The Great Depression was one the worst time periods in American history. The Great Depression started in 1929 and ended in 1939. It started in America with the crash of the stock market and then later began to have a big impact globally. As shown in Document 1, the Great Depression was the worst economic downfall in American history. Millions of people were left unemployed and searching for nonexistent jobs. It was a common sight to see children begging on the roads. Furthermore, banks started to fail and people started to lose any savings that they had. Overall, the main causes of the Great Depression were the stock market crash of 1929, the reduction in purchasing, and the abuse of the major economic ideas.
The stock market crash of 1929 was the biggest cause of the Great Depression. The stock market crash impacted millions of American people. Before the stock market crash, many Americans were getting greedy. They were continuously buying more and more. As described in Document 10 after the Americans “bought all they can afford they go on buying, a little down and the rest in easy payments.” (Document 10). This method of buying with installments was bad for the economy. Elmer Davis foreshadows the Great Depression when he states, “the bill will be all the larger when it finally has to be faced.” (Document 10). Another reason that Americans got greedy was the speculative boom in the stock market. As described in Document 5 there was a “speculative boom that developed with increasing intensity in the years after 1927.” (Document 5). The speculative boom made Americans greedy as they were hoping to make quick profits from the speculative rise. However, as more Americans began to invest in stocks, the prices started to be forced upwards. These forced up prices were a result of “competitive bidding rather than by any fundamental improvement in American (business).” (Document 5). As a result of the speculative boom, investors bought more stocks. However, when the stock market crashed, the investors with the most stock were trying to get rid of it as fast as possible. This lead to the stock prices being dropped drastically. This is shown in the newspaper title in Document 3 which is “Stock prices slump $14,000,000,000 in nation-wide stampede to unload” (Document 3). The drop in prices would have been a good way to jumpstart the economy, but Americans were no longer buying anything. Most Americans stopped buying stocks which was worse for the economy since it cannot grow without consumers. Overall, the stock market crash of 1929 was one of the greatest causes of the Great Depression because it completely dropped the prices of all stocks and put millions of Americans into poverty.
After the stock market crash of 1929, many Americans were reluctant to buy anything. Also, many Americans were too poor to be able to buy anything besides the absolute necessities. After the stock market crash, many Americans lost their jobs. As shown in the table in Document 4, unemployment rates were drastically rising after the stock market crash. Without jobs, Americans could not purchase anything and this made the country continue downwards. Maintaining a family became extremely hard since many adults were losing their jobs. The hardships of family life are further explained in Document 7 where the average mill worker describes her daily lifestyle. In her story, she explains that her income combined with her husbands is just barely enough to support her entire family. This means that the average family did not have much money leftover to spend on other items and luxuries. The table in Document 9 further supports this argument because it shows the average US family income distribution. After the stock market crash, nearly 60% of American family’s annual income was under the poverty line (Document 9). This showed that the families under the poverty line could not afford anything other than the absolute necessities which meant that they could not purchase other luxuries. Overall, the reduction in purchasing was one of the causes of the Great Depression and it was happening because of the unemployment which led to a lack of money.
The abuse of economic ideas was one of the smaller causes of the Great Depression. As described in the background essay, the 4 major economic ideas are the law of supply and demand, say’s law, the business cycle, and the stock market (Background essay, 437-439). Before the Great Depression started, American people were breaking some of these economic ideas. As described in Document 6, “consumers bought goods on installment at a rate faster than their income was expanding” (Document 6). By buying goods on installment, it meant that people would pay over time. This purchasing style was okay in the beginning but after a while, it had serious consequences since many people were gaining debt and their income wasn’t capable of paying the installments. Also, this type of purchasing broke the law of supply and demand since the supply and demand for goods remained the same, but people didn’t have money to buy goods and had to use installment. This meant that there would be a time where people would stop buying which would lead to a sap in the economy (Document 6). Furthermore, Document 10 describes that people continued buying even after they couldn’t afford it. This shows that people broke the business cycle because usually if people stopped buying after they couldn’t afford it, then production slowed and workmen were fired. However, in the years before the Great Depression, people used installments and continued buying which broke the business cycle. Additionally, the farming economy also started to abuse the law of supply and demand. Farmers started to overproduce items in hopes of being able to sell more. However, this overproduction backfired and as shown in Document 11 the prices of goods completely dropped. The farm industry fell as farmers were forced to sell their goods at a very low price. Overall, the abuse of economic ideas impacted the Great Depression since people started paying with installments and breaking the business cycle and the law of supply and demand.
In conclusion, the Great Depression was caused by many different factors. The greatest cause for the Great Depression was the stock market crash of 1929 which put millions of Americans into poverty and made many lose their jobs. Additionally, the Great Depression was also caused by the reduction in purchasing since many were unemployed and couldn’t afford to purchase anything besides the absolute necessities. The reduction in purchasing also kept the economy down since it can’t grow without consumers. Furthermore, the abuse of the major economic ideas also had an impact on the Great Depression. Overall, the stock market crash of 1929, the reduction in purchasing, and the abuse of the major economic ideas were the three major causes for the Great Depression.