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The Great Depression: The Extensive Effects

The 1920s was a time of roaring prosperity. Even mid-October of 1929,

the average middle-class American saw an “illimitable vista of prosperity” ().

The thought of poverty was close to an end; in 1928, President Herbert

Hoover stated, “We have not yet reached the goal, but given a chance to go

forward with the policies of the last eight years, and we shall soon with the

help of God be within sight of the day when poverty will be banished from

the nation” (). The prescience of the end of poverty became known as the

American Dream; however, this foresight was shortly lived. On Tuesday,

March 26, 1929, the Hoover Administration saw the largest stock market

crash of their administration to that date. Several months later brought Black

Monday, the largest stock market crash in American history and the cardinal

cause of the Great Depression. The Great Depression is one of the single

most important events in the financial history of the United States and the

world; the effects of and leading to the Great Depression lasted for several

years.

The Great Depression was an economic deficit with worldwide effects

that began with the stock market crash of October 1929; the most profound

effect of the Great Depression was the highest rate of unemployment in

American history: banks, factories, and stores closed, leaving millions of

Americans jobless with no money. Without money, many Americans had to

rely on either the government or donations from charities to be obtain food;

as the depression continued, however, the Roosevelt administration created

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government agencies to aid in supplying Americans with food, relieving the

effects of the Great Depression, preventing a catastrophic event like it from

occurring again ().

The group of people most affected by the Great Depression and the

events it instigated were the American stockholders; thousands of

stockholders lost large sums of money due to the rapid decrease of stock

values caused by the crash of Black Monday. Although this was a huge loss,

predicting it was impossible; from 1925 to 1929, the average stock price of a

common stock on the New York Stock Exchange more than doubled, causing

many people to make large investments in the stock market in hope of

making large profits. Even people who had no prior knowledge of the stock

market or how it worked attempted to invest in anticipation of profits.

Economists, such as Irving Fisher, assured stockholders that they were

“dwelling on a permanently high plateau of prosperity ()”. This, along with

the assurance of many other reporters and professionals, cause the

popularity of being a stockholder to skyrocket: in 1920, there were only

29,609 stockholders; a mere ten years later, there were 70,950.

Stockholders’ ignorance of how the stock market worked soon turned against

the thousands of investors in America and spread throughout the rest of the

United States, halting economic flow ().

The Depression had a remarkable effect on the United States; however,

the United States was not the only place to feel the consequences of the

Great Depression: Canada was also profoundly affected (The Global Effects of
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the Great Depression 1). Previously, Canada’s economy relied on the export

of grain and other raw materials. The people who exported these goods

suffered huge losses after other countries increased tariffs on imported

products. Following the closing of many Canadian companies, the

unemployment rate in Canada rose from three percent in 1929 to twenty-

three percent in 1933 ().

Other governments were affected by the Depression as well. As the

Depression was at its zenith in 1933, the only country hit as hard as the

United States was Germany (). Approximately six million individuals in

Germany were left unemployed. Many aspects of German life led to these

despondent times. Most prominent were the reparations Germany was still

paying from World War I. Chaos arose in Germany after the war, causing

hyperinflation in 1923; Germany was just recovering when the stock market

crash hit (Effects on Germany 1). Another factor in the economic downturn

was the German government. Germany suffered a series of poor leaders; the

chancellors of 1932, as Herbert Hoover said, were unable to deal with the

effects of the deepening Depression. On January 30, 1933, Adolf Hitler

became the chancellor of Germany (). The leadership of Hitler, one of the key

figures in the relief of the Great Depression both in Germany and worldwide,

marked the foundation of the collapse of the Great Depression.

The actions beginning in 1933 aimed at relieving the Great Depression

in the United States and Germany had a major influence on other nations,

particularly Great Britain (). Great Britain, unlike the United States, had a
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moribund economy prior to the stock market crash of October 1929 ();

however, the British economy did not suffer a morbid crash, as did the

economies of the United States and Germany (Effects on the United Kingdom

1). Britain did, however, suffer declines in both imports and exports during

the Depression. In comparison to other thriving nations during the time of

the Great Depression, the United Kingdom remained in a fairly stable

economic condition (Effects on the United Kingdom 2).

