Trickle-Down Economics And The Great Depression

Sandhya K C
Professor Larry Pool
History 1302
12/05/2017
It’s important to understand both trickle-down economics and the Great Depression to really explain the role of the former in the latter. Trickle-down economics is economic cum political policy which voices that economic assistance to the wealthy class, investors or businessmen trickles down to the poor class or general mass, thereby stimulating the economic growth. However, never has it been so implemented that it has resulted into fruition. The Great Depression is the worst economic downturn of the industrialized world which lasted for nearly a decade. (Staff, 2009) It was a phase when stock market crashed and remained unstable, nearly a quarter of the US population were unemployed,
This policy was adopted because President Hoover was a firm believer of this concept. Since he himself had been on the receiving end of help from those with the resources, he thought providing financial aid to the investors and businessmen would not only benefit the direct recipients but also the general public. Also, as a businessman and as an official in relief agency, he had cared for the people and helped those in need. So, he assumed people in communities and societies would help each other when in need. However, that wasn’t the case to be. Due to his thought process behind the trickle down, no deep study was performed on the policy on how it would work, what needs to be done and what should be the approach in case it fails. As a result, neither direct relief was provided to the people nor people came together to help each other out. Further, to make the trickle down policy work, Hoover asked the employers to increase the salary of the workers. (SMITH, 2016) The reason being if the people are provided with more money, they will spend more to buy the goods from the market thereby resulting in the growth of businesses and industries. Sadly, the scenario was such that people were already reeling from the effects of volatile economic condition and were in the fear of possible unemployment that would cause them to be asking for penny. Thus, they tried to save whatever money they had, so as to secure the needs of
Though, the mere concept of trickle-down economics shouldn’t be blamed for the depression. Had there been efforts made in detailed evaluation of the policy, the steps needed to be taken for the effective implementation so as to get better results, and to make active participation of the people in the whole process of trickle down, the scenario could have been different. Despite criticism from many economic experts and politicians, President Hoover, guided by his philosophies developed from personal experiences, went ahead with the policy. (SMITH, 2016) The personal insistence of President Hoover to make trickle-down economics a success, aside from the policy itself, is also equally responsible for causing the depression to be so huge and long lasting. Keeping aside all the facts, the concept of prosperity trickles down from the business men to the public would work in a situation where the economy is stable, the flow of goods and money is smooth and the people as well as the investors are optimistic of the future. Now, taking the facts into consideration, when the trickle-down economics was brought about by President Hoover, the economy was on a downslide, the flow of goods and money was halted, and neither the people nor the investors were optimistic of the future. Hence, the trickle-down