Why the Great Depression Occurred

Introduction As observed by Romer (2003), â€Å"the great depression took place in the late 1920s to the late 1930s and was the longest and most severe depression ever experienced in the industrialized Western world† (p 1). The world wide economic downturn that originated from the United States was characterized by massive decline in output, widespread unemployment, and acute deflation in most economies across the globe (Romer, 2003).Advertising We will write a custom research paper sample on Why the Great Depression Occurred – a Public Budgeting Stand Point specifically for you for only $16.05 $11/page Learn More However, the timing and magnitude significantly varied in various regions across the world with some parts of the world such as United States being adversely affected while other regions were mildly hit. In the United States, the great depression set off in 1929 and continued until early 1933 where it was set on a road to recovery but these efforts unfortunately failed and the American economy was highly characterized by drastic falls in prices and real output (Romer, 2003). In addition, the industrial production of the country’s economy fell by 47% while the real gross domestic product fell by 30% and the whole sale price declined by 33% resulting into deflation; further, the unemployment rate is believed to have exceeded 20% which negatively impacted on the purchasing power of the individuals consequently reducing aggregate demand (Romer, 2003). Poverty and despair were the main features of the great depression in American region with most people being unable to access the basic needs of food, decent clothing and shelter and relying on aid from charity organizations (Burgan, 2001). The depression was the worst to ever hit the nation and when president Franklin D. Roosevelt brought new policies and ideas to Washington, there was a link of optimism in the region but this was short lived since the depr ession worsened in 1938 and did not end until the country went into world war ll in 1941 (Burgan, 2001). Factors That Led To the Great Depression The prevailing government policies at the time highly facilitated the occurrence of depression and the failure and derailment in recovery of major economies. From 1929-1933, the American economy experienced substantial reduction in money supply from the federal reserves (Edwards, 2005). This, coupled with subsequent bank failures served to intensify monetary contraction in the economy and destabilize the economy which precipitated the occurrence of depression (Edwards, 2005). Scholars believe that substantial decline in money supply which was attributed to Federal Reserve decisions had severe contractionary effects on overall output in the economy as well aggregate demand (Romer, 2003).Advertising Looking for research paper on history? Let's see if we can help you! Get your first paper with 15% OFF Learn More This may have si gnificantly influenced people’s decisions to spend as there was widespread fear and uncertainties with consumers and business owners anticipating decreases in wages and prices in the future (Romer, 2003). To further worsen the situation, most states prohibited banks from diversifying their portfolios across jurisdictions which significantly promoted bank failures while in countries like Canada which allowed nationwide bank branching, incidences of bank failures during the period were not experienced (Edwards, 2005). Bank failures led to widespread bank panics across the American economy whereby depositors lost confidence in the solvency of banks consequently withdrawing their deposits from banks (Romer, 2003). Increased withdrawals by depositors forced banks to liquidate loans in order to raise the required money which served to increase bank failure in United States (Romer, 2003). The early 1920s was characterized by tax reductions which facilitated economic boom in the Amer ican economy during the period (Edwards, 2005). However, President Hoover signed a revenue act in 1932 which created a provision for significant tax increment in the region increasing the tax rate from 25% to 63% while President Roosevelt further increased individual and corporate taxes with the highest individual rate increasing to 79% (Edwards, 2005). The tax increment killed the laborers’ incentives for work as well as investment and entrepreneurship consequently reducing the amount of spending which intensified the effects of depression and frustrated the efforts of recovery (Edwards, 2005). In addition, the Smoot-Hawley trade act which had been established to boost farm incomes by reducing foreign competition in agricultural production in America may have played a significant role in reducing world trade during the period of depression (Edwards, 2005). The trade act had raised import tariffs to an average of 59% on more than twenty five thousand products which prompted o ther countries to retaliate by imposing increased restrictions on United States’ products consequently reducing trade such that by 1933 the overall international trade had reduced by two thirds of the level prevalent before the recession (Edwards, 2005). However, some scholars believe that this policy had minimal significance in the occurrence of the depression but may have contributed to extreme decline in world price of raw materials which resulted in severe balance of payment problems for primary products exporting countries (Romer 2003). Another damaging trend that may have facilitated the occurrence of the depression was the prevalent inequality in wealth distribution whereby in 1929, the richest 24000 families in the US owned 34% of all the monetary savings in the country while an approximate 21 million families lacked any savings (Burgan, 2001).Advertising We will write a custom research paper sample on Why the Great Depression Occurred – a Public Budgeting Stand Point specifically for you for only $16.05 $11/page Learn More Consequently, only few Americans could afford to locally produce goods despite the fact that factories kept on producing goods which led to under consumption which further led to the weakening of the economy (Burgan, 2001). Conclusion The great depression caused devastating effects to major economies of the world and adversely affected international trade. Numerous measures implemented by the government proved fruitless in containing the situation and the contemporary economies should learn from this occurrence in order to avoid incidences of depression in the current dynamic economy. Reference List Burgan, M. (2001). The Great Depression. Minneapolis: Compass Point Books. Edwards, C. (2005). The Government and the Great Depression. Retrieved from https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-0508-25.pdf Romer, D. C. (2003). Great Depression. Web. This research paper on Why the Great Depression Occurred – a Public Budgeting Stand Point was written and submitted by user Arielle R. to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

