Great Depression Today's Global Economic essay

Download this essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from essay:

The excessive use of margin had encouraged speculation. Poor governance on the part of banks and brokerages allowed for a market failure where investors were not making rational decisions, resulting in a bubble.

A variety of new taxes were created to offset Roosevelt's social programs. The American psyche had been scarred by the abject poverty of such a wide proportion of the population. There was palpable fear and desperation. This resulted in the creation of a social safety net and massive infrastructure investment. To pay for this, payroll taxes were developed and this was followed by more taxes to pay down. Withholding taxes and broader income taxes also came out of this era.

The gold standard was abandoned as a result of the Great Depression. The rigidity of the standard was considered to be an impediment to recovery. The coming of World War Two resulted in the postponement of monetary system development until the Bretton Woods conference, which resulted in a modified version of the gold standard.

Economists have spent entire careers trying to understand the Great Depression. Keynesian economic theory derives largely from an explanation of the New Deal -- the government spending made up the difference in the balance of payments, raising the GDP as a result. The monetary supply theory was developed, attributing the bulk of the Depression to the structural problems in the banking system. The Federal Reserve's inaction with respect to increasing money supply is therefore held as a primary cause. This theory has guided Federal Reserve policy in recent years. This theory is similar to the Austrian school's money supply theory, which blamed the excess of money in the 1920s for the bubble and its subsequent burst.

The neoclassical view is that the decline in productivity in the late 1920s caused the Depression. In truth, it was likely a combination of all of these factors. Events as cataclysmic as the Great Depression are not caused by one or two antecedents. It takes a wide range of problems to back a nation into a corner like the Great Depression. The causes can thus be divided into two categories -- structural issues from the 1920s and government responses in the 1930s.

Roosevelt's famous inaugural address exemplifies the view of Hoover's responses to the crisis:

"So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself -- nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance." -- F.D. Roosevelt

The fear was twofold. The first fear was the consumer fear of the country's financial system. There was credit available in 1930 and the market was on the road to recovery. But consumers did not feel as comfortable as market participants, however, and kept their cash to themselves. It was not until Roosevelt's banking reforms that the fear began to fade. Had the government taken steps to alleviate the fear at the outset of the crisis, the impacts may not have been as bad.

The second fear was the fear of competition. Competition is the lifeblood of the market system. Trade increases availability and decreases prices. The retaliation for Smoot-Hawley reduced U.S. exports, putting significant strain on the economy. Equally important was the reduced availability and increased price of imported goods. The impacts of this response were devastating, taking a recession and turning it into Depression. The Fed's lack of willingness to increase the money supply may have also contributed to the Depression. Consumers were relatively unwilling to spend, so more money may not have helped, but businesses may have been able to keep their workers employed long enough for Roosevelt to take power and make the necessary banking and trade reforms.

Conclusion

The Great Depression is the benchmark for economic crisis and the most important event in 20th century U.S. history. From the depths of the Depression comes the basis of our current economic thought and many of our governmental institutions and programs (and taxes). There is no one root cause of the Depression. It was precipitated by poor governance and irrational investing and then exacerbated by a series of ill-conceived policies. Debate also remains as to the impact of the New Deal. Most of the world had already turned the corner by the time the New Deal was implemented and it is entirely possible that the U.S. would have turned the corner as well.

On balance, Roosevelt's greatest contribution to the ending of the Depression may have been the development of a regulatory framework for the banking industry. This restored some of the faith in the banking system. Consumers will did not have jobs, which meant that this restoration of confidence took a long time to trickle through the economy.

Ironically, it was Smoot and Hawley who made the greatest contribution of any politician or economist as a result of the Great Depression. Over one thousand economists had petitioned against their bill, but a clutch of selfish business interests made the Act happen anyway. It would be to their detriment, as export markets dried up. The value of open trade to the development and sustained success of the global economy would be taken much more seriously following Smoot Hawley. The end of the 20th century and the beginning of the 21st century have been driven by improved freedom of trade, a telling legacy of Smooth Hawley's brutal contribution to Depression-era suffering.

The greatest economic event of the 20th century was followed by the greatest event of any type. The New Deal had failed to provide employment for Americans despite the government-sponsored improvements to the GDP. The Depression, built on the bubble of 1920s excesses, declining consumption and incompetent government response during the Hoover era, came to an end as loudly as it began, with the coming of war. But the lesson we learned from the Depression are still remembered today, and our policies and actions reflect that.

