Causes of the Great Depression

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Causes of The Great Depression

The Great Depression, which lasted for over a decade, was the longest and most devastating economic collapse seen in the history of the modern world. Originating in the United States, it eventually spread to many other countries, destroying their economies and industrial sectors. To understand the effect it had on the societies of America, as well as abroad, it is important to understand the major factors that led to its arrival.

In the 1920s, America was experiencing a great boom in terms of its economy. It had come out of World War I intact, and was now focused on strengthening itself. However, in doing so, it became a country that was quite introverted. The focus was on “getting rich and enjoying new fads, new inventions, and new ideas. The traditional values of rural America were being challenged by the city-oriented Jazz Age…”(McElvaine, 1).

This self-centered attitude and behavior seemed to fit well with the needs of the American economy at the time. The goal of the many businesses and manufacturing companies was to create a demand for the many products they produced. To accomplish, advertising methods that had been used to promote support for World War I were now used to promote the many new products that emerged. The tactic worked, and it resulted in the “mass consumption that kept the economy going through most of the 1920s” (McElvaine, 1).

However, there was a drawback. Despite a booming economy, there was an uneven distribution of income. As the 1920s progressed, the ratio of income going to the wealthy increased, while the ratio of income going to the poor decreased. This was the result of two factors. First, even though businesses were showing a remarkable level of productivity, the workers were only getting a small portion of the resulting wealth. Second, huge income tax cuts in the top bracket allowed the wealthy to keep a bigger portion of their profits, while the...
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