The United States and the world - Sample Essay
There are many important socio economic and financial events and developments that happened in the history of the United States and the world. Sadly, some of the important events are remembered in negative light because it featured hard times and not positive times. Perhaps, one of the most important and the dimmest moment in the global socio economic and financial history is the occurrence of the Great Depression.
The Great Depression was a catastrophic meltdown and breakdown of the system that was supposed to protect the world and ensure that the financial and economic motion of the world moves on sans any serious disturbance. They were disturbed, nonetheless. The disturbance came in the form of the Great Depression, and other minor financial and economic setbacks after that, leading all the way to the present day recession, which is yet again another serious problem that is being confronted by government agencies, as well as private entities in the hope that this problem does not go any further.
The Great Depression and the current recession share many things in common, particularly the parallels found in how the volatility and stability of the commodity market was characterized during these two particular periods in the global financial and socio economic history. The relevance and importance of this discussion is hinged on the fact that financial depression, and even recessions, are important and affects everyone.
Discussing it and providing additional literature for this particular aspect of economic discussion is important because of its ability to act as catalyst for information source for individuals who are exposed to the text discussing the aspects of commodity markets and how it is affected by the Great Depression and the current recession; possibly, it is also important to discuss the other possible financial and economic recessions and depressions happening in the future.
In the course of the paper, what would be discussed and explored is the drawing of the parallels between the volatility and stabilization of commodity markets during the Great Depression to those of the current recession. A. Commodity Market and Local/Global Economics The commodity market has always been affected by the local and global economics, which in turn has always been affected by what happens in the socio economic and financial landscape of the country and of the world.
Although there are many different aspects comprising the economic sphere, these are all interlinked with one another. The changes that happen in one sphere will sooner or later affect the other aspects of the national/global economics, setting off a chain reaction. It was the concept of chain reaction that featured the domino effect in the economics that affected commodity market during the Great Depression and during the global financial crisis; there were, of course, key reasons why such things happened.
One of the characteristics that are similar with the Great Depression and the current recession is the recurring theme of unequal distribution of wealth. There are economists and theorists like Waddill Catchings and William Trufant Foster who argued that the onset of the economic depression like the Great Depression was caused largely by the unequal distribution of wealth among the people (Jacobs, 2005, p. 83).
In the case of the Great Depression, there are few people who have money to spend and there are many people who have very little to spend so they don’t spend much. The presence of the concern on the uneven distribution of wealth affects the commodity market because the traffic of the goods being sold or produced relies heavily on how the people inside the community/society/country is endowed with their own share of the overall financial power and monetary distribution inside a group of individuals. For the production arm to function, it needs financial resources.
For the production of commodity market goods to be necessary, the previously produced and traded commodity market goods should first be consumed to avoid unmoving supply and the problem of overproduction that freezes the money (capital) inside the unconsumed goods. Distribution of wealth has been voiced out as one of the problems during the Great Depression; people believe it triggered the great depression. During the recent recession, there are still fingers that point to the unresolved issue of uneven distribution of wealth. This is not surprising in the era of capitalism and consumerism.
It becomes a problem, however, once the presence of uneven distribution of wealth makes the commodity market and the goods inside it incapable of being productive for the society. But with the production model in the country geared towards production, the country and the world soon became bloated with unconsumed goods. These unconsumed goods, which the people did not buy and consume, resulted to losses, especially to small time business entities who expect very little or minimal earnings if the sales of their goods reach their minimum expectation.
But if it did not (which happened because the people in general do not have enough money to spend), the world might be placed in a situation wherein there were too much goods – including commodity goods in the commodity market – and very few people buying or consuming it. This, according to Foster and Catchings – was one of the possible reasons for the occurrence of the Great Depression, and this can also apply to the recent recession (Jacobs, 2005, p. 83). The world is still heavily producing, including raw materials and raw goods that are clustered in the commodity markets.
But because the consumers are consuming very little of these products, income was affected. The goods that were not sold affected the people with lesser money more, especially since this situation ties up their hands and making them incapable of moving on if they cannot even get back even the capital for their business ventures back. If the case of undistributed wealth persisted and production at the current rate is still pursued, there is the danger of recessions and even more depressions in the future because the money that can purchase and consume these goods are distributed to a select few individuals.
