Causes of the Great Depression

Topics: Wall Street Crash of 1929, Economy of the United States, Great Depression Pages: 8 (3258 words) Published: October 8, 1999
Between the late 1890's, after the panic of 1893, and the late 1920's, the American people led good lives in which most prospered. In the 1920's the problems that led to the Great Depression were dispersed over a time of maldistribution of wealth, and what was called a bull market. A bull market is a stock market that is based on speculation. Speculation was a system of borrowing money to buy stocks and selling for a profit. Speculation only worked if the stock market was on the rise though. To this day people who have not been properly educated about the Great Depression believe that President Hoover was the cause. The idea that President Herbert Hoover caused the Depression could have arisen from the fact that he was the President at the time the Depression began. However, the people who do not believe that President Hoover was the cause deem the crash of the stock market in 1929 as the real culprit. The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit. If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but can be put under two main categories. The responsibility for the Great Depression falls not only on the Stock Market Crash, but also on the maldistribution of wealth, an unstable economy and the wild stock market practices of the 1920's. The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920's. The people of the working class were significantly increasing their output, but their wages only increased slightly. For example, the average worker out put from 1923-1929 increased about 32%, but the average income of the worker only increased about 8% (Gusmorino, Main Causes of the Great Depression). Therefore one may conclude that wages only increased one-fourth the amount production increased. Another amazing feat of the manufacturing increase was that prices for goods stayed the same, therefore the executives in the companies were keeping the mass amounts of profit that were now coming into the company. In fact, one can see that top executives in a certain company increased significantly because their salaries from 1923-1929 rose 64% (Gusmorino, Main Causes of the Great Depression), eight times more than what the workers wages increased. The "roaring twenties" was an era when the United States prospered tremendously. The national income rose from $74.3 billion to $89 billion (Gusmorino, Main Causes of the Great Depression). The whole American population did not live through the benefits of the "Coolidge Prosperity." For example McElvaine, in his research on the Great Depression, stated, "in 1929 the top 0.1% of the population had an income equivalent to the bottom 42% of the population," (McElvaine, Causes of Depression). That same top 0.1% of the population in 1929 had 34% of all the savings, while 80% of the population had no savings at all. A good example of this maldistribution of wealth can be seen with Henry Ford. In 1929, Ford reported an income of fourteen million dollars, while the average income of the American people was seven hundred and fifty dollars annually (McElvaine, Causes of Depression). If one were to calculate these numbers by present daily standards, with the average income at eighteen thousand dollars, Henry Ford would be making an astonishing three hundred and forty five million dollars. However, one should be reminded that Ford was not the only man in America making this amount of money, there were many people just like Ford around the Nation. Comparing the 1920's to today, one could say that such businessmen are like the Internet CEO's today. With such a growing gap in the income of the people, it was without surprise that such a catastrophic event could occur. The Federal...
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