When you here the phrase “The Great Depression”, it evokes numerous images for most people and for the most part, the first thought to come to mind for most of us, is the financial fallout of the 1930’s. Of course that was what it was; but calling it that, is so clinical, so emotionally cold, that it doesn’t really get to the heart of the real history of such an event. Certainly we need to shy away from subjective aspects of our research as much as possible, but when dealing human beings, the spiritual, emotional, physical and intellectual makeup of an individual are the tells of why people do the things they do, why they make the decisions they do and how the vision of our history comes to be.
We always have to remember that history is never a set of dry facts and figures that can be simply categorized by a name, a date or some dry dissociated diatribe that we see in so many academic papers. History in all of its myriad forms is a study of processes. The process of human interaction observed through time, the processes of the biological world we live within, the so called “Acts of Gods” that more often than not, are both the protagonist and antagonist in the perceptions of how we view the world around us.
The Great Depression came at a time in history when every culture i.e., every financial market, was quickly becoming interdependent upon one another. Before the advances in modern transportation and other technologies, failure of a culture to support itself did not necessarily affect the other cultures that surrounded them. If there was an effect, the strength of that effect varied with time, distance and the geographical barriers that lay between them.
Unlike today’s world, where a momentary drop in one stock market is seen seconds later around the entire world, the past may have had limited technology, but it also had time to take a breath, to see the simple balance sheets and not need a computer to model the nature of their wealth.
The Great Depression was an awakening to the collective understanding to which even man made activities; could, like nature itself, take on an unpredictable life of its own, to become a process by which the nature of man’s activities becomes more than the sum of their parts.
This worldwide economic collapse began in 1929 and only ended well into WWII. It’s a unique period of time imprinted on the minds of those who still live who went through it, movies made about it, thesis after thesis trying to explain it, all in the quiet fear of one thing, the thought that if it happened once, it could happen again.
This fear is especially troubling in that there was such prosperity before the crash came, subsequently followed by a loss of forty billion dollars, the failure of over nine-thousand banks, reduction of purchasing from all classes leading to the a reduction of production, the loss of jobs and the cycle that dragged the system down. On top of this, drought conditions throughout the Southern Midwest and with our own brand of ignorance, the creation of the Smoot-Hawley Tariff, which charged high tax for imports, leading to less trade with American and economic retaliation, resulting in a Tariff War.
You wonder at the irony of Herbert Hoover’s comment a few months before winning the U.S. Presidency in 1928, “we in America are nearer to the final triumph over poverty than ever before in the history of any land.” (Hover 1928)
When he said this it was common in the 1920’s to leverage as much as ninety percent of a given stock purchase, with brokers charging twenty percent or more in fees. Of course no one worries about fees when stock prices were going up so fast, but the speed of the rise was the huge amount of money being borrowed on margin which was used to bid up the price of stocks far out of proportion to the real value of the companies themselves.
We have to ask ourselves what was the blindness of the times that lead to such a financial collapse and do we understand enough even today, to prevent the same catastrophe. In truth there was no real blindness. It was more a critical mass of developing trends, technologies and the quickening of interdependent financial systems.
Adding to this, the Federal Reserve System had just been created sixteen years before, still developing even the beginnings of its own organization, political solvency and some measure of economic expertise in the modern sense of what that meant.
Most economists believe that a recession is a normal part any financial cycle, but how do we tell the difference between a recession and a depression. A recession becomes a depression when a countries GDP drops ten percent or more.
From 1929 to 1933 the U.S. GDP plunged twenty-seven percent and after a small rally, from 1937 to 1938 it dropped another eighteen percent.
Ultimately there will continue to be a battle of wits over the causes of The Great Depression; some will focus on the human elements, the psychological, Acts of God. Some will show proof that a combination of laissez-faire and Keynesian theory might be the solutions to even today’s present recession; whatever path we take, our success will be based on learning to work together, knowing when and how to limit the natural tendency of business to be too risky, to greedy and the inherent interference of government to be overwhelming in the nature of its regulation. For in truth our success will always be found in our belief of each other and the balance to keep that faith strong in what we work for collectively.