In the 21st century, the Great Depression is commonly used as an example of how far the world's economy can decline. The depression originated in the U.S., after the fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday).
The Great Depression had devastating effects in countries rich and poor. Personal income, tax revenue, profits and prices dropped, while international trade plunged by more than 50%. Unemployment in the U.S. rose to 25%, and in some countries rose as high as 33%.
TIMELINES OF THE GREAT DEPRESSION
1920s (Decade)
- During World War I, federal spending grows three times larger than tax collections. When the government cuts back spending to balance the budget in 1920, a severe recession results. However, the war economy invested heavily in the manufacturing sector, and the next decade will see an explosion of productivity... although only for certain sectors of the economy.
- An average of 600 banks fail each year.
- Organized labor declines throughout the decade. The United Mine Workers Union will see its membership fall from 500,000 in 1920 to 75,000 in 1928. The American Federation of Labor would fall from 5.1 million in 1920 to 3.4 million in 1929.
1922
- The conservative Supreme Court strikes down federal child labor legislation.
1923
- President Warren Harding dies in office. Calvin Coolidge, becomes president. Coolidge is no less committed to laissez-faire and a non-interventionist government.
- Supreme Court nullifies minimum wage for women in District of Columbia.
1924
- The stock market begins its spectacular rise. Bears little relation to the rest of the economy.
1929
- Herbert Hoover becomes President.
- Annual per-capita income is $750. More than half of all Americans are living below a minimum subsistence level.
- Backlog of business inventories grows three times larger than the year before.
- Recession begins in August, two months before the stock market crash. During this two month period, production will decline at an annual rate of 20 percent, wholesale prices at 7.5 percent, and personal income at 5 percent.
1930
- By February, the Federal Reserve has cut the prime interest rate from 6 to 4 percent. Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: 'Liquidate labor, liquidate real estate... values will be adjusted, and enterprising people will pick up the wreck from less-competent people'.
- The Smoot-Hawley Tariff passes on June 17. With imports forming only 6 percent of the GNP, the 40 percent tariffs work out to an effective tax of only 2.4 percent per citizen. Even this is compensated for by the fact that American businesses
1931
- No major legislation is passed addressing the Depression.
- The GNP falls another 8.5 percent; unemployment rises to 15.9 percent.
1932
- This and the next year are the worst years of the Great Depression. For 1932, GNP falls a record 13.4 percent; unemployment rises to 23.6 percent.
- Industrial stocks have lost 80 percent of their value since 1930.
- 10,000 banks have failed since 1929, or 40 percent of the 1929 total.
- GNP has also fallen 31 percent since 1929.
- Over 13 million Americans have lost their jobs since 1929.
- International trade has fallen by two-thirds since 1929.
Interesting Facts
THE GREAT DEPRESSION DEEPENS: BANK RUNS AND THE HOOVER ADMINISTRATION
Despite assurances from President Herbert Hoover and other leaders that the crisis would run its course, matters continued to get worse over the next three years. By 1930, 4 million Americans looking for work could not find it; that number had risen to 6 million in 1931. Meanwhile, the country’s industrial production had dropped by half. Bread lines, soup kitchens and rising numbers of homeless people became more and more common in America’s towns and cities.
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