|Categories:||History Economics The Great Depression|
The Great Depression and the Great Recession were economic times when the economies of the western countries had been severely affected. They were characterized by long-term unemployment, fall in industrial production, close down of many investments, consumers spending drop down and widening the gaps between the rich and the poor. The ruling governments during the two economic hard times had to lay down new strategies to revive the economy of the countries affected. Differences and similarities between the two economic times in the world history will be explored in this research work.
The Great Depression occurred from 1929-1939, and it is believed to be the worst and the longest economic crash that has ever occurred in the western countries. The stock market of United States crashed, and most of the investors closed down their investments. Industrial production went down, and millions of US workers were laid off. Consumers spending dropped and by 1933, 13-15 million American Adults were unemployed (Walls 1). President Franklin D. Roosevelt set up relief and reformation measures of reviving the economy of the country early 1930s by the steps were not successful until 1939 when The World War II started.
Conversely, The Great Recession officially began in 2007 and went through 2009. Its beginning was marked by the bursting of eight trillion dollar housing bubble that hit the western countries again (DB 1). Consumers spending experienced sharp cutbacks that resulted from the great loss of wealth. The stock market of the United States became chaotic due to the bursting of the bubble that led to close down of most of the investments in the United States. A lot of people lost their jobs due to the collapse of industries, decreasing their production. 6.1% of all the US payroll employments were lost as more than 8.4 million persons were fired from their job (The Great Recession 1). The bursting of the housing bubble and the drop in the stock market affected lives of people leading to poverty as adults and children lost their health insurance.
Differences have been pointed out between The Great Depression and The Great Recession. The freefall of the US stock market was faster and bigger during The Great Recession than it was during The Great Depression. This was due to synchronization of the global integration of the markets as it has been reported by International Monetary Fund (IMF). The synchronized recession was also found to last longer characterized with slower economic recoveries than it was the case in The Great Depression (Jacobson 1). However, during The Great Recession, the US stock market did not drop as it did during The Great Depression. Due to changes in economic policies and market philosophy, the price-to-earnings ratio of the stocks during The Great Recession was not as low as it was experienced during The Great Depression.
Comparing the stock prices during the two economic times, we note that the equity prices fell, and fifteen months later they had started rising during the recession. The overall situation during the depression was quite different because, after the fall, it took thirty-five months to start growing again. This is almost three times worse as it was in 2009. Probably the situation in 2009 had been better as compared to the situation in 1929 because of the emergence of modern financial technology and instruments that ensured the crisis spread further and faster than it was the case in 1930s. Between 1929 and 1933 unemployment rate raised from 3.2% to 24.9% an increase of 21.7%. This indicates that there was an average increase in the unemployment rate of 6.8% per annum during the depression. On the contrary, the unemployment changed from 4.4% in 2007 to 10.0% in 2009 (Jacobson 1). There was an average increase 2.2 point annually almost a third of what was experienced during the great depression. The comparison of the Gross Domestic Product (GDP) of United States between the two tough economic times indicates that during the Great Recession, GDP was not affected as it was during the Great Depression (DB 1). It took eight years for the GDP of this country to return to its normal level after its fall in 1929.
Some similarities exist between the two economic times when the United States stock market dropped and performed poorly. The rate at which the employees lost their jobs were similar during the two economic times, and it had not been experienced at any other time. Some people had been out of work for more than six months between 2007 and 2009 an experience that was only witnessed during the Great Depression. Also, during the Great Recession, the rate of inequality in United States rose becoming almost similar with the economic gaps between the rich and the poor that were experienced in 1929 during the Great Depression.
From the exploration of the two historic economic events, we can safely conclude that the advancement in technology and financial instruments contributed significantly in making the Great Recession much better as compared to the Great Depression. Although experienced in two different times, the lives of most people were affected, and most of them took many years to recover. The government interventions in both cases helped in improving the economies of the countries affected.
DB, Devon. Is Another Depression Possible?: A Comparison of The Great Depression and The Great Recession. 28 September 2011. 13 June 2015.
Jacobson, Louis. Comparing the Great Recession and the Great Depression. 19 September 2013. 13 June 2015.
The Great Recession. n.d. 13 June 2015.
Walls, Jeannette. The Great Depression. n.d. 13 June 2015.
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