Works Cited:

No author. (1929). Wall Street Hums on the Day of Rest to Catch up at Work. New York Times. Retrieved April 23, 2009 from http://www.nytimes.com/library/financial/102829crash-sunday.html

No author. (1929). Stocks Collapse in 16,410,030 Share Day, but Rally at Close Cheers Brokers; Bankers Optimistic, to Continue Aid. New York Times. Retrieved April 23, 2009 from http://www.nytimes.com/library/financial/103029crash-lede.html

Salesman, Richard M. (2004) "The Cause and Consequences of the Great Depression, Part 1: What Made the Roaring '20s Roar" The Intellectual Activist .

Carter, Susan. (2006). Historical Statistics of the U.S.: Millenial Edition. Retrieved April 23, 2009 from http://www.hyperhistory.com/online_n2/connections_n2/depression9.html

Wilson B. Brown and Jan S. Hogendorn. International Economics: In the Age of Globalization. Retrieved April 23 from http://www.google.com.au/books?id=5SoP6KUDwY4C&pg=PA246&dq=smoot+hawley&sig=GplUGJBCti3Tv3XN2saPicP5Lsw

U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D.C., 1960), p.70.

Franklin D. Roosevelt's Inaugural Address, 1933 retrieved April 23, 2009 from http://historymatters.gmu.edu/d/5057/[continue]

Cite This Essay:

"Great Depression Today's Global Economic" (2009, April 23) Retrieved December 8, 2016, from http://www.paperdue.com/essay/great-depression-today-global-economic-22563

"Great Depression Today's Global Economic" 23 April 2009. Web.8 December. 2016. <http://www.paperdue.com/essay/great-depression-today-global-economic-22563>

"Great Depression Today's Global Economic", 23 April 2009, Accessed.8 December. 2016, http://www.paperdue.com/essay/great-depression-today-global-economic-22563

Other Documents Pertaining To This Topic

  • Depression the Great Depression Pre Depression Economy Summary

    Depression The Great Depression Pre-Depression Economy Summary • Write a journal entry describing a weakness in your chosen character's sector of the economy that would later contribute to the Great Depression. • Write a summary of the weaknesses in the American economy that contributed to the Great Depression. The Great Depression was one events of the twentieth century that defined the entire century. It was the longest lasting and most widespread financial crisis in the

  • America Economy the Global Economic Crisis That

    America Economy The global economic crisis that the United States finds itself in today is in many ways similar to the basic characteristics and consequences that followed the Great Depression that lasted from 1929 to 1933. In this paper, the Great Depression and its aftermath will be examined at length with the purpose of comparing its similarities and differences with the current economic turmoil. Specifically, this paper will highlight government bond

  • Did the New Deal Prolong the Great Depression

    New Deal Prolong the Great Depression? The modern day economy is currently facing the biggest challenges it has faced since the Great Depression of the 1929 -- 1933. Much like then, the leaders of today are striving to develop and implement laws and reforms, with their main emphasis being on stability and prudence -- at least at a theoretical level. The modern day economic crisis has emerged from within the American

  • Era Great Depression Identify at least 2

    Era Great Depression Identify at least (2) two major historical turning points in the period under discussion. The problems were similar in Germany and the U.S. Germany was in the midst of a labor crisis and depression after 1918 and the transitional national market was a woebegone thing. Under such circumstances the natural result was the hope of another militarization. (Marwick; Emsley; Simpson, 2001) This resulted in the Nazi rise and

  • H 1B Shortage in Today s Society

    To protect themselves, many Americans chose to avoid working with or becoming friends with those who immigrated. A lack of trust permeated everything that the Americans did in regards to the immigrants, at least with the men. This was not always true of the women, as they often got along together and shared the trials and difficulties of raising families. However, many men who owned shops and stores would not

  • Economics Crisis as an Inevitable

    The U.S. is a property owning civilization and a number of the people wanted land and housing. Americans however scarcely ever create savings. "The country itself lives on other countries' savings by issuing bonds to finance its excessive consumption. The current crisis began with cheap housing loans offered by banks. Banks provided loans but instead of holding the loan in their books, they packaged them into collateralized debt obligations (CDOs)

  • Economic Development and Crises the

    All these situations impact the overall morale of the staff members, and as such their levels of performance and commitment to the employers. The scenarios are more dramatic for the people who are actually downsized, but the negative impacts are also observed at the level of the remaining staff members, who are presented with fewer opportunities for personal and professional development. The International Labor Office argues that in times of


Read Full Essay
Copyright 2016 . All Rights Reserved