When we think of a broken economy, the stock market crash of 1929 comes to mind. Stocks tanked, large and small businesses closed, and a line formed just to get soup and a loaf of bread. This became known as The Great Depression. The Great Depression lasted nearly a decade. The main reason behind it was actually the solution. Countries left the gold standard in an attempt to fuel their economy only to string out one of the longest economic crises in history. Everyone lost everything.
Banks closed. Large and small businesses closed. People lost their jobs, their homes, their savings and basically lost everything. Charity was the driving force behind survival.
Children would frequent their friends’ homes. Everyone had beans on the stove in the pot and would add more beans everyday. Beans, Bread, cracked eggs, and whatever other food they could get hold of became a decade worth of staples for survival.
During this time, most businesses were small businesses. There was big industry which had also been affected. For big industries, there was a downturn in production and profit. Many workers lost their jobs without the potential to replace that job. Some big businesses closed their doors, but where it really affected people was in the small business area. Small businesses simply closed their doors. There was no way for them to survive The Great depression. World War 2 ended The Great Depression by sparking military production. This basically employed everyone including women. Small businesses began to operate again, and industry thrived.
There have been many recessions. Recessions have the same effect as the Great Depression, but in a milder and lesser sense. There is a decline in business activity caused by various factors. In today’s world, a bursting bubble usually means a recession. The last great recession that comes to mind was from 2007 – 2009.
The poor economy from the Great Recession of 2008 took a heavy toll on small businesses nationwide. During the Clinton administration when the Glass-Steagall act had been repealed, the effects of derivatives didn’t hit home until 2007. This is when derivatives backed by cheap mortgages given to people without credit became a real problem. It attracted many people to invest in homes even during skyrocketing home prices. The collapse came when these same people were unable to pay their mortgage.
The United States saw the decline of midsize and small businesses nation-wide. There wasn’t anything anyone could do to remedy the situation. Restaurants, bars, small clothing shops, small grocery stores and many services were almost instantly shut down overnight. Parts of large cities became ghost towns overnight. The Great Recession of 2008 hit small businesses so hard that when they closed, nothing was left but boarded up windows. Data shows that the demise of small business during The Great Recession accounted for 62% of net job losses.
Small businesses thrive in a good economy. A good economy allows for expansion and expansion means added jobs. Small business accounts for 50% of employment in the United States. They are a vital part of the US economy keeping unemployment rates down and providing needed local services. As a consumer, we always want a good economy. It doesn’t only benefit our stock portfolio, but it benefits our communities.