Modern America

Posted: January 5th, 2023

Modern America

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Modern America

The great depression is documented as the most severe economic drawback to have ever happened during the industrial revolution, as detailed in 1929 to 1939. The great depression, as described in history, began in 1929 following the stock market crash, which consequently pioneered fear and panic among the various investors, with Wall Street being among the first industry to have been severely affected by the economic downturn. The depression was further characterized by a drastic decline in consumer spending and investment, hence the decline in industrial production for the various companies and unemployment as companies sacked off multiple employees to cut costs. This scholarly article seeks to expound on the major causes of depression, mechanisms of solving the great depression, and the rise of the cold war after the depression, as detailed below.

Major Causes of Great Depression

The great depression accounting for the worst economic breakdown in history, is linked to have been caused by a variety of factors such as stock market crash, banking panics in addition to monetary contraction as well as decreased international lending and tariffs. The onset of the depression in 1920 was characterized by stock market expansion, which led to the rise in the stock market prices as the various individuals viewed stocks as the cheapest and easiest means of acquiring wealth and income. Hence, the multiple individuals in the society sold their properties and mortgaged their homes as they sought more funds to buy stocks. The high number of shares was financed with loans hence the high margin with the loans being repaid by the profits gained from the claims whose prices were shooting daily (Das, Mitchener and Vossmeyer, 2018). 1929 was, however, the drawback in the stocks as prices declined sharp and the various individuals who had invested their cash rushed in a bid to liquidate their holdings, consequently leading to the decline of the costs and escalation of panic (Talmadge, 2019). Society ultimately witnessed the psychological shock among the investors and, therefore, a lack of trust among both the consumers and businesses within the economic cycle. The decline in the durable goods and business investments culminated in the reduced industrial output and job losses hence the reduced expenses.

The banking and monetary contradiction witnessed between 1930 and 1932 also explain the significant causes of great depressions. The panic among the various bank customers led to the cash withdrawals for the amount deposited in the bank. The massive amount of leaves led to the failure of multiple banks, hence the declaration of the four-day holiday by Franklin D. Roosevelt (Das, Mitchener, and Vossmeyer, 2018). The various banks remained closed until they could prove their solvency to the government through the inspectors instituted (Talmadge, 2019). The bank failure led to the decrease in consumer spending as few banks offered the lending services due to low investment in addition to various individuals hoarding money in cash forms. The federal reserves increased their interest rates, hence reducing the money supply as it was believed that it would aid in the maintenance of the gold standards through which the United States and various countries had preserved their currency. The reduced money supply explains the decreased prices, low lending, and investments.

The reduced international lending and tariffs also account for causing depression, as witnessed in 1929-1939. The United States economy was drastically expanding. The various Banks within the United States’ lending capabilities reduced due to the high interest rates imposed by the banks and the policies instituted by the government (Das, Mitchener and Vossmeyer, 2018). The drastic drops in prices consequently interfered with various other country economies such as Argentina, Brazil, and Germany, whose economies drop long before the great depression (Talmadge, 2019). The high competition for the European markets for agricultural products led to the imposition of new tariffs on agricultural imports by the congress in the United States. The agricultural produce was high in production. Congress hence adopted the Smoot-Hawley Tariff Act, which culminated in the imposition of steep tariffs on various agricultural and industrial products. As a result, multiple nations retaliated to the tariffs, leading to the overall decline in output for the various countries, which affected global trade.

Mechanisms of Solving the Great Depression Problems

As improvised by President Franklin, the new deal comprised three program series; public work projects as well as financial reforms in addition to regulations. The new agreement saw the provision of support to the various key stakeholders in the economy: farmers, the unemployed, and the youth and elderly who were the most affected. As designed by the President, the deal incorporated the new constraints and aimed at safeguarding the banking sector, which had been worst affected by the sharp drop in prices.

The new deal utilized three R’s as the mechanisms of the relief of the economy as well as solving the challenges that arose from the depression. For instance, the economy utilized the relief of the poor and the unemployed to improve the money supply within the economy (Galvin, & Healy, 2020). This is because the high amount of money in supply implicated of continuous supply in the production as the final products were in continuous supply due to the availability of the cash by the customers who were able to purchase the products hence the escalation of the prices due to availability of money (Galvin, & Healy, 2020). The second R represented the reclamation of the economy to the previous levels, which was through the improvement of the economy in increasing the purchase of the final products. The other R represented the reform of the financial systems as a method of the economy’s reclamation.

