Sample Economics Paper on The Great Depression

The Great Depression

The Great Depression was an economic epidemic that affected almost all nations across the world. It was an economic depression that was felt in countries at different times in the 1930’s, with the earliest mention of this problem being in 1929. Though the 20th century was filled with different kinds of depressions, the Great Depression was the worst ever to hit the world, hence its name. Between the years 1929 and 1932, the Gross Domestic Product (GDP) fell in the whole world by a staggering 15%. It was an event that brought to the fore the frailties and instabilities of the world economies.

The Great Depression is thought to have started in the United States of America due to the fall in prices of stocks. This news spread all over the world leading to the crash of the stock markets all over the world in October 1929. This day went down in history as one of the worst days in the world’s economy and was named the Black Tuesday due to the effects that it had on the world economy. The Great Depression was not only felt in the developed, it was an occurrence that affected developed countries and those, which were stable economically. It also affected poor countries that were struggling economically. There was a tremendous drop in taxes, personal income, profits and in international trade, as a result there was a great increase in the rates of unemployment. The Great Depression was solely responsible to a number of occurrences including the halting of the construction industry in a number of countries in the world, the decline in the machinery industry and decline in farming all over the world.

The factors that are believed to have occurred simultaneous to the great depression and which are thought to be the chief origins of the depression include but are not limited to the ones discussed herein.

Following the crash in stock markets, there were economic problems that followed, the rates of unemployment, due to the economic problems is believed to have risen at a very high rate. By March 1930 for example, statistics show that there were about three million unemployed people in the United States alone, this was almost twice the number that was seen before the depression. The then president, not wanting to believe that there was an economic crisis, still urged the people to go about their business as usual, he promised that the worst effects of the economic crash would be over within sixty days, this was not to be. With the increase in unemployment, there was need for people to find alternative sources of income. This led people to apple vending and by December 1930, the streets of towns such as New York were filled with apple vendors.

With the increase in economic difficulties and the inability of people to purchase food, there was unrest in a number of towns all over the world. The most notable such unrest was in Minneapolis where due to lack of food, people resorted to breaking into food stores and getting away with food. There were also documentations of xenophobic tendencies though these were minimal. It is believed that the xenophobia came about because of the inability of the natives and the locals to find paying jobs as a result; they resented foreigners who were able to stay employed. These feelings are believed to have led to the deportations of thousands of Mexican Americans due to the feeling that they were “stealing” jobs from the real Americans.

There are various reasons that are believed to have been the roots of the Great depression. These grounds are from the economic misfortunes that occurred in the world from 1929 to around the close of the 20th century. The most common reasons given for the depression include:

The fall of stock markets

This first happened in the United States in October 1929. It is seen as the first step towards a long horrifying period. The crash of the stock markets on a day that came to be called the Black Tuesday, led to loss of lots of money by stockholders. News of this economic epidemic travelled fast, reaching every part of the world. Many people too different measures to try protecting themselves from the epidemic but it was not enough, nothing could prevent the depression from occurring.

Bank failures

This is believed to be another main reason as to the occurrence of the Great Depression. The failure of banks led to their collapse with more than nine thousand banks collapsing over the years marking the great depression. In the years preceding the depression, economic conditions all over the world were quiet secure, as a result, there was no real reason as to why anyone would have thought of insuring bank deposits. The failure of banks all over the world and in the US especially, meant that people lost billions of shillings that had been saved in the banks.

The economic policy that America had adopted with Europe

There were different types of economic policies that were adopted by the United States in a bid to protect the traders. One of these policies saw to the increase in taxes charged on imports. This was definitely bound to bring about negative effects on international trade. Other countries increased their taxes on imports to march the taxes that they were forced to pay in trade with America; others also stopped or decreased the quantity of goods being traded with America thereby reducing international trade.

Decrease in purchasing power

This is believed to have been as a due to the fall in stock markets and the prevailing economic conditions of the time. There was fear among the people in the United States and they gradually stopped purchasing. This was undesirable to the production industry because the quantity of goods being produced had to be decreased thus the need to lay off some of the workers. The loosing of jobs by the individuals affected by the reduction in purchasing power led to even lower purchasing power.

Theories explaining the Great Depression

There are a number of theories that attempt to elucidate the Great depression. Economists have, for a long time, not been able to come to a conclusive reason as to the occurrence of the depression; they have however managed to come up with a number of theories, among them being:

The demand driven theories are mostly proposed by the Keynesian and Institutional economists. These theories state that the reason for the depression was the loss of confidence by the citizen. This can be seen for example when there was a decrease in purchasing power after the crash of stock markets. The lack of assurance led to less purchasing and as such less consumption thereby forcing the production levels to decrease. There were also less and less investments due to fear of getting losses from such economic activities. Holding money was seen to be more profitable than actually putting the money to use, this led to an increase in the value of money, and as such just a little amount could get a person, lots of purchases.

The monetarists also posit that the Great Depression started as a conventional recession, one of the many that had been experienced throughout the years. It was the monetary policy mistakes committed by the relevant authorities; they argue that led to the attenuation of the money supply worsening the economic conditions.

The conventional theorists insist that the Great Depression did not begin as a conventional recession; instead, they hold that it began as a variety of recessions. Unlike the monetarists, they hold that the banking crisis leading to the failure of banks was the main reason as to why there was a sudden change from a recession to the great depression. The failure of the Federal Reserve to upsurge the quantity of money, thanks the monetary policies adopted by Roosevelt, acted as a catalyst to an already horrible situation. The acts of the then president, Roosevelt, worsened the economic situation when he reduced the fiscal stimulus immediately after the Federal Reserve raised the necessities of the bank reserve.

Though there are, different theories explaining the situation experienced in the world in the 1930’s they all agree that this was one of the worst economic depressions ever to be experienced in the world. The decisions made in this period were not properly informed and as such it was even more difficult for the world to recover as fast as was necessary.