Great Depression 8 Essay Research Paper

Great Depression 8 Essay, Research Paper

“The Great Depression of the 1930’s was a worldwide phenomenon composed an infinite number of separate but related events.” The Great Depression was a time of poverty and despair caused by many different events. Its hard to say what caused this worldwide depression because it’s all based on opinion as opposed to factual data. There are many contributing factors but not one specific event can be pin pointed for starting the depression. It is believed that some events contribute more than others-such as the Stock Market Crash of 1929.

The Stock Market Crash of 1929 was in the majorities opinion, a long and overdue crash that was bound to happen. Prices sky-rocketed so high that when they reached what was believed to be it’s all time high, most people sold their gaining stocks for a profit. So many people sold their stocks at a rapid rate that the corporations were unable to pay the shareholders. Speculation arouse months before the crash when Roger Babson made his speech at the annual National Business Conference which he said “….. Sooner or later a crash is coming which will take the leading stocks and cause a decline from 60 to 90 points in the Dow Jones Barometer.” This and many others speeches like this scared people into selling there stocks before the inevitable would happen. This was a leading causes that assisted the Great Depression become one of the bleakest and most studied events in the history of our country: yet not the only cause.

Another large contributing factor was Mother Nature, I say this because in Oklahoma the weather was so dry that the farmers were unable to harvest their crops: these farmers became known as Okies. The land was a barren wasteland of dust and dirt in which it got it’s name the Dust Bowl. In other areas, the extreme opposite took place: farmers overproduced and prices rapidly dropped because the demand decreased. The drastic result of this oversupply made it hard for farmers to make money due to the fact that they had so much that they were forced to sell it at substantial low priced just to remain competitive enough to make even the small profit they were making. The imbalances were however, self correcting in which if manufacturers made too much of something, it’s price would fall, profits would disappear, and the producers would cut back on output. In 1932 the American writer, Stuart Chase described cycles as “the spree and hangover of an undisciplined economy.”

Economists recognized the depression as a cycle in which there were four cycles; expansion; crisis(or panic); recession (or contraction); and recovery. The definitive description was made by Wesley Clair Mitchell of the University of California. A cycle Mitchell explained in Business Cycles(1913) was “the process of cumulative change by renewal of [Economic] activity develops into intense prosperity by which the prosperity engenders a crisis, by which crisis turns into depression and by which depression finally leads to…. a revival of activity.”

Banks played a significant role in the depression because they were in charge of all the money and interest rates. For example when banks had large reserves, they lowered interest rates. Cheaper loans encouraged manufactures to invest in new equipment and hire additional workers. The resulting expansion of production caused an upswing of the cycle. The increased borrowing eventually reduced the bank’s reserves, thus resulting in a drastic increase of interest rates. That discouraged investors and slowed the economy down. Another good explanation was the bad distribution of wealth for the cycles. During these challenging and difficult times the rich opted not to spend there money: they saved in banks, vaults, etc. This resulted in increased investments, more production, and eventually more goods piled up on shelves and warehouses. Prices fell, production was cut back and workers were discharged. As a result, the economy entered the depression phase of the cycle.

The crisis stage of the cycle was brought about by bank failures and by irrational selling of stocks ;thus causing business failures, a slowing in production, a rise in unemployment, and an overall optimistic view about the future.

Another helpful aide in the depression was the chief International creditor who was described as “unexperienced and less careful about it’s lendings because it was less dependent on this business than the chief pre-war tender, Great Britain.” He granted huge short term loans to politically unstable nations.

Lionel Robbins was a professor at the London School of Economics. He offered what was probably “the most influential contemporary explanation of the length of the downturn in the Great Depression(1934). The World War (World War I) had destroyed much property and stimulated nationalistic sentiments that resulted in restrictions on international trade; Robbins wrote” Robbins believed that the depression was dragging on because of structural weaknesses. An example of Robbins philosophy was that the monetary confusion and rampant inflation after the war had hampered.

Many policies that the government put out hurt and slowed the recovering economy. One act known as the American Hawley-Smooth of 1930 crushed the European industry which was already unstable from the depression. It stopped European trade and prevented European from earning the almi