Posted: October 20th, 2022

Week IV: Great Depression and New Deal Discussion

Week IV: Great Depression and New Deal (February 3-9)
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Please address at least one of the following:

1) How did the 1920s lead to the troubles of the 1930s?

2) What caused the Great Depression? Why did it last so long?

3) What did people do to try to survive the Depression?

4) What did the government do to help the nation out of the Depression?

5) How effective were the policies of FDR? What might you have done if you had been president during the Great Depression?

Sample Essay
How did the 1920s lead to the troubles of the 1930s?

The 1920s were referred to as “The New Era” by businesses (Divine, 815). This New Era appeared to be a time of prosperity but it was a bit of an illusion. People were distracted and blinded by the introduction of the new products that were making their lives easier. While people were busy buying new cars and appliances and were going to jazz clubs and to the theater, once prosperous industries were falling in to disorder. Railroads were being outpaced and replaced by the trucking industry and the personal car (Divine, 815). Coal was no longer in demand, petroleum and natural gas were the new go-to for fuel (Divine, 815). Synthetic fibers were replacing the need for natural crops like cotton (Divine, 815). New England Mills were closing and the jobs were being outsourced down south where labor was cheaper, thus putting thousands of employees out of work (Divine, 815). In addition to these once prosperous industries now floundering, there was an oversaturation of goods on the market. More products were being produced than they were being sold (Divine, 815). There was also an unequal distribution of wealth amongst corporations, business men, management, and workers (Divine, 816).

Now, I struggle a bit with understanding the full concept of stocks, but I have a general idea, so I’m going to try and tackle this. There was a lot of speculation surrounding stocks. People believed stocks were prosperous and would continue to rise, so many people placed a lot of money in to stocks based on faith, rather than on a concrete reality (Readings and Divine). So, lots of people bought stocks in the 1920s and the stocks continued to rise, but the purchasing and rise was not based on actual numbers, but more in the belief that things were going well. The people who were putting money in to stocks often put their entire life savings in to them (Divine, 843). People were busy putting all of their money in to stocks, so they were simultaneously not putting their money in to consumer goods BUT NO ONE SEEMED TO BE PAYING ATTENTION. From 1924 onward, the rise in the purchase of large consumer goods steadily declined and by 1927, the country was in a bit of a recession, purchasing far less than they had in previous years (Divine, 842). In 1929, due to a decline in the purchase of consumer goods, the stock market crashed, and because so many people had invested all of their money in to stocks based on pure speculation, a lot of people lost money. Banks suffered great losses in the crash and were unable to offer loans to consumers (Divine, 844). Consumers, without loans, were unable to make purchases. Without buyers, factories began to slow production and had to layoff workers. The loss of employment led to fewer purchases of consumer goods which led to more layoffs and the closure of some factories (Divine, 844). By 1932, unemployment was at 25% (Divine, 844). Without jobs, people became unable to pay their mortgage and, if they hadn’t already done so in the purchasing of stocks, drained their life savings to pay their mortgages (Readings). Banks had to close (Readings). When banks closed, people who had not gone and retrieved all of their savings, lost their money. A distrust for the banks arose and people rushed to withdraw all of their money. In our textbook, on page 845, they state, “If the billions that had gone in to stock market speculation had been used instead to increase wages—which would then have increased consumer purchasing power—production and consumption would have been brought in to balance”. Of course, hindsight is always 20/20. It’s easy to look back and say, “You should have done this to prevent this” but we can only learn from history’s mistakes.

Divine, R.A., Breen, T.H., Williams, R.H., Gross, A.J., & Brands, H.W. (2013). The American Story (5th ed.) Upper Saddle River, NJ: Pearson Education.

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