Explain and differentiate between the Great Depression of 1929 and the recession of 2008. What government agencies arose out of the Great depression and what are their roles?
Principle of Management BUAD 305
Dr. Catherine Causey
It is a common misnomer that people interchangeably use the words recession and depression. According to Investopedia, a recession is defined as a significant deterioration in activities across the economy. This decline in economic activity should last longer than six months. The indicator of a recession is a two quarter consecutive period of declined Gross Domestic product. On the other hand, a depression is defined as a prolonged recession that lasts two or more years. A depression is characterized by economic factors such as increased unemployment, diminished output, and a marked volatility in currency values. In a depression, consumer confidence and investment decrease causing the economy to shut down (investopedia, 2012). This paper intends to explore the differences between the great depression of 1929 and the financial crisis of 2008. The paper identifies the causes of the Great Depression of 1929 and the financial crisis of 2008. It further looks at the government agencies relating to human resource that arose from the Great Depression.
The Great Depression of 1929 The great depression is documented to have been one of the worst economic depressions in the history of the United States. It was a financial decay that started in 1929 and lasted well into the 1940’s. It occurred in North America and Europe but affected many countries around the world as well (Howarth, 2009).
Causes of the Great depression The cause of the great depression is attributed to several factors. The stock market crash of 1929 is referred to as spark that ignited the Great Depression. The stock market crash started on October 24th, 1929 with a twenty one percent decline from its previous high. The decline caused a selling panic by investor so that they could salvage some of their investment. This idea did not help the situation because virtually no one was buying. Two months after the decline started, investors had lost over forty billion dollars and the crash was now in free fall. The stock market begun to recover in 1932 but this was not enough to prevent the adverse effects of the great depression (Howarth, 2009). Another factor that heavily contributed to the Great depression of 1929 was the failure of Banks. Many people lost their saving while Bank deposits were uninsured. As Banks continued to fail, people lost more or their saving because deposits were not insured. Additionally, banks were not in a position to issue loans because of uncertainty in a crumbling economy (LaRocque, 2013). The third major cause of the depression of 1929 was a general decline in the purchasing across the board. Due to the stock market crash and the failure of the banks, consumer purchasing confidence decline. This had a further crippling effect on other aspects of the already weakened economy. A reduction in the number of purchases forced companies to reduce production. As company reduced product, they were in turn force to reduce to the workforce to cut costs. The unemployment rate rose to about 25% at the height of the depression (Becker, 2012).
Government Agencies and policies relating to Human Resource that arose out of the Great Depression The government agencies and policies that developed during the depression were an effort by President Roosevelt to save the economy. President Roosevelt created the National Industrial Recovery Act; the purpose of the act was to try and get more money into the hands of the working class. The Act put into law a fixed minimum wage and the maximum hours that an employee can work in a given work. The Act also ended child labor in many industries. Additionally, it gave unions the right to represent and bargain on behalf of workers (Perry, 2011).