Sat Essay, Great Depression

A world wide economic depression from 1929 through 1933, unique in its severity and duration and with slow and uneven recovery

The social and political conequences of prolonged economic collapse were enormous. Mas unemployment and failing farms made insecurity a reality for millions of ordinary people, who looked in desperation for leaders who would \"do something.\"

The Great Depression was triggered by developments in the United States that culminated in the stock market crash of 1929. People were investing borrowed money more and more, but the value of stocks was decreasing, and so people had to sell off their stocks, a crash was inevitable. In other words, thousands of people started selling their stocks all at once. The result was financial panic. Countless investors and speculators were wiped out in a matter of days and weeks.

Throughout the 1920s, american bankers and investors had lent large amounts of capital to many countries. Many of these loans were short term, and once painc broke, New York bankers began recalling them. Gold reserves thus began to flow out of European countries, particularly Germany and Austria, toward the United States. It became very hard for European business people to borrow money and the panicky public began to withdraw its savings from the banks. These banking problems eventually led to the crash of the largest bank in Austria in 1931 and then to general financial chaos. The financal crisis led to a general crisis of production: between 1929 and 1933, world output of goods fell by an estimated 38%. As this happened, each country turned inward and tried to go it alone. More than 20 nations, including Britain and the United States, went off the gold standard in order to price their goods more attractively in foreign markets, with no real advantage gained. Similarly, country after country followed the example of the United States when in 1930 it raised protective tariffs to their highest levels ever. Within this context of fragmented and destructive economic nationalism, recovery finally began in 1933.

First, no country came forward to coordinate a response to the international economic situation. Second, almost every country suffered from poor national economic policy: governments generally cut their budgets and reduced spending when they should have run large deficits in attempt to stimulate their ecnomies

Franklin Delano Roosevelt's basic goal was to reform capitalism in order to preserve it. He chose forceful gov't intervention in the economy. He established innovative programs that promoted agricultural recovery (ex: Agricultural Adjustment Act of 1933, which was aimed at raising prices and farm income by limiting production). Set up the Works Progress Admistration (WPA) in 1935, which employed one-fifth of the entire labor force at some point in the 1930s, constructing public buildings, bridges, and highways. Finally, Delano established a national Social Security system, with old-age pensions and unemployment benefits.