The Great Depression: A Severe Worldwide Economic Depression

1. Introduction

The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. The timing of the Great Depression varied across nations; in most countries it started in 1929 and lasted until the late-1930s. It was the longest, deepest, and most widespread depression of the 20th century. In the 21st century, the Great Depression is commonly used as an example of how far the world’s economy can decline.

The effects of the Great Depression were devastating. Unprecedented levels of unemployment, poverty, and homelessness afflicted millions of Americans. Families were forced to move in with relatives or into crowded urban slums. Many people attempted to find work by hitchhiking or riding trains from one city to another. Children often had to drop out of school to help support their families. Farmers were particularly hard hit; prices for farm products fell sharply, and many farmers lost their land to foreclosure.

2. The First Phase of the Depression: 1929-1933

The first phase of the Great Depression began with the stock market crash on October 29, 1929, known as Black Tuesday. Over the next three years, stock prices continued to fall and banks began to fail. Businesses closed their doors, and millions of workers lost their jobs. By 1933, when Franklin D. Roosevelt became president, the unemployment rate had reached 25 percent—the highest in American history up to that time—and nearly one-third of the nation’s banks had failed.

3. The Second Phase of the Depression: 1933-1937

In March 1933, Roosevelt declared a “bank holiday”—closing all U.S. banks for four days in order to prevent runs (when depositors attempt to withdraw all their money at once). Congress then passed a series of New Deal laws designed to stabilize the economy and provide relief for those in need. One of these laws created the Federal Deposit Insurance Corporation (FDIC), which guaranteed bank deposits up to $5,000—a move that restored public confidence in the banking system and helped stem the tide of bank failures.

New Deal programs also helped farmers by paying them not to grow crops and by providing loans to help them keep their farms afloat. And the Works Progress Administration (WPA) put millions of unemployed Americans to work on thousands of public works projects—building roads, bridges, schools, and parks across the country. In 1935, Congress created the Social Security system to provide economic security for seniors and other vulnerable groups.

4. The Third Phase of the Depression: 1937-1941

The third phase of the Great Depression began in 1937 and lasted until 1941. It was characterized by a sharp increase in unemployment—which rose from 14 percent in 1937 to 19 percent in 1938—as well as a decrease in industrial production and personal income. This phase was caused in part by a series of bad economic decisions made by President Roosevelt and his advisers.

First, Roosevelt tried to balance the budget by cutting back on government spending—including on New Deal programs that were helping millions of Americans weather the economic storm. Second, he raised taxes—including taxes on businesses, which led to a decrease in investment and hiring. Finally, Roosevelt tightened monetary policy by ordering more gold to be bought with American dollars—which made it more difficult for other countries to do business with the United States and led to a decline in international trade.

These policies helped contribute to a sharp economic downturn in 1937 and 1938, which was only exacerbated by a series of natural disasters—including floods, droughts, and hurricanes—that struck various parts of the country. By 1939, the unemployment rate had once again reached double digits, and the economy had yet to fully recover.

5. Conclusion

The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s. It was the longest, deepest, and most widespread depression of the 20th century. The effects of the Great Depression were devastating. Unprecedented levels of unemployment, poverty, and homelessness afflicted millions of Americans. Families were forced to move in with relatives or into crowded urban slums. Many people attempted to find work by hitchhiking or riding trains from one city to another. Children often had to drop out of school to help support their families. Farmers were particularly hard hit; prices for farm products fell sharply, and many farmers lost their land to foreclosure.

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