The Great Depression

Miscellaneous ColaM August 8, 2016 0 0
Have you heard the term 'The Great Depression'? With this expression of the economic crisis in the United States is meant. This occurs after about October 29, 1929, when shareholders sell their shares en masse, because of high rates dangerous in their view. Not so much these days, but rather the fear response to plummeting prices caused a chain reaction where years later the aftershock was still feeling it. October 29, 1929 also went down in history as "Black Thursday."

Industrial Revolution

The origins of the crisis lay in the industrial revolution. This phenomenon was born around 1750 in England. This term is the transition from handcrafted, designed to mechanized labor-intensive products. Although the first modern steam engine was invented a century before, their use really took momentum by James Watt brought about some improvements in the device.
Mainly due to the population growth and colonial expansion, there was strong growth in textiles. Because the textile employees this high demand could not keep up, there was a strong need for a loom powered by a power source. In the beginning it was water, but the steam engine took over soon.
Because there was strong population, also increased the demand for goods, the transport sector thus gained momentum. The invention of the steam engine in 1824 made it easier this demand could be met.
Belgium was the first European country to industrialized, followed soon France and Prussia. The northeastern states of the United States soon followed. Japan was the first non-Western country that followed this trend.


The rise of the steam engine, producing goods became less and less labor intensive. This had the consequence that for producing goods less and less people were needed, but that there are more and more jobs in industry and services were available. At first beneficiaries were the people the already more prosperous people of this phenomenon: after the abolition of child labor in 1900 arose, including a wage increase, a larger group of people with money.
Cost of goods
As the labor cost for goods produced by the mechanization could significantly down, also decreased its cost. A good example is the car: with the introduction of the first production line in its factories, Henry Ford made his cars affordable for the "normal" citizens.


The sharp increase in prosperity created an unstoppable optimism among the population. Not only were there lots of loans contracted because in assuming it was to pay them back on time, was also a lot of trading in shares. As a result prices rose sharply.
When the first stock traders massively sold their shares and depositors their money shots, there was unrest directly to the banks and brokerages. They assumed at first that there was some speculators and that the unrest would blow over. Small shareholders thought here very differently: they were shocked. The next day the same thing happened. With peaks and troughs reached their lowest prices on November 13 the same year.
Despite falling prices, the economy initially appeared to be stable. However, this was a misconception: the stock market crash led to the population to considerable uncertainty and tension. The consumption decreased and so began the new year with falling prices and production figures. This led to unemployment by a large part of the population.

Cause of the crisis: surpluses

The Industrial Revolution resulted eventually not only prosperity, but was also a cause of the resulting crisis: through innovation in employment, production increased significantly. However, this did not apply to the wages of workers. A weakness of the unions and because many immigrants from poorer parts of Europe were willing to work for very low wages meant that the wages were so low that few people were able to buy the goods produced. This created a surplus at the factories.
At the time of the First World War, the United States provided much food aid to Europe. American farmers were so set on this production that when Europe itself was again growing food, there was a large surplus. As a result prices fell. Since the income of farmers decreased, they developed debts to the rural banks where they had taken out loans to expand their production. These rural banks had close ties to the big banks, which could absorb this blow: an agricultural crisis was the result.

Consequences for the Netherlands

The Netherlands also was hit hard by the recession. By adhering to the Gold Standard and the growing turmoil in Europe took years before the economy actually flourished again.
The Netherlands also experienced during the crisis of high unemployment. In 1935, the peak year, about 19.4 percent of the population was unemployed. These were converted six hundred fifty thousand work years.

New Deal

During the first part of 'The Great Depression' Calvin Coolidge was at the helm, which adopted a so-called laissez-faire policy. The change in policy came when Franklin Delano Roosevelt was elected as president and introduced his famous 'New Deal'.
The New Deal consisted of a package of government-driven measures, which were aimed to contribute to the economic again.
Emergency Banking Act
The Emergency Banking Act was a measure that allows all the major banks were checked on their finances before they could reopen. There were banks with financial problems required to implement reorganization, after which they could possibly get government support.
Economy Act
The 'Economy Act was to reduce the salaries of civil servants and pensions of civil servants. According Roosevelt would without this measure result in a debt of 1 billion euros.
Agricultural Adjustment Act
The Agricultural Adjustment consisted in limiting the production of seven basic goods: corn, cotton, dairy goods, pigs, rice, tobacco, and wheat. By limiting this production the price would go up. The government informed the farmers how much they were harvested, and the farmers received subsidy for the part of the country that they did not use.

Second New Deal

Although Roosevelt at a re-re-elected by a large majority, met his policy still a lot of opponents. Especially the Supreme Court ensured that many of his actions were reversed. As a reply, in particular the opposition of the Supreme Court and the call of the people to intervene, the government came back with a number of initiatives.
Works Progress Administration
The utilities Works Progress Administration was a program to 3 million Americans jobs were helped. It concerned here especially jobs in construction, although there is also a fund for artists. In addition, there is the budget of this utility also food, shelter and clothing provided.
Social Security Act
"The Social Security Act was the law which laid the foundation for the American welfare state. It arranged that disability insurance, pensions and benefits were for children and the disabled. Yet this is not directly applied to everyone: with operating range from the law, were groups like farmworkers and domestic workers still left out.


Ultimately, it was not the 'new deal' that put an end to the Depression, but World War II. Still, many economists assume that the New Deal there helped make the economy would not further slumped down.