The Great Depression is one of the most critical periods in the modern history of the United States. It began with the global economic crisis in 1929, which most affected the United States. Throughout the 1930s until 1939, the economy could not fully recover from the crisis and recover. Therefore, this entire period was called the Great Depression — because of its duration and severe societal consequences.
The decline of the United States economy during the Great Depression was profound. Some industries were in a disastrous situation, primarily the financial sector. By the beginning of 1933, the entire financial system began to stop, and banks began to close. The debt crisis was severe, the fall in the value of shares was great, and private depositors and firms sought to withdraw their money from the banks, which led to the collapse of the entire banking system, which was blocked and ceased to function. Although America was plunged into chaos, the economy suffered an incredible collapse, yet a number of anti-crisis measures were developed that helped the country to get out and recover.
The causes of the Great Depression are the subject of ongoing discussions about the role of government policies and private business activity. McClay states that it is difficult to identify the true causes of the Great Depression, as there are quite a lot of factors, but there are still two versions (428). The main reason for the crisis was that capitalism had ceased to be an automated system. It was a crisis of overproduction of many goods, which followed a period of prosperity and recovery of the American economy.
The spontaneous development of the market and the presence of significant capital, which operated outside the framework of national regulation, led to the fact that so many goods, including food and much more, were produced that the market could not digest. The purchasing power of the population did not correspond to the number of goods that were made and were on the market. As a result, there was a market crash.
The second reason was financial speculation. This was the period when the financial market was developing and stock trading was growing. But this process also took place beyond any control. As a result of which many financial bubbles were inflated, financial speculation was committed, fictitious speculative companies were created, and fraud was carried out. And this, too, led to the inflating of the financial bubble and a sharp collapse in the value of stocks, which served as another strong impetus for the economic crisis.
In 1932, Franklin Roosevelt was elected president of the United States. The first third of the year of his rule was aimed at finding anti-crisis measures and creating laws that were supposed to slow down the deteriorating situation as much as possible.
Roosevelt’s reform plan is divided into two periods; shortly after the inauguration, Roosevelt was forced to declare a bank holiday, meaning that the banks’ activities were frozen. After that, a law was passed that generally suspended the activities of banks and allowed them to work only after the rehabilitation, which was carried out by unique state bodies that determined the situation in the bank and decided whether it could function or not. It was provided with financial assistance from the federal government if it could perform, and the bank opened and continued to operate. This effectively meant that President Roosevelt had the opportunity to nationalize the banking system because the banks were not working anyway.
Concerning industry, the state also decided to follow the path of regulation and the adoption of appropriate regulatory legislation, which stimulated fair competition codes. To eliminate chaos, and anarchy, to restore the price level, and production levels, a special law was adopted on the restoration of industry, in accordance with which codes of fair competition were created. In addition, this law made it possible to start a specific regulation of labor relations. There was a particular article that regulated the relationship between labor and capital. For the first time, the right to form independent trade unions in the industry was proclaimed by workers themselves.
If the first stage of the reforms was aimed at stopping the panic and helping to restore the industry to some extent, then the central part of the social problems was already solved in a later period. Since there were no social assistance and support programs in the United States, measures were taken to provide the unemployed population with public work. Unemployment reached about 13 million people by the end of 1932 (McClay 432). The public works program mainly provided for infrastructure and socially significant projects. These included the construction of hospitals, stadiums, schools, post offices, bridges, highways, roads, airports, dams, and hydroelectric power stations. National parks and nature reserves were improved, and special measures were taken to protect the environment.
As for the significance and consequences of the course of reforms, there are discussions about how effective they have been in economic terms. Most likely, their effectiveness was not very high because many problems, in particular unemployment, and the decline in production, persisted for a long time. The economy was pulled out of the crisis by the Second World War that had already begun in Europe in 1939.
In conclusion, social legislation, first adopted in the United States in the 1930s, has since been a pillar, the basis for the functioning of the entire American society. For the first time, such civilized forms of regulation of economic and social life were created, which were previously absent in the United States. Therefore, the significance of Roosevelt’s new direction lies in the fact that it was during this period that the current American state was created and a policy was formed that continues to the present day.
Work Cited
McClay, Wilfred. Land of Hope. An Invitation to the Great American Story. Encounter Books, 2019.