How the Great Depression Affects Us Today - Essay Sample

Introduction

The Great Depression (GD) occupies a prominent position in the history of the United States. Many consider, and perhaps rightly so that the GD is the greatest catastrophe to have ever hit America since the end of the American Civil War in 1865. After the country had experienced almost a decade of economic growth, the economy ground to a painful halt in 1929 when the stock market crashed, sending shockwaves across the US and many other parts of the globe. The crisis began on October 24 in 1929 when there was unprecedented sale of stocks at the nation's stock exchange. On the specified day, there was a frantic sale of overpriced shares for fear that the mark would perform poorly with a record 12.9 share were traded on the same day in what came to be known as Black Thursday. Five days after the crash, another record of 16 million shares were traded on a day that was dubbed Black Tuesday, as the panic further spread throughout the economy. The panic sales rendered stocks worthless, sparking a financial crisis that never witnessed before.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

The October 24th crush did begin in 1929- it was an outcome following a decade of events that created a considerable optimism in the economy and, as a consequence, prepared the ground for the crush. Many believe that decline emanated from the decision of the Federal Reserve which tightened the monetary policy after the country witnessed a constant rise in economic growth. Beginning early 1920s, the country saw the economy expand and is regarded as a time of prosperity in the US's history (Romer and Pells). During the period, stock prices increased fourfold in response to economic growth as the citizens became more bullish about the state of the economy at this time. This created speculation in the economy regarding the performance of the stock market. To stem the speculation, the Fed implemented a tight policy which heightened the speculation and further panic in the economy. Other scholars argue that the housing boom that occurred in the early 1920s led to an excess supply of houses in the period up to 1928. Between 1928 and 1929 the oversupply of houses led to a significant decrease in the construction industry, precipitating the country into a credit crisis (A&E Television Networks; Fiorillo thestreet.com). Whatever the argument, the depression created enormous damage to the economy which took several years to recover.

The effects of the GD were catastrophic. More than one thousand banks collapsed, plunging the country in a credit crunch. Lack of credit made many companies to fail to meet their operations and, as a consequence, thousands of firms closed their businesses. Since business could not sustain their operations, many laid-off workers, resulting in massive employment in the country. For instance, statistical evidence indicates that by 1931, the number of Americans who were jobless rose to 6 million with the numbers steadily rising to at least 15 million by the time the crisis reached its lowest end in 1933(A&E Television Networks). High levels of unemployment not only resulted in a significant decrease of economic output of the country but also devastated households across the nation. This state of affairs would haunt the economy for more than a decade even though there was a mixed period of good economic performance in the first half of the period between 1933 and 1940.

The GD may sound as a historical event that happened almost a century ago which cannot be an issue of great concern for many people today. The depression's devastating consequences are long gone and, therefore, not considered to those in the position of making policy about the overall direction of the country economically. However, the extent to which the event is regarded as necessary does not relate to its effect on the US economy but the various actions that were instituted to lift the country out of the crisis and the impact such measures had in altering many aspects of American society which prevail even today. Rather, it is the legacy that an event of such magnitude left on America society which lived on for almost 90 years now. Today 's prosperity of Americans, the role of government in the economy, income inequalities, institutionalized equal rights for all Americans, robust citizen participation in public matters, and the operation of the banking system are a testament of the measures taken in the 1930s as a reaction to the economic distress created by the GD.

Throughout the history of the United States over the last 80 years, it has been evident that the GD changed the role of the government in the management of the economy. One notable impact change in the way government managed the economy relates to the laissez-faire concept of economics. For years, Americans, especially American corporate organizations, held a strong belief in capitalism and its capability in solving the economic problems. However, the GD proved to the people and policymakers that the markets cannot regulate market trends entirely on their own. In other words, there was an appreciation of the role government can play in stabilizing the economy during hard economic times. Before this period, there was full trust in capitalism, but the events of the GD made many economists believe the propositions of legendary economist John Milton Keynes about the need for government to regulate the economy (Smiley econlib.org). Although the role of government has always been criticized by most economists, the practice of government intervention in the economic activities of the country as widely accepted today.

