VCU history professor considers Great Depression causes and lessons learned
The “Black Tuesday” stock market crash happened 80 years ago this month
University Public Affairs
This month marks the 80th anniversary of the stock market crash recognized as the start of the Great Depression. And while the Great Depression is best remembered for the economy misery caused worldwide in the 1930s, its root causes happened much earlier according to John T. Kneebone, associate professor, Department of History.
“I think most people talking about the Great Depression today would probably point to World War I, which brought the destruction of the world economy, and then the failure to reconstruct as contributing factors,” Kneebone said. “And at the same time in the United States, the stock market took off and more people were using credit to buy houses and cars.”
That all changed late in October 1929 when the stock market stumbled on Thursday, Oct. 24. And on the 29, a day that would come to be known as “Black Tuesday,” the market crashed. By November, the markets had dropped below what they had been in 1925.
“What made this worse is that Americans had been taking out loans to buy houses and automobiles. And to continue to make payments on those items, they stopped spending in other areas,” Kneebone said. “It produced a roller coaster effect because a drop in consumption meant a drop in production in the factories and people were laid off. And those laid off couldn’t consume and the nation fell downward.”
By the early 1930s, the nation’s unemployment rate rose to about 25 percent, though Kneebone said the rate varied nationally. In Virginia, unemployment peaked at about 10 percent, but in large industrial cities, 60 percent to 70 percent of the workforce was unemployed.
Kneebone said the Great Depression also had an impact on banking and farming. And many nations, including the United States, turned inward to try to solve economic problems rather than focusing on rebuilding the international economic system.
Kneebone said lessons learned from the Great Depression have helped the U.S. weather future economic downturns.
“Everything from the Federal Insurance Deposit Corporation to protect bank deposits so people wouldn’t run to get money out if they feared the bank may fail and efforts to ensure we had a social safety net through social security and the strengthening of labor unions,” Kneebone said.
But other measures that resulted from the Great Depression, such as the separation of commercial banking from investment banking, were turned back in later years.
While the Great Depression brought changes in economic practices and government regulations, did it also change the outlook for people who lived during that time?
“Were people changed by it? That’s a tough question,” Kneebone said. “I think for people who grew up as children in the 1930s, they would have also had experience in the 1940s with total mobilization for war and full employment, and of course the message there was also conservation. So they would have been hit from childhood through their adulthood with those kinds of messages.”
Kneebone said the Great Depression also influenced the course of history, leading to the rise of Nazi Germany and World War II, terrible suffering in what is known today as the third world, and the beginning of decolonization.
This semester, Kneebone is teaching a seminar course on America in the 1930s. He said the students, young enough to have grandparents or great-grandparents who lived through the Great Depression, are surprised at what they learn about that era in history
“I think they are just profoundly shocked at just how difficult times were,” Kneebone said. “The Great Depression came slowly. People said after the stock market crash that everything would be okay. And it crept in. It wasn’t until the early months of 1933 that people realized just how terrible everything was. Let’s hope that doesn’t happen with us now.”
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