Causes of the Great Depression

The great depression refers to the worst economic depression, which
occurred in the American history. Although it was a global economic
problem, America is usually regarded as the root of the global crisis.
It involved a vast financial decline that commenced in 1929 and lasted
in the early 40’s. During this economic depression, banks closed
doors, individuals lost their jobs, savings, and homes and many
individuals relied on charity for their survival. The American real GDP
fell from approximately $ 1,000 billion to less than $ 750 billion
within a span of three years. This was due to an increasing rate of
unemployment during the depression period. Different American families
were affected by the depression especially the agricultural families
and investors. Various factors have been viewed as the chief
contributors of the great depression. The crash of the stock market is
believed to have a leading role in causing the great depression. The
stock market crashed in 1929, which caused a selling panic. By the time
the crash became complete in 1932, stocks had approximately lost 90 % of
their value (Bernstein 56). This led to the worsening of the economic
situation for the Americans. Another cause of the great depression was
bank failures. Over 9,000 banks failed throughout the 1930’s. Most
individuals lost their savings and deposits were uninsured (Bernstein
62). Because the economy was in a bad economic scenario, most banks
hesitated developing fresh loans whether personal or home loans. This
led to worsening of the situation because expenditures became less.
A reduction in purchasing was another factor contributing to the great
depression. Because of the crashing of the stock market and fears of the
future economic problems, most individuals stopped purchasing items
this included all classes. Failure of purchasing items reduced the
number of items produced, which in turn reduced the number of
individuals employed hence, the unemployment rate increased leading to
a worse economic situation. Smoot-Hawley tariff was also a chief
contributor to the great depression. This tariff became established in
1930 so as to help in protecting American companies, when businesses
began to fail. However, this charged high taxes for imports leading to
low trade amid America and other countries. Although drought conditions
did not have a direct cause of the great depression, they are also
believed to contribute to the great depression. The drought which
occurred in the Mississippi valley was of great proportion that even
some Americans could not pay their taxes or other debts, and as a result
could not sell their firms at a profit. The drought conditions led to a
decrease in output and reduced employment rate. This worsened the
economic situation that Americans were facing. Hence, the drought
conditions also contributed indirectly to the great depression.
The great depression impacted the lives of Americans vastly. The great
depression led to a rapid rise in the rate of crime as many Americans
were left unemployed. Putting food on the table became a serious problem
to most Americans and petty theft became a common issue for most
Americans in order to have resources that they could use in paying for
their bills (Burgan 75). Apart from participating in crimes, others were
forced to practice prostitution as they tried to look for a means of
paying their bills. Health care was not regarded as a priority by most
Americans and visiting a physician was only reserved for dire
circumstances. The demographic trends changed sharply emanating from the
depression. Marriages became delayed as most males were forced to wait
until they were capable of providing for a family prior to proposing to
a spouse (Burgan 86). Birth rates dropped sharply because most Americans
opted to practice birth controls so as to avoid having additional
expenses due to unexpected children. The rates of devorce decreased as
people sought to abandon their families without any formal settling
married individuals viewed it difficult to seek court settlements.
Besides, the great depression made thousands of farmers to leave their
homes and migrated to other areas for instance, farmers from Arkansas
and Oklahoma migrated to California. In addition, most Americans that
survived the great depression became wary of the banks and suspicious of
the stock market throughout their lives. People feared investing in the
stock market as they did not have confidence in the stock market because
of the declining stock prices. Saving in banks was also feared by the
Americans since the Americans did not have enough confidence in the
banking industry.
One of the ways of resolving the great depression was through the
development of strict trading and banking laws. After the crash of the
stock market and failing of most banks by 1933, strict laws governing
banking and trading became introduced, as well as financial safety,
enforced by the Federal Deposit Insurance Corporation (FDIC) and
Securities and Exchange Commission (SEC). This increased the confidence
of investors and traders leading to growth of businesses and banks this
indeed aided in resolving the great depression. Another way of resolving
the great depression was through the New Deal. The New Deal comprised of
programs that were designed in helping Americans through addressing the
rising rates of poverty and unemployment (Smith 27). The work creation
programs helped in resolving the great depression since as more job
opportunities became created, Americans were capable of sorting their
bills, thus reducing the rates of poverty and the economic situation was
brought to normal. The New Deal also increased the role of government in
the lives of Americans this eased the economic situation faced by
Americans during the great depression, thus raising the future
expectations and hopes of Americans. This had an effect of increasing
output leading to resolving of the great depression.
Conclusion
The great depression was a vast economic depression that has ever
occurred in the American history. The great depression was caused by a
crash of the stock market, a reduction in the purchasing of items, bank
failures and the Smoot-Hawley tariff. These factors played a key role in
the contribution of the great depression. The depression impacted the
lives of Americans since people struggled for survival during the time.
There were increased rates of poverty, which led to increased rates of
crime and prostitution. Males were also made to wait longer before they
married due to economic hardships. However, the great depression became
resolved through the New Deal and establishment of strict regulations
governing trade and banking. The New Deal constituted programs, which
targeted at creating job opportunities with a notion of reducing the
rates of poverty that were increasing at an alarming rate. Strict
regulations on trade and banking increased the investors confidence
leading to the growth of output and employment rate.
Works Cited
Smith, Robert W. The Great Depression. Westminster, CA: Teacher Created
Resources, 2006. Print.
Burgan, Michael. The Great Depression: An Interactive History Adventure.
Mankato, Minn: Capstone Press, 2011. Print.
Bernstein, Michael A. The Great Depression: Delayed Recovery and
Economic Change in America, 1929 – 1939. Cambridge [u.a.: Cambridge
Univ. Press, 1993. Print.
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