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The Actual Causes of the Great Depression Essay (Article)

In the period between the end of First World War and the onset of the great depression, United States enjoyed relatively stable economic conditions under the leadership of a string of republican presidents.

The market was flooding with new and improved products, business men engaged in extensive marketing and financial institutions provided potential consumers with easy credit to boost their purchasing power. In fact, in August 1928, Hebert Hoover, a republican presidential candidate at the time confidently proclaimed that America was nearer to the final triumph over poverty than ever before (Wiegand, 2009).

Economists, historians, and financial analysts have over the years tried to reach a consensus over the actual events that led to the great depression. In the 1920s persons employed in the service industry such as office secretaries comprised 30% of all the people who were gainfully employed and this percentage had risen to 38% by 1929 (Wiegand, 2009).

However, the economy of America lacked diversification and employment opportunities was heavily dependent on a few industrial sectors which were operating in the economy. Upon the declination of these industries in the late 1920s, expenditure in the construction industry reduced by approximately18 % in the period between 1926 and 1929 while automobile sales continued to decline (Wiegand, 2009).

Consequently, the need to lay off workers who were not directly involved in production process such as service industry workers emerged which led to widespread unemployment and poor standards of living among these workers.

In addition to lack of diversification in American economy, there was unequal distribution of wealth in the country’s economy which resulted in reduced purchasing power among consumers (Brinkley, 2007). In the period before the great depression, industrial and agricultural production had increased significantly.

However, low income levels among most American consumers reduced overall demand and resulted in disequilibrium between demand and supply which negatively impacted on industrial performance. The credit structure in pre depression period contributed to occurrence of the great depression. Financial institutions incurred great losses emanating from customers defaulting on loans and reckless investment in the stock market.

In the late 1920s, Europe, a major importer of American goods reduced its demand for American products. This was attributed to increased productivity among some European countries and the fact that some countries within the region were experiencing financial difficulties (Brinkley, 2007).

In addition, the international debt structure in American economy was highly unstable due to the post World War effects. Some European countries with shattered economies such as Germany and Austria owed huge amounts of money to American banks and were unable to repay. In response to this, American banks made huge loans from European countries’ governments to service their own loans which led to piling up of debt.

Economic and Psychological Impact Summary

The great depression brought with it a great deal of hardship and suffering which extended in every aspect of American life. Its consequences were devastating to the country’s economy and to people’s lives. For an office secretary, the major threats posed by the great depression were loss of employment and reduction in disposable income.

Unemployment caused adverse psychological effects to American workforce whom had developed in a culture where unemployment and poverty were viewed as signs of failure rather than transition in life. A jobless office secretary would develop a sense of idleness, helplessness and reduce his/her self esteem which resulted in frustrations and loss of self worth among the unemployed Americans.

The great depression adversely affected the financial ability of American workers such as office secretaries. Due to loss of employment and reduction in per capita income, consumption ability of office assistants considerably reduced leading to reduced purchasing power hence poor standards of living.

Due to persistent unemployment and decline in income, poverty incidences among these workers increased rapidly. Increased strain for such families to meet their basic needs and the prevalent uncertainties in the economy resulted in the market retreat from consumerism which reduced overall demand.

The great depression presented new challenges for workers who were already facing the risk of unemployment. Bank loan officers incurred enormous losses due to payment default by low income borrowers while manufacturing executives had to deal with reduction in financial resources available for spending. In addition, automotive dealers experienced reduced sales while farmers lacked adequate market for their products due to reduction in overall demand.

President Roosevelt’s new Deal Summary

Franklin Roosevelt’s new deal played a major role in reconstruction and recovery of American economy from the great depression. The republican president established the federal emergency relief administration which provided financial grants to relief agencies which provided assistance to desperate and unemployed Americans (Brinkley, 2007).

The unemployed office assistants consequently benefited from such relief programs which provided them with basic needs and financial assistance. In addition, Roosevelt’s government established temporary projects through the civil work administration where workers would gain temporary employment to further sustain themselves. Office assistants secured employment in these industries which provided them with an opportunity to earn income.

In a bid to establish a long term solution to the problem of unemployment in the United State’s economy, President Roosevelt sought to promote industrial recovery in the region through a series of reforms. His administration allowed the creation of labor unions which advocated for protection of worker’s rights, reasonable salaries, and creation of jobs in America.

In addition, the congress passed the national industrial recovery act in 1933 which further promoted efforts towards stabilizing the labor market through improved industrial performance (Brinkley, 2007). An office secretary would therefore benefit from working in a relatively stable economic environment where jobs were secure and the income levels were reasonable.

President Roosevelt’s new deal aimed at responding to the economic depression which had sent a series of panics to the banking sector and threatened the entire financial system and the living standards of Americans. Coupled with the president’s pleasant personality, the new deal served to promote confidence among the Americans amidst economic and social turmoil that persisted in the society at the time.

The new deal spearheaded recovery efforts in United States through its imaginative and far reaching projects instigated by the federal government and the Alphabet Laws. These projects promoted industrial growth, financial stability, stock market recovery, social and political reconstruction, and overall economic development.

However, the new deal faced a lot of criticisms from President Roosevelt’s opponents such as the American liberty league which raised a lot of concerns over the new deal’s dictatorial policies and its supposed attacks on capitalism consequently raising substantial public opposition (Brinkley, 2007). In addition, the new deal appeared to focus more on the role of federal government in American life rather than providing immediate solution to the great depression.

Reference List

Brinkley, A. (2007). American history: a survey. New York: McGraw Publishing.

Wiegand, S. (2009). Lessons from the Great Depression for Dummies. Indiana: Wiley Publishing Inc.

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IvyPanda. "The Actual Causes of the Great Depression." August 20, 2019.


IvyPanda. 2019. "The Actual Causes of the Great Depression." August 20, 2019.


IvyPanda. (2019) 'The Actual Causes of the Great Depression'. 20 August.

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