The United States 1919 – 1941, The Wall Street Crash
Between 1921 and 1929, for eight years, there was a major boom in the American economy. Business was prospering, sales increased, profits increased and the prices of shares rose. Ordinary Americans were investing money in the stock market (Wall Street), buying shares in companies which they hoped would make large profits. However, this all came to sudden halt with the Wall Street Crash in October 1929 and America fell into a serious economic depression. There were many causes of the Wall Street Crash that lead to the eventual depression such as the speculation, overproduction of goods, government policies, isolation, and the stock market.
Speculation is possibly one of the most significant causes of the Wall Street Crash. Many Americans assumed that the easiest way to make quick profit or get wealthy was by playing the stock market. In 1920 there were only 4 million share owner in America and by 1929, there were 20 million out of a total 120 million. In addition, 6000, 000 new investors were speculators who borrowed some money in order to buy some shares and then selling them as soon as the prices rose. They then pay back their loans but still have some profit left in the process. Speculation was a form of gambling in which they risked their own money. During the 1928, speculation became quite popular as the demand for more shares increased rapidly and prices began to rise significantly. For example, in March the shares were at $145 and by September they had risen to $413. One key factor that contributed to this whole speculation was confidence among people. As long as people were confident there would be more buyers and sellers which would keep the prices at an all time high. However if they began losing their confidence and hope, prices would stop increasing which would result in more sellers eventually leading to an economic crash. This is exactly what happened in America. Some shareholders began to lose confidence and believing that the prices of shares could not continue to rise forever, decided to sell. This hence triggered a panic and so many shares were sold during 24th October 1929 that by Tuesday 29th October the share prices continuously fell and in the process, people began losing vast amounts of money, creating bankruptcy. This is due to the fact that too many people thought that share prices could only go up, which encouraged them to invest more than they could afford in the stock market. And so when the crash occurred, they lost more money and were ruined. Banks did not have enough money in reserve to help businesses that were in trouble. This was because they had lent too much money but now the banks were facing difficulties because people could not afford to repay their loans. Also it was because banks had speculated on the stock exchange, so when the market crashed the banks became bankrupt. As more people began to lose their trust, they started withdrawing all the money from the bank and kept them safe with themselves as they were afraid to buy any more goods. This meant that since no one was buying any goods, industries would not get any profits, and banks became bankrupt, leading to a cycle of depression as the situation got worse and worse. However this whole event was a short term cause of the Wall Street crash as it began quite late and affected the economy in a shorter period of time. This is how speculation contributed to the Wall Street Crash.
Although speculation is a major cause of the Wall Street Crash, it certainly isn’t the only one which led to this event. Overproduction of goods was also another key factor that helped cause the collapse of economy. This was also another short term cause as it wasn’t happening from a long time ago and only had an effect once it actually occurred at the time. The boom of the 1920s was based on selling more and more goods. But by 1929 US industry was running out of customers. By 1929, there was a growing surplus of manufactured goods being produced and mass production means supply is greater than the demand. The richest and wealthy part of the society had already bought what they needed and wanted which lead to oversaturation. Better off Americans could not go on spending forever, there was a limit to how many cars and fridges people would buy. From 1900 to 1920, improved machinery such as improved fertilisers and harvesters made agriculture more efficient which then created unemployment for some farmers because if machines and technology can improve the farming, then farmers are no longer needed that much. As a result, it was producing surpluses of wheat and food than needed of which nobody wanted. And so if the rich people have already consumed the goods they needed, this means there is no profit being made leading people undergoing debts and that leads to the banks going bankrupt. The situation worsened as the US industry could not sell abroad because other countries had put up tariffs in retaliation to the USA as they had set tariffs before to protect their own industries. This in effect means that they could not sell their surplus food and were stuck with the overproduced food unable to make any profit. As many industries and big businesses depended heavily on trade and making profit, they were now more or less in trouble as the impact was tremendous. This thus as a result finally leads to the market crashing known as the Wall Street Crash. This furthermore shows that the speculation was not the only cause which leads to the inevitable economic collapse.
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There were many other economic weaknesses which were quite reasonably responsible for the Wall Street Crash. Government policies such as the Laissez Faire and ‘rugged individualism’ which was an approach in which the republicans believed that it would be best to interfere less in the everyday lives of the American citizens as in their view, the purpose of the president was to leave people alone so that they could become independent and to make them capable of finding jobs on their own without the support of the government. This, they thought, would make America rely less on the government which meant that everyone was allowed to perform their own tasks making America strong. However, for some this was a major struggle as this meant that the government would not help the poor and desperate people who didn’t have the money to do anything and without any help, they would perish. Since the poor didn’t benefit in the boom in the first place, they suffered even more due to this policy.
