Policies to Counter The Great Depression of 1929
Introduction
The Great Depression transformed policy-making in the USA. The depression began in 1929 and lasted to 1941, resulting in hardship for millions of citizens, and crippled banks, businesses, and farms (Smiley). The government took legislative activities to remedy the economic downfall of the country. This topic is important to historians because the depression is the most important economic event in history, the policies also reflect the ideals of leaders, and their effectiveness can be scrutinized gauge their effectiveness then and in the present circumstances. Forthwith, the policies touch on farming, social welfare, and regulating the financial business. Although not always successful, the Acts and laws passed by the government to counter the Great Depression, such as Emergency banking Act and New Deal, helped address issues faced by farmers and the general public, and controlled businesses, eventually pulling the country out of depression.
1929: Black Tuesday
Black Tuesday, the fourth and final day of the stock market crash, kick-started the collapse of the economy. Black Tuesday, 29th October 1929, was a culmination of economic failure that started on 24th October, the previous Black Thursday (Edwards 1). In this time-frame, the stock was failing uncontrollably: 11% on Thursday, 13% on the following Monday, and 12% on Tuesday (Edwards 1). When the Dow fell to 212.33.9, the ticker tape announced that the stock prices were hours behind; hence, investors had no idea how much money was being lost. The failing prices led to people losing their confidence in the stock market, which they believed, controlled the economy. As such, citizens took drastic measures like withdrawing their savings from banks and invested in commodities. The stock market crash of 1929 prompted the Great depression. Don't use plagiarised sources.Get your custom essay just from $11/page
Policies to curb the Great Depression
Protect Local Economy (1930). President Hoover restricted imports to the US to protect the local economy. Hence, he signed the Smooth-Hawley Act, a Tariff Act that, increased import tariffs from an average 40% to 59% on agricultural and 25,000 other products in 1930 (Edwards 1). The strategy failed in protecting the farmers as other nations retaliated against Hoover’s strategy, by creating their own tariffs on US imports. In the end, the economy stalled, and world trade reduced. The Hawley Act proved detrimental to the farmers, and the consequences worsened when the Dust Bowl Drought happened.
Increase Income Tax (1932). The Revenue Act aimed at increasing income tax rate and was created in 1932. Through the Act, the government hoped to have a 63% tax rate that would eventually reduce the federal deficit (Edwards 1). Individual tax rate rose to 79%, while state and local governments also experience tax hikes. President Roosevelt believed that the public would be more confident in the economy. Instead, the higher taxes worsened the Depression as the citizens lost incentive for work, and there was little investment into entrepreneurship. The Revenue Act failed to attain its goal.
Institutions and the Public (1933). President Roosevelt signed several Acts upon his inauguration to govern corporations. The first was the New Deal through the Emergency Banking Act (Hardman). The Act closed all the banks to stop bank runs. Act permitted banks to reopen once they were examined and found to be financially secure. After an assessment, 5,000 banks were declared eligible for opening in the next three days. Comparatively, the Securities Act, demanded that corporations avail information to investors before issuing stock. The policies were meant to improve transparency in the financial sectors.
Equally, the government enacted laws for public welfare. For instance, the Federal Emergency Relief Act, which funded jobs in agriculture, arts, construction, and education (Amadeo). The Agricultural Adjustment Act subsidized farmers to reduce their crops, doubling the crop prices by 1937. Again, the National Industrial Recovery Act set up public Works Administration to create jobs. The government made laws to create jobs and improve the quality of life.
Protect Farmers (1935). The government encouraged farmers with favorable policies. The Soil Conservation and Domestic Allotment Act encouraged better farming practices, by paying the farmers to grow soil-building cops (Amadeo). The initiative came after the worst dust storm in history that occurred on 15th April, 1934. Similarly, the Rural Electrification Act helped the farmers to generate electricity for their locations, improving electrification in rural areas. The Resettlement Administration trained and gave farmers loans for farming. The government was keen on sustainable farming practices.
Third New Deal (1937). The New Deal was for housing projects and to reduce public debt. Regarding housing, the government sold and bought electricity from the Bonneville Dam to be used in houses (Hardman). Tenant farmers also received money to buy farms and settlements under the Farm Tenancy Act. The National Mortgage Association sold houses in the secondary market to increase home ownership. Through the Association, banks and other loaning institutions could give out more house loans by buying insured mortgages by the Federal Housing Administration (FHA). At the same time, the New Deal proposed reducing government spending. However, this decision caused a depression. Nonetheless, the economy improved by 5.1% and unemployment decreased to 14.3%. In 1937, the government aimed to improve access to housing for the public.
Market Accounting (1938). President Roosevelt introduced new accounting practices. The President abolished mark-to-market accounting. Mark-to-Market accounting was blamed for the Great Depression because the banks priced in more losses than had actually occurred and there was no transparence (Smiley). Without mark-to-market, banks to write the value of their real estate as the values declined. The rule, however, allowed the institutions to keep the assets on their books at historical prices. After the enactment of this rule, the economy started growing again, signaling that the Depression was ending.
Launching of the Federal Security Agency (1939). The federal Security Agency was created to monitor different sectors of the government. The agency was independent resulted from the Reorganization Act of 1939 (Amadeo). Accordingly, the agency monitored federal education funding, social security, and food and drug safety. Reducing government agencies helped in efficiency and saved on cost. The government improved its delivery of services by incorporating different bodies in the agency.
Depression Over (1941). The Depression had already declined by 1939. This was at the onset of World War 2 in which the US significantly participated (Smiley). The mobilization of resources for the Second World War eventually led the country out of the Depression permanently. Through laws and economic adjustments, the US survived the Depression and was ready for another war.
Conclusion
Although not always successful, the Acts and laws passed by the government to counter the Great Depression, such as Emergency banking Act and New Deal, helped address issues faced by farmers and the general public, and controlled businesses, eventually pulling the country out of depression. From 1931 to 1941, the government passed laws that favored farmers. Some include the Federal E Federal Emergency Relief Act and Farm Tenancy Act. The public also gained through housing and job creation as indicated by the Third New Deal and National Industrial Recovery Act. The banks were monitored by the Emergency banking Act, and changing accounting practices. The Smooth-Hawley and the Third New Deal had their shortcomings. Overall, the government did its best to recover from the crisis.
Works Cited
Amadeo, Kimberly. “Great Depression Timeline: 1929 – 1941.” The Balance, www.thebalance.com/great-depression-timeline-1929-1941-4048064. (Accessed 15 Feb 2020).
Edwards, Chris. “The Government and the Great Depression.” Cato Institute: Tax and Budget, www.cato.org/sites/cato.org/files/pubs/pdf/tbb-0508-25.pdf. (Accessed 15 Feb 2020).
Hardman, J. “The Great Depression and the New Deal.” Poverty & Prejudice: Social Security at the Crossroads, web.stanford.edu/class/e297c/poverty_prejudice/soc_sec/hgreat.htm. (Accessed 15 Feb 2020).
Smiley, Gene. “Great Depression.” The Library of Economics and Liberty, https://www.econlib.org/library/Enc/GreatDepression.html. (Accessed 15 Feb 2020).