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The Great Depression

The Great Depression was an economic catastrophe that lasted more than 10 years.

Written by Jess Ullrich / July 8, 2022

Quick Bites

  • Depressions are significant periods of economic decline, usually lasting years.
  • The Great Depression lasted for about a decade, upending the lives of millions of Americans.
  • Some believe the New Deal contributed to the end of the Great Depression, while others think it was U.S. involvement in World War II.

While some economists say we’re headed toward an inevitable recession in 2022, its impact will likely pale in comparison to the Great Depression. That economic implosion persisted for a decade, upending the lives of everyday people in the U.S. and globally. Unemployment levels soared, making it difficult for families to put food on the table and keep a roof over their heads. The worst part? The downturn and its effects persisted for 10+ years.

Read on to learn about economic depression, what the Great Depression was, how it happened and how it ended.

Inside this article

  1. What’s a depression?
  2. What was the Great Depression?
  3. The Roaring Twenties
  4. The Roaring Twenties end
  5. How it ended

What’s a depression?

An economic depression is marked by a sustained period of decline, typically lasting a year or more. It is a catastrophic economic event. It generally results in high unemployment, low inflation and extreme declines in gross domestic product (GDP, or the value of goods and services produced in a country) of more than 10%.

When GDP falls, it means that the country’s economy is shrinking, which can result in lots of bad things—lower business production, unemployment, business closures, declines in consumer spending and more.

Recessions are typically shorter, with less severe declines in economic output. A recession might last six months and GDP may fall a small percentage, but a depression can last years and declines are more severe.

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What was the Great Depression?

The Great Depression was a devastating economic decline that lasted from 1929 to 1939. From 1929 to 1933, the U.S. GDP fell by 30%.[1] While GDP is an important measure of economic health, it doesn’t tell the whole story—the Great Depression had a profound impact on everyday people both in the U.S. and globally.

U.S. unemployment hit a staggering 25%. Production slowed, making common goods more difficult to find. Thousands of banks failed. The price of goods tumbled. According to the Federal Reserve, the price of chicken decreased from 38 cents a pound to 12 cents a pound, and a dozen eggs dropped from 50 cents to 13 cents.

Despite significant price decreases, many families couldn’t afford basic necessities because unemployment was so high. Worker incomes decreased by over 40% from 1929 to 1933.[2] Pause for a moment and consider how losing 40% of your household income would impact your family. You’d probably have trouble putting food on the table and keeping your home and car. That’s exactly what many people struggled with during the Great Depression.

Household and community gardens, called “thrift gardens,” became a popular way to keep costs down. Families cut back on entertainment expenses and learned to use what they had instead of buying new items. If you wanted to go to the movies on the weekend, you had neighbors over to play cards instead to save money. If you ripped your pants, you patched them up.

Recession vs. Depression vs. Inflation

Recession vs. Depression vs. Inflation

A recession occurs when the economy slows down. A depression is a way worse version of a recession. Inflation is when prices of gas to tea are rising.

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The Roaring Twenties

The U.S. economy surged for several years before the Great Depression. During the “Roaring Twenties,” the U.S. experienced unprecedented wealth. Consumer spending increased, there was a cultural renaissance, alongside social upheaval. The U.S. GDP also increased by 40% in the years preceding the Great Depression.[3]

A big reason the economy was booming was that technological advances resulted in the production of more electronic goods. This led to more jobs, higher spending and more people moving from farms to cities.

At the same time, social and political changes were brewing—women gained the right to vote and more women entered the workforce. Some adopted the iconic flapper image, though probably fewer than movies and books like The Great Gatsby would lead you to believe. Black culture moved into the mainstream, with jazz and blues music gaining popularity. Still, Black Americans struggled with ongoing discrimination and devastating political setbacks, including the defeat of the Dyer Anti-Lynching Bill—which would’ve made lynching a federal crime—in 1922.[4]

The Roaring Twenties come to a crashing end

The hot economy of the 1920s obviously didn’t last forever and came to a stunning end with the 1929 stock market collapse.

Because wages grew in the 1920s, more people had more money to invest. Consumers were putting money into the stock market, and speculative investments increased.

But the Fed unexpectedly increased interest rates in August 1929, creating a snowball effect. Consumer spending decreased and people became more skeptical of the stock market. After surging for several years, the stock market collapsed on October 29, 1929.

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“A lot of people think the Great Depression was caused by the stock market crash in 1929, and that was certainly a contributing factor,” says Dock David Treece, former licensed investment advisor. “However, leveraged speculation had fueled the market higher for years and protectionist tariffs contributed greatly to curtailing economic growth in the late 1920s.”

Recession vs. Depression vs. Inflation

Recession vs. Depression vs. Inflation

A recession occurs when the economy slows down. A depression is a way worse version of a recession. Inflation is when prices of gas to tea are rising.

Find out more

The bleeding didn’t stop after the market crash—people began to panic and tried to withdraw their money from banks en masse. Unfortunately, many banks invested account holders’ savings during the stock market surge, so they didn’t have the money to give to consumers seeking withdrawals. This resulted in many, many people not being able to access their savings and thousands of bank failures.

“The fact that the U.S. was still on the Gold Standard at that time also restricted policymakers' ability to respond to market pressures and reinvigorate the economy after the initial downturn,” Treece shared.

When and how did the Great Depression end?

The jury’s still out on when the Great Depression officially ended. While many experts say it ended in 1939, the Federal Reserve says the downturn persisted until 1941.[5]

There are also conflicting opinions about how the Great Depression ended. Some say that newly-elected President Franklin Delano Roosevelt’s policies, including the New Deal, helped improve the economic climate. Under the New Deal, several federal agencies and programs were created, in the hopes that these measures would curb unemployment and turn the economy around. Others argue that United States involvement in World War II in 1941 helped mobilize the economy.

Either way, let’s just hope we never get that depressed again.

Article Sources
  1. “The Great Depression.” Britannica. https://www.britannica.com/event/Great-Depression.
  2. “Great Depression Facts.” Franklin Delano Roosevelt Presidential Library and Museum. https://www.fdrlibrary.org/great-depression-facts.
  3. “What Caused the Roaring Twenties? Not the End of a Pandemic, Probably.” Smithsonian Mag. https://www.smithsonianmag.com/history/are-we-headed-roaring-2020s-historians-say-its-complicated-180977638/.
  4. “The Roaring Twenties.” History.com. https://www.history.com/topics/roaring-twenties/roaring-twenties-history.
  5. “Great Depression.” The Federal Reserve. https://www.federalreservehistory.org/time-period/great-depression.

About the Author

Jess Ullrich

Jess Ullrich

Jess Ullrich is a personal finance writer who's been creating online content since 2009.

Full bio

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