The negative effects of The Great Depression


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Page last updated: 2/12/2022

This article will discuss what are the negative effects of The Great Depression. For that, the article will explain what The Great Depression was, and why it happened. 

What was The Great Depression? 

The Great Depression was the confluence of many factors that led to an economic downturn that impacted most of the world. It started in 1929 and lasted until 1939. It causes many economic, political, and societal changes. 

It started in the United States, but spread across the world, going through a recession up until the summer of 1929. And as people started to change their spending habits, it led to an even worse situation, The Great Depression.

The Great Depression brought a decline in sales, high rates of unemployment, and a huge deflation in almost every country in the world. But it affected areas of the world at different levels, although it was long and severe in the United States and Europe, it was milder in Asia and Latin America. 

But let’s understand a little more about what caused The Great Depression.

What caused The Great Depression? 

The Great Depression was caused by multiple factors that impacted the economic scenery to that large extent. The first thing was the market crash in October of 1929. Which affected the confidence people had in the American economy. 

It had an immediate impact on how people handle their spending. Who had money at the bank just took it out, and people got in a saving money line of thought, instead of investing as people were doing before.

Because people were taking their money out of the banks, and others weren’t able to pay the loans they had in the banks, due to unemployment, banks started to panic at the beginning of the 1930s. Some of them even closed because of the lack of money, and possibilities of making new loans.

Another matter that caused The Great Depression was the gold standard. This was a process that connected central banks of many countries to organize the monetary exchange between them. So this connection was one of the reasons why The Great Depression expanded all over the world.

The Great Depression had many negative effects on economics, politics, and cultural and social life. Let’s discuss what they were

The negative effects of The Great Depression

What were the negative effects of The Great Depression? 

The Great Depression that happened between 1929 and 1939 had many negative effects in pretty much all of the areas. Let’s discuss what they were.

Negative effects in economics 

During The Great Depression, the world suffered a huge economic downfall. In the first 5 years of it, the Gross Domestic Product (GDP) of the United States fell around 50%. This was mostly caused by deflation, causing many companies to bankrupt.

And it was only close to World War II that the economy started to show some slight improvement, mostly due to government support called the New Deal. The Great Depression also harmed the employment rate. In 1928 America’s unemployment rate was around 4,2%, but in 1933 it reached its peak of 25%.

Many banks, one-third of the American banks, also failed due to The Great Depression. That was because banks had used their money to invest in the stock market. And as people started to take their money out of the bank, it had no way of working anymore.

It also caused a huge deflation. Prices fell around 30% between 1930 and 1932. It helped people that were unemployed or had become poor due to The Great Depression, but it was extremely negative to businessmen, farmers, and people that had loans. 

Because even though you were making less money, your loan didn’t decrease. The Great Depression also impacted the trade market. Since the negative economic effects came from everywhere, each country tried to protect its industries, especially the American industries. 

This caused many trade barriers, which decreased 66% between 1929 and 1934.

Negative effects in social life

Aside from all the economic issues. During The Great Depression, the Midwest of America experienced a huge drought, now called The Dust Bowl. It lasted for 10 years, and it impacted many of the country’s farmers.

This caused many of them to leave the country in search of ways to survive. In 1933 alcohol became once again legal, which allowed it to be taxed, to help pay for the New Deal. But the whole process was so difficult that people lost hope in the notion of the American dream.

Living in all these perspectives, caused people to rethink their relationship with money. They started to rather save up, being that they were insecure about the economy. 

People also canceled many marriages, and the birth rate decreased. The kids that were born during that period usually had to grow up fast, to help their family with work. Women also started to look for more job opportunities to help with their income in whatever way they could.

Negative effects in politics

The negative effects The Great Depression had on politics were severe and long-lasting. It first made people start to question if capitalism worked. And although the II World War improved the employment rate, being in a war isn’t necessarily what makes an economy grow.

