The Great Depression was the worst economic recession ever experienced in the history of the United States. The Stock Market was at an all time low and many people thought it would never recover. Suicides were rampant and people were starving. For over a decade this horrific economy plagued the United States. FDR did his best to help raise the economy with his New Deal Programs but it wasn’t until the 1940s that we saw a real rise in the economy and standard of living. This miraculous period of recovery came from the United States entering World War II. The country needed manpower and firepower if they hoped to win the war. As men went off to war, women became the heads of households and took the men’s place in factories. Factories across the nation changed from producing clothing to uniforms, cars to Jeeps, tanks, and planes, and from metal trinkets and machines to guns and bullets. Production rose immensely and people finally were able to work and make a living. All of this due to one of the most horrific and bloody conflicts the world has seen. This paper will speak about and explain just how this happened and why.
The “Roaring Twenties” was a strange time for America. While there were huge shifts in the mentalities of people, especially women, there was still a lot of turmoil going on in the country simultaneously. This included racial tension between whites and the minorities (mainly blacks), prohibition which caused an uproar in organized crime, paranoia about communism and anarchy during the “Red Scare”, as well as disputes over our origin as humans regarding evolution in “The Scopes Trial”. Regardless of the turmoil that was rampant within the country at the time, the 1920s were still a progressive time in America. The “New Women” regarded as “Flappers”, were women who expressed themselves loudly and abrasively and wore makeup similar to that of prostitutes the time. They believed in more sexual freedom and were not held down by the system. Jazz was created and thus brought about many new artists and music styles while also bringing about new ideas about self-expression that were looked upon with skepticism and paranoia by more conservative Americans. And the economy itself was looking as if it was booming. The “Average Joe” was now able to invest money in the Stock Market rather easily.
More and more men began investing their money in different stocks, seeing it as a potential way of getting rich. The Credit system was introduced in the country as a similar fashion to loans and people took advantage while they could. Banks didn’t think twice about granting these high interest short term loans (basically what credit is) and gave them to a high percentage of people (Innovations in US banking practices and the credit boom of the 1920s.(Report), Business History Review, Summer, 2013, Vol.87(2), p.309(19) [Peer Reviewed Journal], Rotheli, Tobias). The issue with this system was that barely anyone was paying these loans back. Banks began to lose money very quickly and because the Federal Reserve Act had not yet been written, there was no way to regulate this crisis. As people saw banks closing, they began taking their money out of banks and then began removing their money from the stock market. This then caused the market to appear as if it was beginning to decline which then scared a large amount of people to take their money and run as well. This then literally caused the market to fall which then caused everyone else to take their money out of the stock market. This is what caused the Stock Market Crash that ushered in The Great Depression.
So what exactly was it that brought back the economy up from the Great Depression? This paper argues that it was the joining of the United States into WWII after the Pearl Harbor attacks coupled with FDR’s New Deal programs introduced previously that helped raise the economy. FDR was inaugurated as the thirty-second President of the United States in the midst of the Depression. In his Inaugural Address, FDR spoke about the horrible state the country was in and then spoke about his what would be called New Deal Programs aimed at restoring the country’s economy. His speech not only restored confidence in the American people, but earned him vast praise and approval. “They came from all across the country; they came from all classes; and they came from the very young and the very old. Despite this ostensibly heterogeneous authorship, the contents of the letters and telegrams were remarkably homogeneous. Many of the letters simply commented favorably on the speech that they had heard firsthand on the radio, wished the new president well at the outset of his presidency, and closed with an appeal to the Deity. Many others, however, communicated their reactions to the inaugural address in very specific ways, and it is these reactions to which we now turn. One dominant interpretive pattern by which the public (and the press) reacted to the speech involved confidence. It was a most interesting reaction, for three reasons: Confidence references some of the extratextual motives behind the speech; confidence provides a thematic link to the Hoover administration; and confidence provides an important inventional window on drafts of the address.” (Title: FDR’s First Inaugural Address: Text, Context, and Reception, Is Part Of: Rhetoric & Public Affairs, 2002, Vol.5(4), p.655, [“The Return Of Confidence” Line 1, Sentence 2 – end of line 5], [Peer Reviewed Journal],Author: Houck, Davis W ; Nocasian, Mihaela). What many do not know is that his speech was a result of a letter he received from previous President Herbert Hoover.
