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| The ''Great Depression'' is the period of history that followed "]", the ] crash of Thursday, ], ]. The events in the ] triggered a world-wide ], which led to ] and a great increase in ]. | The ''Great Depression'' is the period of history that followed "]", the ] crash of Thursday, ], ]. The events in the ] triggered a world-wide ], which led to ] and a great increase in ]. | ||
| Some economists argue that the depression was both caused and prolonged by government intervention in the economy, rather than by an inherent instability in the free market. One of the triggering events was certainly the implementation of the ], which raised tariffs on imports in order to protect local producers who were being hurt by foreign competition. In response, many other countries also raised their tariffs, badly hurting US businesses that exported their goods. Thus, rather than helping to lift one sector of the US economy out of its economic doldrums, the final result of Hawley-Smoot was to add yet another sector of the economy to those already suffering. | |||
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| In ] the United States elected ] to replace Hoover as president. With unemployment near twenty five percent of the workforce, he initiated a number of government programs to increase ] and provide jobs, which jointly are called the ]. Some believe that these actions helped bring the country out of the depression--though there is considerable controversy over the extent to which this is true--and provided some of the infrastructure, including ] that are still in use today. | In ] the United States elected ] to replace Hoover as president. With unemployment near twenty five percent of the workforce, he initiated a number of government programs to increase ] and provide jobs, which jointly are called the ]. Some believe that these actions helped bring the country out of the depression--though there is considerable controversy over the extent to which this is true--and provided some of the infrastructure, including ] that are still in use today. | ||
| Because the US was still in a state of depression when it entered ], it is hard to make a serious argument that the ] was a success. The reasons, however are open to debate. Some argue that the inherent instability of a market economy caused such a bad depression that even the well-chosen interventions of the New Deal could not correct it quickly. Others argue that because this longest depression in US history was also marked by the greatest degree of government intervention in US history, it is more reasonable to argue that government action worsened, rather than lessed, the severity of the depression. | |||
| It is known that ] New Deal programs were initially struck down by the ], so that his initial interventions in the economy were all halted. During this time the economy was on a slow improving trend. After the Court began to uphold his interventionist legislation, the economy took a sharp downward dip, which has been called a depression within a depression, from which it was only slowly recovering when the US entered WWII. Thus it is claimed that his intervention delayed the economic recovery that had been underway. This argument is supported by the fact that his programs significantly increased business costs and uncertainty about future government interventions, thus inhibiting business investment and hiring. | |||
Revision as of 17:58, 16 January 2002
The Great Depression is the period of history that followed "Black Thursday", the stock market crash of Thursday, October 24, 1929. The events in the United States triggered a world-wide depression, which led to deflation and a great increase in unemployment.
Some economists argue that the depression was both caused and prolonged by government intervention in the economy, rather than by an inherent instability in the free market. One of the triggering events was certainly the implementation of the Hawley-Smoot Tariff Act, which raised tariffs on imports in order to protect local producers who were being hurt by foreign competition. In response, many other countries also raised their tariffs, badly hurting US businesses that exported their goods. Thus, rather than helping to lift one sector of the US economy out of its economic doldrums, the final result of Hawley-Smoot was to add yet another sector of the economy to those already suffering.
In the United States, Herbert Hoover was president, and he tried to do something about the situation without much luck. One of the major problems was that with deflation, the currency that you kept in your pocket could buy more goods as the prices went down. The other was that there had been no oversight in the stock market or other investments, and with the collapse, many of the stock and investment schemes were found to be either insolvent, or outright frauds. Unfortunately, many banks had invested in these schemes, and this precipitated a collapse of the banking system in 1932. With the banking system in shambles, and people holding on to whatever currency that they had, there was minimal cash available for any activities that would cause positive change.
In Germany and some other countries, the governments printed more money to avoid this situation, but it actually made the situation worse, as the currency was then being spent on scarce goods, and prices increased exponentially, creating a situation now called hyperinflation. Promising to fix the situation, Adolf Hitler took over the government there. The situation was similar in Italy, where Musolini took charge.
In 1933 the United States elected Franklin Delano Roosevelt to replace Hoover as president. With unemployment near twenty five percent of the workforce, he initiated a number of government programs to increase liquidity and provide jobs, which jointly are called the New Deal. Some believe that these actions helped bring the country out of the depression--though there is considerable controversy over the extent to which this is true--and provided some of the infrastructure, including roads that are still in use today.
Because the US was still in a state of depression when it entered World War II, it is hard to make a serious argument that the New Deal was a success. The reasons, however are open to debate. Some argue that the inherent instability of a market economy caused such a bad depression that even the well-chosen interventions of the New Deal could not correct it quickly. Others argue that because this longest depression in US history was also marked by the greatest degree of government intervention in US history, it is more reasonable to argue that government action worsened, rather than lessed, the severity of the depression.
It is known that Roosevelt's New Deal programs were initially struck down by the Supreme Court, so that his initial interventions in the economy were all halted. During this time the economy was on a slow improving trend. After the Court began to uphold his interventionist legislation, the economy took a sharp downward dip, which has been called a depression within a depression, from which it was only slowly recovering when the US entered WWII. Thus it is claimed that his intervention delayed the economic recovery that had been underway. This argument is supported by the fact that his programs significantly increased business costs and uncertainty about future government interventions, thus inhibiting business investment and hiring.
The great depression was an extended economic contraction that affected the entire world, and in some places it continued until government-induced World War II spending restarted economic expansion.
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