AskEssays.com - Discover essay samples

Causes of the great depression

4.9 of 5.0 (202 reviews)

Contains
1674 words
Category
History

Causes of the great depression Page 1
Causes of the great depression Page 2
Causes of the great depression Page 3
Causes of the great depression Page 4
The above thumbnails are of reduced quality. To view the work in full quality, click download.

Causes of the great depression


Between the late 1890's, after the panic of 1893, and the late 1920's, the American people led good lives in which most prospered. In the 1920's the problems that led to the Great Depression were dispersed over a time of maldistribution of wealth, and what was called a bull market. A bull market is a stock market that is based on speculation. Speculation was a system of borrowing money to buy stocks and selling for a profit. Speculation only worked if the stock market was on the rise though. To this day people who have not been properly educated about the Great Depression believe that President Hoover was the cause. The idea that President Herbert Hoover caused the Depression could have arisen from the fact that he was the President at the time the Depression began. However, the people who do not believe that President Hoover was the cause deem the crash of the stock market in 1929 as the real culprit. The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit.

If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but can be put under two main categories. The responsibility for the Great Depression falls not only on the Stock Market Crash, but also on the maldistribution of wealth, an unstable economy and the wild stock market practices of the 1920's.

The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920's. The people of the working class were significantly increasing their output, but their wages only increased slightly. For example, the average worker out put from 1923-1929 increased about 32%, but the average income of the worker only increased about 8% (Gusmorino, Main Causes of the Great Depression). Therefore one may conclude that wages only increased one-fourth the amount production increased. Another amazing feat of the manufacturing increase was that prices for goods stayed the same, therefore the executives in the companies were keeping the mass amounts of profit that were now coming into the company. In fact, one can see that top executives in a certain company increased significantly because their salaries from 1923-1929 rose 64% (Gusmorino, Main Causes of the Great Depression), eight times more than what the workers wages increased.

The 'roaring twenties' was an era when the United States prospered tremendously. The national income rose from $74.3 billion to $89 billion (Gusmorino, Main Causes of the Great Depression). The whole American population did not live through the benefits of the 'Coolidge Prosperity.' For example McElvaine, in his research on the Great Depression, stated, 'in 1929 the top 0.1% of the population had an income equivalent to the bottom 42% of the population,' (McElvaine, Causes of Depression). That same top 0.1% of the population in 1929 had 34% of all the savings, while 80% of the population had no savings at all. A good example of this maldistribution of wealth can be seen with Henry Ford. In 1929, Ford reported an income of fourteen million dollars, while the average income of the American people was seven hundred and fifty dollars annually (McElvaine, Causes of Depression). If one were to calculate these numbers by present daily standards, with the average income at eighteen thousand dollars, Henry Ford would be making an astonishing three hundred and forty five million dollars. However, one should be reminded that Ford was not the only man in America making this amount of money, there were many people just like Ford around the Nation. Comparing the 1920's to today, one could say that such businessmen are like the Internet CEO's today. With such a growing gap in the income of the people, it was without surprise that such a catastrophic event could occur.

The Federal government also could be held responsible for contributing to the growing gap between the rich and the working-class. The President at the time, Calvin Coolidge, and the conservative Congress favored business; additionally, they supported the wealthy individuals who controlled the business. One great example of the federal government helping the wealthy of the nation came in the Revenue Act of 1926. This acted decreased the amount taxed on a person's annual salary. For example, a business owner in the beginning of 1926 would have expected to pay six hundred thousand dollars on his annual one million dollar salary; however, when the Revenue Act of 1926 was passed, this businessman was obligated to pay only two hundred thousand dollars of his annual salary (None, Causes of The Great Depression). The driving force behind this tax cut was President Coolidge and Andrew Mellon, the Secretary of the Treasury. Besides the executive and legislative branches, the judicial branch was known for their influence in the growing gap between the socioeconomic classes. In a 1923 Supreme Court case named Adkins vs. Children's Hospital, the Supreme Court declared minimum-wage legislation to be unconstitutional (Kanjas, Timeline of the Great Depression). The impact of this a declaration showed that employers did not have to pay their workers any certain wage so that the top executives and stockholders of a company may collect larger profits.

