5min read
Published on: Apr 9, 2024
#Financial Markets
Florence Owens Thompson, a Native American woman, was born in Cherokee Nation, Oklahoma in 1903. She was only 17 when she got married to Cleo Owens, a farmer from Missouri, in 1921. Within the next five years, she gave birth to three children.
You might be wondering what to do with that piece of information...
Economic hardship made the couple, along with the larger Owens clan, migrate westwards to Oroville, California in 1926 for work prospects. There, they found work in the sawmills and the farmlands as the economic situation worsened.
Florence was pregnant at the time of migration and proceeded to give birth to two more children over the next few years.
Tragedy struck home when Cleo died of tuberculosis in 1931, with Florence expecting another child. The child was born six months later.
A widow with six more mouths to feed, Florence worked day and night to support her family. She worked in the fields during the day and at a restaurant at night.
Florence decided to give love or companionship another shot, courting a rather well-to-do Oroville businessman. In 1933, she was pregnant once more.
But a persistent fear of losing the issue to the powerful family forced Florence to run away with her children to her parents’ farm in Oklahoma. Her parents raised the infant.
In 1934, the entire family consisting of Florence, her children, her parents, her relatives migrated from Oklahoma to Shafter in the southern San Joaquin Valley to find economic opportunities.
Florence got into another relationship with a man who worked as a bartender and a butcher. She again birthed a child in 1935.
The man was never able to make ends meet, and it was Florence who used to take care of the family.
The couple kept migrating from one place to another for the next few years, chasing crops throughout California and occasionally into Arizona. Florence gave birth to three more children over the next few years, though one of them died within two years of her birth.
The family kept struggling to somehow survive the financial crisis which was sweeping the country and the world for more than a decade now.
It was amid this long period of economic downturn that Dorothea Lange, a leading photojournalist, photographed Florence along with two of her seven children.
The 1936 photograph, titled the “Migrant Mother” and published across all the leading global newspapers and magazines, became the defining image of this depressingly long period of economic downturn known as the Great Depression.
Dorothea Lange, “Migrant Mother,” Nipomo, California, March 1936
The Great Depression was the most severe period of global economic recession within the past few centuries. It was among the longest economic downturns ever.
The term “Great Depression” is frequently attributed to British economist Lionel Robbins who wrote the eponymous book in 1934.
The devastating period during 1929-1941 impacted most countries in the world.
Businesses failed frequently and miserably, and most people found it hard to survive due to high unemployment rates.
Florence was one among the millions who were struggling to barely provide for their families.
A queue of unemployed people in Amsterdam, Netherlands in 1993
To understand the phenomenon, let’s start from the beginning.
The Roaring Twenties (1920s) were marked by a phenomenon economic growth and an excitement around the stock market in the US.
In fact, the Dow Jones Industrial Index soared 500% within five years during this phase.
However, large-scale speculative trading led to an unprecedented rise in the prices of assets.
Ultimately, the New York Stock Exchange (NYSE) crashed with a bang on 24th October 1929. The day is now known to us as Black Thursday.
It was the Wall Street Crash of 1929 that gave impetus to widespread economic depression in the US and the world.
The stock market fell almost 90% from its all-time highs of 1929.
The gross domestic product (GDP) of the US shrank by more than 36% from 1929 to 1933, within a gap of only four years.
During the same period, the unemployment rate in the US soared from 3.2% to over 25%.
Source: ResearchGate/The Ups and Downs of Capitalism - Interview with Ben Bernanke
As the US market showed a little recovery following a previous economic depression in 1920-21, the unsound economic policy pursued by the Federal Reserve also contributed to the economic slump.
The Fed increased the total money supply by $28 billion between 1921 and 1928, a rise of 61.8% within a span of 8 years.
Meanwhile, it kept the interest rates very low during the 1920s which led to exponential growth.
When the Wall Street crashed in 1929, the Fed drastically reduced the money supply by one-third. The action led to a severe illiquidity crisis.
Banking and real estate institutions collapsed during the next few years, with the Fed injecting next to zilch in the market.
US President Herbert Hoover legislated the much-criticised Smoot-Hawley Tariff Act in 1930.
It introduced a multi-industry tariff in an apparent attempt to battle global competition in the domestic US market.
The affected countries retaliated in similar order.
Consequently, global trade fell by 66% between 1929 and 1934.
“The philanthropist,” Herbert Block, Chicago Daily News, 5th December 1930
Franklin Roosevelt, the next US President, initiated the New Deal in 1933 after being elected to the White House.
The programme introduced price supports, minimum wages and social security schemes.
It also removed the gold standard, restricting individuals from hoarding gold.
It also began several public works in order to create jobs for the masses.
The government introduced tax hikes in excise, personal income, corporate income etc. to fund the New Deal programmes.
Federal taxes rose 3x between 1933 and 1940, putting a huge burden on tax payers.
Even in 1940, the unemployment rate still stood at 14.6%.
Eventually, the New Deal wasn’t quite successful in rescuing the US economy from the Great Depression due to its severity.
Learn more about the impact of elections on the US market.
The Great Depression ended around the time the US entered the World War II in 1941.
The number of unemployed workers declined by 7 million between 1940 and 1943.
Meanwhile, the number in military service rose by 8.59 million.
Industrial production also increased in order to contribute to the war effort.
It doesn’t mean that the war was meant to end the economic downturn. We should remember that correlation does not imply causation.
These metrics make people deduce that the World War II ended the Great Depression.
However, it is not the complete story.
As is common to wars, the World War II brought massive death and destruction in its wake. Millions of soldiers and civilians died in fighting, genocides, massacres and ethnic cleansings.
Tax hikes and rationing during the war led to a drastic decline in the standard of living for most people.
Unlike the public sector, the private sector suffered quite a lot as production fell by 50% during the war years. It was only after the war ended that private investments rose from $10.6 billion to $30.6 billion within a year.
The 1930s was not the only phase of time when the global economy collapsed.
In the 21st century, we witnessed the Great Recession during 2007-08 and the Coronavirus pandemic-induced recession during 2020-22.
Scholars study these historic market events so that they can gauge the symptoms of any such potential crises.
BitDelta users, on the other hand, should learn about events like the Great Depression so that they can keep a close watch on the current functioning of the global financial markets.
To follow the latest market trends, keep following the BitDelta Academy.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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