This affects the commodity market because this can result to the closure of smaller businesses, which in turn, can affect the production output and eventually the ability of the country to earn. They will be getting fewer and fewer commodity goods to sell if the producers stop producing because the product they produce is not being consumed in a rate that guarantees a decent margin of income enough to keep the business going. For example, the producers of a certain commodity (i. e. grain) cannot hope to extend and continue their business if their latest batch of products are not being sold to the public.
Where will they get the money to continue the operation if not for the profit that they are expecting but not getting? The commodity market may not be the direct culprit for the Great Depression. The role of the commodity market, how it is important to some countries and how commodity market goods were eventually hit by the depression materialized once the United States and other countries made the frantic moves geared in the hope of salvaging the financial landscape of the country via last resort actions which did not help anyone.
It did not help the country of origin. And worse, it made the situation in other countries more unbearable especially those which relied heavily on commodity market goods exporting (Eichengreen, 1996, p. 230). “Stocks were dumped on the market, provoking a liquidity panic that aggravated the crisis of the commodity-exporting regions (Eichengreen, 1996, p. 230). ” B. Great Depression and the Commodity Market No other global financial and economic nightmare would have been equal to the Great Depression during the 1920s and the 1930s.
The Great Depression was an encompassing socio economic event that broke the financial and economic backs of several different countries, from the rich, first class countries all the way down to developing and third world countries and even in poorer countries (Eichengreen, 1996, p. 58). “Like their North American neighbors, these countries were subjected simultaneously to capital and commodity market shocks (Eichengreen, 1996, p. 58). ” The Great Depression saw the loss of money and value among the different social institutions, and how the resulting panic made it even worse.
“The Depression produced large budget deficits, unprecedented levels of unemployment, bank failures, and crashes of stock and commodity markets (Makin, Ornstein, 1994, p. 91). ” It reflected some of the flaws of the financial and economic system in the local and international sphere. Because of the inability of the leaders to exercise vision and to correct the system before it showed the negative effects, the world suffered in different degrees and stages throughout the world during the Great Depression.
During the Great Depression, the impact was felt in the commodity market sector because of what professionals believed to be an “exceptional speed of the decline in commodity prices in the final quarter of 1929 (Eichengreen, 1996, p. 230). ” This particular incident and movement in the commodity market was surely an indicator that something that is powerful and destructive and life-altering. It was happening because this particular movement in the commodity market is not normal.
If there were fluctuation in commodity prices, it comes far and in between and usually not in such short period and not as drastic compared to what happened during the Depression. During the Great Depression, those who did not have enough money were not able to continue with their business that is related to commodity market. For example, farmers and those in the agricultural sector, from which the country relies for the supply of necessities that are important in the sustainability of farming and production, suffered from the loss, slow down or decrease in government support.
Their own personal money was not enough to make the business stabilize throughout the Great Depression because local resources are getting more expensive. The value of money was shrinking that the ordinary individual cannot afford to buy anything with the money he or she got because it has lost its value. When this happens, the areas of production losses its means to efficiently operate, letting go its workers, shutting down the plant and contributing to the decreasing source of supply which the country can trade.
Even if they can, it is difficult because other countries are very cautious of what they buy from other countries (they only opt for what the country truly needs). The surplus of what was not sent outside of the country was already lost capital for the business entities. The goods inside the commodity market that are used for processing other things that are not included in the most basic needs of humans were the ones that experienced a slowdown in trade.
This is because of the Depression, especially when the attitude of the people was simply to secure what they basically need. With no money to buy for other things that were not as important as basic needs, the demand dropped, the products went untouched in market stands. The trade for the supply for the raw materials of these items choked inside the supply line because as the Depression pressed on, some items on the commodity market found itself stuck and with no place to go.
This situation created a vicious cycle that involved and affected many different financial and economic sectors including the commodity market. With decreasing number of prospective buyers for the commodity goods traded inside the commodity market, there was no other choice but to cut down prices. The cutting down of prices of the commodity goods for sale went down to as high as 60 per cent cut. Because of that, farmers went broke and bankrupt, unable even to settle for a break even for the production (Eichengreen, 1996, p.
230). The commodity market was being targeted to be re-energized. Subsidies from the government started pouring in, funnelled towards agricultural business. The agricultural businesses can resume its operation and the supply of the products that this sector produces can start pouring in again, in the belief that the presence of commodity goods that can be actively traded locally and internationally can help contribute in the revival of the country’s financial situation.