American Economics in the 1920s and 1930s
by Rit NosotroChange Over Time essay
Describe USA economic cause and effect from the "Roaring Twenties" to the "Great Depression" and the "New Deal".
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Summary:
Few periods in American history have influenced our current government structure, size, and economy more than the “Roaring Twenties” and the “Great Depression”. Actions in the 1920s led to the depression in the 1930s which led to the New Deal in 1933 through 1938. The economic cause and effect for this time period can be traced back to World War I.
World War I exhausted people. Grief, loss, and hard work made the people ready for a change. The “Roaring Twenties” brought this in a number of ways. Consumerism reached its height in this time period. The “flapper” epitomized consumerism with her makeup, ready made clothes, and cigarettes. Entertainment soared and morals began to slide. All of these factors covered the inflation that was happening in prices. Worker’s salaries increased but did not match the rate of the price increases and farmers were forced further into debt. National economics also suffered with income taxes being the lowest for those who were the wealthiest. In 1924, immigration became limited, reducing the number of workers in the economy. When the stock market crashed in 1929 all the economy’s weaknesses became clear. This was not, however, the start of the Great Depression but just a signal of its onset.
The Great Depression most drastically effected national moral by eliminating jobs. In 1929 only three percent of the workforce was unemployed, by 1933 this had reached twenty five percent. Since a quarter of the nation was out of work, people stopped spending money. All durable goods such as automobiles, housing and appliances, didn’t sell and forced people who worked in those industries out of their jobs. People with jobs had to accept pay cuts and were lucky just to be working. Banks lent out more money than they had and many people lost their savings. Family life also changed drastically, with marriage and birth rates falling rapidly while divorce rates grew. All of this kept the economy in a shambles with no hope of relief. Then came the New Deal.
After taking office in 1933, President Franklin Delano Roosevelt sought to bring change to the nation by increasing the role and power of the government in ways Hoover hadn’t. Hoover had been reluctant to use welfare programs to help those in need and did not establish many public works projects. Roosevelt, however, used both of these programs generously. At this time the US also abandoned the gold standard and put more money into circulation, meaning there was more cash circulating than there was gold bullion. Trust in banks was one of the first things Roosevelt sought to restore. This happened with the “bank holiday” and the Emergency Banking Act. The Federal Deposit Insurance Corporation also helped to restore trust by ensuring the safety of people’s money in case the bank failed. The Public Works Administration appeared at this time as well. Dams, bridges and other public buildings were built, creating more jobs for unemployed people. Work camps were also set up to help people find jobs.
Ultimately, it was not the New Deal that ended the Depression but our entry into World War II. In 1940 the unemployment rate was still at fifteen percent. World War II produced many more jobs and finally got the nation back to normal. The New Deal was influential in that it helped alleviate the misery that overtook the people but it also expanded the role of the federal government in ways that should have been cut back after the Depression. This was not the case, however, and we still retain many of these programs today. During this time period the church was ineffectual so the government took over roles that church used to fulfill. As a result, many programs that should be part of the church’s outreach are now government programs and the government becomes the church.
QuickQuiz:
1. What year did the Great Depression begin in?
a) 1928
b) 1929
c) 1930
d) 1931
2. What year was the New Deal started in?
a) 1930
b) 1929
c) 1934
d) 1933
3. Which president started the New Deal?
a) Franklin Delano Roosevelt
b) Hebert Hoover
c) Calvin Coolidge
d) George Bush
4. In 1940 the unemployment rate was still at ___ percent.
a) 20
b) 50
c) 30
d) 15
Bibliography:
Holcombe, Randall G. http://www.cato.org/pubs/journal/cj16n2-2.html
MSN Encarta Research and Learning http://encarta.msn.com/encnet/refpages/RefArticle.aspx?refid=761564651
Simkins, Scott http://ocean.st.usm.edu/~wsimkins/bookends.html copyright 1997
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