How Did The Great Depression Affect The Economy

Economic Stimulus During the Great Depression

Few events have so influenced the face of the United States as did the Great Depression. As the most deep, universal and lengthy recession of the 20th century, it left in it's wake scars that remain vivid today. Although the economic solutions implemented by leaders such as Franklin Roosevelt are still hailed as ground-breaking today, they often impeded, rather than encouraged, a return to economic stability.

While many consider the stock market crash of 1929 to be the cause of the Great Depression, in reality it was only the time when the United States' strained economy reached the breaking point. Throughout the “Roaring 20's” the United States' had flourished and reached never before attained

However, the demand for manufactured produce could not meet the increased output. This already imbalanced economic structure was only augmented by the fact that lower- and middle-class debt had seen an influx. To many, automobiles and household appliances, such as sewing machines, had become to be seen as “necessities,” and the advent of installment plans encouraged many to overspend. In addition, the ability to buy stocks “on margin,” paying only 10-20% up front, meant that the stock market was open to uneducated, reckless investors. When stocks fell throughout mid-October, investors rushed to sell shares, with 16.4 million shares being sold on Black Tuesday alone. This decimated the stock market, resulting in the Wallstreet Crash of 1929, which was the tremor that dropped America's “House of Cards.” Banks collapsed throughout the country, reaching a total of 10,000 failed or suspended banks by 1933. Throughout the 1930's national economies slumped worldwide, with the US GDP not recovering

Great Britain, Germany and Canada were among those hardest hit elsewhere. Did all of these countries adopt “New Deal”-like policies? While Germany adopted Hitler's Fascist policies out of desperation, Great Britain struck off in a decidedly different direction. There, the population had lost confidence in the Labor Party that had dominated the government, and voted in a substantially increased number of Conservatives. Like many other countries, including France and the United States, Great Britain was struggling with an deflated currency based on the gold-standard. By dropping the gold-standard, a move that shocked the international community, and adopting a controlled currency, Britain effectively managed to drop the value of it's currency. By maintaining low manufacturing costs, partially through keeping wages from rising, Britain maintained a high export rate. Spending, particularly deficit spending, was deemed to be unwise and a cause for inflation, and for this reason, government sponsored building projects were avoided. All these measures combined to prevent Britain from plunging into as deep an economic crisis as the United States, Germany and Canada. By 1935, Britain had largely recovered from the Depression, with it's GDP and unemployment returning to post-recession proportions. Great Britain, who could have fallen far deeper into recession then the United States, due to