In 1933, the unemployment rate reached an all-time-high at 25%. The Great Depression was the worst recession that America had ever seen, and there was no clear path forward. But the way America responded changed the course of history.
Major Economic Impacts of the Great Depression
The immediate economic impacts of the Great Depression were typical for a recession: mass layoffs, business closures, reduced consumption, and general panic. Unfortunately, the Hoover administration did not deal with this panic well. When the Great Depression began in 1929, President Herbert Hoover took on the stance of voluntarism. He believed the recession could be solved, so long as people donated to charities and business leaders held off on mass layoffs and decreased wages.
Fig. 1 - Herbert Hoover
Of course, it didn’t take long for it to become clear that voluntarism was not cutting it. President Hoover responded by focusing his approach on banks and industry leaders. He believed that giving loans to banks (which would then become loans to industry leaders) would help the position of the economy. The general public, however, did not see any benefits and, instead, believed that President Hoover was more concerned with big business than American citizens.
The Bonus Army
In the spring of 1932, thousands of World War I veterans arrived in Washington, D.C. to demand their bonuses–set to be paid in 1945–immediately. They set up encampments and refused to leave until their bonuses were paid. When the Senate blocked a bill that would allow immediate payment, there was a sense of defeat. While many left, a number of veterans stayed with the hopes of pressuring action. President Hoover responded by sending the U.S. army to remove the remaining members of the Bonus Army and to destroy their encampments.
Fig. 2 - Bonus Army encampment
So, in 1932, when a new candidate offered hope, the general public was more than ready to elect him. President Hoover, a Republican, was running again with the promise that staying the course would benefit the country more than rash action. Franklin Delano Roosevelt, however, the Democratic candidate, seemed to have a plan. As the governor of New York, he had instituted relief policies that became the model for other states. He promised to offer the same relief on a federal level.
Major Political Impacts of the Great Depression
When President Franklin D. Roosevelt assumed office, he hit the ground running with his New Deal, a series of government programs aimed at boosting the economy and providing relief to struggling Americans.
Fig. 3 - Franklin D. Roosevelt
During what is known as the First Hundred Days, he closed and inspected banks to restore public confidence. He also set into motion a number of programs and bills, including:
The Banking Act of 1933: created the Federal Deposit Insurance Corporation (FDIC) to supervise financial institutions
The Civil Conservation Corps (CCC): offered employment in conservation to young men so that they could send funding home to their families
The National Industry Recovery Act (NIRA): created committees of industry leaders and union leaders to decide on wages, working conditions, and prices
Agricultural Adjustment Act (AAA): paid farmers to not produce in order to limit overproduction and raise crop prices
This is not to say there were not important parts of the New Deal in the following years. For example, the Securities and Exchange Commission (SEC), created in 1934, became responsible for regulating the stock market. The Second New Deal, lasting from 1935 to 1936, continued on the same path of public welfare and faced more scrutiny by Republicans. Notable legislation and programs included:
The Wagner Act: ensured the legality of the collective bargaining introduced by NIRA
The Social Security Act (SSA): introduced a federal insurance program for the elderly, those with disabilities, and the unemployed
The Works Progress Administration (WPA): employed individuals in various public works projects and; invested in the arts and employed artists, musicians, and actors
The Works Progress Administration is responsible for the construction of the Golden Gate Bridge, the Chrysler Building, and the Hoover Dam.
The New Deal greatly expanded the role of the federal government and introduced aspects of the welfare state—before the New Deal, the United States was the only industrialized country without Social Security or similar program. Some Americans, feeling jaded by capitalism, even had a newfound interest in the possibilities of socialism and communism.
the welfare state
a state in which the government ensures the social wellbeing and economic security of its citizens
Major Social Impacts of the Great Depression
During the Great Depression, no one was safe from layoffs. Professionals and unskilled workers alike found themselves without jobs. However, minorities and women were often the first to lose their jobs. White men entered occupations that were generally reserved for minorities and once considered beneath them. Domestic work, and occupations typically reserved for women, however, remained untouched.
Overall, there was actually an increase in the number of women in the workforce during the Great Depression as they needed the income for their families.
Many families did not have any savings due to the stock market crash and bank closures, leaving them struggling to survive. There were increased rates of malnutrition, suicide, and theft. Rates of prostitution rose as many women were left without an option. The end of Prohibition offered a brief reprieve from daily sorrows, but it also contributed to increased rates of alcoholism. Access to proper healthcare was a luxury many could not afford, as was higher education. Marriage and birth rates dropped in the face of a grim future.
Major Social Impacts of the Great Depression: Hoovervilles
As we discussed earlier, President Hoover did little to help the average American when the Great Depression began. In fact, he actively vetoed a bill that would introduce a federal relief program. Without any federal aid, a significant number of Americans lost their homes. Homeless settlements developed on city outskirts where people lived in shacks made of scrap metal, lumber, and cardboard. They earned the name “Hoovervilles,” a nod to President Hoover’s lack of action.
Fig. 4 - a Hooverville in Seattle, Washington
Major Social Impacts of the Great Depression: The Dust Bowl
In the 1930s, dust storms ravaged the Great Plains region, particularly the states of Oklahoma, Kansas, Colorado, Texas, and New Mexico. Severe droughts and poor farming practices had led to lose topsoil, and when hit with strong winds, this topsoil contributed to horrific storms. During this period, many farms were ruined or simply abandoned. Without homes or means of employment, many farming families moved farther West to California. There, they found agricultural jobs with far lower wages.
Fig. 5 - a dust storm in Texas
Global Impact of the Great Depression
It is important to understand that America was not the only country experiencing the Great Depression. Other countries were seeing the same unemployment rates and lowered standards of living. But, as the Great Depression took hold, America took on a more isolationist position. The Smoot-Hawley Tariff Act, for example, increased the import tax to protect and support American businesses. While it had little effect in America, it dealt a blow to the world economy as other countries rushed to institute taxes of their own.
Impact of the Great Depression on Europe
America’s isolationist stance also led the nation to halt loans to European countries who needed the funding more than ever. Unfortunately, economic instability led to political instability in many countries. In this power vacuum, totalitarian and fascist leaders gained power, such as Adolf Hitler in Germany and Benito Mussolini in Italy.
Immigration to America
As a result of political instability in Europe, there was a small, but steady flow of intellectuals, scientists, and artists into the United States. This esteemed group included scientist Albert Einstein, psychologist Erik Erikson, and actress Ingrid Berman. The average European, however, was not so lucky. America’s strict immigration policy favored those with skills deemed beneficial to society.
Impact of the Great Depression - Key Takeaways
- The Great Depression led to mass layoffs, business closures, reduced consumption, and general panic.
- The Hoover Administration provided little relief to the average American, leading to the election of President Franklin D. Roosevelt.
- President Roosevelt instituted the New Deal, a series of programs to boost the economy and provide relief to struggling Americans. This greatly expanded the role of the federal government.
- Even so, unemployment rates were extremely high. Minorities and women often lost their jobs to make room for white men.
- There was an increase in malnutrition, suicide, crime, prostitution, and alcoholism. There was a decrease in access to healthcare, access to higher education, marriage rates, and birth rates.
- America took on an isolationist policy during the Great Depression, contributing to economic and political instability in Europe.
References
- Fig. 4 - Hooverville in Seattle (https://commons.wikimedia.org/wiki/File:Hooverville_on_the_Seattle_tideflats,_1933_(50495168952).jpg) by Seattle Municipal Archives (https://www.flickr.com/people/24256351@N04) licensed by CC BY 2.0 (https://creativecommons.org/licenses/by/2.0/deed.en)
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