Great Depression Begins

The Great Depression began in 1929, when a collapse in the American stock market helped trigger the most severe economic downturn of the modern industrial era. Unemployment soared, banks failed, and families across the United States and much of the world lost jobs, savings, and homes. The crisis lasted roughly a decade and reshaped ideas about the role of government in economic life.

The 1920s had been a decade of apparent prosperity in the United States. Car ownership, radios, and household appliances spread widely, and many Americans bought stocks, often with borrowed money. Yet the boom was uneven. Farmers had struggled with low prices since the early 1920s, wealth was concentrated at the top, and many families relied heavily on credit. Stock prices climbed far beyond what company earnings justified, creating a fragile situation.

In late October 1929, share prices fell sharply in a series of panicked sell-offs, with days now remembered as Black Thursday and Black Tuesday. Billions of dollars in paper wealth vanished. Historians still debate how much the crash itself caused the Depression, since it was one part of a larger story. Most agree that bank failures, a sharp drop in spending and investment, and a shrinking money supply turned a downturn into a catastrophe. Tariffs such as the Smoot-Hawley Act of 1930 and the international gold standard helped spread the damage abroad.

By the early 1930s, about a quarter of American workers were unemployed. Thousands of banks closed, wiping out the savings of ordinary depositors. Families lined up at soup kitchens and bread lines, and shantytowns nicknamed "Hoovervilles" appeared on the edges of cities. In the Plains states, drought and poor farming practices produced the Dust Bowl, driving many families westward in search of work. Countries from Germany to Australia to Latin America also suffered badly, and the political strain contributed to the rise of extremist movements in parts of Europe.

In the United States, Franklin D. Roosevelt won the presidency in 1932 and launched the New Deal, a series of programs for relief, recovery, and reform. It created jobs through public works, regulated banking, and later established Social Security. Economists still disagree about how much the New Deal ended the Depression; many point to the massive spending of World War II as the final push back to full employment. Its legacy endures in federal deposit insurance, financial regulation, and the expectation that governments should respond actively to economic crises.