In the global aspect, this questioning if capitalism worked gave a chance to learn more about marxism, and for fascists politicians, such as Adolf Hitler, to get more and more power.

Long term negative effects

Because during The Great Depression the American government created the New Deal program, people started to expect, differently from what capitalism proposed, that the government would always help them when in need.

That is because it generated many public job opportunities, including some to build the towns of Greenhills, Ohio, and Greenbelt, Maryland. 

Being aware of these negative effects of The Great Depression can be a way for people to understand how a crisis can spread all around the planet, and how it can change people’s life from one moment to the next. It will allow governments to understand how to prevent it from ever happening again.

Frequently Asked Questions (FAQ): What were the negative effects of The Great Depression? 

What were the states that were most negatively affected by The Great Depression?

The States that were most negatively affected by The Great Depression were the ones that suffered not only from the economical crisis but also went through a natural disaster that had an even more devastating effect on the farmers and their lands. 

It was the MidWest states that experienced an event that came to be called The Dust Bowl. It was a drought period of The South Plains, that happened because of a huge dust storm. As this dust swept through Texas to Nebraska, the land lost its ability to produce, and the crops that were already there were killed. 

This brought even more poverty, unemployment, hunger, and despair to people that were already living the consequences of the worst economic crisis ever. Farmers already had very few places to sell what they made, but with the destruction of it all, they didn’t even have any food to eat. 

Could The Great Depression have been avoided?

After a crisis, people will usually ask themselves what could have been done differently to avoid such a situation. When talking about The Great Depression, it is no different. People are still looking for answers if they could have been avoided. 

What is possible to say is that if the key causes of it were different, The Great Depression might have looked a lot different, or it might not even have happened. 

The first thing to consider is that instead of overproducing frames and industry would only produce the appropriate amount, causing people to need things anymore. This caused the prices to fall, and companies and farmers couldn’t pay for their loans, so they ended up closing.

Another aspect that could have made the Great Depression was the excessive credit line. People had a mentality to buy now and pay later. But people didn’t understand how credit works, and creditors went back to pick up their goods once they weren’t paid, leaving some people with anything.

Did the death rate go up during The Great Depression?

According to research, there was a great health improvement due to The Great Depression. From the improvement of labor laws and financial security laws, health care got better after it.

But a study done by Stuckler and colleagues in 2012 showed, analyzing the death rates all over America, that some causes of death decreased during The Great Depression, while others went up during the same period. 

The mortality rate due to pneumonia, flu, and respiratory tuberculosis fell during The Great Depression. While the rates of death from heart disease, cancer, and diabetes went up during that period. 

Does The Great Depression impact our lives nowadays?

Yes, we are still living with some of the impacts that The Great Depression brought. Those are specially related to how the banking system was improved because of it, how labor laws were changed because of it, and especially how people have learned how to deal with loans and stocks.

Back then, there was no regulamentation around buying stock and making a loan, people would get it as they wished. In the same way, the banks didn’t need to assure they would have everyone’s money as they wanted it back. By setting laws for that, you prevent such things from happening again.

Aside from that, the creation of labor laws that gave the employee some guarantees, allowed them to have a 40 hour week, vacation time, and some sense of security if they got fired. Aside from that, it prevented children from working, making it an extremely beneficial law for nowadays. 

Who made money during The Great Depression?

During The Great Depression, even though most people lost everything, some other people got richer during the period. An example of it is Joseph Kennedy that made a lot of money in unregulated stocks due to insider trading. And after the market crashed, he started investing in movies, making a lot more money.

Aside from him, J. Paul Getty also made a lot more money during The Great Depression due to oil stocks and real estate. He had the rule to hold his goods when everyone was seeking, and when everyone was buying, he would sell them. He was an extremely determined person, who had his business as a priority. 


This article revolves around the negative effects of The Great Depression. To explain what they were, it discussed what was The Great Depression, and why it happened.

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