Impact of the Great Depression on Legislation

To what extent did New Deal legislation represent a change in American government? This question is particularly important because it shows how the effects and the preventative masseurs of the past directly influence the way things work today. How the Social Security Act, the development of the State Welfare Programs, and Industrial Pensions and Welfare Capitalism stabilized the economy, protect the individual US citizen, and prevent another economic disaster from occurring.

The Great Depression was the worst economic disaster in the history of the industrialized world, lasting 10 years from 1929 to 1939. Beginning with “Black Thursday”, October 24th, 1929 when 16 million shares of stock were quickly sold by panicking investors which caused the stock market to crash on the following Tuesday. In just 2 months stockholders lost over $40 Billion Dollars. The depression was caused by several fundamental structural weaknesses in the U.S. economy. Banks operated without guarantees to their customers, so when things went wrong people would naturally panic, few regulations were placed on banks who lent money to those who speculated recklessly in stocks, agricultural prices were low leaving farmers unable to begin any kind of recovery. By 1933 over 4,000 banks had failed totaling 9,000 by the end of the 1930’s.

People across all classes stopped purchasing products because they feared further economic woes. This led to reduced product production, reduction of workers (people lost their jobs and could no longer pay for products that were purchased through installment plans leading to repossession) and unemployment rose over 25% leading to even less spending, worsening the economic situation. The Great Depression led to the New Deal in the US, but the effects reached across the world. In Germany, the Great Depression was a direct cause of the rise of extremism that led to World War II.

The Social Security Act of 1935 was created to produce a security web for people working or not working who were injured and cant work or with disabilities and or old age that make working not possible. This web would protect these individuals by categorizing there need base so that proper pay compensation could be given so they could be able to support themselves financially. “It established the social insurance programs of social security and unemployment compensation as well as the public assistance programs of Aid to Dependent Children (later changed to Aid to Families with Dependent Children, or AFDC), Old Age Assistance, and Aid to the Blind. All of these provided direct relief, payments given without work that is normally payed” (Rose, pg. 1)

The creation of this Act can be seen to be a direct influence of the Great Depression and because this act produces security for many people it can be seen to be a preventative measure towards another economic crises by eliminating the panic that individual people get during mass layoffs, so instead of money flow stopping which contributed greatly to the severity of the Great Depression, it continues to flow, eliminating repositions of products purchase through instalments and products continue to be purchase while the individual has enough time to find a new job

Work Cited

  1. Rose, Nancy E. “Work Relief in the 1930s and the Origins of the Social Security Act.” Social Service Review, vol. 63, no. 1, Mar. 1989, pp. 63–91., doi:10.1086/603679.
  2. Quadagno, Jill S. “Welfare Capitalism and the Social Security Act of 1935.” American Sociological Review, vol. 49, no. 5, Oct. 1984, p. 632., doi:10.2307/2095421.