The Cause and Effects of the Great Depression Essay

1452 Words Feb 13th, 2011 6 Pages
Many people speculate that the stock market crash of 1929 was the main cause of The Great Depression. In fact, The Great Depression was caused by a series of factors, and the effects of the depression were felt for many years after the stock market crash of 1929. By looking at the stock market crash of 1929, bank failures, reduction of purchasing, American economic policy with Europe, and drought conditions, it becomes apparent that The Great Depression was caused by more than just the stock market crash. The effects were detrimental beyond the financial crisis experienced during this time period. The first and most obvious known factor in the development of The Great Depression is the stock market crash of 1929. The Money Alert website …show more content…
The effect of not purchasing goods caused many companies to begin to produce a surplus, or an excess of goods, which caused companies to reduce their unneeded workforce (Kelly). Since so many people were out of work, they too were unable to purchase goods, and soon a domino effect was created and many companies went out of business. During this time period, many people purchased goods on payment plans, similar to the modern credit system we use today, and their inability to pay caused many companies to repossess the purchased goods. This caused companies to have additional inventory of products that contributed to the lack of need to manufacture additional products (Kelly). By this time, more than 25% of the workforce was now out of work, and due to the overproduction of goods and overstock of inventory, there weren’t enough consumers to purchase these goods (Kelly). Another major contributing factor to The Great Depression was America’s economic policy with Europe. During the midst of the depression, the government decided to create the Smoot-Hawley Tariff to help protect American companies by taxing import goods from Europe. The government initially created the Smoot-Hawley Tariff to protect America by making foreign agricultural goods more expensive than domestic products so that foreign goods would cost more than local grown goods(Kelly). Due to many revisions during the initial stages of the tariff, many other American businesses were included

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