The large gap growing between the United States citizens was creating a very unstable economy. According to economists who have studied the Great Depression, in order for the economy to operate appropriately the total demand must equal the total supply. Unfortunately in the twenties this equilibrium with supply and demand was not held; there was incredible excess in the amount of goods produced and unfortunately the price of goods was not dropping and the working class could not afford to buy them. The maldistribution wealth and income was one of the most profound causes of the Great Depression.

The United States working class would generally spend what they could as soon as they received their paychecks. In fact, three quarters of the United States' population would spend most of or nearly all of their money on consumer goods, food, clothing, radios, and cars. Everyone seemed to be living a good life despite the fact they did not have exceptional wages. Middle-class family's income was usually around two thousand five hundred dollars. What was most amazing about the income distribution was the fact that 55% of the national income was distributed to the top 25% of the national population (Nordean, Causes and Cures). The working and middle-class of this time lived for three things; credit sales, luxurious spending and investment from the rich. The way in which most people could afford to buy what they wanted, was credit.

The credit problem appeared as a result of the middle-class wanting to spend money on a luxurious living. The key for the middle-class to living a luxurious living was the magical word, credit. Credit was something anyone could have and with credit they could buy whatever they wanted and not have to worry about paying for it until a later time. The concept of buying now and paying later caught on quickly with the American people. At the end of 1920's, 60% of cars and 80% of radios were bought on credit (Gusmorino, Main Causes of the Great Depression). Between 1925 and 1929 the credit amount in the United States rose from $1.38 billion to $3 billion (Gusmorino, Main Causes of the Great Depression). The President could also be seen taking part in the whole credit trend. A Presidential committee, unidentified by the author, stated that credit was the, 'telescope the future into the present,' (None, Causes of the Great Depression). This notion of the 'telescope to the future' meant that when the future was to come, there was little to buy that already had not been bought. This concept of credit was good for the time being, however, it made the time in which the people who could not originally buy these products even worse when they had to pay the credit companies. Furthermore, the wages of the working-class could not go to new products to buy, or sometimes in extreme cases food, because they had to pay for products that had already been previously purchased by credit.

The United States economy required the middle-class population to continue their luxurious spending and increasing investment from rich people to continue prosperity. The significant problem with this idea of the United States economy being based on the rich investing and the middle-class credit use was that the economy would gain a false wealthy confidence that would later on hide the oncoming Depression. If conditions in the United States economy took a slight turn off track (as they did in the stock market crash of 1929), investing by the rich and spending on luxuries would come to a sharp halt. According to many economists, it is important for savings and investment to stay balanced. If the levels of investment were to increase suddenly, the level of production should increase. However, because of maldistribution of income that existed in the 1920's, the sudden increase in investment created problems for the economy. The great amount of investment and credit use led to the widespread amounts of market speculation.

Maldistribution of wealth existed not only among the social classes, but also in the business world. For example, in 1929, 200 corporations controlled approximately half of all the cooperate wealth (McElvaine, Causes of Depression). While many industries, such as automobiles for example, were thriving in the new industrial America, industries such as agriculture were still prospering but it families began moving off the farms and into the cities; furthermore, farm life in America was being cut down. In 1929, Ford Motor Company reported earnings of more than $345 million; farm prices fell about 72% (McElvaine, Causes of Depression). In 1929, the average income of an American was $750, but in that same year the average income of someone working in agriculture was about $273 (McElvaine, Causes of Depression). Therefore one could ...

You are currently seeing 50% of this paper.

You're seeing 1674 words of 3347.

Keywords: causes of the great depression quick check, causes of the great depression quizlet, causes of the great depression worksheet, causes of the great depression in canada, causes of the great depression worksheet pdf, causes of the great depression graphic organizer, causes of the great depression class 10, causes of the great depression stock market crash

Similar essays


The Story Of Medusa Ilana Elir

There are many variations of the story of Medusa. Yet, I find this one more detailed and precise. Medusa is apart of the chain of Greek Mythology, these stories, or legends are not real and usually said to get a point across, or entertainment. Medusa also shows the relationship the society had with women at that time. Medusa was a Gorgon,...

