Реферат: The Depression Essay Research Paper Depression of
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The Depression Essay, Research Paper Depression of the 1930s Depression of the 1930s The economic depression that beset the United States and other countries in the 1930s was unique in its magnitude and its consequences. At the depth of the depression, in 1933, one American worker in every four was out of a job. In other countries unemployment ranged between 15 percent and 25 percent of the labor force. The great industrial slump continued throughout the 1930s, shaking the foundations of Western capitalism and the society based upon it. The “roaring twenties” was an era when our country prospered tremendously. The nation’s total realized income rose from $74.3 billion in 1923 to $89 billion in 1929. However, the rewards of the “Coolidge Prosperity” of the 1920’s were not shared evenly among all Americans. According to a study done by the Brookings Institute, in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%. That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all. Automotive industry mogul Henry Ford provides a striking example of the unequal distribution of wealth between the rich and the middle-class. Henry Ford reported a personal income of $14 million in the same year that the average personal income was $750. By present day standards, where the average yearly income in the U.S. is around $18,500, Mr. Ford would be earning over $345 million a year! This maldistribution of income between the rich and the middle class grew throughout the 1920’s. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income. A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32% in manufacturing. During that same period of time average wages for manufacturing jobs increased only 8%. Thus wages increased at a rate one fourth as fast as productivity increased. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits. In fact, from 1923-1929 corporate profits rose 62% and dividends rose 65%. The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge’s administration (and the conservative-controlled government) favored business, and as a result the wealthy who invested in these businesses. An example of legislation to this purpose is the Revenue Act of 1926, signed by President Coolidge on February 26, 1926, which reduced federal income and inheritance taxes dramatically. Andrew Mellon, Coolidge’s Secretary of the Treasury, was the main force behind these and other tax cuts throughout the 1920’s. In effect, he was able to lower federal taxes such that a man with a million-dollar annual income had his federal taxes reduced from $600,000 to $200,000. Even the Supreme Court played a role in expanding the gap between the socioeconomic classes. In the 1923 case Adkins v. Children’s Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional. The large and growing disparity of wealth between the well-to-do and the middle-income citizens made the U.S. economy unstable. For an economy to function properly, total demand must equal total supply. In an economy with such disparate distribution of income it is not assured that demand will always equal supply. Essentially what happened in the 1920’s was that there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income. A 1932 article in Current History articulates the problems of this maldistribution of wealth. President Calvin Coolidge had said during the long prosperity of the 1920s that “The business of America is business.” Despite the seeming business prosperity of the 1920s, however, there were serious economic weak spots, a chief one being a depression in the agricultural sector. also depressed were such industries as coal mining, railroads, and textiles. Throughout the 1920s, U. S. banks had failed–an average of 600 per year–as had thousands of other business firms. By 1928 the construction boom was over. The spectacular rise in prices on the stock market from 1924 to 1929 bore little relation to actual economic conditions. In fact, the boom in the stock market and in real estate, along with the expansion in credit (created, in part, by low-paid workers buying on credit) and high profits for a few industries, concealed basic problems. Thus the U. S. stock market crash that occurred in October 1929, with huge losses, was not the fundamental cause of the Great Depression, although the crash sparked, and certainly marked the beginning of, the most traumatic economic period of modern times. The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. Many investors, caught up in the race to make a killing, invested their life savings, mortgaged their homes, and cashed in safer investments such as treasury bonds and bank accounts. As the prices continued to rise, some economic analysts began to warn of an impending correction, but they were largely ignored by the leading pundits. Many banks, eager to increase their profits, began speculating dangerously with their investments as well. Finally, in October 1929, the buying craze began to dwindle, and was followed by an even wilder selling craze. On Thursday, October 24, 1929, the bottom began to fall out. Prices dropped precipitously as more and more investors tried to sell their holdings. By the end of the day, the New York Stock Exchange had lost four billion dollars, and it took exchange clerks until five o’clock am the next day to clear all the transactions. By the following Monday, the realization of what had happened began to sink in, and a full-blown panic ensued. Thousands of investors–many of them ordinary working people, not serious players–were financially ruined. By the end of the year, stock values had dropped by fifteen billion dollars. Many of the banks which had speculated heavily with their deposits were wiped out by the falling prices, and these bank failures sparked a run on the banking system. Each failed bank factory business and investor contributed to the downward spiral that would drag the world into the Great Depression. By 1930, the slump was apparent, but few people expected it to continue; previous financial panics and depressions had reversed