The Great Depression
It is said that the cause of the catastrophic stock market crash known as the great depression was due mostly to uncontrolled political and industrial systems otherwise known as capitalism. However, the timeline leading up to the Great Depression proves that many other factors played a role in the stock market crash that occurred in the decade of the 1930's. So lets take a look at rather four, factors contributing to the great depression that we will further discuss in the following paragraphs. Four of the main causes that led up to the great depression were unequal distribution of wealth, uncontrolled political and industrial systems, high tariffs and war debts. ...view middle of the document...
The rising incomes of the wealthiest Americans fueled rapid growth in the stock market (see Stock Exchange), especially between 1927 and 1929. Soon the prices of stocks were rising far beyond the worth of the shares of the companies they represented. People were willing to pay inflated prices because they believed the stock prices would continue to rise and they could soon sell their stocks at a profit.
In the 1920's decade, during World War I, federal spending grows three times larger than tax collections. When the government cuts back spending to balance the budget in 1920, a severe recession or relation to the rest of the economy results. However, the war economy invested heavily in the manufacturing sector, and the next decade will see an explosion of productivity... although only for certain sectors of the economy. An average of 600 banks fail each year. Agricultural, energy and coal mining sectors continue to drop. Textiles, shoes, shipbuilding and railroads decline. The value of farmland falls from 30 to 40 percent between 1920 and 1929.
Organized labor declines throughout the decade. The United Mine Workers Union will saw its membership fall from 500,000 in 1920 to 75,000 in 1928. The American Federation of Labor would fall from 5.1 million in 1920 to 3.4 million in 1929. Technological unemployment enters the nation's vocabulary, 200,000 workers a year are replaced by automatic or semi-automatic machinery. Over the decade, about 1,200 mergers will swallow up more than 6,000 previously independent companies, by 1929, only 200 corporations will control over half of all American industry. By the end of the decade, the bottom 80 percent of all income-earners will be removed from the tax rolls completely. Taxes on the rich will fall throughout the decade.
By 1929, the richest 1 percent will owned 40 percent of the nation's wealth. The bottom 93 percent experienced a 4 percent drop in real disposable per-capital income between 1923 and 1929. The middle class is only 15 to 20 percent of all Americans. Individual worker productivity rises to 43 percent from 1919 to 1929. But the rewards are being funneled to the top: the number of people reporting half-million dollar incomes grows from 156 to 1,489 between 1920 and 1929, a phenomenal rise compared to other decades. But that is still less than 1 percent of all income-earners. The Ku Klux Klan reaches the height of its influence in America: by the end of the year it claimed over 9 million violent and racist members. It declined drastically in 1925, however, after financial and moral scandals Then, the stock market begins its spectacular rise.
In 1929, Annual per-capital household income is $750, for farmers and their household, it is only $273. Automobile sales decline by a third in the nine months before the crash. Construction goes down $2 billion since 1926.
Recession begins in August, two months before the stock market crash. During this two month period, production declines at...