The U.S. stock market crash of 1929 initiated the Great Depression in October of 1929 though this one event was caused by external sources and was not solely responsible for the most devastating economic collapse in American history. During the decade-long depression, many lost their businesses, jobs, homes, savings, and in most cases, hope. Both the positive and negative effects of government programs and policies instituted to alleviate the economic meltdown and the suffering of the people are still debated today but most did little to help while some only exacerbate the desperate situation.
Many dynamics factored into instigating the Great Depression, but the central reasons were twofold. One was that the wealth of the nation was unevenly distributed. A middle class, as we would recognize it today, did not exist. The country was literally divided between the ‘haves, and the have nots,’ those with enormous wealth and power and those struggling to pay the bills each month. This wide gap of economic means during the ‘Roaring Twenties’ served to create an unstable economy which combined with inflated speculations among the majority of stock market investors to send the country down the financial tubes. “The excessive speculation in the late 1920s kept the stock market artificially high but eventually lead to large market crashes. These market crashes, combined with the mal-distribution of wealth, caused the American economy to capsize” (Hicks, 1960 p. 110).
State governments were in no position to do much to aid depression victims, so hard-pressed were they for revenues. The response of the federal government was, at least in the early years, too little and too late. President Herbert Hoover and his aides were convinced that prosperity was soon to come is just around the corner. Roosevelt, as he repeatedly claimed, restored optimism to the American people after they had descended into misery as a result of the depression and that his New Deal policies ‘saved capitalism’ (Yantek, 2007). The economic conditions of the time demanded that the solutions foster relations between the capitalist class and the working class, each of whom had opposing interests (Baker, 2003). The New Deal, while serving to save capitalism primarily by alterations within the government structure, internal alterations, was complemented by programs of domestic reform, many of which survive to this day. According to many, the New Deal was successful only in creating a new economic predicament instead of bringing its touted prosperity. Despite extraordinary fundamental changes and reforms brought about by the New Deal, the economy had not accomplished levels of production that were present prior to the stock market crash. The working class was very dissatisfied as their standard of living had steadily declined. The national income per person in 1938 was also much less than it was in 1929. Unemployment was escalating, and farmers faced a crisis of their own. After the failures of the New Deal, a predisposition for militarist conquests by industrialists sought to solve the economic troubles facing the American capitalist way of life by external measures, thereby extending the capacity of its economic rule over other countries of the world. The militarist wing represented the outlook and interests of the big business, which proved to be the actual leaders of the United States under the guise of social reforms of the New Deal (Novack, 1940).
The proponents of imperialistic military actions used to ease economic woes argue that World War Two pulled the country out of Great Depression. This mindset continues at the highest levels of government today, as evidenced by the current war in Iraq. However, this simplistic connection was not necessarily the case. The U.S. economy began making a comeback in 1938, well before the U.S. entered the conflict in late 1941. Additionally, this economic expansion ended prior to the end of the war, thus debunking the argument. Today, incomes are again becoming disproportionate. This, combined with poor economic strategies and the exploding National Debt, threatens to plunge America into another Great Depression potentially much worse than the catastrophe of the 1930s.
Baker, Dorie. “Yale Professor Writes Book on American ‘Security’ System.” Yale News Release. Yale University, 2003.
Hicks, John D. Republican Ascendancy, 1929-1933. New York: Harper & Row, 1960.
Novack, George. “Autopsy of the New Deal.” Fourth International. Vol. 1, N. 1, May 1940, pp. 10-13.
Yantek, Tom. “The New Deal: Capitalism Loses its Hat.” Kent State University. 2007.