The Great Depression was the worst economic downturn in modern history, lasting from 1929 to 1939. It was marked by mass unemployment, poverty, hunger, and despair across North America and Europe. Determining the exact year when the Depression was at its peak is difficult, but most historians agree it was likely 1933.
The Lead Up to the Great Depression
In the 1920s, the United States experienced a massive economic boom. New technologies like automobiles, airplanes, radio, and movies led to new industries and new jobs. The stock market was soaring as ordinary people started investing their savings. There was a widespread feeling of unlimited prosperity and “get rich quick” exuberance.
However, this rapid growth was built on a shaky foundation. Stock prices became wildly overvalued compared to company earnings. Too much capital was tied up in the stock market and not enough was going into productive investments. The vast majority of wealth was concentrated among the rich, while the wages of working Americans remained stagnant.
In 1929, the stock market bubble finally burst. On October 29, known forever after as Black Tuesday, share prices on the New York Stock Exchange collapsed. The Dow Jones Industrial Average fell 25% in just four days. Panicked investors rushed to sell their stock, only driving prices down further. The U.S. economy fell into recession.
The Great Depression Begins
Over the next three years from 1930 to 1932, the recession turned into a full-blown depression. National income plunged, unemployment skyrocketed, and the banking system neared collapse:
- GDP fell nearly 50% from its 1929 level
- Unemployment reached 25% at its peak in 1933
- Over 9,000 banks failed, wiping out millions of people’s savings
As banks failed, there was less money circulating in the economy. With no money, consumers could not buy goods, and businesses could not invest in new inventory. This cycle just kept perpetuating the economic decline.
Causes of the Great Depression
The Great Depression was caused by a perfect storm of factors that combined to cripple the economy:
- Stock market speculation and panic selling
- Overproduction by farms and factories
- Weak international trade due to tariffs
- A flawed banking system with no deposit insurance
- No action by the Federal Reserve to expand the money supply
- Plunging consumer spending and business investment
With all of these issues compounding each other, the economy was locked in a vicious downward spiral. The Depression spread quickly across the globe, severely impacting Canada, Europe, Latin America, and other regions that depended on the U.S. for trade.
The Depression Reaches Rock Bottom (1931-1933)
In the early 1930s, the Great Depression went from bad to worse. Jobs disappeared at an alarming rate as more and more companies went bankrupt:
- 1930 – 4 million unemployed
- 1931 – 8 million unemployed
- 1932 – 12 million unemployed
With so many people out of work, homelessness and poverty increased dramatically. “Hoovervilles,” or shanty towns built of scrap materials, sprung up in cities across the country as homeless Americans struggled to survive. Bread lines stretched for blocks as people waited for free food.
On the agricultural front, farmers struggled with low crop prices, droughts, and dust storms. Many farms went into foreclosure, and families fled the “Dust Bowl” regions of the Midwest in search of work.
In 1932, Franklin D. Roosevelt was elected president on the promise of a “New Deal” recovery program. However, even FDR’s decisive actions could not turn the economy around immediately. Conditions continued deteriorating in the early months of his presidency.
1933 – The Depression Hits Rock Bottom
Economic indicators reached their lowest points in 1933:
- GDP fell to $56 billion, half of the 1929 level
- Unemployment peaked at 25%
- Manufacturing output was cut in half
- Housebuilding dropped by 80%
- Over one-half of U.S. banks had failed
The early months of 1933 marked the very depths of the Great Depression’s downward economic spiral. FDR had to take dramatic federal action to re-inflate and stabilize the economy.
The New Deal Recovery Program (1933 Onward)
After taking office in March 1933, Roosevelt immediately launched the New Deal – a series of government programs aimed at providing jobs, reforming the financial system, and stimulating the economy:
- The Civilian Conservation Corps (CCC) employed young men in conservation work
- The Works Progress Administration (WPA) created infrastructure jobs
- The Tennessee Valley Authority (TVA) built dams and hydroelectric projects
- The Securities and Exchange Commission (SEC) regulated stocks
- The Federal Deposit Insurance Corporation (FDIC) insured bank deposits
In addition, Roosevelt took the U.S. off the gold standard so the Federal Reserve could expand the money supply. He also legalized beer sales to generate tax revenue.
The New Deal programs put millions of Americans back to work. However, it took World War 2 defense spending in the early 1940s to completely end the Depression. Still, FDR’s policies laid the foundations for recovery starting in 1933.
Economic Turnaround (1933-1939)
Thanks to the New Deal programs and WWII spending, the economy steadily improved after 1933:
- GDP grew at an average 8% per year from 1933 to 1937
- Unemployment fell to 14% by 1937
- Industrial production doubled from 1933 to 1937
- Stock prices rose over 250% from 1932 to 1937
However, the economy took a sharp downturn in 1937 after FDR cut back on New Deal programs. This “Roosevelt Recession” confirmed that the economic recovery was not self-sustaining until WWII came along.
