Facts and Major Causes of the Great Depression
The Great Depression was a long period of the economic mess that started from the United States and spread internationally. The timing of the depression is usually quoted between 1929 and the 1930s. The devastating economic woe saw a massive drop in America’s Gross Domestic Product (GDP). Additionally, several millions of Americans were left without jobs. The commonest things that were most prevalent during the Great Depression were people queuing for hours in bread and soup lines.
Conditions before the Depression
Towards the last days of the 1920s, the American economy flourished like never seen before. In essence, the economic boom dominated the rest of the world. Following the destructive effects of the First World War, the economy of Europe struggled to stand on its feet. What this meant was that Europe could not buy much of American goods.
When then-US President Herbert Hoover came into power, he was 100% confident that America could literally pull every citizen out of poverty. Those high hopes of the president made the citizens believe that America’s economy was on track, almost like Heaven on Earth. Businesses raked in profits and re-invested heavily in stock markets. As the growth peaked, the better days couldn’t hold water for so long; everything began to crumble apart. The Great Depression had set in.
President Hoover’s image dropped drastically. Every year he spent in office, economic and social conditions in the U.S. got worse and worse by unimaginable amounts. His presidential tenure, which started in March 1929, began to spell doom for Americans. There was nowhere to go to. Rather than properly address the issue by taking a firm hold of the economy, President Hoover instituted very minimal federal policies.
To be fair to the President, the economy was already overheated before Hoover took office; it was only a matter of time before the bubble burst. Critics, on the other hand, might argue that Hoover’s administration certainly could have taken several steps to properly halt the economy from crashing.
Major Causes of the Great Depression
It will be very biased for someone to point fingers without properly analyzing the main causes of the Great Depression. After careful analysis of historical documents, we present the following as some of the causes of the Great Depression:
Wall Street Crash of 1929
Wall Street is the hub of US financial investments. It houses the New York Stock Exchange (NYSE), and 29th October 1929 was the day everything turned upside down – a Doomsday for the American economy. It is a day now known as Black Tuesday. On that fateful day, shares numbering up to 16 million were sold out into the stock market. Wall Street had crashed. Several millions of Dollars in savings, pensions, and other funds completely vanished. The American economy was reduced to tatters. The ensuing panic and anxiety reverberated in every nook and cranny of the American society.
Looking back at the events leading up to the stock market crash, one cannot help but notice that the crash was partly due to tariffs. When Herbert Hoover assumed office, a lot of people traded shares because the president had planned to increase tariffs. However, the Senate later stopped the president from his tariff plans. Wise investors immediately predicted bad days ahead. The panic influenced a lot of people to sell off their shares. Previously on Black Thursday (24th October), over 12 million shares were “dumped” cheaply into the market. It has been estimated that 10 to 15 billion US dollars were lost as a result of Black Tuesday. Stock prices declined close to 89%. The American economy had annihilated itself, sparking off the Great Depression.
Other Causes of the Depression
Apart from Wall Street’s crash, the following are some other factors that ushered in the Great Depression:
Overconfidence and Consumerism
The economic boom of the 1920s created a false impression that the good days would last forever. Americans became overconfident as they lived to the maximum in the modern era – way beyond their means in some cases. This blinded them from seeing the danger that lay ahead. The wealthy lived lavishly. Mass advertisements encouraged people to acquire properties. The overconfidence and consumerism stretched the economy beyond its limit. Most of all these lavish lifestyles were fueled by dangerous loans and credit facilities.
Bad Government Policies
The decisions of the then-government adversely affected the American economy, which in turn spiraled into the depression. After the First World War, the US government of the day instituted isolationist policies. This involved placing high tariffs on imported goods. The raising of tariffs was coupled with protectionism. The higher tariffs slowed down US exports to Europe. Trade relations between America and Europe declined as the latter counter-imposed high tariffs on American goods. As the depression set in, American export value dipped by huge margins.
Low Agricultural Output
In the 1920s, the agricultural yield of the US was over-productive. The abundance of food lead to lower prices (the overproduction crisis). However, in the early 1930s, a serious drought visited most American farmlands. The severe drought converted the soil into dust. Then came strong winds (dust bowls) which blew away the topsoil and destroyed vast areas of farmlands, approximately equal to 100 million acres. Crops and animals perished. An estimated three million American finances got worse and poverty soon became the order of the day.
Recklessness on the part of Banks and Financial Institutions
American banks also played a big part in worsening the depression. Banks were not properly regulated during the 1920s. The banks collected peoples’ monies and gambled it away in the stock market. When Wall Street came crashing down, it wasted away the investments of the Banks’ customers. Banks could not meet the panic withdrawal request of numerous customers. Banks after banks went bankrupt, people’s life savings and funds vanished into thin air. As a result of a crippled middle class, the economy could not get itself up and running again.
Facts about the Great Depression
The Great Depression was the greatest economic disaster in world history. It brought untold sufferings to the US land and beyond. The following are some important facts that you should know about the Depression:
Unemployment Rate Shot Up
In the wake of the depression in 1933, 15 million US citizens became jobless. The remaining small percentage of the working class claimed meager wages. Their paychecks were slashed down by more than three times.
It caught everyone by surprise
When the stock market crashed and burst into flames, many people either underestimated the gravity of the issue or were still oblivious to the ills that it posed. And considering how everything was smooth sailing prior to the Depression, hardly could anyone predict that a depression was about to strike. But this wasn’t surprising, considering the fact that in 1929, up to 90% of Americans did not buy stocks. It wasn’t only the public that was caught off guard, the federal and state governments’ responses were not the best. For instance, President Hoover stuck his grounds and continued with his minimalist economic interventions and policies.
The GDP of America declined
As a concrete manifestation of the depression, the gross domestic product (GDP) dropped significantly by 30%. In the time interval of 1929-1933, industrial production went down to 47%. Crisis in the banking sector collapsed up to 20% of the existing banks.
The Depression lasted for about a decade
It wasn’t easy but the US had to endure 10 years of harsh economic times. Starting in 1929, the Depression recovered in the late 1930s.
There were unending queues for food and other basic provisions
The depression was so severe that it starved people. Poverty and hunger forced people to line up the street and beg for their daily bread.
The Great Depression wasn’t only confined to the U.S.
The Great Depression hit hard at the US but it also extended its arms to European countries and the world at large. It was a period which marked a global economic decline.
President Herbert Hoover was overwhelmed by the crisis
The US president did try to address the issue but he was highly unsuccessful, perhaps even too late. Hoover’s approval ratings plummeted all throughout his presidency. And in November 1932, Hoover lost the presidential office to a more vibrant and proactive person by the name, Franklin D. Roosevelt.
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