The Great Depression and The Great Recession: Compare and Contrast
The question that has been asked by many over the last decade is What were the two greatest economic catastrophes in the U.S. of the last 100 years? The Great Depression and the Great Recession are the two that come to my mind when I think about this topic. Most people usually know about the Great Depression but not a lot of people really have a good understanding or know much about the Great Recession. Even though they were very different in their ways they both had a very powerful impact on the economy in their time periods which was separated by 80 years.
History.com states “The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939.” There were many things that contributed to The Great Depression. It began with the Stock Market. The Stock Market was doing great through most of the 1920s. The more it grew the more money people were throwing into it. People bought on margin and when it crashed in October 1929 people couldn’t pay back all the money they owed because their stocks were worth nothing. Millions of investors were affected and Wall Street went into a panic. There were also bank failures because many small banks overextended credit to farmers and they couldn’t pay it back forcing the banks out of business. This almost shut down the United States banking system. There were too many poor people despite an economy that soared in the 1920s. More then half of the people living in the United States were living in poverty. Lastly, there were farm failures because there was a horrible drought in the Great Plains. The Midwest became known as the “Dust Bowl” because it turned the farms into abandoned deserts. No one thought that something like the Great Depression could have happened to them. During this time, many people were out of work, hungry, and homeless.
After the Stock Market Crash of 1929, President Herbert Hoover believed the government’s role should be limited. He didn’t believe in providing relief and aid. His goal was to get people back to work. His administration implemented stronger protections for labor and substantially increased federal subsidies for agriculture.
In October 1930, he established the President’s Emergency Committee for Employment later renamed the President’s Organization for Unemployment Relief to coordinate the efforts of local welfare agencies. According to David E. Hamilton “One of Hoover’s big policy mistakes was his signing of the Smoot-Hawley tariff in 1930. This law increased tariffs significantly on a wide variety of imported goods, creating the highest tariff rates in U.S. history.” As a result, he was blamed for The Great Depression and not reelected in 1932. Franklin D. Roosevelt became the new president. Roosevelt began the Agricultural Adjustment Act which paid farmers not to produce, and then expanded Hoover’s Reconstruction Finance Corporation, which provided bailout money to large banks and corporations. He also expanded spending on public works.
According to History.com “The Great Recession was a global economic downturn that devastated world financial markets as well as the banking and real estate industries. The crisis led to increases in home mortgage foreclosures worldwide and caused millions of people to lose their life savings, their jobs, and their homes. It’s generally considered to be the longest period of economic decline.” One cause of The Great Recession was subprime mortgages. History.com states “Subprime mortgages are home loans granted to borrowers with poor credit histories. Their home loans are considered high-risk loans.” As a result of the subprime crisis, the more houses that were built the less the houses with mortgages were worth. This caused people to default on their mortgage and the banks to suffer because the houses were valued at less then the mortgage the bank held. The Great Recession is linked back to former president George W. Bush. He said all American’s should own their own house which fueled the housing bubble.
Barack Obama inherited the fallout of The Great Recession although the immediate response was handled by President Bush’s administration. The economy at the time had lost nearly 3.6 million jobs in 2008 and was shedding jobs at a nearly 800,000 per month rate when Obama took office. During this time, several major financial institutions either collapsed, were forced into mergers, or were bailed out by the government The Obama administration implemented the American Recovery and Reinvestment Act of 2009. It was signed on February 17, 2009, and ended the Recession in July 2009. It was an immediate relief to families. It sent $260 billion to families in tax cuts, tax credits, and unemployment benefits. It also created jobs in public works. Obama’s administration helped fix the effects of the recession faster than expected and also rescued the car industry.
Hoover’s administration and Obama’s administration handled these financial crises differently. Hoover didn’t believe in relief and aid and Obama did with tax credits and cuts. Although both Hoover and Obama believed in getting people back to work. They both implemented that. In the end, Obama’s way fixed the economy and in 2020 under the Trump Administration, the Stock Market is the highest its been, while Hoover’s way didn’t fix the Depression and he wasn’t reelected.
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