Stock Market Crash of 1929 and the New Deal Response

From the Great Depression Stock Market Crash

The desconfianza (distrust) spread among investors. On 24 October 1929 (Black Thursday), the New York stock market was severely affected. The urge to sell shares was overwhelming, but nobody wanted to buy them, thus triggering the stock market crash. Many investors were ruined, and people rushed to banks to withdraw their money out of fear. This caused many banks to collapse, and numerous businesses were ruined. The stock market crash precipitated the failure of many banks, leading to a widespread economic recession (depression) that affected many industries, including trade and agriculture.

Economic Consequences

• Consumption diminished.
• Factories closed because they could not sell their production.
• The number of unemployed rose to 13 million.
• Many families fell into poverty.

From the U.S., the crisis spread to the rest of the world as U.S. banks withdrew deposited funds from European banks, and American companies reduced investment in other countries.

Combating the Crisis: The New Deal

In 1932, one of the worst years of the Great Depression, Franklin D. Roosevelt won the elections. He proposed a program to encourage recovery and lift the country out of the economic crisis. The New Deal defended state intervention to revive the economy.

Economic and Social Reform

The economic measures included:

• Support for companies in difficulty.
• Creation of public works.
• Destruction of accumulated agricultural stocks.
• The state took control over the banks.

These economic reforms were accompanied by social reforms. The state promoted a large public works plan to combat unemployment and favored a policy of supporting agricultural prices and increasing workers' wages to boost their purchasing power. These measures resulted in a revival of the U.S. economy and a significant decline in unemployment. By 1934, productivity levels reached those of 1929.

End of the Depression

Despite these measures, the crisis did not fully disappear until the Second World War. The needs for rearmament and provisioning during the war turned the United States into the main supplier for its allies.