in a year or two. The usual forces of economic expansion had vanished, however. Technology had eliminated more industrial jobs than it had created; the supply of goods continued to exceed demand; the world market system was basically unsound. The high tariffs of the Smoot-Hawley Act (1930) exacerbated the downturn. As business failures increased and unemployment soared–and as people with dwindling incomes nonetheless had to pay their creditors–it was apparent that the United States was in the grip of economic breakdown. Most European countries were hit even harder, because they had not yet fully recovered from the ravages of World War I.) The deepening depression essentially coincided with the term in office (1929-33) of President Herbert Hoover. The stark statistics scarcely convey the distress of the millions of people who lost jobs, savings, and homes. From 1930 to 1933 industrial stocks lost 80% of their value. In the four years from 1929 to 1932 approximately 11,000 U. S. banks failed (44% of the 1929 total), and about $2 billion in deposits evaporated. The gross national product (GNP), which for years had grown at an average annual rate of 3.5%, declined at a rate of over 10% annually, on average, from 1929 to 1932. Agricultural distress was intense: farm prices fell by 53% from 1929 to 1932. President Hoover opposed government intervention to ease the mounting economic distress. His one major action, creation (1932) of the Reconstruction Finance Corporation to lend money to ailing corporations, was seen as inadequate. Hoover lost the 1932 election to Franklin D. Roosevelt. The depression brought a deflation not only of incomes but of hope. In his first inaugural address (March 1933), President Franklin D. Roosevelt declared that “the only thing we have to fear is fear itself.” But though his New Deal grappled with economic problems throughout his first two terms, it had no consistent policy. At first Roosevelt tried to stimulate the economy through the National Recovery Administration, charged with establishing minimum wages and codes of fair competition in every industry. It was based on the idea of spreading work and reducing unfair competitive practices by means of cooperation in industry, so as to stabilize production and prevent the price slashing that had begun after 1929. This approach was abandoned after the Supreme Court declared the NRA unconstitutional in Schecter Poultry Corporation V. United States (1935). Roosevelt’s second administration gave more emphasis to public works and other government expenditures as a means of stimulating the economy, but it did not pursue this approach vigorously enough to achieve full economic recovery. At the end of the 1930s, unemployment was estimated at 17.2%. Other innovations of the Roosevelt administrations had long-lasting effects, both economically and politically. To aid people who could find no work, the New Deal extended federal relief on a vast scale. The Civilian Conservation Corps took young men off the streets and sent them out to plant forests and drain swamps. The government refinanced about one-fifth of farm mortgages through the Farm Credit Administration and about one-sixth of home mortgages through the Home Owners Loan Corporation. The Works Progress Administration employed an average of over 2 million people in occupations ranging from laborers to musicians and writers. The Public Works Administration spent about $4 billion on the construction of highways and public buildings in the years 1933-39. The depression years saw a burst of union organizing, aided by the National Labor Relations Act of 1935. New industrial unions came into existence through the efforts of organizers led by John L. Lewis, Walter Reuther, Philip Murray, and others; in 1937 they won contracts in the steel and auto industries. Total union membership rose from about 3 million in 1932 to over 10 million in 1941. The expanded role of the federal government came to be accepted by most Americans by the end of the 1930s. Even Republicans who had bitterly opposed the New Deal shifted their stance. Wendell Wilkkie, the Republican presidential nominee in 1940, declared that he could not oppose reforms such as the regulation of the securities markets and the utility holding companies, the legal recognition of unions, or Social Security and unemployment allowances. What bothered him and other opponents of the New Deal, however, was the extension of the federal bureaucracy. The depression caused much questioning of inherited economic and political ideas. Sen. Huey P. Long of Louisiana found a national following for his “Share the Wealth” program. The socialist writer Upton Sinclair was nearly elected governor of California in 1934 with a similar program for redistributing the state’s wealth. Many writers and other intellectuals swung even further left, concluding that capitalism was on its way out; they were drawn to the Communist party by what they supposed to be the accomplishments of the USSR. In other countries the depression had even more profound effects. As world trade fell off, countries turned to nationalist economic policies that only exacerbated their difficulties. In politics the depression strengthened the extremes of right and left, helping Adolf Hitler to power in Germany and swelling left-wing movements in other European countries. The depression was thus a time of massive insecurity among peoples and governments, contributing to the tensions that produced World War II. Ironically, however, the massive military expenditures for that war provided the economic stimulus that finally ended the depression in the United States and elsewhere. Bernstein, Irving, A Caring Society: The New Deal, the Worker and the Great Depression (1985). Boardman, Fon W., Jr., The Thirties: America and the Great Depression (1967). Davis, Joseph S., The World Between the Wars, 1919-39: An Economist’s View (1974). Kindleberger, Charles P., The World in Depression, 1929-1939 (1975; repr. 1983). Markowitz, Gerald, and Rosner, David, eds., Slaves of the Depression (1987). Wecter, Dixon, Age of the Great Depression, 1929-1941 (1971). |