The Great Depression Essay

The Great Depression was without any doubts one of the most difficult periods in the history of the whole Western industrialized world and it lasted from 1929 till 1939. In America the beginning of the Great Depression period is related to the stock market crash, which happened in October 1929. This stock crash caused serious panic in Wall Street and soon led to reduction of the consumer spending and lack of investments. It was hard to imagine the level of unemployment as several years later 13 to 15 million American citizens lost their jobs and became unemployed. More than a half of all banks of the country failed. The reforms, which were introduced by President Franklin D. Roosevelt, brought the needed relief to the economy of the country, but still the economy did not manage to fully turn around until 1939. Researching and better understanding of the real reasons and factors, which led to the Great Depression is utterly important even for modern world, as  these are precious historic lessons for many generations of American citizens and their leaders.

After the election of Herbert Hoover in 1928 the interests of investors grew and the prices for the stock shares in the country started to rise. It is known that in 1919 around 317 million of shares were resold and ten years later the number reached billion. The great part of the capital of the country was invested into shares. Economy was transformed into stock market. People could easily purchase “on margin” and this was possible due to the ability of an investor to provide small cash down payment on shares, whereas the rest was borrowed from a stockbroker, who remained the holder of the stock certificates, because the prices could fall rapidly. But the situation turned out to be not stable, as already in September 1929 stock prices started to decline and in October the real fall began. On the 24th of October 1929 there was the well-known Black Thursday, when 12,894,650 shares were traded. The leading banks were trying to save the situation and purchased blocks of stock, which could contribute to production of rally on the next day. On Monday the situation got worse again and market entered the stage of free fall. Black Monday turned out to be even worse, than Black Thursday, as on October 29 16,410,030 shares were traded at the New York Stock Exchange and this meant an absolute collapse of the system. (Kelly 2016). The losses could be counted in billions of dollars and thousands of investors left. The stock crash is considered to be one of the most meaningful events, which led to the Great Depression. This crash was not directly the cause of Great Depression, rather it was a proof of the fact that the prosperous economy of the country in 1920s was built upon poor basis. Thus the stock market crash contributed seriously to economic decline of the country.

Economic recession during this period was accepted by most researchers as one of the reasons of the Great Depression. The situation in economy was not good long before the stock crash and the key factors, which accelerated decline in economy, were overproduction and underconsumption. In the 1920s the production was rapidly developing and the volumes of the produced goods grew, whereas the purchasing power of consumers was not that high. Consequently more and more products were manufactured, less and less of them were sold and more and more money was borrowed in order to be invested into the stock market.

The owners of the businesses wanted to get over profits and at the same time they did not increase wages for their workers. These factors contributed to breaking of the general economic balance of the country. The greatest part of the population was able to earn money only for their basic needs and the vicious circle with overproduction and underconsumption could not be broken. Farmers aimed at sustaining of their position and took mortgages in order to buy more equipment and other materials and receive good profits. Unfortunately the prices for wheat, corn and cotton were reduced in 1929 and farmers were left with enormous debts.  If to add the crash of the stock market to this general situation in economy of the country, it would be clear that there were a number of factors, which grouped and led to serious economic collapse.

Irrespective of the state of the economy in the country, a lot usually depends upon its leaders. Thus the role, which was played by the government in America, could not be misinterpreted and should be considered as the second meaningful reason of the Great Depression. The tariffs were so high that there was little chance left for foreign trade. Hoover was convinced that it was important to increase tariffs on the imported goods, as this would help to avoid foreign competition. With the aim to support farmers the Smoot-Hawley Tariff was issued. But then other manufactured items were added to this tariff. Such approach turned this tariff into a rather dangerous document, as instead of supporting farmers in their competition with foreign producers, it contributed to increase of prices of the most of raw materials. When this tariff was still signed by Hoover, other countries were forced to react with corresponding measures and the situation for American farmers and entrepreneurships became even worse. The exports of the country went down and contributed to development of the Great Depression.

Any country, irrespective of the fact how strong and powerful it is, depends upon other countries of the world. Although the process of globalization is considered to be relatively new, still during the period of the Great Depression countries were not able to exist and develop in isolation from each other. Thus the third important reason of the Great Depression could be considered the poor situation in European economy. It could be explained first of all by the Great War. The 1920s brought gradual recovery to the economies of such countries as Spain, France and Great Britain and this meant that these countries could reduce the imports of the American goods. At the same time it is important to note that the European nations were not able to pay their debts to each other, including America. The Allies had loaned $11 billion from the United States and were not able to return the money. Before the stock market crash the countries could borrow the money from the American banks, but after the events of October 1929 it was not possible any more. The above-mentioned Smoot-Hawley Tariff worsened the situation for the European countries.

Overall, the Great Depression is one of the meaningful and remarkable economic downfalls in the history of the United Stated and probably the whole world. Researchers point out various reasons and factors, which contributed to this significant economic regress, still it seems that the strongest force was produced exactly by the combination of all these factors both in economic and political spheres of the country and abroad. Knowing the reasons of the Great Depression and remembering of its lessons could be a guarantee of the future choices and measures to avoid its repetition in any form.

Works cited:

Beattie Adnrew. What Caused the Great Depression? 2016

Eichengreen, Barry. Golden Fetters: The gold standard and the Great Depression, 1919–1939.

Hamilton, James. “Monetary Factors in the Great Depression”. Journal of Monetary Economics, 1987

Kelly Martin. Top Five Causes of the Great Depression. American History, 2016 Ads

Rothermund, Dietmar. The Global Impact of the Great Depression, 1996

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: March 29, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
Available at:

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]
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