Another Republican policy which might have caused the Wall Street Crash could possible be the set up of tariffs which also played a major part in the Crash incident. This is mainly because as the government firmly believed in import tariffs making it expensive to import foreign goods. These tariffs were set up in the sole purpose of protecting their businesses against foreign countries and to reduce competition permitting the American companies to increase rapidly as a result. Although this may have been a good idea at the time when the boom was progressing, but it soon turned into a critical and crucial stage when the Wall Street Crash occurred. This is because the British began setting up tariffs to ensure their industries’ safety therefore making it incapable for the Americans to sell their extra surplus food. This therefore created isolation creating problems for the Americans instead of helping them. As you can see, these policies was a long term cause of the Crash as it happened over a long period of time and remained an issue ever since they were introduced. And so the Republican policies were not new or did not immediately cause the crash but slowly and eventually lead to the upcoming events of the collapse. This therefore proves that speculation was not the only definite cause and the republican policies which were originally designed to help the economy, instead caused the collapse of the economy.
Uneven distribution of the wealth also effectively caused the Wall Street Crash as this uneven distribution of money across America lead to an increase in poor people in some places and increasing poverty, whereas there were other areas that had quite a lot of prosperity and wealth. This is in effect a long term cause as the poor distribution of income between rich and poor had been a issue for a long time and was already present even before the crash, and so when the crash occurred, the situation deepened even more. Many poor people such as the farmers or other misfortune people barely had any money to begin with even before the Crash and did not share equally in the time of the boom or so called, “Roaring Twenties”. Majority of the farmers did not benefit as the total US farm income dropped from 22 billion in 1919 to 13 billion in 1928 as farmers also struggled against competition from Canadian wheat producers. Most of this uneven wealth is also due to the government policies such as the Laissez – Faire as without government support and without them providing money for the poor, then the deprived people would remain poor and can then not buy any goods. So when the Wall Street Crash occurred, they lost all their jobs and were forced to move elsewhere. Six million rural Americans were forced off the land and many of these unskilled workers migrated to the cities, for example the Black Americans. This is because they usually had the worst paid jobs and most of them became unemployed very quickly. Hence, this leads to increase in unemployment. The majority of Americans who were poor could not afford to buy consumer goods. This furthermore leads to overproduction as less people are buying goods of which some are too poor or have already bought what they required, leading to a panic of selling goods, therefore no profit is being made. This then results as bankruptcy in banks and businesses being broke having no money to invest and therefore the economy collapses.
To conclude, all these factors contributed to the Wall Street Crash, not only speculation even though it was possible the main cause. Speculation bankrupted many banks and caused people to lose their savings thus making people less confident resulting in less goods being bought also leading to no profit and businesses going bankrupt. As the government did not do anything to help it lead to overproduction. Overproduction also caused the economic collapse as companies were producing too many goods and American goods could not be sold abroad because other countries had put tariffs (taxes) on them to make them more expensive. When the demand for goods began to fall, workers' wages were cut and some workers became unemployed, which meant that they could no longer afford to buy the new consumer goods. This is also due to the poor distribution of wealth among the Americans. Farmers could not afford to buy the new consumer goods which lead to no profit being made and panic in selling goods. Therefore, no progress was being as and unemployment and share prices continued to fall causing a vicious circle of Depression. Consequently, this shows that the Wall Street Crash did not only occur because of speculation but other factors affected it in some way leading to the eventual downfall of the American economy.
Source A is an election poster published by the Democratic Party during the Depression. It shows a picture of a man smiling and conveys the message “Smile away the Depression!” and “Smile us into Prosperity!”. This is a sarcastic statement directed at the American people. It is saying if you smile, the depression will go away and their problems will be solved. It is meant to make them realise that if they rely on a Republican government who just tries to hide the problems, then these problems will still remain there. According to this source, you can see that it is accusing President Hoover of not doing anything during the depression and not supporting the poor people. This source is quite useful as it tells us the attitude of the government and the Democratic Party and hints of what the President was criticised for, showing what the Democratic Party thought of him and other people thought of him. It shows that the President and the Republican Party firmly believed in rugged individualism meaning that they did not get involved and interfere into the lives of people. This tells us that since the government did not aid their people with their problems and disputes, that there was no help offered for unemployment people and no benefits were given to the poor. Unemployment rose, homelessness increased, and soup kitchens and bread queues became a familiar sight in American cities, but still Hoover did very little to help. This moreover shows that President Hoover believed that the businesses would lead the economy to recovery and reassured the American citizens constantly that the cycle would return to ‘boom’ and ‘prosperity is just around the corner.’ Source A also demonstrates what the election issue is about and how the idea of a do nothing president is shown rivalling Franklin Roosevelt. This source furthermore indicates that there were bonus marchers and this is shown in ‘Warning – Do not risk Federal arrest by looking glum!’ written on the poster at the very bottom. This is because when the bonus marchers started protesting demanding their money slightly early, they were instead shot down and killed brutally.
