The passage of the social security act was largely in response to which of the following?

The most devastating impact of the Great Depression was human suffering. In a short period of time, world output and standards of living dropped precipitously. As much as one-fourth of the labour force in industrialized countries was unable to find work in the early 1930s. While conditions began to improve by the mid-1930s, total recovery was not accomplished until the end of the decade.

The Great Depression and the policy response also changed the world economy in crucial ways. Most obviously, it hastened, if not caused, the end of the international gold standard. Although a system of fixed currency exchange rates was reinstated after World War II under the Bretton Woods system, the economies of the world never embraced that system with the conviction and fervour they had brought to the gold standard. By 1973, fixed exchange rates had been abandoned in favour of floating rates. (See also money.)

Causes of the Great Depression

What brought about the worst economic downturn in modern history?

Both labour unions and the welfare state expanded substantially during the 1930s. In the United States, union membership more than doubled between 1930 and 1940. This trend was stimulated by both the severe unemployment of the 1930s and the passage of the National Labor Relations (Wagner) Act (1935), which encouraged collective bargaining. The United States also established unemployment compensation and old-age and survivors’ insurance through the Social Security Act (1935), which was passed in response to the hardships of the 1930s. It is uncertain whether these changes would have eventually occurred in the United States without the Great Depression. Many European countries had experienced significant increases in union membership and had established government pensions before the 1930s. Both of these trends, however, accelerated in Europe during the Great Depression.

In many countries, government regulation of the economy, especially of financial markets, increased substantially in the 1930s. The United States, for example, established the Securities and Exchange Commission (SEC) in 1934 to regulate new stock issues and stock market trading practices. The Banking Act of 1933 (also known as the Glass-Steagall Act) established deposit insurance in the United States and prohibited banks from underwriting or dealing in securities. Deposit insurance, which did not become common worldwide until after World War II, effectively eliminated banking panics as an exacerbating factor in recessions in the United States after 1933.

The Great Depression also played a crucial role in the development of macroeconomic policies intended to temper economic downturns and upturns. The central role of reduced spending and monetary contraction in the Depression led British economist John Maynard Keynes to develop the ideas in his General Theory of Employment, Interest, and Money (1936). Keynes’s theory suggested that increases in government spending, tax cuts, and monetary expansion could be used to counteract depressions. This insight, combined with a growing consensus that government should try to stabilize employment, has led to much more activist policy since the 1930s. Legislatures and central banks throughout the world now routinely attempt to prevent or moderate recessions. Whether such a change would have occurred without the Depression is again a largely unanswerable question.

Learn about the Japanese invasion of Manchuria and China and its aftermath

In September 1931 the Japanese Imperial Army invades Manchuria, and refugees flee their burning cities. From The Second World War: Prelude to Conflict (1963), a documentary by Encyclopædia Britannica Educational Corporation.

The memories of Europeans, by contrast, are haunted not by their economic difficulties, which were considerable, but by the spectre of Adolf Hitler and his drive to conquer the European continent. The Great Depression, of course, had created the perfect environment—political instability and an economically devastated and vulnerable populace—for the Nazi seizure of power and fascist empire building. Consequently, it was the spread of totalitarianism and not economic hardship that occupied the minds of Europeans in the 1930s. The situation was similar in Asia, where urban and rural penury was a normal feature of economic life; moreover, the decade of the 1930s is forever linked to the spread and brutality of Japanese imperialism. Thus, while Americans were preoccupied through most of the decade with their own domestic hardships, Europeans and Asians had other, more transnational, problems to confront.

Moreover, the distinctive economic dilemmas of the 1930s were novel to Americans, largely because their historical experiences were so dissimilar to those of people in the rest of the world. For example, when British author George Orwell published The Road to Wigan Pier in 1937, he was describing an old problem: the class structure and its immemorial effect on workers in Britain. But when American authors such as Edmund Wilson and John Steinbeck wrote about the shut-down assembly lines in Detroit or the exodus of the Okies (Oklahomans displaced by the Dust Bowl) to California, they were describing something new: the near-total breakdown of a previously affluent economy. Americans were absorbed by their “Great Depression” because they had never before encountered such a widespread economic failure. This is why they, unlike their foreign counterparts, did not even begin to think about the approach of war or the dangers of totalitarianism until the end of the 1930s.

Dorothea Lange: Migrant Mother

Migrant Mother, photograph by Dorothea Lange for the Farm Security Administration, 1936.

But no matter how insular Americans were through much of the decade, the world arrived on their shores in the 1930s. At the moment that Americans were worrying about their economy, European intellectuals, scientists, scholars, artists, and filmmakers were literally running for their lives. The place that many of them ran to was the United States.

The most important event in the history of European culture in the 1930s was this massive hemorrhage of talent. No one was more responsible for transforming the cultural balance of power between Europe and the United States than Hitler. From the moment he assumed power in Germany in 1933, his book burnings, his firing of Jewish scholars in German universities, his assault on modern art, and his conquest of Europe at the end of the decade forced the most illustrious members of the European intelligentsia to flee, many of them first to France, then to the United States. Even a partial roster of émigrés to America in the 1930s is extraordinary. Among the natural scientists (most of whom were instrumental in constructing the atomic bomb) were Albert Einstein, Enrico Fermi, Edward Teller, Leo Szilard, and Hans Bethe. The social scientists included Erik Erikson, Hannah Arendt, Erich Fromm, Paul Lazarsfeld, and Theodor Adorno. Philosophers such as Paul Tillich and Herbert Marcuse also emigrated, as did novelists and playwrights such as Thomas Mann, Vladimir Nabokov, and Bertolt Brecht. Musicians and composers included Igor Stravinsky, Béla Bartók, Arnold Schoenberg, Paul Hindemith, and Kurt Weill. Among the architects were Walter Gropius and Ludwig Mies van der Rohe. Painters and sculptors left too, notably Marc Chagall, Piet Mondrian, and Marcel Duchamp. And among those who found a home in (and helped to change) Hollywood were Fritz Lang and Billy Wilder—not to mention the Hungarian director Michael Curtiz, whose legendary Casablanca (1942) was in part a tribute to European refugee actors, from Peter Lorre to Ingrid Bergman.

book burning

Germans burning books on the Bebelplatz, Berlin, 1933.

Notably, not all persons seeking entry to the United States as refugees from Hitler’s Germany were outstanding scholars, artists, scientists, or musicians. Most were average Europeans, but throughout the 1930s Congress chose not to liberalize the immigration laws to allow for more than the minimum quota of arrivals.

As a result of the massive intellectual and artistic emigration, by the end of the 1930s New York City and Hollywood had replaced Paris and Vienna as the home of Western culture—just as Washington, D.C., would replace London and Berlin as the centre of Western politics and diplomacy at the end of World War II. To comprehend the America that became a postwar superpower, culturally as well as politically, it is necessary to understand how the United States responded to and emerged from its own singular experiences of the Great Depression in the 1930s.