83 reviews
Download
Western Expansion of the U.S.

International borders have always been centers of conflict, and the U.S.-Mexican border is no exception. With the European colonizing the New World, it was a matter of time before the powers collided. The Spanish settled what is today Mexico, while the English settled what is to day the United States. When the two colonial powers di...

182 reviews
Download
American values from jamestown

Before England could settle the New World, it needed a Middle Class to fund private settlements and a millitary to protect those investments. Although the Spanish had a hundred year head start the English would in turn dominate the New World. This was all set in motion by King Henry VIII's Act of Supremacy. King Henry VIII broke from t...

202 reviews
Download
Electoral College Is No Longer

The electoral college has been our method of electing presiden's sinc eth constitution was formed. With increasing popoulations and the addition of third parties, it can be questioned however, as to wheth or not this i still a functional method of elections. There have been many cases in history where a president has been elected to o...

106 reviews
Download
Early Western Civilization

Egyptologists had lost interest in the site of tomb 5, which had been explored and looted decades ago. Therefore, they wanted to give way to a parking lot. However, no one would have ever known the treasure that lay only 200 ft. from King Tut's resting place which was beyond a few rubble strewn rooms that previous excavators had used to...

210 reviews
Download
Obidiah

OBADIAH Judgement is pronounced. Obadiah''s oracle against Edom as sentenced by Yahweh Himself is severe and without hope for future restoration of this people. Edom''s crime and reason for judgement is explained by Obadiah in this sense, ''you stood by on the day of your brother''s captivity; and rejoiced over the children of Ju...

128 reviews
Download
Government in the usa

The Federal Government The Federal government also has three elements: executive (the President), legislative (Congress) and judicial (Supreme Court) branch, and the three elements are checked and balanced by one another. The President The President is the effective head of the executive branch of government, head of state and Comm...

33 reviews
Download
Middle East And Canada

Introduction In December 1985, the Canadian press reported the death by suicide of hundreds of field mice in the Middle East. In an apparently instinctive reaction to a problem of over-population, the mice wilfully plunged to their doom off the cliffs of the Golan Heights. This bizarre story was the subject not only of straight news covera...

165 reviews
Download
European settlements

The European history of Virginia began in 1570 with a short-lived Spanish mission probably located on the York River. In 1584, Sir Humphrey Gilbert obtained a grant from Queen Elizabeth to colonize all of North America not occuppied by the Spanish or French. The first expedition to the vast new territory, named Virginia in honor of the queen, w...

27 reviews
Download
Early History of Judaism

It has been argued that Judaism can be seen not only as a single religion, but as a group of similar religions. It has also been pointed-out that through all the trials and tribulations that Judaism has suffered through, that there have been common themes that have proven omni-pervasive. Any institution with roots as anc...

50 reviews
Download
Causes of world war i

Causes of World War I The First World War had many causes; the historians probably have not yet discovered and discussed all of them so there might be more causes than what we know now. The spark of the Great War was the assassination of the Archduke Francis Ferdinand, heir to the throne of Austria-Hungary, and his wife by a S...

94 reviews
Download
Fourth amendment exceptions

The Fourth Amendment to the Constitution states that people have the right 'to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures,' but the issue at hand here is whether this also applies to the searches of open fields and of objects in plain view and whether the fourth amendment provides protect...

91 reviews
Download
Roosevelt and Hoover

President Franklin D. Roosevelt is commonly thought of as a liberal and President Herbert C. Hoover as a conservative. The validity of these accusations, however, is uncertain. Before classifying each president in the categories of ?liberal? and ?conservative,? it must first be understood what is meant by each ter...

170 reviews
Download
Carthage and the punic wars

Carthage was first founded as a trading post in the year of 814 BC. Carthage was founded by the Phoenician Princess Elyssa-Dido on a peninsula from Africa which extends into the Mediterranean Sea. According to legend Elyssa_Dido fled from her brother Pygmalion, the king of Tyre, after he killed her husband. The post benefited from the...

182 reviews
Download
Atsisiųsti šį darbą