The United States government, through the ruling party, made various reforms in alignment with the New Deal whereby it empowered the different liberal ideologies and the multiple machines, which consequently improved the trade unions in addition to the various ethnic groups (Galvin, & Healy, 2020). The government also adopted the policies that saw the reverse of the money hoarded in the reserves through the banks’ loaning to facilitate the liquidity of the banks and the consequent directive in which the various small banks merged  (Galvin, & Healy, 2020). The banks were also under the control of the national government. The reforms by the government to forbid the gold coinage exchange and ban the gold as legal tender for debts in private and public contracts saw the improvement of the economy. The signing of the industrial manufacture of alcohol by the government was also a mechanism for the rise of the economy.

The rise of Cold War tensions

Effects of Arms Race

Following the end of the Second World war II in 1945, several countries engaged in the arms race, as evident in the USSR, which tested its first atomic Bomb in 1949. The test culminated in the onset of the race between the two superpowers by then (the United States and USSR). The two countries sought to establish the vital and most potent nuclear weapons capable of effectively delivering atomic weapons. Zhao (2019) attest that both the USA and USSR tested the hydrogen bombs in 1953 as the countries were at par in technological advancements and feared lagging in research. The nuclear weapons hence were of no essence as both countries could fire back at each other. Trauma on the intimidation of USSR compliance to Eastern Europe failed with Stalin reacting to fear, hence escalating the tension due to the arms race, which aimed to end the war.

Differing Ideologies

The two superpower countries, USSR and the USA, ideologically differed, leading to the Cold War escalation. For instance, the USA believed in capitalism, where people had the freedom to actin-based on constitutional freedoms (Talmadge, 2019). The United States system of governance allowed for one President, which led to the creation of the World Bank and International Monetary Fund. They aimed at aiding in the reconstruction of the various continents affected mainly by the second war, such as Europe and Asia (Zhao, 2019). The USSR, though the dictatorial power exhibited through communism which was widespread in people’s lives, was against the USA’s capitalism in which they opposed the German reconstruction. This is because the USSR feared territorial expansion hence the fear of security.

Effects of Cold War Tensions on American Culture and Domestic Policies

The long period of the cold war, which lasted for about 40 years, escalated the tensions to the USSR as the American culture and domestic policies became widespread. The USSR political beliefs inflicted fear among the American leadership hence the retaliation through the formation of the Anticommunism. The threats led to the demeaning effect and the description of the American individuals to undergo societal alienation when they bow to communist ideologies (Zhao, 2019). The impact of the cold war impacted the modeling of the American foreign policy and political ideologies, which consequently affected the American organization with the American individuals left except conformity and calmness. This is because the American leadership was threatened by the constant apprehension of the Soviet Union, as witnessed during the twenties and thirties, as they fear the Soviet Union’s dominance.

Changes in the Society

The feminist movement led to changes in inequality and law. The women in society are almost granted the same opportunities as the male counterparts as they are believed to have the same ability as men. The women can vote on the various platforms and lead on the multiple platforms previously dominated by women.

Conclusion

Ultimately, the great depression in the United States might be attributed to various factors such as the stock market crash, banking panics, and monetary contraction in addition to decreased international lending and tariffs, as detailed above. The rise of the cold war is also linked to the Arms race, differing ideologies, and effects of cold war tensions on the American culture and Domestic policies, as detailed above.

References

Talmadge, C. (2019). Emerging technology and intra-war escalation risks: Evidence from the Cold War, implications for today. Journal of Strategic Studies, 42(6), 864-887. https://www.tandfonline.com/doi/full/10.1080/01402390.2019.1631811

Das, S. R., Mitchener, K. J., & Vossmeyer, A. (2018). Systemic Risk and the Great Depression (No. w25405). National Bureau of Economic Research. https://www.nber.org/papers/w25405/2018

Galvin, R., & Healy, N. (2020). The Green New Deal in the United States: What it is and how to pay for it. Energy Research & Social Science, 67, 101529, 2-9. https://www.sciencedirect.com/science/article/pii/S2214629620301067/2020

Zhao, M. (2019). Is a new Cold War inevitable? Chinese perspectives on US-China strategic competition. The Chinese Journal of International Politics, 12(3), 371-394. https://academic.oup.com/cjip/article/12/3/371/5544745/2019