Effects of the Great Depression
Social and economic changes
- The impact of the Wall Street CrashIn October 1929 share prices on the Wall Street stock market in New York crashed, helping to cause the Great Depression. and the resulting economic depression were immense. Between 1929 and 1932 the USA’s Gross Domestic Product (GDP)Measures the wealth or income of a country. It is the total value of goods and services produced by a country in a year. fell from $104 billion to $59 billion.
- There had been around 1.6 million unemployed people before the crash. However, by 1932 this had grown to around 12 million people - roughly a quarter of all people of working age in the US population.
- The unemployment rate varied across the country. Some cities, such as Toledo, Ohio, registered an unemployment rate of up to 80 per cent.
Over 100,000 businesses shut down between 1929 and 1931, contributing to the rise of unemployment. Some had borrowed money to keep going before the crash and could not afford to pay back their loans. Others had been hit by falling demand for goods as people had started to spend less money, especially on goods they did not consider to be essential.
Most of the people who initially lost their jobs worked in the older industries, such as coal mining, textiles and steel production. By 1929, other industries, such as banking, domestic services and teaching, were also affected. Unemployment rates were high among unskilled workers, women and African Americans, who were more likely to lose their jobs first because of discriminationTo treat someone differently or unfairly because they belong to a particular group.
A vicious cycle had begun:
- fewer goods were sold
- businesses shut down
- unemployed workers had no money to spend
This downward trend of business closures leading to more unemployment was part of the economic depression. Because it affected millions of people, it became known as the Great Depression.
Collapse in farming
Farmers had already been struggling before the Great Depression. During the 1920s, modernisation of farming, including the use of new fertilisers and farm machinery, had led to overproductionThe production of more of a product than is wanted or needed. This meant that the prices farmers could get for their produce began to fall.
Some farmers had bought shares or taken out bank loans to pay for the modernisation of their farms. When the Wall Street Crash happened, their shares became worthless and the bank closures left them with huge debt A sum of money owed by an individual or business to another person or business. As a result, many farmers went bankruptA legal status where a person or organisation is ruled to be unable to pay their debts. Some had to sell their land and others had their land taken from them by their bank when they could not pay their debts.
Farms were often bought up by large industrial farming businesses. Many farm owners now found themselves employed as poorly paid farm labourers. Some unemployed farmers travelled the countryside looking for work.
African American farmers were usually sharecroppersFarmers who had to pay to use land by giving a proportion of their produce to the owner. which meant they paid their rent with the value of a share of the crops that they grew. As the prices of farm produce fell, they found it more and more difficult to pay their rent and still have some produce left to sell for themselves. Landowners also commonly paid them less for their produce in order to force them off their land.