To What Extent Was the Decline of the Staple Industries Essay Example

To What Extent Was the Decline of the Staple Industries Essay Example To What Extent Was the Decline of the Staple Industries Essay To What Extent Was the Decline of the Staple Industries Essay To what extent was the decline of the staple industries the most significant development affecting the people of Wales and England 1880 – 1929? The decline of the staple industries was a very significant development in people’s lives. Before the decline of the staple industries, Britain was known as the â€Å"workshop of the world† this was due to the fact that Britain producing 2/3 of the worlds coal, 50% of the worlds iron and 5/7 of all the worlds’ metal. This all changed when countries like Germany and the US used cheaper methods of extracting and producing these resources that Britain’s buyers looked else wear, the decline of these main industries caused a wave of job losses and other main industries to suffer. Britain lost its place as the most powerful empire; there were many reasons for this. Britain didn’t have the necessary raw materials needed for industrialisation; Britain’s farming industry couldn’t produce enough food to feed the growing population. The Liberal reforms were very significant in people’s lives. There were many reasons for why the liberals decided to reform Britain and these issues are highlighted in Booth and Rowntrees reports about people living below the poverty line. These reports tell us that if someone lost their job before the reforms they had to rely on their savings, family and friends, and the pawn brokers or depend on the poor laws which were the only sort of social protection they had. The government hardly ever stepped in to help people, the conservative government and member of the House of Lords all believed that if a person was poor that meant they were lazy; these reports discovered that that wasn’t the case and that in fact the majority of the poorest in society were born there. Some shocking statistics had shown that 11% of primary school children were malnourished and in 1900 the height for enlisting was reduced to 5 feet and even 50% who enlisted were in too ill health. There was a major need to reform, because working conditions needed to be improved in order to improve Britain’s employed for the future. Another significant factor that affected the people of Britain was the changing role of women in Britain. The main cause in the change to women was primarily down to world war one. The war opened up a wider range of occupations to female workers and hastened the collapse of traditional womens employment, particularly domestic service. From the 19th century to 1911, between 11 and 13 per cent of the female population in England and Wales were domestic servants. By 1931, the percentage had dropped to under eight per cent. For the middle classes, the decline of domestic servants was facilitated by the rise of domestic appliances, such as cookers, electric irons and vacuum cleaners. The popularity of labour-saving devices does not, however, explain the dramatic drop in the servant population. Middle-class women continued to clamour for servants, but working women who might previously have been enticed into service were being drawn away by alternative employment opening up to satisfy the demands of war. The number of women in the Civil Service increased from 33,000 in 1911 to 102,000 by 1921. The advantages of these alternative employments over domestic service were obvious: wages were higher, conditions better, and independence enhanced. Another reason was the general strike. The general strike was called by the TUC to support the miners in their quarrel with the mine owners, who wanted to reduce their wages by 13 per cent and increase their shifts from seven to eight hours. Workers in industries such as iron, steel and coal were encouraged to stay off work. The strike affected people across the country because these industries were at a standstill this caused the rest of the country to suffer. To conclude, I think that there were many significant factors that affected the British people and the declined of the staple industries was one of them. However, i think that the most significant factor was the war, as this affected all sexes and age groups across the country and no one was left unscathed by it.