought that attempt to answer the question When was the Great Depression in the US.
Keynesian Thoughts: These people believe that lowered
aggregate spending in the time led to the downturn, and the Government
did not take adequate measures to correct this. It is well known that
the Government must suffer a fiscal deficit to correct this problem, but
Franklin Roosevelt did not carry this out completely. Moreover, the
drop in international trade due to the Smoot-Hawley Tariff Act in June
1930 also led to the Depression spreading to other countries since the
US was a major exporter at the time. Even the factor of deflation that
came into play meant that demand was subsequently lowered as people
spent lesser on buying goods and services. Also see this Great Depression Timeline.
Monetarist Thoughts: This school believes that the cause for
the Depression was a crisis in the banking system, poor management by
the Federal Reserve and the monetary contraction that occurred as a
result. This inactivity by the Federal Reserve led to a fall in the
money supply by one third, and this could have been countered if the
Federal Reserve had carried out emergency lending and the buying of
Government bonds, both of which are methods to increase liquidity and
the money supply in the economy.
New Classical Thoughts: This school claims that the fall
occurred because of lowered productivity, and this led to a further
decline in labor force and capital stock as well. They claim that the
intervention of the Government, which happened after the crash, was too
little too late and it further strengthened the Depression rather than
countering it. To understand more about 'When was the Great Depression'
all these three schools of thought need to be given equal amounts of
attention and study.
You may like to learn more about what caused the Great Depression and also about life during the Great Depression.
The Great Depression Facts
Here are some more facts about the Great Depression
that you may or may not have come across before. No matter how bad the
consequences were at the time, the Great Depression is something that
taught the world about the worst that could happen with their economies,
and this has prepared them to better handle such disasters in the
future.
On Black Tuesday the stock market fell by 12%, which was
preceded and succeeded by many other falls. On this day alone, the
Government lost $16 billion of the overall $30 billion loss.
In 1932, around 40% of the US banks had failed.
US unemployment reached a 25.2% high in 1933.
The average American family income dropped by 40% between 1929 and 1932.
1939, when World War II started, is the answer to 'When was the Great Depression over'.
People who lost their homes lived in Hoovervilles, named after
Herbert Hoover, who was the President till Roosevelt took over in 1933.
Nearly 50% of children were afflicted during this period.
A lot of Americans turned to a life of crime at this time.
The Empire State Building and the Golden Gate Bridge were constructed at this time, and provided jobs to many people.
All the facts in this article about 'When was the Great Depression' changed the nature of not just the US economy,
but the world's economy as well. This was a truly testing time for many
families, and there were many people who suffered irreversible losses.
Though time has healed most wounds, the memories of these dark times
still remains fresh in the mind.
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