What is Great Depression? Causes and the End of Great Depression

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oi-Sneha

By Sneha B K

Published: Saturday, December 24, 2011, 12:54 [IST]

The term and concept of ‘Great Depression’ originated at the turn of the 20th century. The Great Depression is the worldwide economic downturn which began in 1929 and lasted until the late 1939. It was the longest and most severe depression of the 20th century which had the devastating impact all over the world.

It originated in the United States with the steepest fall in stock market and rapidly spread to almost every country in the world. Thousands of individual investors got ruined, banks and financial institutions, particularly those holding stocks in their portfolio got bankrupt and that gave rise to unemployment and poverty.

During the period, Dow Jones Industrial Average, America's leading index fell by 13%, stock prices fell by 40%, over 9,000 banks filed bankruptcies wiping out 9 million savings accounts, 86,000 businesses got shut, wages declined by average of 60% and unemployment lifted up to 25% making 15 million people jobless.

The main outburst was weakness and imbalance in handling economy. The Great Depression has set an example for the 21st century to analyze how far the world's economy can decline.

Main causes for Great Depression
· One of the main reasons for Great Depression is stock market crash which happened on October 29. Stock market was not regulated and there was over speculation, many Americans bought stocks on credit known as margin buying. Investors lost 14 billion dollars in one single day and by the end of 1929, 40 billion dollars were lost from the US economy.
· Many banks lent money to investors to buy stock. When investors lost money from the stock market, people start withdrawing money from their bank accounts. 9,000 banks filed bankruptcies as there were no enough funds to return so they had to close the doors, people lost their savings.
· People stopped spending money, which increased the economic crisis as demand and production was not balanced.
· When consumer spending came at halt, unemployment rose, reaching its highest level in 1933 by making 15 million people jobless.

The conclusion of Great Depression
Depression caused major political imbalance. In 1933 democrats elected Franklin D Roosevelt and he came out to be as a real hero, under his surveillance the New Deal programs of relief, recovery and reform implemented, which had brought a major improvement in American politics.

Some programs regulated wages, which helped families to cope up with their daily necessities like food and clothing. Some employed artists, writers and labourers. Senior citizens who could no longer work were given with social security.

United States borrowed funds to build up its military, as an outcome manufacturing sector jumped to 50% in 1939, with this unemployment reduced to 17%. The Great depression lasted until World War II in many countries. When America entered the war and enrolled 10 million men and women into the military.

American exports increased with the supply of munitions, ammunitions, weaponry, etc. that put millions of workers back to factories and all contributed to the end of the Great Depression. The American economy flourished and there was no road back to refurbishment.

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