How Government Policies Influenced the Great Depression


The great depression was the longest and most wide spread economic depression which started in the early 1930s and lasted until 1940s.This depression resulted in the fall of market prices ensuing failings in tax revenue, personal income, profits, prices and international trade. Government played a major role in both the hindrance and recovery of the great depression.

Hoovers fiscal policy accelerated the decline. By reducing all income tax rates by 1 percent due to the ongoing budget surpluses, the surplus turned into a deficit that grew rapidly as the economy contracted, by reducing household disposable income, the household spending also reduced resulting in further decline in the economy.

The federal expansionary monetary policy resulted in bank runs and bank failure; and American dollars began to be redeemed for gold as the gold outflow resumed. This resulted in the financial conditions worsening because the public increasingly held more currency and fewer deposits, and as bank built up their excess reserves which were far too small to stop the fall in money supply.

Compounding the error of high-grade tariffs, colossal subsidies and deflating monetary policy, the Revenue Act policy was passed in1932 which doubled the income tax. Because of the declining revenues and increasing welfare appeal, the strain on the cities drove multifarious municipalities to the edge hindering the depression recovery process.

Civil Work Administration (CWA) was created to generate jobs for the unemployed especially in the high paying construction arena however it resulted in large opposition cost to the government hence prolonging the recovery of the great depression.

Informal policies against hiring the female gender, the minorities and workers over the age of 45 or those not attained the age of 18 were reduced which pushed individuals to work harder resulting in increase in new factories hence a decrease in unemployment which also resulted to recovery from the great depression.

The Civilian Conservation Corps (CCC) policy made young men live in work camps where they worked and their paychecks were sent home to their families. This resulted in building of many public works, structures and trails all over the country. This policy in turn helped in recovery from the great economic depression experienced at the time. The Federal Housing Administration (FHA) was created by the government to battle the housing crisis. The FHA was to regulate mortgages and housing conditions.

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