Analysis: The Great Depression
After Robert Hoover was elected the president, people had hope in him he would revive the economy. Considering his strong managerial skills in the corporate world, he was perceived to be the best person to revive the economy (p.1002). The change started to be experienced in 1929 when most Americans became fully employed and received salaries that had never been paid before. During his first year in office, people felt the effect because the treasury secretary Andrew W. Mellon reduced tax, which made people get more money in their pockets. Hoover saw the danger and started warning investors to be more cautious. The stock market was made easy and flexible, and this allowed many people to invest in it. However, buying on margin was not to last for long before the effects could be felt. Due to a lack of regulations in the stock market, the stock price declined, although brokers could sell the stock at a lower cost to cover the loan. Although no one was concerned about it, the stock price kept rising because people were earning on better terms (White, E. N. (1990).
By 1927, the economy had signified some weaknesses. For instance, the production of steel, construction of residential and automobiles were declining. This was also similar to the rate at which the consumers were spending. Come mid-1929; there was a sharp decline in the stock market. Also, employment, industrial production and other economic activities were sharply declining, and at the same time, the stock market was still rising. By early September 1929, there was a drastic fall in the stock market. The world exchange was not spared also because it had experienced a sharp decline by mid-October the same year. The collapse of the stock market became severe and lasted long, making it referred to as the great depression (Beaudreau, B. C. (2004). The great depression was therefore caused by economic distress (p.1004). However, the collapse of the stock market never caused the great depression. But instead, it revealed that the economy of the 1920s was founded on a fragile basis. F. Scott observes that the prosperity of the 1920s was an age of plenty that was short-lived and could not last.
The collapse of the stock market also created psychological panic, which affected economic growth. In fear of losing, people swiftly withdrew their money from the stock market and banks (p.1004). This move made matters worse, and by 1932, more than 9000 banks were shut down, and the economy experienced an alarming collapse. The cause of the great depression was the factor of overproduction but less consumption. For example, manufacturing production experienced an increase of about 43%, while consumption-ability could not increase with such a rate. The impact of the great depression was global. People lost their jobs, and looting and rioting started in many parts of the world due to this economic pressure. For example, in 1932, farmers could not pay their mortgage, and sheriffs were on their necks. Due to these frustrations, they formed The Farmers Holiday Association to front their case to the government (p.1007). Also, the government policies highly contributed to the great depression. Such procedures included raising tariffs on imported goods, raising tariffs on agricultural products, among others. Hunger was looming everywhere, and school children suffered from it; many people became homeless because they could not settle their mortgages. As desperate times call for desperate actions, the rate of crime, domestic violence, begging and prostitution escalated. Life was tough for African Americans to bear, and every person struggled to survive (Elder, G. H. (2018).
In conclusion, the great depression was man-made; the poor policies made by the people in power can change the state of the world. The depression was not fostered, and the leadership was working to ensure that people had money in their pockets. However, the poor policies and the stock market’s collapse led the world to a period of reckoning. Although a country may think its problems are for its people, this thought was annulled by the great depression. This is because the impact of the collapse of America’s economy affected the whole world. In the future, countries in the world should always consider coming together to form policies that will govern the stabilization of the world economy.
Beaudreau, B. C. (2004). Mass production, the stock market crash, and the great depression: the macroeconomics of electrification (Vol. 175). iUniverse. https://books.google.com/books?hl=en&lr=&id=iiTKp8WtDkC&oi=fnd&pg=PR10&dq=Beaudreau,+B.+C.+(2004).+Mass+production,+the+stock+market+crash,+and+the+great+depression:+the+macroeconomics+of+electrification+(Vol.+175).+iUniverse&ots=ebeVO2zmVP&sig=0_jDl8djVGAv9pw268wmIF4e3VA
Elder, G. H. (2018). Children of the Great Depression: Social change in life experience. Routledge. https://www.taylorfrancis.com/books/mono/10.4324/9780429501739/children-great-depression-glen-elder
White, E. N. (1990). The stock market boom and crash of 1929 revisited. Journal of Economic Perspectives, 4(2), 67-83. https://www.aeaweb.org/articles?id=10.1257/jep.4.2.67