Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 until the late 1930s, marked by unprecedented levels of unemployment, plummeting stock prices, and widespread poverty. It deeply influenced business practices and ethics, exposing the need for greater accountability and transparency within financial institutions and prompting a shift in government policies towards economic regulation and social welfare.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the Stock Market Crash of October 1929, leading to a dramatic decline in industrial output and widespread bank failures.
2. Unemployment rates soared during the Great Depression, peaking at around 25% in the United States, which severely affected families and communities across the nation.
3. Many businesses failed during this period due to reduced consumer spending and investment, leading to significant changes in corporate responsibility and ethical business practices.
4. The Great Depression prompted major changes in government policy, including increased economic regulation aimed at preventing such an economic disaster from happening again.
5. The social impact of the Great Depression led to greater advocacy for social safety nets, including unemployment insurance and social security programs.

Review Questions

• How did the Great Depression influence changes in business ethics during the 1930s?
  • The Great Depression led to significant shifts in business ethics as companies faced immense pressure to adapt to new economic realities. With many businesses failing and public trust eroding, there was a growing demand for accountability and transparency in corporate practices. The ethical expectations surrounding corporate responsibility increased, emphasizing the need for businesses to prioritize their stakeholders' interests over merely seeking profit.
• Discuss the impact of the New Deal on American business practices in the context of the Great Depression.
  • The New Deal had a profound impact on American business practices by introducing reforms that aimed to stabilize the economy and protect workers. Policies such as labor rights protections and financial regulations changed how businesses operated, promoting fair labor standards and responsible financial practices. This shift marked a move toward greater governmental oversight of businesses, establishing a framework that emphasized ethical considerations in corporate governance.
• Evaluate how the lessons learned from the Great Depression have shaped contemporary views on economic regulation and corporate responsibility.
  • The lessons learned from the Great Depression have profoundly influenced contemporary views on economic regulation and corporate responsibility. The catastrophic consequences of unregulated markets underscored the necessity for government intervention to ensure fair practices and protect consumers. As a result, modern regulatory frameworks are designed to prevent similar economic crises by enforcing ethical behavior among corporations, fostering an environment where businesses are held accountable not only for profits but also for their societal impacts.

Related terms

Stock Market Crash of 1929: The Stock Market Crash of 1929 was a major financial collapse that marked the beginning of the Great Depression, characterized by a rapid decline in stock prices and loss of investor confidence.

New Deal: The New Deal refers to 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, stimulating economic recovery, and reforming financial systems.

Economic Regulation: Economic regulation involves government intervention in the economy to promote fair competition, protect consumers, and prevent market failures, which became increasingly important during and after the Great Depression.