Inequality And The Financial Crisis: The Wall Street Crash

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In the beginning of the financial crisis, most people normally will not realize or predict the disaster that is coming. As John Kenneth Galbraith discussed in “The Great Crash 1929,” “only after the market crash were there plausible grounds to suppose that things might now for a long while get a lot worse” (pg. 90). During the Wall Street Crash of 1929, the most destructive stock market crash happened in the United States’ history. There are numerous causes dedicated to this crash, such as, the inequality and the poor regulations of structures. The causes of this 1929 Great Crash are similar to those of the Financial Crisis in 2008. However, the Wall Street Crash of 1929 led to “a longest and deepest economic downturn in the United States’ …show more content…

Many researchers propose and suggest that inequality is the main factor that leads to a financial crisis and there is a casual connection between inequality and severe downturns. In the 1929 Financial Crisis, inequality refers to the corrupted distribution of income among the citizens. In the 1928, the income unequal distribution became the most extreme point in the United States since the richest five percent of the population held more than one-third of all income of the United States’ citizens. From Galbraith’s words “the proportion of personal income received in the form of interest, dividends, and rent – the income, broadly speaking, of the well-to-do – was about twice as great as in the years following the Second World War” (pg. 177), it showed that the rich were gaining more power and wealth, in different forms. As the five percent of the population held the large proportion of the United States’ economy, this means that the rest of the population, especially those who were originally poor, were suffering just for living. From this fact, it proves that, at that time, “the economy was dependent on a high level of investment or a high level of luxury consumer spending or both” (pg.177). When the economy is highly relying on only a few people, it becomes less stable and is more likely to suffer from big swings because these people were not able to buy large quantities of everyday needed items. Because the rich invested in new projects and bought luxuries, when they lose money and could not afford to buy things, the economy crashed. Inequality was one of the causes of the 1929 financial crisis because in the beginning of the decade, the economy was growing; therefore, it created an environment that buying stocks became a hobby for the rich. As the rich gained more money from stock market, it persuaded others that stock was easy money, which dragged more people to this market. Due to

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