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The Great Depression is one of the greatest economic meltdowns in global history. The event occurred gradually, with the most significant effects evident between 1929 through the 1930s (Library of Congress, 2022b). However, the historic occurrence had its epicenter in the United States, and the economic meltdown affected economies to different degrees across the globe. A stock market crash on Wall Street was the biggest factor influencing the meltdown and played a critical role in how financial systems operate today. Elements such as trade, unemployment, low imports and exports, reduced trade within the global market, and overproduction in the manufacturing industry are some elements that contributed to the event’s progression and severity in different countries. This essay focuses on the effects of the Great Depression. The essay proposes a connection between social and economic factors in creating and preventing similar events.
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Reduced Global Trade
The Great Depression created an environment where global trade was highly challenging for most countries. Even though countries within each continent had created stable relationships with their trade partners after the culmination of World War I, the Great Depression reduced countries’ abilities to support trade relations across their national borders. One of the reasons for strained trade relationships was the lack of investor confidence in the international market (Crafts & Fearon, 2010). Many investors traded their stocks and hose to keep their funds, leading to the Great Wall Street crash in 1929. Most investors chose to keep their finances instead of reinvesting, thus reducing the amount of funding available for loans. Easy access to business loans before the crash aggravated the situation as businesses failed and the number of defaulters rose. The manufacturing industries had also zealously produced more products than most populations could purchase during the economic boom following the end of the First World War. The main goal was to export the excess products, especially in cases where countries were rich in mineral resources. However, failing economies globally led to low demand and prices, thus discouraging exports. During the economic slump, countries could not exchange necessary commodities, leading to unemployment, government funding, and individual ability to afford basic needs (Madsen, 2001). Countries with the highest numbers of unemployment also experienced civil unrest, as large percentages of their populations could not afford basic needs (Library of Congress, 2022a). Countries with the capacity for agricultural production also suffered as value addition and exportation dropped. Manufacturing costs also drove most people to focus on subsistence farming, which was particularly punitive in states where most people in rural areas had moved to urban regions in search of employment and better lifestyles. The stock market crash also caused losses for the latter as companies declared losses and eventual bankruptcy (Hansen & Hansen, 2020).
Low Global Living Standards
In most cases, self-sustainability requires the ability to cater to basic needs (including food, shelter, clothing, medical care, and education) individually. However, such sustainability also depends on others’ ability to use their skills and knowledge to produce different products and services. A single individual cannot meet all the needs alone. Exchanging products and services for currency allows individuals to obtain what they need to meet their needs. During the Great Depression, individuals could not sustain their lifestyles for various reasons. For instance, farmers moved to cities for employment and better pay (Simon, 2001). Although the strategy initially worked, high production costs made it difficult for employers to offer valuable compensation opportunities.
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Factors such as the Dust Bowl drought made it difficult for remaining farmers to grow food for the American population, with similar cases arising for various countries recovering after the First World War (Long & Sui, 2018; McLeman et al., 2013). Meager pay and few available opportunities made it difficult for families to meet basic needs and caused a decline in their living standards. The families could not obtain education for future opportunities, thus creating a vicious cycle that stifled efforts to raise living standards for most people. Most governments tried to raise living standards by imposing more taxes because international investments were not forthcoming. However, the tax regimes sank living standards lower. They necessitated a change in tact comprising some bailouts, increased government debts, and exploring relations with countries that experienced the least adverse effects, as was the case with China and eventually Germany. The Great Depression served as a prime example of the connection between social, political, and economic factors influencing individuals’ abilities to achieve quality living standards.
Further, the event highlighted the interconnectivity of individuals in different social classes. Although the wealth gap widened during the depression, adverse changes in one socioeconomic class caused a decline in the rest. The wealthy could not afford labor and access basic needs at reasonable costs, while the less fortunate lacked the economic opportunities necessary to afford basic needs.
The Great Depression was a monumental historic event for several reasons. Firstly, it highlighted the interconnectivity of individual national economies globally. Secondly, it raised awareness of factors likely to cause economic ruin for countries, especially regarding investments. Thirdly, inadequate policies at the time led to better policy development for similar future events. For instance, the Great Recession in 2007 did not have effects as severe as the Great Depression. The event also made it possible to establish the interconnectivity of success between different social classes, especially in times of dire economic downfall. Thus, arguably, while the effects of the Great Depression were mostly catastrophic, the event also charted a path for better preparation to avert a similar event in future.
- Crafts, N., & Fearon, P. (2010). Lessons from the 1930s Great Depression. Oxford Review of Economic Policy, 26(3), 285–317. https://doi.org/10.1093/oxrep/grq030
- Hansen, M. E., & Hansen, B. (2020, April 24). Perspective: Making it easier to declare bankruptcy could avert economic catastrophe. Washington Post. https://www.washingtonpost.com/outlook/2020/04/24/making-it-easier-declare-bankruptcy-could-avert-economic-catastrophe/
- Library of Congress. (2022a). Great Depression and World War II, 1929-1945: Americans react to the Great Depression. Library of Congress. https://www.loc.gov/classroom-materials/united-states-history-primary-source-timeline/great-depression-and-world-war-ii-1929-1945/americans-react-to-great-depression/
- Library of Congress. (2022b). Overview: Great Depression and World War II, 1929-1945 | U.S. History Primary Source Timeline | Classroom Materials at the Library of Congress. Library of Congress. https://www.loc.gov/classroom-materials/united-states-history-primary-source-timeline/great-depression-and-world-war-ii-1929-1945/overview/
- Long, J., & Sui, H. (2018). Refugees from dust and shrinking land: Tracking the Dustbowl migrants. The Journal of Economic History, 78(4): 1001-1033. https://doi.org/10.1017/S0022050718000591
- Madsen, J. B. (2001). Trade barriers and the collapse of world trade during the Great Depression. Southern Economic Journal, 67(4), 848–868. https://doi.org/10.2307/1061574
- McLeman, R. A., Dupre, J., Berrang Ford, L., Ford, J., Gajewski, K., & Marchildon, G. (2013). What we learned from the Dust Bowl: Lessons in science, policy, and adaptation. Population and Environment, 35(4), 417–440. https://doi.org/10.1007/s11111-013-0190-z
- Simon, C. J. (2001). The supply price of labor during the Great Depression. The Journal of Economic History, 61(4), 877–903. https://doi.org/10.1017/s0022050701042012