Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 until the late 1930s, marked by a significant decline in industrial output, widespread unemployment, and deflation. It fundamentally changed government policies and economic theories, influencing the historical development of policy analysis and the role of government in economic intervention.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the stock market crash on October 29, 1929, known as Black Tuesday, which wiped out millions of investors.
2. Unemployment rates soared during the Great Depression, reaching as high as 25% in the United States by 1933.
3. The Great Depression led to significant changes in economic policy, including increased government intervention in the economy and the establishment of safety nets for citizens.
4. Global trade plummeted during this period, exacerbating economic hardships as countries implemented protectionist measures like tariffs.
5. The social impact of the Great Depression was profound, leading to widespread poverty, changes in family structures, and significant migrations as people searched for work.

Review Questions

• How did the Great Depression impact government policies regarding economic intervention?
  • The Great Depression drastically shifted government policies towards increased intervention in the economy. Prior to this period, there was a prevailing belief in minimal government involvement. However, the severe economic collapse forced policymakers to reconsider this approach, leading to initiatives like the New Deal. This represented a significant transformation in how governments viewed their role in stabilizing economies and addressing social welfare.
• Evaluate the effectiveness of New Deal programs during the Great Depression in alleviating economic hardships.
  • The New Deal programs were designed to provide immediate relief and long-term recovery from the Great Depression. Many programs, such as Social Security and unemployment insurance, helped stabilize incomes for millions. However, while these measures significantly reduced some hardships, critics argue that they did not fully resolve unemployment or restore the economy to pre-Depression levels until World War II stimulated industrial growth.
• Analyze how the lessons learned from the Great Depression influenced modern public policy analysis and economic theories.
  • The Great Depression provided crucial lessons that shaped modern public policy analysis and economic theories. It highlighted the importance of government intervention during economic crises, leading to the adoption of Keynesian economics which argues for proactive fiscal policies. The experiences during this time prompted policymakers to develop analytical frameworks for evaluating economic policies, emphasizing data-driven approaches to tackle future economic challenges. This legacy continues to inform how governments respond to recessions and systemic economic issues today.

Related terms

New Deal:

A series of programs and policies implemented by President Franklin D. Roosevelt in response to the Great Depression, aimed at providing relief for the unemployed, recovery of the economy, and reform of the financial system.

Stock Market Crash of 1929: A major stock market crash that occurred in late October 1929, marking the beginning of the Great Depression and leading to widespread financial panic and economic decline.

Keynesian Economics: An economic theory developed by John Maynard Keynes, advocating for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of depression.