Economic Depression example essay topic

The Great Depression began in late 1929 and lasted for about a decade. The economic depression that beset many countries in the 1930's was unique in its magnitude and its consequences. "At the depth of the depression, in 1933, one American worker in every four was out of a job. In other countries unemployment ranged between 15 percent and 25 percent of the labor force". The great industrial slump continued throughout the 1930's, shaking the foundations of Western capitalism "an economic system based on the private ownership of the means of production and distribution of goods, characterized by a free competitive market and motivation by profit" and the society based upon it. Despite the seeming business prosperity of the 1920's, there were serious economic weak spots, a chief one being a depression in the agricultural sector.

Also depressed were such industries as coal mining, railroads, and textiles. By 1928 the construction boom was over. The spectacular rise in prices on the stock market from 1924 to 1929 bore little relation to actual economic conditions. In fact, the boom in the stock market and in real estate, along with the expansion in credit (created, in part, by low-paid workers buying on credit) and high profits for a few industries, concealed basic problems. Thus the U.S. stock market crash that occurred in October 1929, with huge losses, was not the fundamental cause of the Great Depression, there was the trade barriers along with the unevenly distributed income were big factors leading to this financial collapse, although the crash sparked, and certainly marked the beginning of, the most traumatic economic period of modern times. There were some economic problems that were in evidence during the 1920's. one problem consisted of unevenly distributed income.

The economy was not stable. National wealth was not spread evenly. Instead, most money was in the hands of a few families who saved or invested rather than spent their money on American goods. Thus, supply was greater than the demand for goods.

For an economy to function properly, total demand must equal total supply. Some people profited, but others did not. While businesses' productivity remarkably increased during the 1920's, workers received relatively small share of the wealth this produced. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers' wages only grew by 8 percent. Thus wages increased at a rate one fourth as fast as productivity increased.

This manufacturing output growth led to oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but that the majority of the people willing to purchase could not afford the products without using credit as consumers did not have sufficient capital to buy all the inventory. Corporate profits shot up to 65 percent in the same period, and the government let the wealthy keep more of those profits. a result, the top 0.1 percent of American families had a total income equivalent to that of the bottom 42 percent. People were willing to be taken in by advertisements and purchase new products even when they did not possess enough money.

People started to borrow money. This notion known as the "credit", otherwise known as consumer debt was then created. This allowed consumers to "buy now and pay later". Instead of having a positive effect, consumers accumulated tremendous amounts of debt. Another factor that contributed to this unevenness of income was the growing rate of unemployment. Technology had eliminated more industrial jobs than it created; the supply of goods continued to exceed demand; the world market system was basically unsound.

People lost their jobs, had trouble supporting their family and in turn based their expenses on credits which all resulted in a crash. The economic system was an ongoing wheel that was now losing its spin. As unemployment soared and as people with dwindling incomes nonetheless had to pay for their creditors; it was apparent that the United States was in the grip of economic breakdown.