“The letter was Hoover’s attempt to explain secretly the nation’s devolving banking crisis. He stated the matter in typically Hooverian terms: “The major difficulty is the state of public mind—for there is a steadily degenerating confidence in the future which has reached the height of general alarm.” 25 Hoover advised Roosevelt that “a very early statement by you upon two or three policies of your administration would serve greatly to restore confidence and cause a resumption of the march of recovery.” Of course the “two or three policies” that Hoover hoped Roosevelt might share with the nation were those of fiscal orthodoxy—since only a rhetoric of orthodoxy might ease the public’s alarm and enable the return of confidence. This letter and the Hooverian emphasis on confidence, with its 11 explicit references to public confidence and 11 explicit references to fear, alarm, and panic, seems to have influenced the draft that Moley brought with him to Hyde Park, and the Moley/Roosevelt draft, to which we now turn.” (Title: FDR’s First Inaugural Address: Text, Context, and Reception, Is Part Of: Rhetoric & Public Affairs, 2002, Vol.5(4), p.658, [“The Return Of Confidence” [line 11 – end of line 14], [Peer Reviewed Journal],Author: Houck, Davis W ; Nocasian, Mihaela). The explanation behind this letter and FDR’s Inaugural Address is simple. Even if he did not know how to fix the economy or if he wasn’t sure if his programs would even work, he needed to raise the American people’s confidence. No amount of programs in a country under a democracy will work if the people do not believe in the administration. If nobody participated in the programs then they wouldn’t work no matter how well designed and ingenious they are. This is why he spoke about his New Deal and “100 Day Plan” in his speech. People were so moved by his speech that they were willing to follow his plans without question. This was the first part of the recovery of the country. The second part was during WWII.
When Pearl Harbor was attacked on December 7th, 1941, FDR delivered his “Infamy Speech” to Congress after which, Congress voted to enter the WWII conflict against Germany and Japan. When men were being drafted or voluntarily joining the military, women became the heads of households and began working in factories. This new “war economy” boosted America’s economy to a positive. The country was put into almost an “overdrive” kind of state. The war made the demand for goods and materials spike immensely which allowed producers to create large supplies of goods and still make a profit. By macroeconomic laws, this is what caused the economy to climb out of the depression. We thankfully know this now however at the time, macroeconomics was extremely young, having just been introduced by English Economist John Maynard Keynes. previously economists only looked at the economy at a microeconomic viewpoint which is why the economy was not recovering during Hoover’s term. This excerpt from a Peer Reviewed Journal supports this claim: “The results indicate that changes in efficiency have had very little long-term effect on U.S. growth, but that short-run growth is often affected by rather large changes in efficiency from year to year. In the Soviet Union, on the other hand, short-run changes in efficiency were much smaller and there is little evidence of a dramatic decrease in efficiency in the later 1970s and early 1980s that would have precipitated the Soviet economic crisis. There is evidence of a serious long-term decline in factor productivity growth, probably caused by a low rate of technological change combined with a gradual deterioration in efficiency throughout the entire post-war period. Both of these results seem consistent with standard interpretations about the operation of a market and a Soviet-type economic system.” (Title: Industrial growth and efficiency in the United States and the former Soviet Union, Is Part Of: Comparative Economic Studies, Winter 1994, Vol.36(4), p.47 Conclusion [Peer Reviewed Journal], Author: Whitesell, Robert, Source: © ProQuest LLC All rights reserved. This states that both the United States’ and the former Soviet Union’s economies slowed down greatly due to a decrease in production from a lack of technological change and efficiency because the demand/need for these two things was no longer relevant due to the war being over.
The Great Depression was a very serious crisis caused by the carelessness of banks caused by greed and an almost delusional utopian belief that every dollar they lend will be paid back with interest. They made this mistake once again with mortgages that caused the real estate crash of 2008. This could very well happen again due to the trillions of dollars in debt accumulated from student loans that are not being paid back. Hopefully America will be ready to confront this very real threat in the years to come in order to avoid a depression that could seriously harm the country.