Causes of the Great Depression Essay

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Causes of the Great Depression Throughout the 1920’s, new industries and new methods of production led to prosperity in America. America was able to use its great supply of raw materials to produce steel, chemicals, glass, and machinery that became the foundation of an enormous boom in consumer goods (Samuelson, 2). Many US citizens invested on the stock market, speculating to make a quick profit. This great prosperity ended in October 1929. People began to fear that the boom was going to end, the stock market crashed, the economy collapsed and the United States entered a long depression. The Great Depression of the thirties remains the most important economic event in American history. It caused enormous hardship for tens of …show more content…

On average, people’s wages stayed the same even as prices for these goods soared. The factories and farms still continued to produce at the same rate, but demand for their products was decreasing. As a result, more and more workers became unemployed, until 25% of the population was out of work. The American Federation of Labor fell from 5.1 million in 1920 to 3.4 million in 1929 (Temin, 68). All of these groups, being poorer than the rest of the country, could not afford to participate in the boom of the 1920’s. There was a major unequal distribution of income that led to the richest 1% of Americans owning approximately 40% of the country’s wealth (Matthews, 2). The country entered the 1920’s with Warren G. Harding as president. Harding was a Republican as well as a laissez-faire capitalist who advocated policies which reduced taxes and regulation, allowed monopolies to form, and allowed the inequality of wealth and income to reach record levels (Tanner, 3). Harding died in 1923 and Calvin Coolidge continued Harding’s policies of minimal government intervention in the economy and in business. Under Coolidge, the stock market began its “artificial” five year rise, the top tax rate was lowered to 25%, and the Supreme Court made an important ruling which further limited government control over monopolies (Tanner, 8). In the 1920’s more people invested in the stock market than ever before.

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