The Great Depression

   Many U.S. banks in the early 1900s were little better than most of the banks of the 1800s, especially in rural areas of the West and South. Because there were no federal regulations existed that could control banks, Americans had few means of protesting bad banking practices. Corruption was rampant and most Americans had no idea what happened to their money after they handed it over to a bank. Many bankers capitalized irresponsibly on the stock market, and bought stocks with customers' savings. When the stock market crashed, this money simply vanished, and thousands of families lost their entire life savings in a matter of minutes. Hundreds of banks failed during the first months of the Great Depression, which produced an even greater panic and rush to withdraw private savings. In the first 10 months of 1930 alone 744 US banks went bankrupt and savers lost their savings. Banks became desperate to raise money so they tried to call in their loans before people had time to repay them. As banks went bankrupt, it only increased the demand for other savers to withdraw money from banks. People waited in long lines to withdraw their savings were a common sight during the crisis time. The government appeared unable to stop bank runs and the collapse in confidence in the banking system. Because of the banking crisis, Banks reduced lending and that lead to there was a fall in investment. People lost savings and that lead to reduces of consumer spending. The economic impact of the great depression was disastrous. Over the time period 9,000 banks went bankrupt of closed their doors to avoid bankruptcy. Due to the banking closures the nation’s money supply decreased greatly which was about a third between 1930 -1933.  The decline of money led to a decline in purchasing which led to deflation.

     The unequal distribution of wealth played a big part in the depression. The unequal distribution throughout the 1920s created an unstable economy and caused it to collapse. Money was distributed unequally between the rich and the poor, between industry and agriculture within the United States There was essentially no middle class: a few Americans were rich, and the vast majorities were poor or barely above the poverty line. This difference made the depression even harder for Americans to overcome. In 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%. That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all. Unemployment was only 3.2% in 1929 and by 1933 unemployment rose to 25%. A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout the 1920’s. From 1923-1929 the average output per worker increased 32%. During that same period of time average wages for manufacturing jobs increased only 8%. The production costs fell, wages rose slowly, and prices remained constant.  The benefit of the increased productivity went into corporate profits. The federal government also played a part in this gap between the rich and middle-class. Calvin Coolidge's administration favored business. With his Revenue Act of 1926 greatly reduced federal income and inheritance taxes. The act encouraged excessive spending which was a problem in the long run.

     The Great Depression was an economic slump in North America, Europe, and other industrialized areas of the world that began in 1929 and lasted until about 1939. It was the longest and most severe depression ever experienced by the industrialized Western world. There were many factors of the great depression. I believe the stock market crash, bank failures, and the unequal distribution of wealth were the main causes of the depression. If these 3 factors did not occur in the great depression then the U.S. would have had a greater chance of the great depression never happing in the first place.

   

     

 

What were the causes of The Great Depression on American society?

Works Cited

 from PBS's The American Experience

 (2000 Think Quest Junior Project)

 from History Matters

 From Michigan Historical Museum

 from the Writing DEN 

     

Watkins, T.H. The Great Depression: America in the 1930s. Boston: Little, Brown and Company, 1993.

   

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