Great Depression

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Date: 2019
Publisher: Gale, a Cengage Company
Document Type: Topic overview
Length: 1,273 words
Content Level: (Level 4)
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The Great Depression was a period of severe economic hardship that began in 1929 and lasted for most of the 1930s. Although it is most strongly associated with North America, the Great Depression affected many countries worldwide. It began with the 1929 crash of the American stock market and ended with the onset of World War II (1939–1945). During the Great Depression, the United States suffered from high unemployment rates and widespread poverty. Thousands of banks closed, and many people lost their life savings. Severe droughts also affected North American food production, further adding to the crisis. In 1933, newly elected US president Franklin D. Roosevelt (1882–1945) implemented the New Deal, which was a package of social and economic reforms to reduce unemployment and increase economic recovery. The increased industrial output made necessary by the outbreak of World War II finally ended the Depression.

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Critical Thinking Questions

  • How did droughts contribute to the economic downfall of the United States in the 1930s?
  • Why were the 1920s called the Roaring Twenties?
  • What do you think might happen today if the world experienced an international trade decline of two-thirds?

Causes of the Great Depression

On Thursday, October 24, 1929, traders working at the Wall Street–based US stock market sold almost thirteen million shares. This amount was about three times the normal volume that changed hands in a single business day. The sell-off sparked panic among investors, and within four days, the value of the American stock market fell by 23 percent.

This event brought an abrupt end to the so-called Roaring Twenties, a time of great social change and strong economic growth. During the 1920s, many people turned to the stock market as a means of increasing their personal wealth. Looking back on the Great Depression, many historians and economic experts believe that the stock market was overvalued for much of the decade.

The 1929 stock market crash triggered a series of events that led to a major economic crisis, which exposed weaknesses in the American banking system. Many banks had invested their customers’ money in the stock market only to lose it in the 1929 crash. This resulted in many people being unable to recover their savings from the banks.

With millions of people losing so much money, consumers were suddenly unable to afford to buy the enormous amount of goods being produced by American businesses. Thousands of businesses joined the estimated five thousand American banks that were forced to close during the early years of the Great Depression. This resulted in heavy job losses that worsened the already grim economic situation.


In 1931, US farmers posted a record wheat crop. This carried over a trend from the 1920s that saw farmers using more and more land to grow crops. Farmers increased production to make up for losses resulting from the low crop prices that followed World War I (1914–1918). The record crop of 1931 caused further drops in the price of wheat, as the market was flooded with too much supply.

During the early 1930s, severe droughts affected many major American crop production centers. These droughts made conditions even worse for farmers, who were already trying to yield crops from the poor-quality farmlands they had created to try to make up for low prices during the 1920s. America’s Great Plains region was hit the hardest. Food production dropped dramatically, greatly affecting the millions of people who were struggling to survive. Large numbers of farmers were forced to seek emergency assistance from the government, and banks took control of many farmlands after their owners were unable to pay to keep them.

Great Depression Reached Its Peak

Historians and economists believe that the Great Depression reached its worst point in 1933. In the United States, unemployment rates reached 25 percent, compared to just 3 percent before the 1929 stock market crash. Many of those who were lucky enough to keep their jobs were forced to take wage reductions, which averaged about 42 percent. America’s gross domestic product (GDP), an important measure of a country’s total annual economic output, fell by more than 50 percent.

Severe losses in the amount of money circulating in the American economy resulted in deflation. Prices fell by an average of 10 percent per year. While on the surface this seemed to be positive, it actually worsened the country’s economic situation considerably. Expecting further reductions in the prices of consumer goods, people largely stopped buying items. This led to an even greater shortage of money flowing throughout the country, making it nearly impossible to grow the economy.

Millions of people traveled across the country in search of work. Many people hitched rides on trains. This became known as “riding the rails,” and it became a relatively common practice. It was not unusual for up to one thousand people to apply for a single job listing. Those who did not find work often stayed in hastily constructed camps outside of towns and cities. These became known as “Hoovervilles,” a reference to US president Herbert Hoover (1874–1964), who many people blamed for the economic conditions that caused the Great Depression.

Internationally, many countries turned to economic strategies aimed at protecting their own industries. This led to a major slowdown in worldwide trade, creating a rippling effect that influenced the global economy. By the early 1930s, international trade had fallen by nearly two-thirds.

Roosevelt’s New Deal

Roosevelt defeated Hoover in the 1932 presidential election. Roosevelt immediately tried to relieve the crippling effects of the Great Depression. He introduced a series of social and economic reforms known as the New Deal. The terms of the New Deal tried to assist farmers and reduce unemployment by putting people to work on public projects. Roosevelt also ordered the immediate closure of banks and allowed them to resume business only when they proved that they had enough available money to safely operate.

The New Deal helped ease the hardships of the Great Depression and helped the American economy begin a slow recovery process. However, many people argued that Roosevelt did not commit enough money to the New Deal. Some believed that the program could have been more effective if the federal government put more resources into it.

End of the Great Depression

When World War II began in 1939, the countries involved had to increase their industrial output to meet the needs of their war efforts. This spurred economic growth enough to end the Great Depression. In the United States, the effects of the Depression lingered until the early 1940s, when Japanese forces bombed an American military base on the Hawaiian island of Oahu on December 7, 1941. This marked America’s entry into World War II and triggered a major increase in industrial production that had a healing effect on the country’s economy.

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Bio Blurb: Franklin D. Roosevelt

Franklin Delano Roosevelt was born in Hyde Park, New York, in 1882. He was a career politician who served as a New York state senator and governor before being elected to the American presidency in 1932. Roosevelt used a wheelchair for most of his adult life as the result of a crippling case of polio in 1921. Roosevelt was a strong leader, and he guided the United States through the Great Depression and World War II, two of the most difficult periods in the country’s history. The immense stress involved in his work took a serious physical toll on his health. After being diagnosed with heart problems, Roosevelt took a vacation to Georgia. There, he suffered a major stroke and died on April 12, 1945, shortly before the United States and its allies posted the military victories that ended World War II. Roosevelt is the only American president to have been elected to the position four times; he won election in 1932, 1936, 1940, and 1944.

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Gale Document Number: GALE|ZOGECE651557846