However, this source does have a few limitations and does not tell us what President Hoover did do and contribute to help the economy. Although things showed no signs of improving, he was reluctant to help those affected by the Depression. It doesn’t say that Hoover tried to restart the economy by persuading business leaders to not cut down wages and during 1930 -31 he even began cutting down taxes slightly so that people would be able to spend money. In addition, he even set up the Reconstruction Finance Company which helped banks by preventing them from going bankrupt, thus encouraging citizens to put their savings, and then the boom could progress again. Nevertheless, this source does not explain what factors the Democratic Party and what Franklin Roosevelt would do to aid the economy and encourage people to buy shares abolishing the Depression. Since it is only one group’s pint of view which means that it does not necessarily show how other people felt towards the Republican Party. Also it is only one Democrat election poster so we would have to study more to see if it was typical of the Democrats election campaign.
Source A is can be fairly reliable as it is directly addressing to the American population and is relevant to everyone, not aimed at any particular class of society. However there are many aspects that may suggest that it is less reliable because it can be biased due to the fact that it is published by the Democratic Party in favour of Franklin Roosevelt and are clearly against Hoover. Furthermore, it is a piece of propaganda used to promote the positive points of the Democratic Party and reveals the weaknesses of the Republican Party. This may influence people to vote for the Democrats. This means that they would try and put down their opposition, especially in this situation as they can manipulate the conditions of the country. They are using the situation against their opposition. Therefore, this source might be slightly prejudiced and unbalanced.
Consequently, In conclusion, I believe that Source A is quite useful as evidence about the Great Depression as it shows opinions and views of the Democratic Party against President Hoover and also shows what kind of propaganda techniques the Democratic Party used to persuade people to vote for them.
The impact of the Depression on people’s lives throughout the US society was tremendous. Nearly ever part of the society was affected by the Depression including the poor, farmers, black Americans, working class and business class. The poor suffered quite heavily due to the Depression and perhaps were the most misfortunate people; however there were other people who suffered perhaps even more by losing their jobs and all their invested money.
Source A does not mention of which specific group suffered most during the Depression however we can assume that by putting down their opposition in their election poster the Democrats would be targeting the people most affected by the depression. This is because they would be blaming the government, and so may vote for a party who shared their view. Some of the people that they may be targeting are farmers as they were unable to pay back their loans and many were forced to move as sheriffs came to seize their homes and land. They also lost their properties and over-farming and drought affected their farms by turning them into dust bowls, being useless and ruined which increased homelessness and unemployment at the same time. However, this source could be aimed at everyone and not any particular class of the society, therefore we cannot definitely assume that it agrees with the statement. However, I believe that it would be most likely be aimed at the people who suffered most, many of which come into being poor, and so this source may agree to some extent with the statement.
Source B most likely agrees to the statement in which the poor suffered the most out of everyone as it describes the horrible conditions of the working classes during the Depression. It shows that the workers lost their homes and jobs and were dying due to starvation and hunger desperately trying to get employed, which is quite true. Since the working class did not receive any government support because of Hoover‘s belief in rugged individualism and not getting involved with the situations, they suffered immensely, needing help from charity and being turned down. However, since this source is written by the leader of the American Communist Party, it may not be very reliable as it may be biased due to the Communists, who are the extreme left wing, being against the Democrats, the right wing so it is likely that he would criticise the government and possibly stress the bad conditions to make the government look bad. It could also mean that this source might be exaggerating slightly about the sufferings and people dying and committing suicides. In addition, since it is a Communist he may also believe in Marxism in which the capitalists are overthrown by the working class and take over the government instead. Therefore, this source shows how particularly the working class were abused by capitalism. However, this source does provide information on how the working classes were affected and is fairly reliable as it says that they were forced to move out of their homes as they were incapable of paying back their loans which is true. Hence, this source does agree with the statement as the working class are suffering the most shown in this particular source of which the working class can be defined as being the poor people as they also were paid quite less and had lost their jobs and homes during the Depression era.
