The Great Depression, New Deal, and World War II


The Great Depression, 1929-1939 was a global economic downturn that devastated countries the world over, the effects of which were widely felt in the United States. This essay explains the causes of the Depression, the efforts made by the Roosevelt administration through a slew of economic measures called the ‘New Deal’ and the reasons why the Depression ended.

Main Body

The Great Depression originated in the United States and had been triggered by the sudden collapse of the Stock market, which on 29 October 1929, crashed. “The shocks to the domestic US economy were a primary cause (Bernanke 5)” for the Depression as the primary sector comprising of mining, farming and logging that had been listed on the stock exchange lost their share prices dramatically. This led to a panic amongst American investors who tried to keep out of the stock market and postpone their purchases of white goods. The sudden loss of capital, forced companies to downsize and thousands of Americans lost their jobs as industrial production declined and the farming sector lost tremendous sums of money due to extremely low prices of farm produce. Poor banking procedures were also to blame. Banks had invested disproportionate amount of customer savings in share market, thus when the market collapsed, so did the banks leaving thousands of middle class Americans without their savings. Banks also gave loans to fraudulent operators who too lost money. The return to Gold standard by the British was also blamed as a cause. The American system of free market was also attributed to the cause for the Depression as lax regulatory policies ensured that market players could exploit the economic system. Others point to the phenomenon of under-consumption as being yet another cause that led to the Depression. The inability of the Government of the day to shore up investor confidence and customer confidence as also ensure public works program to balance the under-consumption and encourage customer spending was another reason for the Depression.

To get over the Depression, Roosevelt initiated a slew of economic reforms and measures collectively known as the ‘New Deal’. Roosevelt first sought to restore the confidence of the American people in the banking system by passing an Emergency Banking Act and creating a Federal Deposit Insurance Scheme. He embarked on massive public works projects like expansion of Dams, railroads and highways to provide employment to thousands of laid-off workers. The ‘New Deal’ policies included forcibly shoring up prices for agricultural produce so that famers could profit. Rules and regulations were framed for private industries to regulate their policies and ensure minimum fair prices for goods produced. The Social Security Act was signed in the Second New Deal measures. All these measures helped the US economy to grow though unemployment continued to remain high till the advent of the Second World War, which gave the government a golden opportunity to employ all workers in the armed forces or industries supporting defense production (Hall and Ferguson 155). Thus it was largely, the Second World War which was responsible for ending the Great Depression in America.

Works Cited

Bernanke, Ben. Essays on the Great Depression. Princeton: Princeton University Press, 2000.

Hall, Thomas Emerson and J. David Ferguson. The Great Depression: An International Disaster of Perverse Economic Policies. Michigan: University of Michigan Press, 1998.

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