What caused the Great Depression?

  • Created by: Lily
  • Created on: 09-05-13 13:49

What caused the Great Depression?


  • Overproduction & maldistribution: masked by "easy credit", manufacturing grew by almost 50% in the 1920's, by 1929 the richest 5% of the population owned 1/3 of the income, 71% had income less than $2,500. By the end of the 1920's 75% of radios were being purchased on HIRE, tax plocies favoured the wealthy, declining industries e.g textiles
  • World Economy: Britain/France/Belgium owed the USA millions of dollars in the inter-allied loans, they had to raise taxes to compensate for this. During the 1920's exports rose by only 38%. There was political unrest across the globe, e.g Russia and communism, and this cancelled out many oversea markets
  • The Government: Mellons tax cuts lowered income for the wealthy making the maldistribution of wealth worse, The Republican Government adopted a laissez-faire attitudeand companies such as the Federal Reserve Board did not act enough
  • The Weak Banks: only 1/3 of banks were under the control of the Federal Reserve Board. The collapse of share preices had a devastating effect of banking, hundreds collapsed which led to the failure of thousands of businesses/farms. (throught 20's banks failed at a rate of well over 500 per year)


  • Homelessness/Joblessness: nearly 13 million out of work, no unemplyment benefit, marriages fell, suicide rates soared, "hoovervilles" were shanty towns for those evicted from their homes, little relief, only able to get temporary labout from farmers
  • Hoboes: unemplyed/homeless wandered who would hitch a ride of freight trains to travel america in search of work.  Hobo camps existed on stolen/begged food. Eventually guards were put up to prevent them
  • Foreclosures: land values plummeted, families often thrown off farms and lost everything, people unable to buy land/pay mortgages, caused anger and resntment from desperate farmers,
  • Dust bowl: severe drought, storm clouds caused topsoil to be blown off barren fields, crop yield suffered masively, dust pneumonia, there was no relief for these farmer

Overall summary

Especially under Hoover the Depression gradually worsened and there was little relief for the people struggling. There were many different reasons why the Great Depression happened, in particular the Wall Street Crash and the failings of the banks through that were very important in causing mass panic and debt which led to the unemployment and foreclosures that heppened in the Depression. However these factors only laid a groundwork for the Depression to happen. The Depression continued due to the failings of Hoover presidency, the failings of Roosevelts first New Deal and the lack of relief for the agricultural workers.


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