Free Essay About The Great Depression

The Cause and Effects of the Great Depression Essay

1443 WordsJan 17th, 20116 Pages

Many people speculate that the stock market crash of 1929 was the main cause of The Great Depression. In fact, The Great Depression was caused by a series of factors, and the effects of the depression were felt for many years after the stock market crash of 1929. By looking at the stock market crash of 1929, bank failures, reduction of purchasing, American economic policy with Europe, and drought conditions, it becomes apparent that The Great Depression was caused by more than just the stock market crash. The effects were detrimental beyond the financial crisis experienced during this time period. The first and most obvious known factor in the development of The Great Depression is the stock market crash of 1929. The Money Alert website…show more content…

The banking industry as a whole after the stock market crashed was going bankrupt due to not being able to carry the “bad debt” that was created from using customer money to buy stock. Because the banks were out of money, they were unable to cover customer withdrawals from their bank, causing many bank customers to lose all of their savings. With the uncertainty of the future of the banking industry, many people withdrew all of their savings, which caused more than 9,000 banks to close their doors and go out of business (Kelly). Due to the effects of the Great Depression, and the collapse of the banking industry, the government created regulations to prevent similar failure in the future. For Example, the SEC, (or Securities Exchange Commission), which regulates the sell and trade of stocks, bonds and other investments was created as a result of The Great Depression. The FDIC (or Federal Deposit Insurance Corporation), was created to insure bank accounts so that that the consumer would be protected if the bank were to go out of business (Kelly). The Great Depression's effect on the banking industry led to many useful changes to the banking industry and helped restore confidence in banks in the American people. The next major factor that contributed to the Great Depression was the reduction of goods being purchased during the time period. After the stock market crashed, consumers from

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The Great Depression

Though most Americans are aware of the Great Depression of 1929, which may well
be "the most serious problem facing our free enterprise economic system,"(
) few know of the many Americans who lost their homes, life savings and
jobs. This paper briefly states the causes of the depression and summarizes the
vast problems Americans faced during the eleven years of its span. This paper
primarily focuses on what life was like for farmers during the time of the
Depression, as portrayed in John Steinbeck's The Grapes of Wrath, and tells what
the government did to end the Depression.

In the 1920's, after World War 1, danger signals were apparent that a great
Depression was coming. A major cause of the Depression was that the pay of
workers did not increase at all. Because of this, they couldn't afford
manufactured goods. While the factories were still manufacturing goods,
Americans weren't able to afford them and the factories made no money (Drewry
and O'connor 559).

Another major cause related to farmers. Farmers weren't doing to well because
they were producing more crops and farm products than could be sold at high
prices. Therefore, they made a very small profit. This insufficient profit
wouldn't allow the farmers to purchase new machinery and because of this they
couldn't produce goods quick enough (Drewry and O'connor 559).

A new plan was created called the installment plan. This plan was established
because many Americans didn't have enough money to buy goods and services that
were needed or wanted. The installment plan stated that people could buy
products on credit and make monthly payments. The one major problem with this
idea was that people soon found out that they couldn't afford to make the
monthly payment(Drewry and O'connor 559).

In 1929 the stock market crashed. Many Americans purchased stocks because they
were certain of the economy. People started selling their stocks at a fast
pace; over sixteen million stocks were sold! Numerous stock prices dropped to
fraction of their value. Banks lost money from the stock market and from
Americans who couldn't pay back loans. Many factories lost money and went out
of business because of this great tragedy (Drewry and O'connor

