Causes of the Great Depression

The Great Depression, beginning in the 1920's and lasting through the 1930's, was a time of extreme economic crisis. Its affects were felt not only by the United States, but worldwide. When one thinks of its causes, they may first imagine the great stock crash of 1929. However, major industrial issues first led to the depression, such as prosperity weaknesses and crop productions.

First, the late 1920's were a time of prosperity. Mass production after World War I encouraged a greater demand for materials, and this created more employment opportunities. However, there were serious flaws to this prosperity. "Laboring people received less than a balanced share; wages lagged behind profits and dividends…" (P + C, 800). In other words, workers were not paid in compensation for the profits, and the profits could not quite meet up. Also, there was a longtime agricultural depression in which farmers faced these same problems.

Secondly, another cause of the Great Depression was the wheat production. The price of wheat had gone up, because farmers were unable to pay off their mortgages. Also, new machinery had been developed which allowed extreme mass production. "…dry farming opened up new land, and agronomic science increased the yield per acre," (P + C, 800). But now there was a large surplus of wheat. More wheat production did not encourage consumers to purchase more wheat products than what they normally did! Thus, "The world price of wheat fell incredibly," (P + C, 800). Additional crops which faced surplus problems were those of coffee, corn, cotton, and cocoa. Crops which were successful were oranges and eggs. "But the coffee planter could not shift to eggs, nor the Iowa farmer to oranges," (P + C, 801). The farmers' home climate simply would not allow it. In addition, the history of a chronic agricultural depression only made conditions worse.

A third contributing factor to the Great Depression was the infamous stock market crash. Since the industry had prospered, dividends were high and many people were investing, hoping to get rich quick. These people were called "speculators," because they were not professional, only in for the fun of it, and were investing with borrowed funds. On paper, their wealth seemed great, "…but if prices fell, even a little, the hapless owners would be obliged to sell their stock to pay off the money the had borrowed," (P + C, 801). One day, when the value of the New York Stock Exchange shares had decreased, owners were in a frenzy to sell their stocks. This quickly brought the value of the entire stock market down, and thus introduced the beginning of the Great Depression.

The decade of the 1920's may be viewed as a time of paradoxes. While the industry prospered, it held its major drawbacks which eventually led to its downfall. Mass production was most likely thought to be the solution to agricultural needs, but it only decreased wages. Also, where people sought wealth in the stock market, they often found themselves in extreme poverty after the crash in 1929. In conclusion, the Great Depression was caused by three important factors; weakness in prosperity, wheat production, and the stock market crash.