Great Contraction facts for kids
The Great Contraction was a very tough time for the United States economy. It was a period from 1929 to 1933. This time is known as the early years of the Great Depression. During a contraction, the economy shrinks, and many people lose their jobs.
What Was the Great Contraction?
The Great Contraction was a serious recession. A recession is when the economy slows down a lot. This period happened right at the start of the Great Depression. The Great Depression was a worldwide economic crisis. It lasted for about 10 years, from 1929 to the late 1930s.
During the Great Contraction, businesses closed down. Many people lost their savings. Banks also struggled and some even failed. This made life very hard for families across the country.
Who Defined This Period?
A famous economist named Milton Friedman used the term "Great Contraction." An economist is someone who studies how money and goods are made and used. Friedman believed that problems with the money supply made this period worse.
He wrote about it in a very important book. The book was called A Monetary History of the United States. He wrote it with another economist, Anna Schwartz. They published this book in 1963.
The part about the Great Contraction was so important. It was later published as its own book. This smaller book was called The Great Contraction, 1929–1933. It came out in 1965. Both books are still read by students and experts today.
Great Contraction vs. Great Compression
It's easy to mix up the Great Contraction with another period. This other period is called the Great Compression. But they are very different times in history.
The Great Compression started around 1940. During this time, the gap between rich and poor people became smaller. This means that economic inequality went down.
This happened because of new government rules. For example, there was "progressive taxation." This means people who earned more money paid a higher percentage in taxes. These changes were part of the policies of the Franklin D. Roosevelt government. Franklin D. Roosevelt was the U.S. President during much of the Great Depression and World War II.