By the 1930's, thirteen million workers lost their jobs which is 25 percent of
all workers. The blacks and unskilled workers were always the first to be fired.
Farmers had no money and weren't capable of paying their mortgages. Americans
traveled throughout the country looking for a place to work to support
themselves and their family (Drewry and O'connor 560-561). John Steinbeck, born
in 1902, grew up during the Depression near the fertile Salinas Valley and wrote
many books of fiction based on his background and experiences during that time
and area of the country. One of his great works would be the Grapes of Wrath In
this book, Steinbeck describes the farmers plight during the Great Depression
and drought. When the rains failed to come, the grass began to disappear. As the
farmers watched their plants turn brown and the dirt slowly turn to dust they
began to fear what was to come. In the water-cut gullies the earth dusted down
in dry little streams. As the sharp sun struck day after day, the leaves of the
young corn became less stiff and erect; then it was June and the sun shone more
fiercely. The brown lines on the corn leaves widened and moved in on the
central ribs. The weeds frayed and edged back toward their roots. The air was
thin and the sky more pale; and every day the earth paled. (qtd. Steinbeck 2-3).
The farmers worst fears were realized when their corn and other crops began to
die. The dust became so bad they had to cover their mouths with handkerchiefs
so they could breath (Steinbeck 3- When the drought hit the Great Plains and
the soil turned to dust, many farmers moved to California because they could no
longer farm their land(Drewry and O'Connor 561). The drought began to affect
other parts of the country. In 1930, Virginia's belt of fertile land dried up.
Ponds, streams, and springs all dried up and the great Mississippi River water
level sank lower than ever recorded. Small farmers every-where began to feel
the drought. Their small gardens were ruined and their corn crop was cut almost
down to nothing. The hay and grass needed to feed their livestock was no longer
available. They now faced a major problem -how to feed their livestock. The
silos were rapidly emptying and the barns in many cases were empty. The farmers
were terrified that the government feed loans wouldn't be available to keep the
livestock from dying. In many cases, the Red Cross was making allowances for
feed to keep alive livestock (Meltzer 121). The small farmers of fruit trees
and vegetable plants depended on others who ran canneries to bottle and can
their produce. The people they depended upon were the same people that hired
scientists to experiment on the fruits and vegetables to come up with better
tasting and yielding produce. Thus the small farmers were dependent on these
same rich landowners for almost everything. They couldn't harvest their produce
on their own so they sold it to the rich landowners and thus made very little
money on their produce (Steinbeck 444-447). The farmers found themselves in debt
caused by the purchase of land, tools, animals and other items bought on credit.
This credit was due to the bank and when the farmers found them- selves unable
to repay the debts the bank took away everything they had - their land, homes,
animals and equipment. When the banks took over, they went in with tractors
and destroyed everything on the farms which included their homes and barns.
This is best por- trayed in Steinbeck's description of how the tractors
destroyed everything in its way. "The iron guard bit into the house corner,
crumbled the wall, and wrenched the little house from its foundation, crushed
like a bug (50).

"In the little houses the tenant people sifted their belongings and the
belongings of their father and of their grandfathers" (Steinbeck 111). This
describes how after many generations of farming on their land these people had
to gather their property and memories and then try to sell whatever they could.
The farmers were so desperate for money that they had to sell for literally
pennies.Steinbeck describes the desperate conversation of a farmer to a
persepective buyer "Well, take it-all junk-and give me five dollars. You're not
buying only junk, you're buying junked lives" (Steinbeck 112).

The desperation for work and money became so bad that they were willing to work
for as little as was offered just so they could have some sort of job and make
any amount of money. Soon it was a fight for life or death (Steinbeck). In a
desperate search for a job farmers moved themselves and their families all over
the country. As people wandered the country looking for work they were unable
to live in one place. Large numbers of homeless people led to Hoovervilles.
The farmers and their families had to build homes out of anything that they
could acquire as Steinbeck describes "The south wall was made of three sheets of
rusy corrugated iron, the east a square of moldy carpet tacked between two board,
the north wall a strip of roofing paper and a strip of tattered canvas, and the
west wall six pieces of gunny sacking"(Steinbeck 310-311). The homes were
usually near water source so they could have water to drink from, cook and wash
their clothing (Steinbeck 311).

To cut down the number of people seeking jobs or needing help, the government
decided to try to come up with some sort of relief. Among other things, they
limited immigration, returned hundreds of Mexicans living here,and sought other
methods to help the farmers. Hoover's Federal Farm Board urged farmers to plant
less so that prices would go up but there was no encouragement to do so.From
1920 to 1932 farm production did drop 6 percent but prices fell ten times as
much-by 63 percent. Farmers watched prices hit new lows-15 cents for corn, 5
cents for cotton and wool, hogs and sugar 3 cents, and beef 2.5 cents(Meltzer
123). With farm prices so low, most farmers, living under the fear of their
mortgages, knew that sooner or later they will lose everything. In 1932 the
farmers declared a holiday on selling. They picketed roads asking people to
join the. They gave away free milk to the poor and unemployed rather then let
it spoil because they refused to sell it. A thirty-day holiday on farm selling
was begun August 8 and extended indefinitely(Meltzer 125). In December 1932, 250
farmers from twenty-six states gathered together for a Farmers National Relief
Conference. They announced that they demand relief from creditors who threaten
to sweep them from their homes and land(Meltzer 126).

In May 1933, the Agricultural Ajustment Act was passed. The aim of this act was
to raise the farm prices by growing less. The farmers were paid not to use all
the land to plant crops. The money came from tax on millers, meat packers, and
other food industries. In June of that same year the Farm Credit Act was passed.
This act helped farmers get low interest loans. With this act, farmers
wouldn't lose their farms to the banks that held the mortgages. The farmers
who lost their farms already would also receive low interest loans(Drewry and
O'connor 569).

The Great Depression was the end result of World War I. It affected the rich
and poor alike, factory workers and farmers, bankers and stockbrokers. In short,
it affected everyone; no one was left untouched. But of all the people hurt,
farmers were the worst off. John Steinbeck chose to write about farmers hoping
that Americans would recognize their plight and correct the situation. The
Great Depression is known to be the worst economic disaster in U. S. history.
For this reason, the Depression caused many people to change their ideas about
the government and economy.


 

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