Comparing Recession to Great Depression

Only available on StudyMode
  • Download(s) : 526
  • Published : May 6, 2012
Open Document
Text Preview
Goslin – Research Paper.

The Great Depression was a harsh global economic depression in the decade prior World War II. The Great Depression, while it happened far before the “Great Recession” of 2008, it can be greatly compared. During the Great Depression, all income, tax revenue, and prices dropped. International trade decreased by more than 50%, and U.S. unemployment climbed to just above 25%. Industrial cities like Detroit and Pittsburgh took the heaviest hits. While the recession of 2008 was not as drastic, it affected the world economy and resulted in a global recession more so than ever before. The percent of U.S. citizens unemployed had reached 10% as of 2009. Along with the challenges unemployment presented, consumer self-confidence, the decline in home values, and an ever-increasing federal debt were also prominent problems. The causes of the Great Depression are more obvious than those of the recession, being the stock market crash of 1929, bank failures, and the notorious Smoot-Hawley Tariff. The causes of the 2008 recession can be tied to the dangerous sub-prime loans, the decisions of the Federal Reserve, and again, the failure of banks and the economic stimulus plan that followed it. While the Great Depression started under president Hoover, Roosevelt is given the most credit for trying to repair America from the Great Depression. Obama’s “solution” to the recession was the economic stimulus plan, which spent 700$ billion tax-payer dollars to save banks from closing. The big question here being, could we face another global recession or a second Great Depression in the future?

The Great Depression had overwhelming outcomes for the rich and the poor in almost every country. All monetary factors such as income, and tax revenue took a dramatic downfall, and international trade declined by over 50%. The decline in the Dow Jones industrial average was -89.2%. The percent of unemployed people in the United States was between 25% and 30%, which was a staggering low for the population at the time. Though suburbs, smaller towns, and rural areas were affected by the Great Depression, cities that were considered “industrial giants” at the time, such as Pittsburgh, Pennsylvania, Gary, Indiana, and Detroit, were racked with job losses and living conditions went from bad to worse. Over two million high-paying jobs were lost, which left most companies with virtually no profit, and easily left those families without homes, food, and money. During the Great Depression, foreclosure was a huge problem faced by mostly farmers. Farmers in the prosperous years before the threat of a depression bought expensive machinery and land with loans from banks. Many farmers offered their resources as a form of security for the banks, which meant that if the farmers failed to pay back the bank, the banks could repossess their resources – the land. After the stock market crashed, not many people had money to buy land, and the land prices plummeted. Banks would take all the assets offered when the farmer’s took the loans, which were their lands and ultimately their homes.

The bailouts during the Great Depression were much more controlled than during the 2008 recession. All loans had to be secured and no more than 5% of the money could go to just one company, and the process by which some industries got loans was more complicated. For example, if railroads accepted loans, they had to be suitable to the Interstate Commerce Commission. People’s reactions to the Great Depression varied depending on their finances. Many rich people felt little to no influence, and were even unaware of the suffering of others. Families during the Great Depression faced the most challenging times. Many couples delayed marriage; the divorce rate fell abruptly because it was often too costly to pay legal charges. Roles in the family reformed in the 1930s. Many men, being out of work, had to look to their wives and children to work to make enough money to...
tracking img