I was born after The Great Depression I, but within my family I heard many stories of how my grandfather was forced to wastefully slaughter hogs because they were valueless and he could not afford to feed them or even bring them to market, of the Dust Bowl, of the hard times, of what a saviour Franklin Delano Roosevelt was and why my family was largely Democratic.
The Great Depression was a dramatic, worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s for different countries. It was the largest and most important economic depression in world history, and is used in the 21st century as a benchmark on how far a modern economy could possibly fall. The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The end of the depression in the U.S. is associated with the onset of the war economy of World War II, beginning around 1939.
http://en.wikipedia.org/...
History repeating itself:
Debt
Debt is seen as one of the causes of the Great Depression. (What follows relates to the USA).
Macroeconomists including Ben Bernanke, the current chairman of the U.S. Federal Reserve Bank, have revived the debt-deflation view of the Great Depression originated by Arthur Cecil Pigou and Irving Fisher: in the 1920s, American consumers and businesses relied on cheap credit, the former to purchase consumer goods such as automobiles and furniture, and the latter for capital investment to increase production. This fueled strong short-term growth but created consumer and commercial debt. People and businesses who were deeply in debt when price deflation occurred or demand for their product decreased often risked default. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged.
Massive layoffs occurred, resulting in unemployment rates of over 25%. (US) Banks which had financed this debt began to fail as debtors defaulted on debt and depositors became worried about their deposits and began massive withdrawals. Government guarantees and Federal Reserve banking regulations to prevent such panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.
The debt became heavier, because prices and incomes fell by 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By 1933, depositors had lost $140 billion in deposits.
Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated. This kind of self-aggravating process may have turned a 1930 recession into a 1933 great depression.
Today's timorous economists are afraid to even utter the fatal word "recession," let alone the more onerous "depression."
Economists of the Roosevelt II era focused on the maldistribution of wealth as a major factor, such as Marriner S. Eccles, Franklin D. Roosevelt's Chairman of the Federal Reserve from November 1934 to February 1948, in his memoirs, Beckoning Frontiers, 1951:
As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
Roosevelt acted by (following list derived from Wikipedia article):
Reforming the financial system, The Securities Act of 1933, followed by the Securities Exchange Act of 1934
Ending "cut-throat" competition
Setting minimum wages and prices
Encouraging unions which worked to increased wages
Cutting farm production, in order to raise market prices
Forcing businesses to work with government to set price codes
Creating the NRA (National Recovery Administration) board to set labor codes and standards
I must not fail to mention another of Roosevelt's actions, the creation of the Civilian Conservation Corps (CCC) in order to to "end to the rampant unemployment and economic chaos that gripped the country."
Accepting the Presidential nomination on July 1, 1932, New York Governor Roosevelt planned a fight against soil erosion and declining timber resources, utilizing the unemployed of large urban areas.
Professional foresters and interested layman raised these aims. In what would later be called "The Hundred Days," President Roosevelt revitalized the faith of the nation with several measures, one of which was the Emergency Conservation Work (ECW) Act, more commonly known as the Civilian Conservation Corps. With this action, he brought together two wasted resources, the young men and the land, in an effort to save both.
The President wasted no time: He called the 73rd Congress into Emergency Session on March 9, 1933, to hear and authorize his program. He proposed to recruit thousands of unemployed young men, enroll them in a peacetime army, and send them into battle against destruction and erosion of our natural resources. Before it was over, over three million young men engaged in a massive salvage operation, the most popular experiment of the New Deal.
http://www.cccalumni.org/...
As a confirmed Luddite, I must invoke the ghost of Lewis Mumford in order to segue into a discussion of the arts during the New Deal:
Bacon did not foresee that the humanization of the machine might have the paradoxical effect of mechanizing humanity; and that at this fatal moment the other arts, so nourishing to man's humanity and spirituality, would become equally arid, and so incapable of acting as a counterpoise to this one-sided technical development.
Art and Technics, 1960, in "Art and the Symbol."
During the depths of the Great Depression of the 1930s and into the early years of World War II, the Federal government supported the arts in unprecedented ways. For 11 years, between 1933 and 1943, federal tax dollars employed artists, musicians, actors, writers, photographers, and dancers. Never before or since has our government so extensively sponsored the arts.
http://www.archives.gov/...
Corporatists and financial institutions have been having hissyfits ever after -- and it was left to malevolent Newt Gingrich to begin the dismantling of FDR's legacy:
With the Republican takeover of both houses of Congress in 1994, the Republicans announced that a new "revolution" had swept America, led by Senator Robert Dole and Representatives Newt Gingrich and Richard Armey. Of course, there was the famous "Contract with America," but the provisions of that document involved minor tinkering with the system, at best. The Republican "revolutionaries" and their conservative supporters went much further.
After decades of failure, the Republicans proclaimed, it was now time to dismantle the New Deal, Great Society welfare-state programs that had caused so much misery and destructiveness to the American people. Conservative editorials appeared in newspapers all across the land explaining the immorality of government's using its power to take money from one person to give it to another. Speeches filled the airways about the necessity to reign in the bureaucrats who were endlessly harassing the American people and eating out their substance. Now that Republicans were finally in charge of Congress, hundreds of departments and agencies were going to be dismantled.
http://www.fff.org/...
Of course, Reagan had already begun the dismantlement during his administration with wholesale union busting and the taking down of the air traffic controllers in the 1980s:
http://answers.yahoo.com/...
Barack Obama as president will have national catastrophes with which to deal, the least of which will not be the over half a trillion national deficit given us by Bush II. Obama can do no better than to refer to the earlier national legacy of FDR for a blueprint on how to deal with present-day problems, as well as a modern-day version of the CCC, this time to repair our nation's tattered infrastructure, rebuilding bridges, highways, schools, etc.