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Essay 2 The Similarities and Differences between the Great Depression and Current Economic Conditions Allison Spencer ENG 141 July 27, 2010 The current economic condition has often been compared to that of the Great Depression of the 30’s. Both began with a dramatic crash in the stock market. Each was exasperated by increased unemployment, decreased industrial production and construction. With these changes came a rise in home foreclosures and repossessions. Additionally, both eras’s had environmental issues which affected conditions within the country. With all of the similarities one can’t help comparing the two.
However, the truth lies in the actual statistics. In President Obama’s inaugural speech (2008) he speaks about presidents making this transition in good times and bad. He wants Americans to understand that it takes hard work and unity to overcome the challenges that we face as a country. He also recalls the hardships of the past and explains that it took many years to overcome the economic downfall of those times. This shows that he has looked at past situations for remedies to the current situation. The stock market stock market crashes seem to be one of the first indicators that there was a problem.
Coincidentally both crashes started in October. After a 400% increase, between 1926 and 1929, the market began a decline that would last for years to come. Between October 24, 1929 and October 29, 1929 stock the market dropped 34%. This decline continued until July 1932. At that point it had gone from a high of 381 points down to 41. This was almost a 90% decline. It would be 22 years before the market would reach that high point again. Between October 1, 2008 and October 10, 2008 the stock market seemed to repeat history. In those ten day the stock market dropped 22. 11%.
On October 24, 2008 the Dow fell to 8,378. 5 points which was the lowest point since April 23, 2003. Only time will tell how the current situation will end, but at this point it seems like the stock market will rebound much quicker this time around. Obama acknowledges that much of the financial trouble that we are in today is due to corporate greed and mismanagement. He went on further to say, that when citizens try to live outside of their financial means; they are making the economic situation worse. During the Great Depression the unemployment rate reached a high of 24. 9% in 1933.
Unable to find work, Americans begin defaulting on their mortgages. It is said that in 1933, there were 1,000 foreclosed homes a day. This, added to the fact that many banks were invested in the stock market, caused the banks to run low on funds. Between 1929 and 1932 more than 10,000 banks failed. Americans lost $2 billion in deposits. In comparison, recently we have reached an unemployment rate of 12. 6% and it has been going down. Also, only five banks have failed in the years between 2008 and 2010. Obama addresses the rise in unemployment by encouraging growth in American industry.
He believes that looking into alternative energy would not only decrease our dependence on non-renewable resources, but also produce more jobs for Americans. Because of bank failures and unemployment, Americans had significantly less money to spend. This caused a drastic drop in production. Many businesses closed their doors, never to reopen again. These closures caused the unemployment rate to rise to points that had never been seen before, and have not been seen since. This led to a slowdown in construction. No one could afford a new home and businesses were closing, not building.
These conditions would continue into the late 40’s. The same thing began to happen recently. The difference this time was the government’s reaction. In the 30’s most government officials believed that they should let things run their course. This attitude led them to do very little to remedy the situation, and things progressively got worse. Economic problems were not solved, and conditions continued to get worse. Currently the government has extended unemployment benefits to those unable to find work. Also, they gave assistance to large corporations that would close without intervention.
This has prevented conditions from deteriorating to the point of the Great Depression. As if things were not bad enough, during the 30’s, most of the mid-west was under drought conditions. Now there are not only problems in the industrial sector, but the farmers are also in trouble. Crops began to fail because of lack of water and insect infestation. Now the farmers were also at risk of losing their homes and farms. This drought led to food shortages across the country. It also led to greater unemployment, because the farmers and there helpers no longer had crops to tend.
Currently we are dealing with a ruptured oil well in the Gulf of Mexico. This has caused hardships for the people living in that region. Fishermen lost their livelihood because the oil has contaminated the seafood in that area. The tourist industry, which is a driving force in many Gulf Coast states, has all but collapsed. Many people have been forced into working for the companies that are cleaning up the oil spill. The difference between now and the past is the fact that BP has been held accountable, and is responsible for the cleanup and paying the people that have lost their income.
During the “dust bowl” there was no responsible party that could be held accountable and made to fix the problem. What has made this economic crisis different from the past? The answer to this question may be as simple as the reaction to the situation. In the past a more passive stance was taken. Leaders thought that things would improve on their own. Obama addresses this firmly, with positive words, in order to encourage Americans to move forward. He knows that, without intervention, economic conditions will continue to deteriorate, not improve.
From the very beginning of the current situation the government has taken a proactive stance. There were “bail outs” for banks that were on the verge of closing. When the unemployment rate began to rise dramatically, it was decided that unemployment benefits needed to be increased. Home foreclosures were prevented with programs to help home owners keep their homes. During the 30’s and 40’s many of these assistance programs did not exist. References Bartlett, B.. (2012, Oct. 30). The Great Depression and the Great Recession. Forbes. com Retrieved Jul. 4, 2010, from http://www. orbes. com/2009/10/29/depression-recess. Eichengreen, B.. (2010, Mar. 8 ). In VOX. Retrieved Jul. 7, 2010, from http://www. voxeu. org/index. php? q=node/3421 Goldman, D.. Great Depression vs. ‘Great Recession’. CNN Money Retrieved Jun. 30, 2010, from http://money. cnn. com/news/storysupplement/economy/. Isidore, C.. (2009, Mar. 25). The Great Recession. CNN Money. com Retrieved Jul. 7, 2010, from http://money. cnn. com/2009/03/25/news/economy/depre. Lightman, D.. (2009, Jan. 27). Congressional Budget Office Compares Downturn to Great Depression. McClatchy Newspapers Retrieved Jul. , 2010, from http://www. mcclatchydc. com/2009/01/27/60822/congre. Mitchell, B. (1947). Depression decade; from New Era through New Deal, 1929-1941. New York, New York: RINEHART & COMPANY, INC.. Obama, Barack. “Inaugural Address. ” White House, Washington, D. C.. 20, Jan. 2009. Rosenburg, J.. (2010,). The Great Depression. Search 20th Century History Retrieved Jul. 7, 2010, from http://history1900s. about. com/od/1930s/p/greatdepr. Schenk, R.. (2008, Jul. 18 ). In A Case of Unemployment. Retrieved Jul. 1, 2010, from http://ingrimayne. com/econ/EconomicCatastrophe/Gre | |