The Causes of the Great Depression
Pre AP US History
American Economic Policy with Europe
The government created the Smooth-Hawley Tariff after businesses began to fail. It was meant to help the companies, but ended up hurting them due to the high tax rate for imported items. Because of the, there was less trade that occurred in the 1930’s. In addition to this, some countries retaliated economically against the U.S.
In retaliation, other countries placed tariffs on American imports. Imported goods from Europe declined from a 1929 high of $1334 million to just $390 million in 1932, while U.S. exports fell from $2341 million in 1929 to $784 million in 1932. Overall, trade declined by 66% between 1929 and 1934.With the reduction of American exports came also the destruction of American jobs, as unemployment levels which were 6.3% in June of 1930 jumped to 11.6% a few months later in November. As farmers were unable to payback their loans to banks, their loan defaults led to increasing bank crashes, particularly in the West and Midwest.
The Dust Bowl
The dust bowl was an agricultural catastrophe in the U.S. in 1935, it was caused by over farming areas of rural North America. The over farming drained all the nutrients from the soil and turned it into a fine powder, so when it was dry and windy it causes dust storms that miles wide.
The Dust Bowl was not a direct cause of the depression but it did worsen it. It add millions to the unemployed list because the farms were unworkable. It also caused a food shortage and worsened the famine that was already going on in the major cities.
The Reduction of Consumer Purchases
With the stock market crash and a fear of further economic troubles, consumerism stopped almost entirely.
This led to declining factory production and a loss of jobs. Fewer people working led to even less consumerism, which led to even less money going back into the economy.
The Stcok Market Crash
In 1929 stock prices were continuously rising. On October 26 1929 16 million shares were traded in one day. Billions of dollars were lost and thousands of investors were wiped out.
As a result of the stock market crash, by the year 1932 stocks were only 20% of what they were in 1929. By 1933 half of the banks in America had failed and 15 million Americans were unemployed.