Conclusion
In conclusion, the historical evidence clearly shows that 1933 was the peak year of economic calamity during the Great Depression. Key indicators like unemployment, GDP, industrial output, and stock prices all hit their lowest points in 1933 before beginning a slow recovery. As such, 1933 can unequivocally be identified as the height of the Depression in America and most of the Western world. The economy did not return to 1929 levels until the 1940s wartime boom.
While the Wall Street Crash of 1929 certainly triggered the Depression, it took several years for the full effects to reverberate through the economy. The early 1930s saw conditions steadily worsening until the system completely imploded in 1933. Thankfully, FDR’s decisive actions with the New Deal began stabilizing the economy and reversing the decline starting in 1933. However, it took World War 2 for the U.S. to finally and completely emerge from the Great Depression.
| Year | Unemployment Rate | GDP |
|---|---|---|
| 1929 | 3.2% | $103.6 billion |
| 1930 | 8.7% | $91.2 billion |
| 1931 | 15.9% | $76.5 billion |
| 1932 | 23.6% | $58.7 billion |
| 1933 | 24.9% | $56.4 billion |
| 1934 | 21.7% | $66.0 billion |
| 1935 | 20.1% | $73.3 billion |
| 1936 | 16.9% | $83.8 billion |
| 1937 | 14.3% | $91.9 billion |
| 1938 | 19.0% | $86.1 billion |
| 1939 | 17.2% | $92.2 billion |
This table shows the peak unemployment and lowest GDP level in 1933, illustrating it as the height of the Depression’s effects before the economy began recovering in 1934.
Impact on Society and Culture
The Great Depression profoundly impacted American society and culture:
- Poverty and starvation led to a 40% decline in birth rates
- Suicide rates increased as people lost hope
- Hoovervilles dotted the national landscape
- Popular media portrayed the struggles of ordinary Americans
- Labor unrest led to a rise in union membership
- New Deal art and photo projects documented the era
The economic devastation was so severe it shook American optimism and forced society to question its fundamental values. However, it also spurred new movements in art, literature, and music that exposed the harsh realities many faced.
Poverty and Despair
As unemployment soared and earnings plunged, Americans struggled to afford basic necessities. Food consumption declined, malnutrition rose, and people resorted to new extremes just to eat. In cities, long breadlines became a common sight. In rural areas, families scavenged food wherever they could find it.
Homelessness was rampant as millions lost their homes to foreclosure or couldn’t pay rent. Homeless encampments called “Hoovervilles” covered open lands on the outskirts of many cities. Even well-off families were forced to live more modestly as incomes shrank.
The extreme economic adversity took a toll on mental health and morale. Suicide rates rose over 20% in the early 1930s compared to pre-Depression levels. Overall birth rates declined by almost 25% as families couldn’t afford to have children. The future seemed bleak for many Americans.
Working Class Response
For blue-collar workers, the Depression meant longer hours, lower wages, and terrible working conditions as companies cut costs. Disillusioned laborers became more supportive of organized labor efforts. Union membership doubled from 3 million in 1930 to 6 million by 1933.
Major strikes rocked America’s factories, mines, and docks in the early 1930s. In 1934, over 1 million workers went on strike across the country, shutting down ports, auto plants, and other industrial sites. However, violent suppression by business owners and police limited labor’s gains.
Artistic Movement
Many writers, artists, and photographers involved with the Federal Arts Project captured the struggles of the Depression era. Photographers like Dorothea Lange and Walker Evans documented rural poverty in their iconic images. Authors like John Steinbeck described the plight of migrant farm workers in his 1939 book The Grapes of Wrath.
The economic strife also influenced popular culture and entertainment. Dance marathons became popular spectator events during the Depression, as contestants competed desperately for prize money. Busby Berkeley’s lavish musicals provided escapist Hollywood fantasy for moviegoers.
Recovery and Aftermath
While the New Deal programs laid the foundations, it took American involvement in WWII to fully end the Great Depression. Ramping up war production spurred massive investment, growth, and job creation. Unemployment dropped to just 2% in the early 1940s.
However, the Depression had long-lasting impacts on America that endured even after prosperity returned:
- Creation of Social Security to provide retirement income
- Banking regulations to prevent risky speculation
- Minimum wages and overtime pay for workers
- Greater role for the government in managing the economy
- Rise of Keynesian economics favoring government stimulus
Essentially, the New Deal established America’s mixed economy model with an active public sector supporting private enterprise. The Great Depression changed attitudes on the government’s responsibility to provide economic security for citizens.
Internationally, economic turmoil contributed to the rise of fascist rulers like Hitler who promised national rejuvenation. The Depression era unrest sowed seeds leading to the tragedy of World War 2.
While the Wall Street Crash may have triggered economic disaster, the Depression reached its nadir in 1933. The policies and programs initiated that year by FDR started turning the tide. But it took a war to complete America’s recovery.