Difference in American lives before the New Deal in 1933

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The Great Depression which started in 1929 had an array of social and economic implications for a majority of American lives. Few people escaped the suffering that ensued after mass layoffs were carried out across the country. Divine et al. assert that African-Americans who left the South for the industry jobs were among the first to get laid off (616). People existed in poor physical conditions with most being unable to afford decent meals and clothing. The psychological burden that individuals faced was even greater as people suffered for long periods with no optimism (Divine et al. 617). American people were affected by the Great Depression with many suffering in poverty due to high unemployment rates and closure of financial institutions.

Implications of the Great Depression

Granados and Roux explicate that the 1920s started with a major recession where economic growth reached negative levels and the total unemployment rates peaked to about 11.3% in 1921 (17291). However, despite the signs of poor economic growth, people did not anticipate a depression until 1929 when the stock market crashed. Health deterioration was one of the major implications of the Great Depression. Despite there being no significant correlation between health deterioration and the Great Depression, there was a peak in the suicide mortality during this period (Granados and Roux 17293). Malnutrition became a menace since people could not have access to proper food due to the lack of produce in markets and high poverty rates among individuals.

Bali posits that the Great Depression affected productivity in the U.S. either singlehandedly or in combination with other pertinent issues during this time (230). For example, the Great Depression coincided with a major drought in the US which led to a further reduction in the productivity of the agricultural sector (Bali 230). The prices for agricultural products reduced significantly making it difficult for farmers to harvest their products for profit. They thus left their farms in search of jobs that would help them earn a living. The immediate implication was that there was a little supply of food and many people could not afford to eat a decent meal.

High rates of loan defaulters in financial institutions made it impossible for the banks to operate. Despite the foreclosure of various property, about 5,000 financial institutions were closed which led to a collapse of the banking institution. Many Americans were left homeless which prompted the springing up of informal settlements across the country (Wheelock 573). The United States government had to intervene by encouraging the construction of new homes and discouraging financial institutions from further foreclosures.

Unemployment was also a critical consequence of the Great Depression. Rates of unemployment were at 3.2 percent during the beginning of the Great Depression, but they had doubled to about 8.7 % by 1930. These figures, however, skyrocketed to about 15% in 1932 and moved further to 23.6% by 1932. By 1933, the unemployment rate in the US was about 24.9% with about 15 million people being rendered jobless. Knüpfer et al. assert that the New Deal initiated by Franklin Roosevelt which included an increased government spending led to a reduction in the unemployment rate after 1933 (5). The government also sought to stimulate the economy by offering funds through the use of initiatives such as public works that were meant to keep people busy and help them get money to spend. The government also offered secured loans to consumers to help boost consumer spending and enhance productivity. These actions helped to regulate the high rates of unemployment despite the massive funds that were used to return the normalcy.

Another major consequence of the Great Depression was the crash of the stock market. The stock market lost about 90% of its value and investors’ money between 1929 and 1932. The stock market did not recover for a total of 25 years since most individuals had no confidence in the Wall Street markets anymore (Romer and Romer 69). Major businesses, banks, and other individual investors were among those wiped out by the stock market crash. Banks which invested money from people’s savings account were unable to repay back this money leading to more financial difficulties.

Concisely, the Great Depression had grave consequences for most individuals in the U.S. The decline in public health and increase in suicide mortality arose during this time. A reduction in productivity, collapse of financial system, increased unemployment rates, and homelessness were some of the difficulties that the American people faced during this period. The high rates of unemployment and collapse of the banking institution impacted the economic and social lives of a majority of Americans who were living in destitution.

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  1. Bali, Selçuk. “Comparisons between the Long Depression, the Great Depression, and the global financial crisis.” Uluslararası Yönetim İktisat ve İşletme Dergisi, vol. 8, no. 16, 2012, pp. 223-243.
  2. Divine, Robert A, T. H. Breen, Hal Williams, Ariela J. Gross, H. W. Brands, and Brands. America, past and present. 10th ed. Pearson Longman, 2012.
  3. Granados, José A. Tapia, and Ana V. Diez Roux. “Life and Death during the Great Depression.” Proceedings of the National Academy of Sciences, vol. 106, no. 41, 2009, pp. 17290-17295.
  4. Knüpfer, Samuli, Elias Rantapuska, and Matti Sarvimäki. Labor Market Experiences and Portfolio Choice: Evidence from the Finnish Great Depression. Unpublished paper, London Business School and Aalto University, 2014.
  5. Reeves, Aaron, Martin McKee, and David Stuckler. “Economic Suicides in the Great Recession in Europe and North America.” The British Journal of Psychiatry, vol. 205, no.3, 2014, pp. 246-247.
  6. Romer, Christina D., and David H. Romer. “The Missing Transmission Mechanism in the Monetary Explanation of the Great Depression.” The American Economic Review, vol. 103, no.3, 2013, pp. 66-72.
  7. Wheelock, David C. “Changing the Rules: State Mortgage Foreclosure Moratoria during the Great Depression.Federal Reserve Bank of St. Louis Review, vol. 90, no. 6, 2008, pp. 569-583.
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