Today’s Wonder of the Day was inspired by Anita. Anita Wonders, “What was the Great Depression?” Thanks for WONDERing with us, Anita!
Have you ever known a friend or family member who was unemployed for a time? Unemployment occurs for a wide variety of reasons, and it's never fun when it happens. The economic hardship and stress it causes can take a toll on a family.
Can you imagine what life would be like if large segments of the population faced unemployment at the same time. Every once in a while, the economy goes through a recession, which is a time of increased unemployment and decreased prosperity.
A particularly-bad recession that lasts for an extended period of time is known as a depression. The worst depression in United States history is known as the Great Depression. Beginning soon after the stock market crash of October 1929, the Great Depression lasted throughout the 1930s, finally lifting in 1939 as World War II began to spur industry in the U.S.
The Great Depression was the result of a variety of interacting factors. After a recession that had started earlier in 1929, the October stock market crash wiped out the investments of millions of people and led to the total failure of many banks. In the wake of the crash, consumers spent less and were afraid to invest.
As goods sat unsold on store shelves and in factory warehouses, industrial output sharply declined. As a result, unemployment rose steadily as factories laid off workers. Without jobs, people spent even less money, causing the cycle to repeat and worsen.
At the height of the Great Depression (around 1933), approximately 13-15 million Americans (over 20% of the population) were unemployed. Nearly half the nation's banks had closed. Many people lost their homes as foreclosures and repossessions increased when mortgages could not be paid. The future was bleak, and the depression spread worldwide, especially into Europe.
As the number of the homeless and hungry grew, crops sat in fields and rotted, because farmers could not afford to harvest them. Farmers had been hit particularly hard by the combination of the depression and weather conditions that had created what was known as the Dust Bowl.
When President Franklin D. Roosevelt assumed power in 1933, the country was in the worst shape in its history. Roosevelt was optimistic, however, telling people that "the only thing we have to fear is fear itself."
Under Roosevelt's "New Deal" plan, many different pieces of legislation were passed with the goal of stabilizing production in both the industrial and agricultural sectors. New jobs were created via new programs, such as the Tennessee Valley Authority (TVA) and the Works Progress Administration (WPA).
Creation of the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC) helped to spur recovery by regulating the stock market and putting banks back on a secure footing, so that investors would return.
The United States faced a long, hard road to recovery. Despite gains, the country was hit again with recessions in 1937 and 1938. Ultimately, the depression-fueled extremist political movements in Europe, such as Hitler's Nazi regime, led to new wars in Europe in 1939.
Although the U.S. would not enter World War II until 1941, the WPA began strengthening the country's military infrastructure in 1939. These war-related increases in industrialization eventually helped finally to pull the country out of the Great Depression.