The Major Causes and Effects of The Great Depression in The United States

The Great Depression began in late 1929 and lasted for about a decade. The 1930s were a time of many changes. Our country had many problems that led to a long hard depression. The United States went from the “Roaring 20’s”, a time of success and happiness, to a terrible struggle to live, only a decade later. Multiple causes occurring within a short time of each other led to a decade of poverty and fear – The Great Depression.

The “Roaring Twenties” was a time when our country prospered. It was right after World War I and people were just getting everything back together. Due to a rapid increase in the industrialization that was fueling the United States economy, the leading economists were led to believe that this growth would continue for a long time. The average total realized income rose from $74.3 billion to $89 billion and there was a seventy five percent increase in the average per capita income. Even in the tremendously prospering 1920's, causes and danger signals were apparent that a great Depression was coming. One of the main causes of the Great Depression was the uneven distribution of money among the rich and middle class people, between industry and agriculture, and between the United States and Europe, throughout the 1920s. This created a very unstable economy. From 1923-1929 the average output per worker increased 32 percent in manufacturing, while at the

same time, the average wages for manufacturing jobs increased only 8 percent. This caused wages to increase at a rate one fourth as fast as the rate that productivity increased. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits, rather than personal profits. Soon after, the pay of the workers did not increase at all but the prices rose. The middle class people could no longer afford the goods and the companies lost money. A 1932 article in Current History discusses the problems of this uneven distribution of wealth. “We still pray to be given each day our daily bread. Yet there is too much bread, too much wheat and corn, meat and oil and almost every other commodity required by man for his subsistence and material happiness. We are not able to purchase the abundance that modern methods of agriculture, mining and manufacturing make available in such bountiful quantities.”

Furthermore, farmers were producing more farm crops than could be sold and the United States was having trouble with the uneven distribution of wealth between Europe and the United States occurred when tariffs were placed on imports. The rich did not want to pay and therefore stopped loaning money to outside countries. To make matters worse, on October 29, 1929, the New York Stock Market crashed. Many people had invested all of their money in the stock market because they were so sure of the economy’s success. People began to sell their stocks at a very quick pace, selling 16 million shares. Numerous stock prices dropped to fractions of their value. Banks lost money from the stock market and from Americans who couldn't pay back loans.

By the 1930’s 25 percent of the countries workers had lost their jobs. Approximately 13 million people were jobless and many of those were also homeless. The blacks and unskilled workers were always the first to be fired. Farmers had no money and weren’t able to pay their mortgages. Poor and middle class families had incomes of less than $2500 per year and 1 in 4 of the Americans who lost their jobs could not find a single job throughout the whole depression.

Farmers picketed and rather than let the unsold milk spoil they gave it away to other poor people like themselves. This led to the Agricultural Adjustment Act being passed in 1933 to help the farmers, most of whom were suffering the most damage. This raised farm prices by growing less crops. The Agricultural Adjustment Act helped these farmers get low interest loans so that they would not lose their farms to the banks that held their mortgage.

Another effect the Great Depression had on the country was the invention of the credit system. Many people could not afford the goods that they wanted but believed that they would be able to pay it back at a later time. The idea of a credit system caught on quickly and buying with credit was started. People would use credit cards to buy everything from cars to groceries and they paid it back after they got their paycheck. This idea lasted past the depression and is still used today.

The Great Depression was the result of many different factors, but the combination of the greatly uneven distribution of wealth and the extensive stock market speculation that took place at this time where the major causes. It affected everyone and it can be safely said that the Great Depression is known to be the worst economic disaster in U. S. history.