The Causes and result of Great Depression compared to the contemporary crisis Essay

Thesis Statement

The Great recession is one of the biggest ongoing financial crises. Researches show that there are many parallels between the Great Depression and the contemporary recession.


This paper will discuss the causes of the Great Depression and its comparison to the recent recession. Moreover, when were the seeds of both the crisis were planted? How the government responded? Was the employment and tax rate high? These are some of the questions, which will be answered in the discussion below.

The Great Depression

The Great Depression began in 1929 and continued until 1939. It spread all over North America, Europe and other developed countries. The Great Depression is known to be the most severe financial catastrophe ever known in history. The main reason for this economic tragedy was the upheaval of the New York stock exchange, which experienced a continued fall of the stock market prices. As a result, most of the banks and financial organizations failed which led to less production, which further aggravated the economic situation.

The Great Depression originated from the United States but had an enormous impact across the globe. The reason why it could not remain restricted to the U.S. was the strong relationship bond the United States developed with the European economies after World War I. Owing to the financial debacle, the flood of American monetary aid to other regions was blocked completely. As a result, the European countries fell in a state of financial misery, because these countries were already indebted to the United Sates.

Britain and Germany were the two prominent countries that were severely impacted by the great depression. In Germany, unemployment rate increased largely leaving millions of people jobless. Moreover, the economic misery gave birth to leaders like Adolf Hitler in Germany and the expansion of Nazism. Although, Britain was less affected, but its industrial sector collapsed for a long time, and the unemployment also rose to a huge extent. Europe was terribly affected by the financial crisis because the extremist parties toughened weakening the status of democracy.

Owing to the huge economic failure, President Roosevelt was elected as president, who initiated a number of schemes to control the situation. Roosevelt came up with various projects to stabilize the economy, but all his efforts were very unproductive, and the economy went down even more. The Great Depression highlighted the hidden flaws and weaknesses of the most developed countries of the world showing their inability to cope with financial issues. For example, before the Great Depression had struck, the governments remained callous during times of the business slump and took no measures to improve the condition, furthermore, to overcome the monetary loss, they relied on unfriendly marketing,. As a result, it badly affected the overall American financial construction and gave birth to the great depression, which is also known as the great crash. After the improvements in taxation, welfare services, the industrial sector and so on, some countries managed to come out of their monetary loss. The beginning of the World War II marked the end of the great depression.

The causes of recent recession

The main reason of an economic recession is the increasing interest rates. Moreover, despite of the high interest rates and stock market decline the Federal Reserve continued to raise the rates when the economy needed low rates to run their businesses and organizations. Experts say that many factors that lead to the contemporary recession. For example, the main factors include the use of credit cards during 2000-2008, which resulted in getting easy loans and provide large sums of money, which became extremely unsafe.

If the ongoing inflation continues, many things would turn ugly, for example, the health insurance provided by the government to the poor will scale down, as any new health program will not be able to initiate due to lack of funds. Furthermore, the nutrition programs provided by the government will also be impacted, as millions of Americans who are provided weekly monetary assistance by Supplement Nutrition Assistance (SNAP) will suffer until the government re starts this program (Jones). Housing schemes provided for the working class and the poor would be at immense risk. The mortgage securities provided by the government failed as well. Every American is highly indebted, and, it is evident that most of the schemes provided by the government would crumple. The first thing needed if we are to get people out of poverty is more jobs that pay decent wages (Edelman). The United States must revise its policies and take serious measures before it is too late.

Comparison of the Great Depression to the contemporary recession

The most prominent cause of both the crisis is the attitude of the federal government. As a result, the interest rates were increased rapidly, ruining the trade sector and destroyed the export business badly, to aggravate the situation further, President Hoover imposed tax increase, which gave way to joblessness and poverty. Similarly, the recession originated in the early 1990s when people were forced for homeownership, this failed because the mortgage loans became invalid resulting in the collapse of majority of the banks, which increased the recession.

Both Obama and Roosvelt failed to cope with the situation and opted to enormous spending instead of maintaining a proper budget. A sensible administration or government always tries its best to cut down spending in times of economic upheaval, but President Obama and Roosvelt just did the opposite. Therefore, as a result, the budget deficits prevailed and unemployment enlarged. During Obama and Roosvelt regime, the national debt rate was sky high. Moreover, experts also observe that the unemployment rate also remained very high under Obama and Roosvelt. The economist writer Henry Hazlitt wrote, “Every dollar of government spending must be raised through a dollar of taxation” (as cited in Folsom 84). According to the findings, the government ruined as many jobs as it produced.

In addition, researchers also observe that the similarities of the Great Depression and recent inflation included a tax system that was unbearable for the people. Hardly anybody was able to pay their taxes, and most people invested money cautiously. Hence, there was very little spending on creative jobs which gave way to high unemployment rates. The employment rate during the Great Depression was 25% whereas during the ongoing recession, it is 8.5 %(Goldman). Roosvelt, in order to escape the situation, put all the blame to the bankers and blamed them for causing the great financial crisis. Similarly, Obama also attacks and belittle the Wall Street bankers for causing the, recent recession. Both the presidents thought that by building hatred and hostility, they would accomplish their goals and get away with what they want but time will tell who is right and who is wrong. President Obama is providing reasons and explanation to improve the ongoing crisis, but a new problem arises every time the government thinks they have solved an old issue (Dorfman).

Hence, there are more similarities between the Great Depression and recent recession, which include senseless spending, unemployment, homelessness bank break down and stock market crash. If one talks about in terms of differences between both recessions, one can argue that in today’s world we are more affected by things like “power” which could be the main reason of the downfall. Moreover, the outsourcing of jobs and housing market can be a cause of the major economic downfall in during recession.


In conclusion, it would not be wrong to say that there are many similarities between the Great Depression and the ongoing recession. However, even if the recent inflation is less intense than the great depression, no chances of recent economic correction seem evident. Some people and organizations do foresee the upcoming global crisis and lessons from the Great Depression have been learned, but only time will tell whether this crisis will rise or decrease.

Works Cited

Dorfman, Jeffrey. “Don't Ever Confuse Legislation Like Obamacare With Actual Problem Solving.” Forbes. 02 Oct. 2013. Web. 06 Oct. 2013.

Edelman, Peter, “Why Can’t We End Poverty in America.” The New York Times. Sunday Review. 2012. Web. 06. Oct.2013. .

Folsom, Burton, W. New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America. New York: Simon and Schuster, 2009. Print.

Goldman, David. “Great Depression vs. 'Great Recession'” CNNMoney. Cable News Network, n.d. Web. 06 Oct. 2013.

Jones, Imara. “PressTV – Why Race Matters in the Government Shutdown.” Press TV. 1 Oct. 2013. Web. 6 Oct. 2013. .