One of the interventions practiced today and originate from the events of the GD is government spending. Although there is a disbelief that Herbert Hover, then president of the United States, scaled down spending as he tried to balance the budget amidst a crisis, data actually shows that the presidency of Hover increased spending to stimulate economic recovery. For instance, when Hover entered office, his government was run on budget deficits. By the time he was leaving in 1933, the deficit had risen to $4.6 billion, showing a significant increase in public spending (Bader cei.org). The danger with increased spending is that it restrains the private sector through borrowing and also encourages policymakers to raise taxes.Today, taxation and tax cuts play an essential role in the economy. More taxes affect the incomes of the citizens negatively as it reduces the amount available among the public for spending or saving. The effect of this economic strategy is it continues to make life unbearable for individuals who are not earning considerable incomes in America today and remains a painful inheritance of the GD.

Besides the rise of appetite for spending and budget deficits, the rise of the voice of the citizens in the management of public affairs remains an integral aspect of the American public today. As millions of Americans lost jobs to layoffs and firm closures, the public became agitated that the leadership at the time was not doing enough to address the issue of employment in the United States. This agitation was often expressed in the form of protests in the streets as an expression of anger and frustration at the government for it apparent poor handling of the crisis. Across major cities in the country, both blacks and whites held protests to petition the government for jobs (Cox workers.org). Over the time, the new weapon of expression took root in the country and became an essential tool through which citizens express frustrations about government failure. Today, whether it is about a foreign policy, police killings, bad economic policies, insecurity, protests have become part and parcel of the freedom of expression of Americans. This culture has been so ingrained in the American that it is an important aspect of American culture.

Acquisition of the chance to protest against bad government policies among African-Americans played a crucial part in fueling the civil rights movement in the mid 20th century. As indicated in the previous paragraph, the crisis forced people to pour into the streets. These protestors included a substantial number of African-Americans who even suffered more pain during the period because they worked in unskilled and semi-skilled jobs. These jobs were taken away and offered to the whites at the expense of the blacks who remained jobless afterward. The challenge of living an economically depressed society added more suffering to the African -Americans who were already lived under extreme suffering caused by racial segregation (Cox workers.org). This agitation would later result in the enactment of the Civil Rights Act in 1964. The act institutionalized equality among races and paved the way for the equality visible in American society in the modern. It affects us today in the sense that all people are required to relate with each regardless of their race, and organizations are obligated by law to promote equality at the workplace. Thus, African American and other minority enjoy the freedom that is guaranteed by the constitution just like any other American citizen.

Whereas acquisition of the freedom of assembly and protest are essential components of the legacy, the fact that the GD led to the birth of social welfare programs in the United as known today cannot be underestimated. When the GD began it instigated massive job losses in the country as many citizens experienced one of the worst periods of their lives as the economy collapsed. Faced with the prospect of widespread poverty, Americans agitated for an effective government action to restore the economy (Smiley econlib.org). As a result, social welfare programs came into being as an intervention of offering financial support to the elderly and significantly damaged families. The programs culminated in the enactment of the Social Security Act which sought to offer protection to individuals and households that did not earn income. The welfare system is an integral part of the US government today. It is funded by the citizens, and this means there is always a tax meant to fund these programs. Thus, the GD affects current taxation in a sophisticated manner.

The issue of income inequality is also a legacy that can be traced back to the GD. For decades now, income inequality remains an emotive issue in the United States. Data suggests that Americans in the top 1percent of income had the highest income percentage of the country's income since 1928. In 1928, the portion of the top percent held a 19.6 percent of the share of the nation's income (Fiorillo). Although the actions of the government led to raid recovery and a return to prosperity, the wages did not increase in corresponding expansion of the economy in response to the government's efforts stabilize the economy. This means that efforts to revamp the economy after the GD only managed to benefit a few individuals in the country at the expense of the masses. Despite this ugly side of the government policies, the government persisted with these policies since the primary concern was to ensure that businesses thrived. As the economy grows, inequality expands, and no amount of effort can achieve both growth and reduction of income inequality (Shin 2049; Panizza 25). This phenomenon has continued for almost a century and remains a major problem in the society today.

The decline of the gold standard and the subsequent rise of the dollar is also a landmark effect of the GD which continues to be part of not only the lives of Americans but also other citizens across the globe. After 1944 the US dollar became a dominant medium of exchange for many countries. Today, the dollar is used everywhere in the world, and most countries price their goods and services on the US dollar (Fiorillo thestreet.com). For an American citizen today, the dominance of the d...