The Great Depression was the result of multiple bad practices during the booming 1920s. Our Keene, Cornell, & O’Donnell (2013) text explains that in effort to reduce competition from overseas, the U.S. began levying high tariffs on goods imported into the U.S. In response, foreign countries issued tariffs on our imported goods, leading to a decreased demand for American goods. Unfortunately, manufacturers did not respond by lowering prices as quickly as they should have and thus were forced to lay-off employees. Additionally, investors did not want to put capital into these businesses which made it impossible for them to recover. During WWI, farming was in high demand and farmers had acquired larger plots of land and advanced farming equipment that made it easier to produce large crops. After the war, demand slumped yet farmers did not rein in their production as they should have. This overproduction meant that prices dropped precipitously. Demand for automobiles also waned in the late 20s, which hurt the steel and rubber industries by extension. Keene et al (2013) point out that “unequal distribution of wealth” was partially to blame for the decreased demand for American goods (p. 657). Corporate profits had increased tremendously, yet workers’ wages rose only slightly. Once the stock market crashed during the 10-day period beginning on October 20th, 1929, the economic fate of Americans, and eventually people across the globe, had been sealed. At this time in history there were no laws in place to protect the average man who had invested in stocks or put his money into the bank. When the stock market crashed their money was gone because bank officials had been allowed to make speculative loans and buy stock with this money that had been deposited by the average man (Keene et al, 2013). From this 1929 crash came the FDIC and the SEC to help safe-guard investors’ money and prevent a future crash.
I imagine that the Great Depression seemed so much worse than previous economic slumps because the Great War just preceding it had created such a boom just beforehand. Additionally, President Hoover’s noninterventionist stance meant that he was hoping for a “voluntary and cooperative approach” to avoid financial crisis, rather than the government intervening by stimulating the economy (Keene et al, 2013, p. 657). In recent history the financial crisis that seems most reminiscent of the Great Depression would be the 2008 housing crisis. In her 2013 Washington Post article, Sheree Curry identifies five main factors contributing to the housing market crash. Allowing unqualified buyers purchase homes with mortgages that they had no chance of being able to afford overtime lead to homebuyers being “underwater” with their mortgages and needing the bank to buy back the houses.
Chamberlain College of Nursing (2019). HIST405N Week 5: From the great war to world war II [Online lesson]. Downers Grove, IL: DeVry Education Group.
Curry, S. (2013). 5 contributing factors in housing market crash. The Washington Post. Retrieved from https://www.washingtonpost.com/realestate/5-contributing-factors-in-housing-market-crash/2013/08/29/8532ddb6-0f60-11e3-85b6-d27422650fd5_story.html?utm_term=.84fbfcddc6d5 (Links to an external site.)