Unlike Great Britain, the Great Depression hit many other countries in

Europe immeasurably. One of these unlucky countries was France, the last

major nation of at that point in time to feel the effects of the Great

Depression; the reason for the delayed impact on France was the

undervaluation of the French Franc (Effects on France 1). France, as Great

Britain, was impacted by the efforts of the United States to relieve the

Depression (). Finally, in 1932, the Depression brutally found its way to

France: the number of tourists dropped and exports of perfume fell, as did

those of wine, food, and other items (). Even though the Depression hit

France late, it came violently. Unemployment rose fifteen percent and

industrial production dropped twenty-five percent from their levels in 1929.

In hope of a change, André Tardieu was elected to run a new French

government in 1932; he gained his popularity by aiming his campaign

towards the threat of communism (). Like many other countries, France

eventually overcame the Depression through involvement in World War II,

which created jobs and caused money to begin circulating once again.
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The Great Depression also hit Italy, with its highly regarded corporate-

fascist government led by Mussolini. The public saw the erratic policy

changes Mussolini made as genius; however, these changes did not benefit

the economy. Even though Italy’s contribution to world manufacturing was

down almost three percent, it rose from the depression in 1934 ().

The United States, like all countries, eventually emerged from the

deficits of the Great Depression. At the forefront of this recovery was World

War II: it increased manufacturing and created millions of jobs. In addition,

aiding in the recovery were government agencies, such as the Tennessee

Valley Authority (TVA); the TVA was created in May 1933 to supervise the

development of a 640,000 square mile area in the Tennessee Valley (). The

Tennessee Valley was a region in which sharecroppers and farmers were

malnourished and soils were useless for growing agricultural products. The

TVA planned to help this region and restore a large amount of agricultural

production to the United States (). Although there were many other agencies,

such as the Civilian Conservation Corps (CCC), the Federal Emergency Relief

Administration (FERA), and the Public Works Administration (WPA), most of

them followed in the footsteps of the TVA: they were aimed at creating jobs

while simultaneously either beautifying the United States or boosting the

economy().

The Great Depression heavily affected the United States and the world

as a whole for several years. The Depression has taught governments around
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the world how to deal with economic problems in hope that it will not happen

again. As Wecter Dixon stated, the stock market could be very profitable:

If a man saves $15 a week, and invests in good common stocks, and

allows the dividends and rights to accumulate, at the end of twenty

years he will have at least $80,000 and an income from investments of

around $400 a month. He will be rich. And because income can do

that, I am firm in my belief that anyone can not only be rich, but ought

to be rich (4).

However, the stock market crash of October 1929 and the ensuing

depression alerted stockholders to how volatile being involved in the stock

market without knowledge could be. Even in the current recession, many

world leaders are influenced by measures taken to end the Great Depression

to revive economic conditions.

Due to its tremendous effects in the United States and throughout the

world, the Great Depression is known in history as a narrow escape from the

downfall of the world economy. Hopefully, one day the world economy will be

as rich and prosperous as the roaring 1920s, and America and the rest of the

world will be chasing the “American Dream” once again, barring another

unforeseen event such as the Great Depression.

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Works Cited

Dixon, Wecter. The Age of the Great Depression, 1929-1941. New York: Macmillian,
1952.

Effects on France. 12 April 2009 <http://www.thegreatdepression.co.uk/effects-on-

france/>.

Effects on Germany. 12 April 2009 <http://www.thegreatdepression.co.uk/effects-on-

germany/>.

Effects on the United Kingdom. 12 April 2009

<http://www.thegreatdepression.co.uk/effects-on-the- united-

kingdom/>.

Garraty, John A. The Great Depression: An Inquiry into the Cause, Course, and
Consequences of the Ninteen-Thirties as Seen by Contemporaries and in
the Light of History. 1st Edition. Orlando:
Harcourt Brace Jovanovich Publishers, 1986.

"Great Depression." World Book Encyclopedia 2001: 338-43.

Smitha, Frank E. The Great Depression, to 1935. 1998-2005. 11 April 2009

<http://www.fsmitha.com/h2/ch15wd.html>.

The Global Effects of the Great Depression. 20 March 2008. 11 April 2009
<http://recessionhistory.info/the-global-effects-of-the-
great-depression/>.