Source D also strongly agrees with the quotation and suggests that the poor people suffered the most of which the majority were Black Americans. This is because unemployment increased quite significantly when the Depression hit them, and most of them didn’t have jobs in the first lace. The Black Americans were also the first ones to be kicked out of their jobs and to lose their jobs, being forced to live on the streets with no money or food, dying due to starvation and malnourishment. Furthermore, they were also increasingly subjected to racism, discrimination, and prejudice making them difficult to cope with their situations mainly because they were a minority class within the society. Black Americans also had less money to begin with and some even had to live in Hoovervilles as they searched for work in small shanty towns. Black Americans were also most likely to be blamed for all the problems and misfortunes of America therefore leading to more racial disputes. According to this source, when jobs are usually vacant, the government tends to replace the Black Americans with white workers and usually gave jobs to white people instead which in this case all showed racism and discrimination against the African Americans. However, this source might be less reliable as it may have been written in an African American newspaper created to show how badly affected the African Americans were, showing that it may have been biased due to this reason. This source overall thus proves that the African Americans were the ones who suffered the most due to the Depression.
Although sources A, B, D, and F might agree with the statement of which the poor suffered the most, there were still many other people in the society who were not poor but suffered just as much or even more. For example, Source E which is written by a British journalist in the year 1973 gives one interpretation of the effects of the Depression on certain groups of people. This source clearly states that the poor were not the ones to suffer as they had nothing to lose in the first place. It also suggests that the middle classes or the people with the most wealth at the time suffered even more as they lost nearly everything that they had gained during the boom and could no longer able to afford to by any food or goods. Therefore, their lives probably did get worse as their opportunities were lost and now could not pursue with their career, education, or entertainment which they had previously done before. This shows that ordinary citizens and professions such as doctors, teachers, who owned houses were broke and many of them lost their savings which they had securely kept in their banks, losing all their hard work, whereas the poor did not lose any of their savings through the bank crisis. According to this source, it also gives an impression that the rich had to make a lot of sacrifices as they could not proceed with their jobs, or even mail a letter. However, this source may not be very reliable in the terms that it is not providing a balanced argument and is only talking about how the middle classes suffered due to the Depression. It doesn’t consider that the rich did make sacrifices but these were mainly luxuries compared to the poor. Also there were ways in which they could benefit such as by buying bankrupt businesses. Many still had their businesses, as big businesses would have survived the depression. Therefore, to conclude this source strongly disagrees with the statement and comments that the middle classes suffered the most due to most of their money being lost through high investment in banks and since the poor didn’t have anything to lose, they did not suffer as much.
Source C represents the changes in the prices of shares of some leading US companies in a table from 3rd September 1929 to 13 November 1929. The pattern that can be shown here is that the share prices have decreased after the depression. For example, the Woolworth Company has decreased from $100 to $52 in November 13, 1929 which is a reduction of $48. This evidently shows that the depression caused the share prices to fall mainly because of speculation causing huge loses of investment in banks leading to bankruptcy which therefore means that everyone who has invested will lose money including people who haven’t invested as they will also suffer by not having any money to buy or feed themselves for survival. Although this source is quite useful in providing us with factual information on the effect of the Wall Street Crash, it cannot be all reliable and has a few limitations. This is because, there is only some companies that are being represented in this source and so does not provide a full impression of the depression on some of the other companies which could have done worse or better than these companies. Also since this is set up by officials, the companies shown may have been chosen intentionally so that the government could send a certain impression across to the public. Also, the government may have only picked the companies that actually suffered due to the impression. However, they may not have picked the ones that suffered heavily and were bankrupt, as they wanted to show to the citizens that the depression did not affect them that badly and so that they could stop panicking. This is because if people stopped panicking, then their confidence will rise and then they can start buying shares again which would make the whole cycle of the boom revive again possibly ending the depression in the process. To conclude, this source does not entirely agree with the statement as the poor did end up suffering as a result of this but the people who had invested also suffered enormously due to the companies going bankrupt, Therefore, it is hard to say whether this source completely agrees with the statement or not, and so this is a balanced source as it can show that the middle classes and rich suffered by investing too much money, however, it can also show that as a knock on effect, since businesses were broke, unemployment increased which also remained in the poor section of the society, thus causing them to suffer as well.
To conclude, some sources for example, A, B, D, and F provide sufficient evidence in proving that this quotation is correct as they all agree that the poor suffered quite heavily due to the Depression. However, source F disagrees with this quotation as it argues that the middle classes suffered more compared to the poor as the poor didn’t have anything to lose and they weren’t the ones who lost all their money through investment like the rich or wealthy classes. Source C on the other hand, did not clearly agree or disagree with the statement as it provides a balanced view. This is because you can interpret the facts and figures as showing that the wealthy people suffered because of more loss of money, jobs, and opportunities or you can consider this source as showing that the poor suffered due to the companies loss even more as they had absolutely no money compared to the rich people and as a result also lost their small jobs and homes.