The economic crisis of the 1930s, known as the Great Depression, is one of the worst economic collapses in history that began in the United States on October 24, 1929, but whose effects were felt strongly in the 1930s.
Black Tuesday: The Beginning of the Great Depression
There is no single cause of the Great Depression. However, the Great War set the stage for this economic collapse. The United States became an economic superpower because the war spending of the Entente powers depended on the loans they received from the United States, and interest in U.S.-made goods increased globally. Like a “world bank”, the U.S. lent money to the U.K. and France. All in all, a series of financial decisions is thought to have led to the Great Depression.
In the 1920s, U.S. citizens migrated from rural areas to cities in the hope of a better life. Between 1921 and 1929, many bought stocks for the first time. Some invested their life savings, while others borrowed money to buy stocks. By 1929, however, the unemployment rate had risen, the agricultural sector had suffered from drought and a drop in crop prices, and the people were living in debt. Stock prices, on the other hand, were above their true value.
On October 28, 1929, on the day known as “Black Monday”, the Dow Jones Industrial Average (DJUA) fell almost 13%. Due to the panic, 16 million stocks changed hands on “Black Tuesday”. By the summer of 1932, DJIA closed at 41.22, its worst close in the 20th century.
Black Tuesday is seen as the starting point of the Great Depression and in the 4 years since then, 9,000 banks went bankrupt. During the Great Depression, which was felt until the Second World War, production took a huge hit due to the sudden loss of money, companies went bankrupt, people struggled to survive with unemployment and hunger.
In 1933, when the Great Depression that marked the 20th century was felt most acutely, 24.9% of the total labor force in the United States was unemployed. Despite the fall in prices, people could not afford basic needs or even healthcare, and children began to look for ways to earn money to contribute to household income instead of going to school. In order to survive under these conditions, people grew their own food and met their daily needs by bartering.
During the Great Depression, Herbert Hoover was President of the United States, and citizens saw him as responsible for the nightmare they were in. Thus, in the next election, Franklin D. Roosevelt was elected president with 57% of the vote. With the reforms called the “New Deal”, the U.S. entered the recovery process. The new laws were intended to provide financial assistance to the poor, eliminate unemployment, and take measures against future economic crises.
The impact of the Great Depression devastated living standards of people and was felt all around the world. Its greatest impact was the poverty of the masses, especially in the industrialized countries. Worldwide production and trade were hit hard. Relations between self-interested countries were severely damaged and trade came to a halt. Although prices fell (deflation), the masses had no money left to spend. However, with the effect of the Great Depression in the 1930s, more importance was given to the regulation of financial markets not only in the United States but also all over the world.
The Great Depression, which lasted for nearly 10 years, was an economic disaster that deeply affected the lives of a generation and whose causes should be understood and worked on to prevent it from happening again.