What were the causes of the great depression of 1929-32

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What were the causes of the great depression of 1929-32?

                                                                

The great depression was a drastic economic change in the industrialised world. It began as a financial phenomenon in 1929 but then it spread across from the borders of America. The depression was a severe economic slump that sustained itself through the 1930s. The consequences of the great depression were not just economic but social as well; where mass unemployment became the norm, hunger marches as well as rallies filled the streets, and eventually the accession of Hitler to power provides an insight into the effects of such a depression.

The post war era favoured America; it exited the war as a strengthened nation unlike that of its allies Britain and France which were devastated. America was undergoing a financial boom. The post-war economy of America with its progression in the industrial as well as manufacturing sectors, and the change in government fiscal policy, resulted in America being at the centre of the world economy. The domestic situation of America reflected its world position, as President Coolidge states ‘the great wealth created by our enterprise and industry, and saved by our economy, has had the widest distribution among our own people, and has gone out in a steady stream to serve the charity and the business of the world’. From this it can be seen that the economical situation, as viewed by the American president, is one of prosperity, growth and development not only at home but abroad as well. The great depression therefore was an event which must have evolved from a perceived prosperous economy.

After the Great War continental Europe was physically devastated. The allied countries were also suffering from debts they owed America; and in an even worse position Germany owed the allies vast sums of money in reparations for the war. Unemployment in Europe was at unsustainable levels, as businesses collapsed and the economy began to shrink. In America the situation was different but still as fragile. The wealth that America accumulated after the war was unfairly distributed amongst the people.  In fact the benefits of the 1920s’ boom saw the top 0.1% of Americans had a combined income equal to the bottom 42%. The affluence and wealth of the country imposed the luxury lifestyle and so began the birth of the credit culture, among middle income America.  It started to appear in America in the 1920s which helped to falsely boost the economy and weaken the financial positions of both the creditors and debtors. Another of the major situations in the 1920s was that international investment s seemed to dry up, and by the late 1920s, lending dropped by more than 90 per cent. With all these factors combined the optimistic American view of the economy seems to be wrongly placed. These are the underlying contexts from which the great depression evolved.

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The American credit culture combined with the falsely boosted economy lead to the New York stock market crash of 29 October 1929. The speculation on investments and profits over inflated the American economy which then collapsed.  This is the point that many historians suggest the great depression began.

The fundamental causes’ of the great depression remains a debated topic amongst economists and historians. There are economic historians who suggest different causes for the depression. In the main stream there are; Keynesian, Monetarist, Austrian School and Neo Classical. There are some other interpretations such as a Marxist view and the former ...

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