Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 until the late 1930s, marked by significant declines in industrial output, severe unemployment, and a crisis in the banking system. This period not only reshaped the American economy but also transformed consumer behaviors, financial systems, and government intervention strategies, leading to lasting social and economic changes.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the Stock Market Crash of 1929, leading to widespread bank failures and significant job losses across various sectors.
2. Unemployment rates soared during the Great Depression, peaking at around 25% in the United States, severely impacting families and communities.
3. Consumer culture saw a drastic shift as people became more frugal; credit expansion faced scrutiny due to its role in creating unsustainable debt levels before the depression.
4. The New Deal represented a radical shift in government policy, introducing social security, labor rights, and various public works projects aimed at economic recovery.
5. Long-term consequences of the Great Depression included increased government involvement in the economy and a new understanding of the need for regulatory frameworks to prevent future financial crises.

Review Questions

• How did consumer behavior change during the Great Depression, particularly regarding credit expansion?
  • During the Great Depression, consumer behavior shifted dramatically as individuals faced economic uncertainty. Many began to prioritize saving over spending, which led to a decline in consumer demand. The expansion of credit that characterized the Roaring Twenties became viewed with skepticism; people were reluctant to take on new debt due to fear of job loss or economic instability. This shift contributed to a further decline in economic activity as businesses struggled without consumer spending.
• Discuss how Roosevelt's New Deal programs aimed to address the issues created by the Great Depression and evaluate their effectiveness.
  • Roosevelt's New Deal programs were designed to combat the devastating effects of the Great Depression through immediate relief for those suffering, recovery initiatives for economic stability, and reforms to prevent future crises. Programs such as Social Security provided safety nets for citizens, while public works projects created jobs and revitalized infrastructure. While these initiatives were effective in providing immediate relief and restoring public confidence, critics argue that they did not fully resolve unemployment or stimulate lasting economic growth until World War II.
• Evaluate the long-term economic and social consequences of the Great Depression on American society and its government.
  • The long-term consequences of the Great Depression fundamentally reshaped American society and government policies. Economically, it led to a more active role for the federal government in regulating financial markets and protecting workers' rights. Socially, it fostered a culture of resilience and frugality among Americans while also catalyzing movements for civil rights and labor rights as people sought greater security. Ultimately, this period laid the groundwork for modern welfare policies and established expectations for government intervention during economic crises.

Related terms

Stock Market Crash of 1929: A sudden dramatic decline of stock prices in the New York Stock Exchange, which triggered the Great Depression by erasing vast amounts of wealth and leading to a decrease in consumer spending.

New Deal: A series of programs and reforms introduced by President Franklin D. Roosevelt aimed at addressing the economic hardships caused by the Great Depression, focusing on relief, recovery, and reform.

Dust Bowl: A severe drought that affected the Southern Plains during the 1930s, exacerbating the economic challenges of the Great Depression and leading to mass migrations and agricultural collapse.