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Consider the arguments for and against the claim that the causes of the Great Depression were long term.

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Introduction

Consider the arguments for and against the claim that the causes of the Great Depression were long term. The Great Depression is one of the most debated topics in modern world history and the causes are greatly discussed. People thought that things were going along quite nicely in the USA during the 1920s until Thursday October 24th 1929, the first day of the Wall Street Crash and the beginning of one of the fiercest economic depressions ever seen. One of the main features of the Great Depression was the collapse of the farming industry with many farmers going bankrupt and their property being repossessed. This was because farmers couldn't afford to run their businesses anymore with the price of wheat plunging from a mighty $2 per bushel at the end of the war to a miserly 51 cents at the height of the depression. Many historians have argued that the demise in farming came about very quickly and that the causes were short term. During the war American agriculture was booming due to the opportunity to supply food to the disrupted European market and after the end of conflict in 1918 European agriculture picked up meaning that the American farmers were over producing. It has been said by historians that the end of World War One acted as a short-term trigger causing a capitulation in the farming industry. This can be illustrated by the fact that between the years of 1919 and 1921, total farm income catapulted from $10 billion to $4 billion. ...read more.

Middle

The 'seven years of plenty' were over and a period of economic depression was about to begin. By the end of that year they had been proved right. Moreover, historians such as Galbraith have said that the infrastructure of the American economy was not strong enough to support such rapid expansion. Some historians have placed great emphasis on the way much of the boom was fuelled by "Get Rich Quick" schemes. Between the years of 1925 and 1929 many Americans went "Wall Street Crazy". Shares could be bought "on the margin" and more and more people were buying shares as a short term speculation rather than as a long term investment in a company. The market value of all stocks catapulted from $27 billion in 1925 to a whopping great $87 billion by October 1929. Many share prices rose spectacularly such as the Radio Corporation of America whose shares went from 85 to 420 just in the course of 1928. This speculation relied almost solely on confidence, something which cannot last forever. Therefore speculators were bound to sell their shares when confidence dropped and share prices would fall catastrophically. This is what happened in the Wall Street Crash. Galbraith argued that the American economy relied too much on confidence and a belief that everybody could become rich. Obviously this optimism could not last forever and a depression was inevitable. This viewpoint could suggest that the causes of the depression were mainly short term in that a lot of people lost confidence very quickly following ...read more.

Conclusion

The coal industry suffered new competition from more modern energy sources, most notably oil. The cotton industry also suffered because of modernisation with the introduction of synthetic fibres. The changes in young women's fashion also meant that fewer textiles were needed to make clothes. This caused an increase in unemployment as the textile mills of the north could not compete in a shrinking market with the southern mills, which employed cheap labour and longer hours. The unemployment caused by the closure of mills further reduced confidence and helped lead to the depression. In conclusion, the long term problems such as the overproduction in farming, the problems with the banking system, the uneven distribution of income and the decline of old industries are more important causes than the short term problems. The stock market would not have been able to rise so steeply had it not been for the way banks gave out credit so easily, causing confidence not to have got so high in the first place. If the income had not been so unevenly distributed then the short term loss of confidence which triggered the depression would perhaps not have happened so easily due to the fact that people's financial situations would not have been so precarious. The short term factors were not as important because of the fact that they were results of the long term problems in America. One thing that is evident throughout this period is the fact that not many economists and politicians at the time knew enough about modern economies to predict the depression and maybe prevent it. ...read more.

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