History of the American Economics

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History of the American Economy

The great depression was a severe economic depression that was experienced globally in the 21st century. It is viewed as the deepest and the longest depression that ever occurred in the world. This economic tragedy resulted in several devastating effects in both poor and rich nations. The impacts of this economic adversity are a clear indication of how world economies can decline and fail. There are many factors that contributed occurrence of this economic problem. The aftermath of the great depression had consequences that were felt throughout the entire American community. It was a huge tragedy that caused the government of America to be fully involved in serious policy considerations and strategies (Gary and Hugh 54). As a result of the great depression of the early twentieth century, a great number of Americans were rendered jobless. Other things that characterized the great depression include; deflation in the prices of assets drops in the demand for credit facilities, and the ultimate disruption of trade.

It is almost an accepted consensus that the main cause of the great depression was the collapse of the stock market. The collapse of the stock market is also known as the black Tuesday by some. This was the pre World War II period, a time in history when there was an overflow in wealth (Gary and Hugh 99). The populace of the United States of America was highly optimistic of this post war period. There was also mass migration of persons from the rural areas into the cities of America. A vast majority of them came to find placement within the fast growing industrial sector at this point in the history of America (Berton, 67). The effect of these activities was a robust economy in the United States of America. This however meant that the productivity of the rural areas which is mostly agricultural based be brought to a halt. There emerged a situation where the farmers in the rural areas could not get sufficient supply of labor and not enough attention was being put on the agricultural sector (Gary and Hugh 77). Pursuant to these, the stock market started taking a southward trajectory, a factor which is an attributed as the cause of the great depression in the United States of America.

The foregone however can seldom get to the root of the explanation of the great depression in the United States of America. The cause of this depression is an issue that has dominated historical discourse for a while now. There has been the emergence of an assortment of schools of thought as to what were the reasons for the occurrence of the great depression in the Americas (Berton, 67). There are many scholars who talk about the causes of the great depressions. The great depression was caused by under consumption together with over-investment that caused a bubble in the economy. As a result, Deflation and panic then set in and many people thought that further loses could be avoided by avoiding the market thus keeping off (Gary and Hugh 55). The holding onto money and resources led to the drop in amount that exhibited the drop in demand thus being a root cause of the great depression.

The great was as a consequence of ordinary recession; only that monetary authority had many policy mistakes that caused a reduction in the supply of money and resources which were of great exacerbation to the economic situation in the post war period the recession leading to the occurrence of the great depression. This view was inclined to the thought that had it not been for the mistakes of players within the monetary authorities to reduce the supply of cash, then the recession would not have developed into the great depression, a phenomenon that negatively affected the entire economy of the United states of America negatively (Berton, 44).

Thought the foregone are the key theoretical underpinnings on the cause of the great depression in the United States of America. A range of market policies that were imposed account for the great depression in the United States of America. A subjective thought of individuals at the micro economical level influence all economic phenomena, the great depression ipso factor individual thought and action can influence the economy at a macro level (Gary and Hugh 78-9).

The great depression was also said to be a result of the inherent instability of the capital model in the United States of America. Capitalism is an economic model where there is ownership of the means of production by private owners. These private owners have their sole objective in the maximization of profits in any given enterprise. Capitalism is characterized by capitalistic accumulation of the market and wage labor. The market environment in a capitalistic system is almost free for all with very minimal government interference and regulation. The debt deflation is a situation where the debt bubble bursts (Berton, 87). The result is a situation where we have debt liquidation. In the period of the great depression in the United States of America, the gross domestic product of the United States reached to an all time high of three hundred percent. The capitalists all took to debts in order to finance their investments thus deflating the system. There was there for increased commodity supply leading to a fall in profits and trade outputs as a whole (Gary and Hugh 44). Consequently there was the emergence of the great depression in the United States of America in the early twentieth century.

Another argument was that there was the growth of disparities in wealth between the bourgeoisie and the proletariat classes in the United States of America. This led to diminished purchasing power. The proletariat who are the majority are expected to be the consumers, capitalism ensures that this group does not have enough even for subsistence. This over time leads to a drop in the purchasing power of a people. The other way to look at it was that the owners of the means of production became even richer and in bid to protect their status they further produced (Berton, 66). Though the production increased, the target market, which is mostly comprised of the proletariat class did not have enough purchasing power. This situation is what led to the great depressions in the United States of America according to this group of scholars.

Protectionism is also another concept that can be attributed to the causation of the great depression in the United States of America in the early twentieth century. Many countries in this period adopted protectionist policies. These were policies put by governments of countries to ensure that the citizens give priority to consumption of what is locally produced. Government’s world over put in place policies that ensured they imported very little, instead they could consume what was produced locally within the countries. This only served to hurt the economy of the United States of America as their surplus goods could not be sold to other countries, thanks to the paradigm of the protectionist policies adopted by players within the world market systems at the time (Gary and Hugh 43).

Compounded, the fore gone theories are explanations into the causation of the great depression that was experienced in the United States of America in the early twentieth century. Having looked at the causes of the great depression, the other questions that needs ramification is that of the duration of the great depression. What are the factors that led to the prolonged period in the great depression?

Factors for the prolonged great depression

In a bid to end the great depression in the United States of America, the government put in place policies that would alleviate this situation. The goal of these policies (referred to in some quarters as the new deal) was to get more and more Americans back to work. Instead of helping to alleviate the impacts of the great depression on the economy of the United States of America, the policies ended up working to the contrary. They only served to sustain the great depression that was being experienced. These policies included the following; increasing the social security net via social security, unemployment benefits, and setting up of deposit and insurance exchange commission (Berton, 77). Social security meant protection of vulnerable groups in the American society. There was also put in place a policy that would ensure benefits for persons who were unemployed, due to the great depression the level of unemployment at the time was very high. Further there was the establishment of the deposit and insurance commission. The setting up of deposit and insurance exchange commission was detrimental to the match towards the end of the great depression (Gary and Hugh 54-9). It put in place rules that suppressed competition and also set up recommended wages that were above the expected levels. This only served to continue the great depression.

There was then the National industrial Recovery plan; this policy allowed industries to raise prices of products on condition that they share their monopoly rents with workers. This in essence meant higher wages. Wage hikes only served to ensure job losses in the industrial and production sector. This was being done at the expense of driving industrial growth. Amalgamated, these measures put in place by the government of the United States of America in the time only served to make the depression worse (Berton, 88). Most of the policies were not well thought out a situation that only served to exacerbate the great depression in the United States of America in the early twentieth century.

Conclusion

Having discussed, the theories of the causation of the great depression in the United States of America and the reasons for its elongation thereof, it is only prudent that the current students of the historical and economical discourse learn from the undoing of the past. This is a sure way of cushioning economies of in the present day world market system from the great depression like depressions.

Works Cited

Berton, Pierre. The Great Depression 1929-1939. Toronto: Anchor Canada, 2001. Print.

Gary M. Walton and Hugh Rockoff. History of the American Economy. 12th ed. 2012 ISBN-13: 978-1-111-82292-7