American history

The Great Depression, reform, and recovery

The Federal Reserve Board chose to stand by, leaving interest rates high and not shoring up banks, while Congress expanded government in an effort to alleviate the recession.

There was a sharp drop in the money supply, which would amount to a one-third reduction by 1933. President Herbert Hoover passed a massive tax increase to boost sagging federal revenues, and caved in to special interests for the protectionist Smoot-Hawley Tariff.

The U.S. economy plunged into depression. By 1932, the unemployment rate was 23.6%, and worker militancy was rising, including the Bonus march on Washington, DC, where the U.S. Army was called out to violently suppress a demonstration by World War I veterans for an earlier distribution of veteran benefits ("bonuses").

Franklin Delano Roosevelt was elected President of the United States later that year, as well as a slate of Democratic "New Dealers". Roosevelt began a wave of social programs intended to lift America out of poverty, and tried to prevent further bank failures with a national bank holiday and by establishing the Federal Deposit Insurance Corporation.

If one defines economic health entirely by the gross domestic product, the U.S. had gotten back on track by 1934, and made a full recovery by 1936, but much of the nation remained steeped in poverty.

By the early 1940s, the United States had managed to pull itself strongly out of the Depression, largely due to World War II, but there is an ongoing, politically charged debate on whether Franklin Roosevelt's social-democratic policies had anything to do with this, and some argue that Roosevelt's policies hampered recovery, or even made the problem worse than it would have been.

Recovery was also, in part, at least, due to the natural resilience of the economy; the Great Depression was the sixth depression in U.S. history. Wall Street enjoyed the longest bull run in history in this post-war period, as the stock market climbed almost uninterrupted from 1949 to 1957.

The U.S. government involvement in social welfare and what Dwight Eisenhower called the "military-industrial complex" continues to this day.